 So welcome everybody and Thanks for coming out on this brutally cold night in the middle of exam period. It's actually really Lovely to see you all here despite the as they say in this trade barriers to entry So I'm Terry Fisher. I'm the director of the Berkman Center And it's my honor to introduce Susan and this wonderful book many of you Undoubtedly know something about her background, but for those of you who don't Susan has been extraordinarily accomplished in a remarkably wide array of settings so after a Dazzling academic career and a clerkship At Yale Law School not Harvard Law School. So it turns out she went on to Stardom in private practice became a partner at The predecessor to the current firm Wilmer Hale and then let's see moved from there to I can if I get the Sequence right she was a member of the board of directors of the organization that from an international standpoint manages not too Effectively but manages the internet then moved into an academic setting became a professor at the University of Michigan Law School Gave it up in order to run the transition team Specifically with respect to telecommunications policy between the Bush and Obama administrations then became for Two years, I think that she fit visor to Obama in this area and then return to Teaching where she is currently now dividing her time between the Kennedy School and Harvard Law School and last but not least from my standpoint Has graciously agreed to join the board of directors of the Berkman Center So if you've kept track here, there's traditional academic training high profile profile private practice Tenured positions at major law schools and one of the chief Policy makers in government Pretty extraordinary array of accomplishments and you can see the diversity of her Background in this remarkable book So as we will hear more detail in just a minute it contains All sorts of things sort of the core message that at least I've been trying to extract from it is a Devastating indictment of US broadband policy So specifically it points out The sad state of affairs that we're currently in in which compared to Many other developed countries. We have relatively slow speeds high prices differential treatment of uploads and downloads and a failure to respect the principles of network neutrality the Obligation of carriers to respect neutrality what they carry That's bad compared to where most countries are and the book tells in great richness The story of how we came to this state of affairs So along the way One of the ancillary benefits of the richness of the narrative is that there's grist in this book for reflection upon even bigger themes So here are a few of them Determinacy or indeterminacy in history is this narrative inexorable or contingent Sometimes reading this amazingly detailed account you get the feeling that there's this Irresistible tide at least in deregulated America toward this sad state of affairs But sometimes you get the feeling of it all could have come out differently if we had less earnest Players in Comcast for example less Fractious behavior among the key players little choices that might have moved critical. What if Michael Eisner had actually Referred the issue to his board so Determinacy versus indeterminacy great stuff in this fantastic case study to reflect on that Another big theme that the book provides fantastic material for is whether the United States is Capable of digging ourselves out of this hole whether our combination in this country of suspicion of governmental engagement in the supply of public services is Will have a lust forever and The last of the things that reading through this seems Intriguing is how powerful is scholarship So if you read this book, which I hope all of you will some things are going to become perfectly clear So for example, I just checked on my computer to see is there file service in my hometown I'm currently a Comcast subscriber and I'm embarrassed by it now. So some personal Implications of this argument are apparent But if the book has the audience it deserves so much bigger questions would be on the table will government administrators take her argument to heart and transform So an optimistic view Should I cling to is that the great strengths manifest in this book will earn it a very wide readership and will Help to overcome the blockages that have beset us thus far So please join me in welcoming Susan Crawford and her Many thanks to Terry for that very generous introduction and to the Harvard Kennedy School and the Harvard Law School for bringing me here And all of you for coming out on this very cold night To Caitlin Howard who's sitting here, she's right raise your hand Caitlin read through this book many times and helped me put it together I'm very grateful and also to Mitchell Shapiro who the Berkman Center Has helped fund who's helped me a lot with the presentation for tonight. I'm very grateful to all of you and to them I've been trying to tell the story for a long time and I feel that I'm not getting the message across adequately and I want to be as clear as possible. This is a sort of Inconvenient truth for telecom So instead of a collapsing Ice flow behind me just imagine a very badly maintained copper wire Right because telecom needs its own movie. It really does It's a subject that touches everybody in America and has salience for every policy issue We care about in this country But we don't seem to be able to grapple with it adequately and I'm convinced that Complex policy issues can be put across on the big screen. I'm convinced of this because Water rights water rights was the subject of Chinatown And all they had to do was add murder and incest and it was a huge huge hit So This is our challenge to make this somehow make this book into a movie somehow reach as many people as possible for the moment It's just a book So who am I? Can I see this? Yeah I'm not a political person at all. I Was right out of law school when I went to work for a tiny firm in Los Angeles That published the computer lawyer. I remember the very first email message I ever got I remember how odd it looked. I remember that little at signal Who was using that? What was the point of that? And I also remember I moved to Washington to be a Associate at Wilmer Cutler. I remember the very first website. I ever went to and Here it is. It was it's a Santa Monica Beach house and I'm from Santa Monica And these are some 20-somethings in the house and I distinctly remember the moment I clicked on this link and I was able to interact with them It was as if the back of the computer had fallen away. It was like the lion the witch and the wardrobe it was magical and I grew up as a musician. I'm from a very gentle scholarly family and I deeply understood the idea behind the internet of being a place where you couldn't be bossed around and Wikipedia is really the the symbol of this where it was a boss-free zone We were all going to flourish as human beings communicating globally Finding access to resources that had been unimaginable before that so the advent of the internet in my life was the most exciting intellectual moment and It has shaped me ever since it's the thing that it's the most important development in my lifetime and I have decided to continue along the path of caring about it a great deal in 2008 I was a freshly tenured professor at the University of Michigan Law School I was on the ICANN board and I was in Cairo with for my last meeting ICANN in order to pretend that it's not American meets all over the world and I I suddenly got a phone call The president had just been elected and I was asked to serve on the transition team And I'd been involved in the campaign at all and it was three o'clock in the morning And I jumped up and down because I was so delighted at the opportunity to serve this young president and his Beautiful family remember when they walked out on the stage at Grand Park. I would I threw everything overboard I went to Washington friends family health everything went out the window I was so pleased to get the chance to serve and I told the transition team I didn't want a job in the administration I just gotten it out Ann Arbor and apparently that is the secret for getting a job Politics is to tell everybody you don't want a job. It works. It worked beautifully And so what happened to me and then when they asked you to serve everybody you have to serve you have to do it No choice, right? So in the year that followed that it wasn't two years. It was just a year I was on the National Economic Council staff. I Got to know the telecom players extremely well I got to know the landscape and I became deeply concerned that when it comes to internet access America's being bossed around by a very few players who have enormous political heft in the capital and Their goals don't align with the goals of the public. They're not evil. In fact, they're great American companies But their motives and goals are to serve their shareholders and to make as high profits as possible. I Also became deeply worried that there was an enormous amount of self-deception in Washington and confusion and just misunderstanding ignorance about what the internet was What was happening in the marketplace for internet access and what the levers of power were that the administration had It was also very clear to me that there was there was no upside to anybody in the whole system in DC in making plain What was going on because as Larry Lessig keeps reminding us? It's it's money that fuels this whole thing and since 1989 AT&T has given much more money to the political system than Goldman Sachs The telecom companies are way ahead when it comes to contributions They also have employees in every single district. There is no upside to Getting in the way of the status quo from their standpoint. It's a difficult set of issues to explain this internet access question It's like it's like an iceberg. It's this enormous multifaceted cold smooth thing It's glassy. It's hard to get your arms around and it's rolling over the landscape and flattening everything in front of it So Boiling it down to a sound bite and explain to people what was going on Seemed very important to me and I was distressed that these companies Verizon Time Warner cable AT&T and Verizon are very practiced at the art of the politics of personal destruction if They could they would smear anybody who tries to disrupt their marketplace and So I decided it was important to write a book about this and I decided that it was extremely important not to have any commercial ties To companies in this field. So I have no clients. I'm grateful that I'm an academic that I can live on my academic salary and I get a little consulting requests and every time I get them. I think ah, this is one of these guys trying to trap me I You know I interviewed dozens of people for this book and almost none of them was willing to speak on the record There is an enormous amount of fear about this policy issue These companies are genuinely powerful I tried very hard to get an interview with David Cohen who I profile in the book He's the contigliere behind Comcast. He's a brilliant political Activist for Comcast and I suddenly got a call back You know David will have lunch with you on May 4th and I accepted with glee. I said great This is my chance to interview David Cohen turns out He was actually calling the other Susan Crawford the one who works for AT&T Not me Because it's in their interest not to engage with me at all And so one of the purposes behind writing the book is to make sure that these arguments at least have to be responded to by the people in the industry So there are number ways to tell this story and there are very few dates. I'm going to impose on you here Here are the two I've learned that unless the public demands of Congress that things change nothing happens and that no one has The courage to act and downside is too great in 1984 the Department of Justice had a lot of courage and It broke up AT&T the phone monopoly because AT&T Mabel was refusing to allow long-distance competition that move led to lower prices for long-distance phone calls and The idea of both that divestiture and the 96 telecom acts that followed that Was that we would have competition across shared facilities for basic communications and that you know It would be reasonably priced and everybody would get access You should know that at the beginning of this story America had the leading phone system in the world It was our pride. It was our joy. Everybody had access at a reasonable cost and The idea of basic communications as a utility was part of this 1984 divestiture and And the 96 act Intrines these principles. That's it for the dates if you read the book You'll see there's a lot left to this history But we really tried in legislation to do it. So 1984 was also the year I graduated from college so I'm about to turn 50 and Life is short and I might as well get in the way I've decided that I there's no chance. I'm getting another political office after this book So I might as well push along. All right. Well since then Since the passage of the 96 act two things have happened one is that internet access has replaced Telephony as the basic utility that we all use For everything for all communications So as Verizon 18 t push away from voice what they're really going towards is data and internet access same thing for Comcast in Time Warner So that's the first thing and the second thing in America is that we've released the providers of these basic utility services from either Competition or oversight they are Unconstrained in their activities in the field Two important developments at the same time. There's been enormous consolidation on both the wired and wireless sides of these marketplaces They've consolidated. They've cooperated. So the story I'm about to roll out for you is that cable controls wires Verizon and AT&T control wireless. These are two separate markets. They're complimentary with an E The rich in America are paying more and more for internet access They're getting gouged and they're paying lots of additional fees Device fees all kinds of crazy things could be it's just gravy. They can be added on. There's no there's no constraint And the access that even the rich are getting in America isn't as good as what's available worldwide Which is a symmetrical which means equally powerful download and upload connection over fiber The middle class and the poor people in America are getting second class treatment AT&T and Verizon are arguing that all anybody really needs is a wireless connection And that's getting more and more expensive and the poor are just left out So in my great city of New York 2.2 million people don't have internet access You know what the leading cities of the world they're just left out. It's just too expensive just too expensive and That raises all of our costs raises the cost of governments ends up heightening inequality in America and At the same time that all this is going on there is a deregulatory battle raging in America so that Just there's that saying about the Holocaust they came for everyone else But not for me and then later they came for me What's going on in on the States is a huge effort by the telcos to Eliminate any state oversight of their wireless activities one by one picking them off and they're heading for the feds as well And so now when people from Korea and Japan and Sweden come to America they feel puzzled Everything slows down You know we think of ourselves as sort of zippy Americans. I've got something to tell you It's just not the case not the case when it comes to this particular issue. This isn't just about national competitiveness It's also about civic life So in 2007 the BBC published this picture. It shows about dozen young men sitting on concrete ballards What are they doing? They're studying at night in an international airport parking lot and why are they going there? They're going there because the electricity to their homes is unreliable So in order to do their homework, they've got to go to the airport Well in the western most counties of this state If you want to get internet access and your kid trying to do your homework You often have to drive to the local public library and I see some nodding heads out there Yes, this is the case in western, Massachusetts, and you park in your car and Open up your laptop and hope Hope that the library has left its wireless hotspot on so that you can access the internet from there Because there isn't adequate access in western, Massachusetts. It doesn't exist So they're in the same spot the students in Guinea and the students in western, Massachusetts If you want to today start a new business apply for a job get government benefits You have to have access to the internet. You just can't live in the 21st century without it So when economists say well, what's the economic burden? Sorry, what's the economic benefit of having internet access just say to one of them? All right, I'm going to take yours away. How do you feel about that? Yeah, how are you going to get your work done without a connection to the internet? So it's the essential utility and in most other countries that develop world It's symmetrical and cheap and not here so captive audience this book I've written and oh thanks goes to Ron Suskind for the title great title right captive audience like it attempts to explain this and Tells us the story because Congress in the 96 acts Says that the FCC is supposed to make available to all the people of the United States a Rapid efficient nationwide communication service at reasonable charges, and we're just not doing that We're depriving people of basic information access when Everybody in a civilized world should have the ability to communicate Just as a matter of human dignity and at the ability to access information in every policy We care about health education national security all of that depends on access those edX courses that we're offering at Harvard and MIT. I bet you kids in Korea are watching those I'm not I hope that people in America have the capacity to watch them. Not sure So here's what should happen. We should provide to every American a 30 buck connection We should be able to do that. We're the you know the most innovative country in the world and Where it's too expensive for a private company to provide that we should be able to build the infrastructure Ourselves we did this with electricity is exactly the same story Electricity used to be provided only by private companies and by very few of them the industry Consolidated and it took enormous political will over decades to fix that situation So we're we're moving in exactly the opposite direction They're bossing us around and they really shouldn't be from the telecom companies point of view It's our wires our rules our wires all rules. So here the facts About 19 million Americans can't subscribe because there is no access where they are a third of Americans 100 million Americans don't subscribe to high-speed internet access as Terry said prices are high speeds are comparatively slow cable dominates the wired side and The Comcast and Time Warner have divided the country. I'll talk about that in a second. They face no real competition other than FiOS, which actually is a better service but available to not very many Americans A Verizon 18 t like bullies in the schoolyard have been treated to their corner. They're just working on wireless and We have no plan for a national upgrade to fiber If you remember nothing else from this presentation, I hope you can see this slide Hang on to this one because this is the the heart of the story These three columns if you can see them are three different definitions of download broadband speeds So the far left is let's say broadband five years ago one megabit per second the middle column is today about 10 megabits per second download and 25 is broadband of the future to the far right as you move from left to right it's sort of a time series and As you move you see that the box says two competitors one competitor as you go from very slow One megabit per second over to ten DSL drops away There are only three forms of media you need to understand to get this whole book It's like the you know a joke with three prongs There's copper cable and fiber Copper wire used for the telephone system has the lowest capacity and is the oldest of the three Cable faster higher capacity, but only for download not for upload And then fiber potentially unlimited speeds just lasers sending light through it All right, that is now your technical background for the entire thing. All right, so As we move from one megabit per second download to ten DSL which is the portion of the copper line used for higher speeds drops away DSL can't provide that capacity So You know, we're not going to have that Then in that middle line, there's something called fiber to the neighborhood or fiber to the node that that means that there's fiber Running to your neighborhood and then copper after that to reach your house. That's what AT&T is offering in its uverse service So uverse provides competition there in the 10 megabit slot But as we move through the future where the rest of the world is where we should be In 75 to 82 percent of the country the only choice for americans is cable The only choice because only in about 14 percent of america is their Verizon files or fiber available This is stupendous and i've written articles about this called the looming cable monopoly And the FCC will say well, yes, we agree that the Cable monopoly exists, but we're not going to do anything about it until there's a public outlaw outcry So the book is aimed at spurring that public outcry So cable is the last infrastructure standing in about 80 percent of the country except where verizon has built files Wireless will not substitute for this wireless is a much lower capacity medium Here's another chart. You might want to remember Comcast and time Warner of a while ago divided up the country and Consolidated their operations So that they control a whole of markets now new york is pretty big So in new york cable vision Has the broncs and part of brooklyn and all of long island And parts of new jersey in connecticut time Warner cable Has all of manhattan and queens and part of brooklyn and comcast has parts of new jersey and In the nyc metro area, but as you look down the list, these are the biggest areas of the country It's one major cable company per each area. There is no competition. This happened because 40 years ago they got exclusive franchises often by Persuading monetarily city council members to hand them those exclusive franchises And so even though that's been outlawed since 92 they still have enormous market power there So cable really stands alone not only is it the only choice For the speeds that we need In most parts of the country, there's only one operator Boston is one of these places There there's a little bit of rcn around the edges It's like standard oil did the same thing you let a little bit of competition exist so you can point to it and say Ha we're competing, but otherwise it's it's mostly controlled by by one company And it's very good to be comcast They measure their video and broadband revenues together and this is just a line going up saying the average revenue per customer They're making more money from the same number of people keeps climbing And really climbing so even though the cost of storage is going way down The cost of computation is going way down the cost of access and connectivity is continuing to climb So I'm looking at the reflection of this in the mirror, which is a lot of fun So here's here's the money quote I was so glad when brian robert said this on an investor call The type's too small, but it's very moving. He says the best business we may be in is broadband not not video They're moving Gradually away from tv into into broadband He said we're raising our prices, but we still have tremendous sales That's because you have no choice and so he says we're 33 to 31 percent penetrated That means that in each part of their footprints they control As of 2011 a third of the market But then he says the goal would be 100 or 90 comcast is looking for 100 percent Market control of each place where it operates and then he says we have one competitor And that's Verizon Fios. That's it. That's their only competitor. And he says I really like that position Yeah, if you're a gatekeeper and you're charging everybody tolls. This looks great So this they tell their investors that they're very aware of the market power and and really ready to go Now so why is this happening? What's going on is that people are fleeing those copper wires So dsl offered by 18 teen verizon the numbers are way down And the numbers are way up for four cable Just for comparison sake here's here the numbers for fiber Is that right? Yeah So there are about five million uh subscribers to fios in america and maybe six to uverse that fiber to the node service But those numbers are much lower than what what cable has at the top there and fios Here's the news is not going to expand if terry has it in his neighborhood. He's really lucky americans are um, yeah, it's the final number there, okay So americans are fleeing dsl because it's slow. That's all this slide says it's really slow It can't get any faster. That's it's just a copper wire And this chart came out yesterday from netflix Showing that so google fiber way at the top Vast symmetrical service verizon files is up there and then come all the cable services And then 18 t uverse and then way down at the bottom dsl And then verizon wireless almost falls off the chart. It's at the very very bottom so, uh This is the story when it comes to the speech that america needs and then people want Only cable can operate it and uverse as a result is not doing terribly well In the markets where it exists. It only has about 18 percent penetration where it's been marketed Fios by contrast where it exists is doing very well 36 percent 37 percent, but the here's why this happened In order to move from the telcos copper to fiber you have to actually dig up the streets and install it That's very expensive in order to take your existing monopoly cable plant and make it faster All you have to do is work on the electronics. You don't have to dig up anything So the upgrade path for cable to get to 100 megabits per second is cheap The upgrade path for the telcos to get from copper to fiber is expensive And so verizon is not going to be expanding this fiber Build that wall street hates it because it's a lot of capital expenditure. You have to dig things up And we saw this reflected in the recent non-compete agreement that was blessed by the federal government of the verizon Comcast deal of 2011 2012 The result of this deal is that they're going to co-market each other's services verizon and comcast if you're competing You don't sell each other's stuff. I think that's pretty obvious So verizon said we'll sell the cable guys wires And you will sell our wireless services Now verizon said if we will continue to market files in the areas where it exists, but we're not going to expand It's just it's just too expensive So all right, that's the picture. It's a cooperation moment between verizon and the cable companies This means that cable leaves wireless to verizon and at&t And verizon leaves the wires to time Warner and Comcast to themselves have already divided up the country Okay And here's the problem It's there is competition from files. It's a much better service than doxus 3.0, which is the cable situation Much more competitive than uverse But comcast only faces competition from verizon in 15 percent of its territory Time Warner faces competition from verizon in 11 percent of its territory. That's not very much And so in most of their footprint and remember they've divided up the country. They don't face each other They don't face any competition And poor cable vision the dolens company has a tough problem around long island because they do face a lot of files They actually have to fight for their households But time Warner and comcast don't have to do that So some really exciting slides coming up. This shows that 94 percent of New ads new broadband subscriptions in the third quarter of 2012 which is right now just ended are going to cable The line plummeting downward is the telcos. They are losing Broadband subscriptions. They used to be about even in the beginning of the The decade and now cable is taking off really quickly and telcos are going way way down This happened because the cable guys did that cheap upgrade and it was too expensive for the phone company to do it Not only do they have 94 percent of the new subscribers Gotta love these numbers. It's a 95 profit profitable product broadband for cable Is all gravy all gravy enormous amount of money for them So another chart showing that broadband subscribers for cable Time Warner and comcast way up for the telcos way down Verizon's doing slightly better on the wire line side of things because they sold off Their second rate copper lines So there are a lot of people in New England who are getting really terrible service watch out for them And all this is happening even though everybody hates the cable company and they're they rate very low on customer satisfaction Just don't have a there's no choice. So you're going to sign up with them no matter what happened And at the same time a comcast is spending much less money on capital expenditure. They're not expanding They're not enhancing they've done their investment. They're just harvesting at this point That's what capex is So it continues to decline unbelievably low. It's down to 14 percent Capital expenditures in comparison to their revenue. So lots of money coming in Very little going out for investments And at the same time their free cash flow climbs. So capital expenditure goes down All their cash goes up. You see all the hours are going in the right direction Life is very good if you're comcast And what's happening to that money is that it's supporting the stock price Enormous amounts of revenue are going in back to the shareholders Showing again that this is a harvesting moment. The shareholders do very well the rest of the country Not so great This final chart shows that both cable and wireless in their separate parts of the schoolyard are doing extremely well There's something like 40 percent of the money they make is just gravy just free cash flow at this point So this is a capital intensive business Big bearish entry got to pour a lot of money into it initially But cable has a monopoly Wireless basically is a duopoly between AT&T and Verizon and so they're in harvesting mode They can just charge whatever it is they want And consumer demand is relatively inelastic So moving over to the wireless marketplace. You see you don't even have to read the book I'm going to tell you what's in here because I want you all to become evangelists for this set of issues So here's the wireless marketplace the two dominant players together Verizon and AT&T have about two-thirds of the subscribers But the 80 percent of revenues and 85 percent of the income. These are giants in the field They really control wireless and you can see this from just this recent quarter So Verizon and AT&T together added more than 2.3 million retail customers The next three largest sprint t-mobile pcs lost almost a million customers so There we go. So there's huge growth for Verizon and AT&T and losses for the other guys And what you really care about if you run these things is churn if people are leaving you or not Nobody's leaving AT&T and Verizon you're all stuck into these long-term contracts You love your iphone by contrast people are leaving the other players in a big way And a clue to the reason that Verizon and AT&T are so powerful is that they have all of the low band spectrum Which allows them to build fewer towers, which is cheaper So they can provide nationwide service Much more cheaply than t-mobile and everybody else can because they got these licenses the book explains how they got them And that's this gap is really impossible to bridge although There is new investment flowing into sprint at this point Which which may make a difference, but I doubt it. It's it's a really controlled marketplace right now So the net of this is that wireless As a share of the revenue for both AT&T and Verizon is climbing dramatically They're giving up on their wires. They're moving entirely into wireless And this is leading to a very dramatic change in the free cash flow these liars these Lines cross used to be the wire line was really important now. It's not at all Wireless is now the source Of what's going on for the telcos. So, you know, your aunt probably thinks of the telephone company is providing telephone wires But it's really not doing that anymore. It's mostly selling wireless services And for those of you who care about comparisons Here's a really great picture this one and the first one are really the most important this shows That in america Average revenue per user For wireless services is just up and up and up in europe It's going down easy to understand not too quantitative. We can do this right if things these are two very different worlds Much more competition in europe hardly any here in america So you can get a A gigabit of data and unlimited minutes and texts in europe for about you guys are going to hate this $12 a month A comparable service A comparable service in the u.s. Goes for uh, either 50 bucks for bring your own device t mobile device or $90 for verizon $90 a month. So people who come here from other countries are just perplexed like what is going on here? Why? My colleague from france here at the top, right? Why is this so expensive? What's going on? Okay, um So the impact here is is a relative lack of competition and wall street journal anton tronofsky is doing a wonderful job Writing about this that cell phone Smartphone subscriptions are just eating up family budgets. It's so much money And it's inelastic you really don't have a choice if you're you're going to live in the world you're going to need a phone and It's people are perplexed as to how they're going to go on Even as we're spending less and less for entertainment clothing and meals out We're spending more and more for wireless. Why because it's it's a utility You need it in order to survive So, um, can't see if I got this oh one more. This is all about eating the family budget Now the goals of the goals of these companies Are clear Let's make more money from each household. Let's get each household to buy more devices. This is the family plans Let's charge a lot for overages if you hit a data limit The new plan is to have toll-free apps so that an application would pay the carrier To be viewed as free by the subscriber This is a new wrinkle on let's price discriminate in ways that help us And it's because there's no oversight either at the federal or state level of these wireless actors They can do this And it's working it's working really well. And so to imagine based on how Verizon's doing so far We can imagine how well they might be doing in 2017 not so far away Um This this is a this is a proxy for annual household spending at in 2017 You can use different growth rates and the graph does this either 3.5 to 9.5 percent If you if you had a growth rate of 9.5 percent each household will be paying more Under all these scenarios. It's more than $2,000 a year For wireless access each household in america subscribing paying right. Can you believe it $2,000 a year? It's it's amazing and even under the slow growth scenario It would still be 434 a month higher than it was in 2011 these increases are whopping And what allows this to happen? is that Market power and lack of oversight um So for both of these markets wired i told you all about the cable monopoly you're convinced and now the wireless monopoly on the other side Suppressing the demand using caps and overages rise of these toll-free business models someday There will be an internet that's just facebook and twitter And people will say well, that's the internet and they get charged nothing by the carriers to reach people And the book goes into great detail about vertical integration used as a method for raising barriers to entry and then if you really want to think about your holiday cards um, where's this? Uh There we go. These executives are some of the highest paid in america and um For brian roberts. He controls all the voting stock of comcast too. It's almost like his private investment Even though he owns just three percent of the equity. This really is the gilded age all over again for these guys they they have enormous power over these companies and uh Really no no constraints. Um So i'm not getting any holiday cards from any of these guys. I know that But I I just wanted you to know what it's like out there. This is actually this is in comparison to their employees paychecks It's it's a thousand x a thousand x far on the cable side Even most american companies. It's about three hundred and eighty x I'm not saying that we're doing great on the inequality metric But when it comes to these particular media companies that would have been viewed as utilities in the past It's really striking so What happened We believed about 10 years ago that competition would protect americans that cable would fight it out with telephony And the wireless would get in there and that we didn't need any regulatory oversight. It turns out we were wrong cable consolidated the phone companies gave up and uh Wireless is not competitive with all these wires. We saw that in the netflix chart It's way down when it comes to capacity We believed that somehow the pixie dust addition of intellect of internet protocol to these networks Would solve the basic economic problems that exist. These are actually natural monopolies It's very expensive to build them Costs go down sharply for each marginal customer after after you've built it the barriers to entry are insuperable And everybody needs it. It's a utility that people have to have to have We also believed that we could keep wholesale markets in place. This is a big problem with deregulation That the book explores that we it's very difficult to get access to a competitive local exchange Provider because we've shut down those networks We sort of believe that more stuff would magically show up and my tech sector is guilty of this We say oh, we can just geek around it We can't geek around this stuff it because it's policy that made the internet take off If it hadn't been for the telecommunications structure that required the phone companies to let internet service providers connect to their lines If it hadn't been for the requirement of common carriage We wouldn't have an internet Because they would have charged the way they're charging now for each use of it and for each device and for everything We ever wanted to do Uh, we were just wrong. We were wrong and the result is that our policies are really harming our country So what's the next step? Well clearly I need better graphics And I hope that all of you will help me with that. We need to make a movie of this We also need a better organization in each congressional district There should be a group that really cares about this and asks questions at every debate What are you doing to bring fiber to all americans? What are you doing to lower telecom costs? What are you doing to make sure that there's some oversight? We had to do it for banking. We should do it for global warming. Why are we not doing it for telecommunications? Um, and I've also listed here the policy steps that have to happen We have to make sure that cities can help themselves So they're a bunch of terrible state laws that have been passed by 18 team others working in the state house We got to preempt those we've got to make sure that there is in fact administratively with the FCC control over high speed internet access Got to make sure that cities get access to cheap money so they can help themselves It's separate conduit and content so only NBCU shouldn't help Comcast as much as it does By the way, the nixon white house wanted to do this in 1974. They said we should separate out cable from Content because it's just too risky if we don't and we should have some oversight of wireless So now that's it. It's all up to you and uh It's going to be a several year battle If if this ever succeeds at all it's going to take Many people getting involved. This is not just my story. This is all of our stories And I look forward to working with you and talking to you about it. So thanks very much for your attention You do it We're a team Yeah, bumip kashnovich, uh, do you think the venture who is google took uh, you showed in your chart the google has a high speed Do you think google will do it in another area geographical area? If not, how what can be done so that Other companies like yahoo facebook, you know things like that. They also venture into these things What can be done in terms of policy administration and local activities? Terrific. It's a great question. So google's Very disruptive move of bringing fiber to kansas city is the most exciting news in this sector this year We're all watching it now google got a lot of concessions from the city of Kansas City that made that possible It may not be possible for them to replicate the cost structure they created in kansas city But what they're doing is embarrassing everybody else and that's great So if the rest of the city of the country's mayors say we really want that they should be able to do But here's the problem in almost 20 states It's either illegal or very difficult for cities to build fiber networks for themselves Because of restrictively straight laws that have been passed So that's why the first bullet for me for next actions is preempting those laws and making it possible It's a self-determination thing. You know, this is not a partisan issue. Republicans should love this That cities should get to do this for themselves if they want to right now There's enormous opposition cities try to do it. They get sued into a bulimion just ask the republican mayor of chattanooga What it was like trying to get his network off the ground So a great question very disruptive, but right now there's a There's a the situation is not great for cities that want to do this for themselves The gentleman in the back, you had your hand up earlier on I live in summerville, which is the city next to this one. We had a force a Mayor with some foresight who demanded that there be two competing cable companies serving the entire city However, the issue of serving the entire city is why we didn't get horizon files because Verizon wanted to be able to come in and serve only part of summerville The city insisted that if you were going to come in at all, they had to serve the whole city There was an impasse and we never got files. Right. Is this the story of files everywhere? Is this why files has has not expanded more? Well, I think the economic stories at the heart of why files hasn't expanded It just is expensive for them to build and wall street wants these very high dividends Wants that free cash flow to stay up and keep the stock price up. It is unhappy when they invest a lot But listen to what we're saying We need to wait for google. We need to wait for verizon. This is a utility. We don't wait for electricity We come home and we turn it on and it works How could it how could it be that we treat this so differently as a voluntary prerogative Of a few companies that that just seems wrong Um here Susan apart from us becoming a sweden or a south korea, which would be amazing I was wondering what you think some best practices are in particular if you're familiar with Australia rolling out the nbn which has someone of a similar history or the uk and what's happened with bt Oh, absolutely. So australia We have a sort of a problem in that it doesn't look like we have a monopoly because they're different ones Different parts of the country in australia. It's obvious. They have a monopoly, which is telstra But but they all hate telstra Telstra really disliked in australia. And so The government the new government came in and ran on wanting broadband in their country And uh, there are a few ministers have really devoted their careers to making sure That fiber rolls out in uh in australia We're hoping that works well. It's I really hope it succeeds There are some issues about how at how at what lower level This wholesale fiber Access is being made available whether there's too much control retained by the incumbent But again, this is about national Industrial policy and australia has been able to do that and say this is important for us. We need to do this for our future South korea same thing I'm going to soul at the end of this month because i'm so curious as to how they did it But it's often because it's just we do this. We're a nation. It's important to us. We're going to do it In the uk more voluntary they encouraged bt to separate its itself into wholesale and retail And and frankly not as fast speeds. They don't have as much fiber as we would probably like So read the book There are lots of international comparisons that are fascinating and I hope that some of the students here will Write about this and rob ferris over here is a real expert in the berkman center. Raise your hand robs everybody sees you get go volunteer work for rob and There's a lot to be learned from other countries americans to be fair don't care about other countries We just don't care We did for sputnik for about a minute, but since then we haven't We haven't really paid attention. So that's why kansas city is so important We can be embarrassed internally even if we can't be embarrassed globally. I think that's not true I think we're really embarrassed when people beat us out. We care if somebody else is ahead of us. Okay. Well, everybody's ahead of us Yeah Here in cambridge, um the deal with compcast have in effect a monopoly and the deal that was negotiated. It's a 10 year deal um Didn't have a lot of according to the people who this city administration. There wasn't a lot of um Wiggle room for what could be negotiated But there were there were sessions where people piled on as much as they could with the idea of you know laying down a record that would then Lead to some favorable things being part of this 10 year deal The argument the claim has always been in theory. There's competition, but verizon just aren't interested in Cambridge yeah, it's hard for me to believe That first so it's two questions. It's hard. Is it it's hard for me to believe that nobody else is really interested in in a market Like cambridge. Yeah, first of all And then the second thing is well um What if what if the city said and why couldn't they say Anybody can use the right of the public way the public right of way Anybody can be we can oblige you to share that With other potential competitive competitors and um You know, why can't why can't they why can't we say to them something like that or require that there be Certain things that apparently they claim can't be required like An option like a public option in health care. Um a public a municipal Uh wi-fi uh To to parallel what comcast do Well, lots of ways to thank you. It's a wonderful question. Um the There's a failure of policies at the federal level because uh, we've deregulated high speed internet access We've given no power to cities to demand particular conditions on the franchisees that come in and here's the terrible conflict of interest Cities get a kickback a percentage revenue of video fees That are charged for by cable So my city new york city gets 150 million dollars a year, which is very useful if you're running a city To be coming back from the cable companies to them So there is actually incentive to work with the cable industry and not push them too much At the same time No, that's what's so great about it it can go anywhere that money So, uh, the problem is you'd have to you'd have to wean yourself from that money And push towards finding someone with a deep enough balance sheet that they could make the investments necessary to run the network Because here's the really terrible problem. There aren't enough players that are rich enough To get the kind of financing you need to build this infrastructure Which is why one of my bullet points is sort of an infrastructure bank Getting long-term low low interest financing so that more ordinary players could do this This is the secret behind doing big things is cheap money and it's not easily available now So there's lots of ways to respond to that but basically the cities don't feel like they have much power Harry Uh, a comment and a question that the the comment is that um I'm I would be glad and I'm sure there are plenty of people around here Would be glad to introduce you to documentary filmmakers If you're not already no, we need to do that in touch. I mean Seriously, I need all the help I can get there are probably people who know more than I do but um It would make a great documentary Depending if you murder the right people on camera, of course, but So the question is What percentage of congress would agree with the proposition? That it's a utility which you keep hammering and which is the premise for the entire argument you laid out because I hear you know you hear talking heads or writers or you know uh crazy blatherers who people listen to say you know Being able to watch porn in your you know on your on your tv On your computer screen is not a basic human right and it's kind of that this kind of extreme Reductionist dismissive, you know, and and we're doing the best we can by giving people high download speeds And it's only an entertainment medium anyway for for the consumer At the same time as people say well business is something else, but that that so so so my question is you know view You know, are you confident or is there any reason to be confident that the fundamental premise that this is a utility That ought to be like treated like electricity. We should have rural electrification, you know that that premise is accepted Congress people only respond to pressure from their constituents And uh when this issue is out You know being discussed online or when people are complaining about their cable company There's a lot of unhappiness from ordinary americans who definitely view it as a utility like how am I supposed to run my business? How am I supposed to survive if I don't have this access? That message hasn't been I believe adequately delivered to congress so that today they may say, oh no It's a luxury. It's just for you know movies But if they if we had a way to aggregate and visualize and push on the messages That actually felt in the middle of the country and by poor people Not by us sitting this room. I think that message could get across It doesn't feel you can't build a new business without it You can't you know, you can't take care of your if you wanted your kid to get educated remotely You can't do it. You know health government benefits are moving online. Here's what I hope will move congress people eventually Stockholm saw its cost of government communications go down 40 percent By providing for fiber everywhere because all those forms you used to need to fill out and hand them the paper They go away, you know the reduction in government cost could maybe get get us. It's such a big sector of our economy But I'm arguing for rational behavior and harry you know, that's that's not gonna happen You've had your hand up for a while from the back group Yes, alex Hi, thank you, uh alex remington. I'm a student at the kennedy school. I took susan's class um I was very struck by uh The point that you made earlier that in many cases There are laws on the books that address some of these bad practices Especially consolidation of monopoly Uh, and so it's not merely a matter of necessarily passing laws as enforcing and regulating them. So With regard to regulation um So recently there was uh, there's been this kerfuffle over the fcc potentially doing away with Um rules prohibiting media consolidation in given markets um So thinking about how to regulate new laws that you would be advocating for Is what we see now more an instance of regulatory capture Or ignorance, which is worse and how do we address whichever it is? There are people of good faith and great intelligence throughout government they There is no upside at the moment to taking on this industry They're just isn't if you're on the hill, we have two or three champions who understand this and are willing to talk about it But everybody else could be run out of office if they tried to do something about this Who are they? Oh marky our our representative from foreign messages is wonderful ed marky senator franken Absolutely understands this from his background in the media industry What potentially potentially we're we're shared brand potentially i'm looking for more champions So you know happy to find them but most people in congress There's no upside and it's also it feels like it's a little complicated. You know their numbers And wires and you know, I don't understand this so they get a little delicate and the other terrible things that they don't want to feel dumb So if anybody asks them a follow-up question, they can't answer it And that that's a terrible thing for a senator or representative. You don't want to be in that position So all all the arrows for them are pointing until they get some big push from the public And their their votes depend their ability to get reelected depends on it They're not going to do anything about it now the administrative level you would think you would act proactively But here's the problem Verizon and AT&T and Comcast and time Warner are very closely tied to the congressional committees that set the budgets for the FCC The appropriations group. So if you come in as the FCC chairman, you say i'm going to take care of this issue You risk having your agency's budget cut in half And that makes it possible for you to do all the other things you want to do So you'd think all right. I'll be brave. I'll go do it. But you know when you get in there it Feels differently. There are all these people whose lives depend on you working in the in the in the commission so We all hope for courage, but uh this courage needs air cover. It needs public support in order to work Uh, I'm curious how you address some of the I mean, I've noticed that the the cable companies every once in a while have put out these great ad campaigns that show them as Great citizens great employers, you know, they employ the underserved who aren't getting access to the actual services that they actually provide and fix for all, you know, everyone in minhattan And although there's grassroots organizations that are trying to gain that Connectivity the only connection that they have to the major providers is through one or even two or even three intermediaries that are That are brokering those deals. And so at the end of the day, they just get insanely sub par Connectivity and I was curious What tools we could maybe give those grassroots organizations or community organizations that are trying to bridge that gap Are trying to make a slightest bit of noise and I don't know the other answer well The tool we can give everybody is to get this on the radar screen Just to get it on the radar screen just make it a salient issue because right now We've got heroes all across the country who are deeply knowledgeable about this And they're they're working in civil society groups. They're in local government. They're in federal government But they're they're feeling isolated. They're feeling lonely. They're behind these dusty windows And so whatever we can do to make this an issue Like consumer credit, you know, like the banking industry that became salient. It just it took effort Whatever we can do to make this issue Be mainstream, you know, right now people look at me and they say Oh, that's Susan Crawford. She's just crazy and I know I'm not crazy. I know I'm right and we've got all these charts Showing the money, you know, what's happened But it's possible for them to call me crazy if there aren't a thousand of me And so it is our opportunity to make this issue mainstream and not not marginal. That's what's going to change the picture I've neglected this side anybody over Last question I think you probably laid down Why this is a dead end if a noble idea in the book But I wonder if you could talk a little bit about freedom pop And uh, they're free or freemium wireless Venture and sort of whether that's going to have any impact at all on this. It's a wonderful question. Um 95 of any wireless network is actually a wire So wireless policy and fiber policy are the same. They're interconnected So if we bring fiber to every city in america, we can have all kinds of wireless situations that are terrific But in the absence of the fiber feeding the towers That isn't going to be a very high capacity connection And it isn't going to allow someone to start a new business So this has been a terrific discussion. There's a terrific book. I think available for purchase here Yeah, um, and there is a waiting for us next door some beverages and some food for reception. So please join me in thanking susan