 Excellent, thanks everyone for coming out and enjoying some wine and cheese and some political economics of media with all of us It should be a rip warren wonky time this evening if you Had looked at the agenda. I Am happy to report that we have a special guest here tonight Michael cops is a friend and colleague. He's been in this space for Feels like eons holding forth a veteran of numerous battles He went in for a tour of duty as an FCC chairman and then re-upped Which is a real brave? Possibly full-hearty thing to do but thank goodness. He was here. He's been a vocal critic when necessary and a public interest champion always and in the time that I've been involved in DC politics I've often looked to him as sort of a beacon In terms of holding forth and holding the line on numerous policy battles He was also the lone vote And a four-to-one vote the lone vote Against the Comcast universal merger And I'm just going to quote him very quickly because I think if you want a very Hard-hitting synopsis of what was wrong. He said of the merger. This is too much too big too powerful Too lacking in benefits for American consumers and citizens And he said that from a position of an FCC commissioner Here in DC and I would say that takes extraordinary bravery to tell a truth of that sort So currently mr. Cops is senior advisor over at common cause for their media and democracy reform Initiative he has his work cut out for him But i'm very thankful that he is still here in dc battling away At many of the problems that plague our media system today So with that i'm going to turn it over to him And he will introduce tonight's Headliner uh susan crawford Thank you Thank you, uh sasha. Thank you everybody for being here. This is a Wonderful testament to susan to see this crowd here tonight I got a copy of this book and I immediately became the captive reader to the captive audience and i i'm really strongly recommended To you the telecom industry and monopoly power in the gilded age. I think it's just a fascinating read and i'll tell you I never thought that somebody could take maybe a page or two And make pool attachments a really fascinating read She did it but this book isn't about Pull attachments. It's about the the world we live in and the and the future of information in america and it's It's exceedingly well down, but i'm gonna let susan talk about the book But if you want to understand How this place works and How people lobby and how influence gets wheeled and how wheeled And how decisions affecting every one of us as consumers and more importantly as citizens get made You need to get a copy of of this book I met susan Long ago by the way, we should wish her happy birthday because yesterday was her birthday I met her as a commissioner at the FCC and then she reappeared in the transition up to the obama administration as A leader that transition and we worked very closely together very intensively together for a number of months because some of you may recall the wonderful Dtv transition we were going through at that time And i'm even happier if you don't recall it because that means it worked, okay But but we worked closely together and She did a wonderful job in them but she has really found her voice as One of the most articulate spokespersons we have i think in the united states of america On telecom and she is blazing trails with this book With the work she does for wired With the frequency with which she writes op-eds for the new york times and i think she is fast becoming recognized as one of the preeminent analysts commentators historians visionaries however you want to put it on telecom and it's It's so important and i think we're starting to get some traction. I certainly hope so thanks to This book and thanks to many people in this room and the programs that you all are Are working on so i'm very proud of Susan of the association and the friendship that we have had i'm proud of the work she has done at And with her law professorship at cardozo recently just finished up a visiting professorship at At harvard and just involved in so many different facets of Telecommunications so i urge you not only to buy and to read this book but to To help spread its message It's aptly named telecom and monopoly power the new gilded age i used to Back many eons ago before modern history was even written i used to teach american history Fresh out of graduate school and my specialty was actually the gilded age And i can say with some confidence having been in this town for 40 years and having studied that history That i don't think the power and influence of money in our society Even back during that original gilded age of the 1870s and 1880s has ever been greater than it is right now These are such important decisions that the FCC is making on telecom and media monopolies and duopolies And in the final analysis it goes beyond just who's providing access to you for broadband it goes to the nature of our civic dialogue and the sustenance of our civic dialogue and we're getting the news and the information that we need to have to be intelligent citizens able to Make help make important decisions for a country that's in a deep deep hole right now with no get out of the whole free card Really important So that's what makes this industry so important. That's what makes this book so important And i couldn't be happier that susan is in the van Gotta hope you all saw on bill moyer's a couple of weeks ago She and bill had what can only be described as a Vibrant and intelligent and rousing a discussion that was it was really excellent So we thank susan for all the good things. She has already done and We just know there are great things ahead too, and we are proud to be on On the road with her so to speak so without further ado Let me introduce susan and happy birthday and congratulations on writing a Fascinating captivating captive audience My cops proves once again that he's the soul of graciousness is awfully nice And it's wonderful to see so many friends here tonight Friends and former students and people who I admire I'm just delighted to get the chance to talk to all of you And I also know because I know so many of you that you are an imaginative group So cast your mind back if you will to the early 1930s When electricity in america was considered a luxury running water. Yes, everybody needed that but not electricity Robert caro has written very movingly of the people living in hill country outside austin Who said we heard all about roosevelt's wonderful fireside chats We read about them. We knew about them. We loved fdr, but we couldn't actually hear the chats themselves Because we didn't have electricity At the time 90 of farmers didn't have electricity even while rich kids in new york city were playing with electric toys Roosevelt comes in in the 30s and from his long experience In georgia understands the grinding effect that a lack of electricity or expensive electricity can have on people And really throws himself into this and makes sure that there's a universal high quality reasonably priced utility service of electricity available to everyone around the country So now cast your mind forward Here in washington, it's about six o'clock six thirty If you are living out in the suburbs someplace It's quite possible that you need to take your kids To the parking lot of the local library In order to do their homework Why is that because for many americans who don't have a wired high speed internet access connection at home The only way to get access to the data flow that those kids need to get an education and footnote here Wonderful pew report today about the digital divide being exacerbated By the educational opportunities that aren't available to lower income kids who don't have wired internet access at home So these parents and their kids are parking and parking lots to get access to wi-fi that might have been left on by the library at night Same thing big article recently in wall street journal about on the front page about people doing their homework kids doing their homework in mcdonald's Where free wi-fi access is available We've got a problem in america in a short and it has to do with the situation of wired internet high speed access Fully 19 million americans don't have access where they live at any price About a third of americans in total aren't subscribing Including 2.2 million americans in my hometown of new york city And many of them do it because of price. They don't subscribe because it's too expensive. There are other reasons They're not sure how relevant it is to their lives But a third of americans 100 million don't have that access in their home For many of us it's extremely expensive whether or not we're in the market for Very high speed wireless access or wired access in the home It's squeezing out other Basic needs of human beings things like food gas Clothing electricity It's expensive and in america It's slow in comparison to other countries. I took a vacation in soul the first week of january Very cold place to go on vacation people there told me that coming to america was like taking a rural Vacation they actually used this hand gesture in front america and this is very embarrassing. They go like this Life slows down when you come to america So even though you need a wired high speed internet connection in order to get a fine education to Apply for a job certainly To get the best health care available to find a new business for yourself start that new business We don't have the kind of universal world class Access that the country that started this whole thing off the internet should have And I think it's a problem for us for economic growth as well as equality and fairness Even though other basic needs of humans are treated as utilities things like gas and electricity and You know just the ability to find a home Um High speed internet access Is not it's still a luxury It's almost as if it's no more important to us than the corner deli even though it's essential for every part Of human life these days So I wrote this book to try to explain the problem and explain how we got here How we got here is that we believed that the magic of the marketplace would protect us when it came to high speed internet access that we'd find a way to Have telephone connections compete with cable modem connections And that they would be roughly the same price and they'd be battling with each other And that would provide access to all americans as well as keep prices down and protect consumers We also believe that wireless access would pressure these wired connections And keep the whole market rolling around it turns out that we were wrong We were wrong although in 2001 2002 A cable modem connection was about the same price and speed as a telephone dsl connection since then It's turned out to be much cheaper to upgrade the cable connection And make it faster than it is to dig up the telephone copper line and replace it with fiber and so Verizon who had been rolling out fiber That would pressure the cable connections has backed off And we're left with a situation in which for wired internet access for most of america More than 80 percent of americans your only choice is going to be your local cable monopolist The wireless access it's fine as a substitute for a slow cable connection But based on usage caps, it's not going to be a substitute for the kinds of things you can do using your wired connection And it's just not giving the same capacity that a wired cable connection can So we've ended up with two separate marketplaces Wired almost wholly controlled by the cable local monopolists, and they are monopolists Comcast and time Warner long ago divided up the country among themselves. You take san francisco. I take minneapolis um and something I called the summer of love in 1997 and uh Verizon and AT&T by far dominate the wireless marketplace You may think of these companies as telephone companies wired telephone companies But more than two-thirds of verizon's revenues these days come from the wireless side They're really over there in wireless where they get at least Two-thirds of subscribers are signing up with Verizon and AT&T And most of the free cash flow everything on that wireless side is going to those two companies who have enormous enormous advantages of scale and scope and barriers to entry in the form of Low-band frequencies that allow them to build fewer towers to have national coverage And the rich keep getting richer on the wireless side So let's take a look at internet access From the past to the future. This is a time series in a sense. You can read this chart from the left to the right This is based on data from the FCC And echoed actually by a report just a couple weeks ago from the FCC about 2011 numbers So when it comes to one megabit per second download service Broadband five years ago. There were Competitors cable and dsl were dividing the market between each other And also available might have been some fiber to the node services by AT&T. They call it the uverse service And also fiber to the home from Verizon. So two technologies meeting the demand a possibility of competition Then as you move to the right for 10 megabit service and above Cable has stands alone for let's say 51 to 57 percent of americans There's still the possibility of uverse with its pretty fast downloads By the way, very cramped uploads on the uverse side And fiber to the home still there for about 14 percent of americans But for what we're going to need for the high bandwidth low latency Applications That we're all going to be relying on for the future Cable stands alone for at least 80 percent of the country the only Form of technology meeting that demand There's still some fiber to the home provided by fios. It's a fine service In fact, it's a better service because it has symmetrical upload as well as very fast downloads But Verizon announced in march 2010 that it wasn't going to be expanding fios beyond what it had already built Leaving cities like alexandria and boston without the the files that they've been hoping for And They have seeded the wired side of this marketplace to cable for most of america As a result, Comcast faces fios competition in just 15 percent of its footprint and Comcast really is enormous It covers 50 million american households About 45 percent of the american population is in Comcast territory And time warner faces competition from fios in only about 11 percent of its territory It's a great business to be in if you're the cable company Notice that fiber to the node fttn That's the u-verse service has just dropped out of this chart on the far right Because it's not able to provide the kind of speeds that cable is going to be providing So for everything we do for data information education telemedicine All of these high bandwidth high capacity low latency Experiences cable has won This is great for these companies. So here's Comcast's average revenue climbing from 2002 to 2012 This company is not evil. It's very well managed. It's a great american success story starting in 1963 With the purchase of just a few systems and expanding through consolidation ever since It's just that the incentives desired by their shareholders don't necessarily align With the social needs of the country as a whole for a ubiquitous Universal reliable and very high speed world-class communications infrastructure We don't seem to have a path to fiber for the rest of the country Cable as a result of its ability to offer these very high speeds is now grabbing Much more of the mindshare when it comes to high speed wired internet access So where see in 2006 the telcos would have been getting about half of the new subscriptions Now cable gets 94 for 2012 of all net ads all new subscriptions for broadband across the country 99 of subscriptions in the fourth quarter of 2012 went to the local cable incumbent Which again faces no competition no oversight And has no reason to keep prices in check or act as a nondiscriminatory purveyor of of transmissions Here's brian roberts terrific manager. This is what he said in may 2011 He said think of Comcast as basically a broadband company and in our Territories he said we're 33 percent 31 percent penetrated the goal would be 100 Or 90 we have one competitor and that one competitor Is fios over the next 10 years people will want more bits in their house. I like that position Well, of course, he likes that position. It means that For everything we're going to want to do using these wired connections Comcast can get a piece of the pie a little bit of flesh You know an opportunity to make more money from the same number of people which again Not evil very smart from the position of a giant cable company On the wireless side, so this is the Verizon 18 t story where they as I said earlier have most of the subscribers and Almost all of the low band spectrum We have a slightly less concentrated but still very powerful Dominated marketplace by these two enormous companies So as I said, they they've really become more like They are wireless companies where two-thirds of verizon's revenue coming from the wireless side Verizon even more of a wireless company because it's dumped some of its unprofitable Wireline Connections if particularly the northeast this I saw this with in with great trauma after sandy When Verizon in new york city ripped out copper to replace it with fiber Um and here 18 t also becoming much more of a wireless company than wired Here's a comparison chart coming from stanford burnstein showing that where in europe Competition is driving revenue per capita down for the wireless companies In america, it's steadily climbing the two giants Verizon 18 t You have so much of a lead over sprint and t mobile can do things like impose usage caps Drive users into shared buckets of bits So they they get more and more opportunities to monetize those households And things are going relatively well for those companies again, not evil Just the way that shareholders would want them to act This was brought up by Chairman cops in his introduction the idea that not only are we facing Very market powerful actors in these separate realms of wireless and wired We're also seeing the launching of really Broad arguments that they are speakers that the first amendment protects their Activities even when all they're doing is transmitting bits from point a to point b And this argument is being raised most colorfully right now in the dc circuit Where there's a case pending that will be decided later this year Verizon is asserting. We're a speaker. We're protected by the first amendment in effect their first amendment writes trump those of 300 million americans We've had for 100 years a tradition of trusting our communications to private companies in exchange for their promise Not to discriminate and not to send our communications over to depica when we were trying to reach people in pittsburgh If Verizon prevails with this argument It will be presumptively unconstitutional for congress or the FCC to do anything about communications regulation So we are resilient and cheerful by nature What should happen and it's terrifically Pleasant to talk about this in washington because you guys have the power to actually do something about this A first and most important i think element of this story would be to ensure that mayors have the power to call for the creation of Of fiber loops around their cities that are wholesale fiber connections That allow for a lot of retail competition Mayors can execute on these plans and get their local communities to be part of the successful economic growth story accompanied with Accompanied by a fiber network Right now it's difficult or impossible in many states in the united states to have this happen 19 states have barriers to municipal networks By the way, these networks wouldn't have to be community-owned They could be privately run as long as they're subject to oversight We should find a way to preempt the state laws that have made it difficult or impossible For uh cities to do this and return the power of local determination To uh cities in the united states This will have a shaming effect on the rest of the country As we're seeing with the google network in kansas city as we understand just how valuable a gigabit connection can be Did you know the kansas city's Credit rating has gone up Since it announces its fiber optic plans That's pretty dramatic and we'll see more and more of these networks in seattle and chicago and boston We should make it as easy as possible for the cities of america to do this We should also ensure that if you're a Provider of transmission services that you act as just conduit and not also be in the position of providing content Dividing up networks between wholesale and retail makes a lot of sense for areas in which competition is possible And that should be a policy move that the country as a whole takes So that we all have the advantages of open networks And the economic growth and opportunities for new jobs and new ways of making a living that those networks provide A lot of this is just about money. There's no magic here Making it possible for new entrants to show up and build those fiber loops around cities is going to be essential so some way of building local infrastructure banks that fund new networks and get paid back over a very long Period of time is going to be extremely important and right now that's not happening and it would be a big next step to make that possible It's finally it's going to be important to ensure that the transmission operator has no built-in conflict of interest to favor their own material at the moment They're subject to no limitations and that puts in the power of these gatekeepers enormous authority to pick winners and losers and it's a problem Most importantly for me right now What i'm trying to do with this talk to you and by urging you to buy the book and get your friends to buy the book Is to just put this issue on the radar screen Right now americans are a little confused by the china objects new devices Little confusion about how wireless fits with wired what the relationships are between these markets And they have the feeling that there's something wrong because they're paying a lot And there's something wrong because they have few choices But they don't understand the market dynamics that are in place right now And they don't seem to have a feeling that they can change the story We should be encouraging people to vote people new representatives into office on the basis of their commitment to bring Fiber connections to their local community. This has happened in other countries. It should happen here And i'm hoping that the book is playing a role in pushing along the public dialogue to get much more attention paid to this issue so when you go home Think tonight about the lovely electric light that you turned on the country called for electricity And we made sure that as a public trust everybody got A basic Connection to electricity that was affordable resilient available What's basic today for high speed internet access i'm going to put this on the table is 100 megabit per second symmetric connection We've got to find a way to get there for the country and as you turn on your lovely electric light Remember that it took a political Effort backed by a president backed by many representatives on the hill to make that happen it is up to us to Dedicate ourselves to ensure that high speed internet access becomes that kind of issue for the country. So thank you very much Thank you. Oh, yeah all right, so while Susan grabs her breath i will Regal you with a couple of logistical things which are that we're going to talk for 20 30 minutes until we get bored and then we're going to open it up for far more interesting Questions from the audience so start pondering What you would like to ask Susan now because you will have a chance and i thought i'd get things started You know i will say reading this book it was like so Full of interesting tidbits i loved that there was like sourcing throughout and i found myself constantly like going down the Rabbit's hole it was sort of wikipedia in book form in terms of just being able to follow things back and i think that Really is the marker of true scholarship I said in essence you're saying like you don't have to take my word for it Here's all the sourcing behind what i'm telling you And i think that's sorely lacking in a lot of debates inside dc today It's like on the one hand you have science And on the other hand you have like no trust me i've got this great opinion And then you have decision makers that are sort of like how do i balance this and Your book was really just chock-a-brock full of a historical context of where we'd been before of what the outcomes From these historical eras when we failed to act or when we acted In ways that we are now paralleling today And i think that's incredibly important. I would urge any Anyone but especially our key decision makers working in telecom like pick this thing up And learn from that history absolutely And so i thought i'd start with maybe something a little bit lighter, which is we've been working together for years and i remember distinctly the first time we sat down and really sort of Dreamed big and it was in this bar. I think in boston and you said I have this idea. I think we need like an earth day For the internet like something that sort of highlights the positive Potentials for this technology as it spreads across the country and globally and so You convinced me in a matter of minutes and it was worthwhile To have a holiday a national a global holiday to celebrate one web And i was wondering if you could maybe talk a little bit about like why you thought that was necessary It was sort of way before anyone else thought this was sexy You were like there and wanting to hold up the importance of this medium for society at large Well, thank you for remembering one web day, which still lives on in the philippines. They're still doing it No one told them that you know, anyway, it is a uh technology institute has a happy hour every year It's good. It's it well. I did that in 2006. I launched an earth day for the internet called one web day every september 22nd The reason I did that is that we don't make progress on big social issues unless we can see them unless we understand and take responsibility for Problems and in the In the case of the internet I was very troubled that people were sort of beginning to understand it as broadcast tv or cable television a passive experience delivered over screens that had All the hallmarks of an utterly commercial experience and I knew that that wasn't right. I knew that actually internet access was the most important development of my adult life and the And every everybody else is that the notion of being able to start a business without permission To connect with anybody around the world to have the human experience of not being isolated because of internet access seemed to me so vital and so not understood That we needed a day when we would have people teaching each other how to edit wikis bounce a You know a virtual rubber ball across the cosmos. I had all kinds of notions for this day earth day Happened because we suddenly saw a picture of the earth from space and realized how fragile Our ecosystem was we hadn't seen that before Because the internet is not visible. I was worried that we would never have that moment Of concern for the power that gatekeepers might have over internet access and I wanted to make that visible I think earth the one web day was a little ahead of its time because We're now getting to the period when it really is getting to be like cable television and a lot of people don't understand how it works or how it's different from mediums in the past And I'm hoping that every day is now one web day for people who care about the internet And also september 27th and also september 27th Great, um, you wrote Right towards the beginning actually and you alluded to this as well You know instead of electricity or water Comcast was gaining dominion over the country's latest utility infrastructure high speed internet access and for anyone that has Sort of a geeky wonky type like myself like you might be familiar with the guy andrew at leska that writes a lot about trains and you spent a good amount of time talking about The collusion of the robber barons, which I thought was fascinating and incredibly important to understand I was wondering could you explain a little bit like how that collusion worked and how Trains and oil all of a sudden got merged in a way that you wouldn't ordinarily think Much to the detriment of well the entire rest of society Well, when you've got a very Important commodity, let's say transportation or oil and the ability to carve up markets and control that commodity With enough speediness and access to capital If consolidation is possible competition is impossible And we saw this in spades in the railroad era where systems that had been built independently Were consolidated by people who created trusts to run those systems and then the john d. Rockefeller and standard oil Hooked up with the railroads Rockefeller was at that point of his career controlling 85 percent of oil production in america And he said look huge shippers of oil railroad barons I will guarantee you capacity i'll pay for it as long as you promise not to ship my competitors Stuff or if you do i'm going to ask for a drawback A clawback if you ship anything that one of my competitors has put off Into the marketplace I'm going to make sure that you never work in this town again. So with enormous Power over commodities and the ability to make deals that favor themselves These actors were able to Keep people outside their circle away from reasonably priced transport or oil So you can see the same situation Echoed in the telecommunications world very expensive to build telecommunications networks as a as a first step And then where consolidation is possible Competition is impossible. So In lots of consolidation in these worlds and the ability to Constrain access price that it will keep neighborhoods that don't have it out of the story And just build an extraordinarily profitable business so that the two are really Quite comparable in the ways that and now information and data is the oil of our era And we've got a few very large companies Serving shareholders, but not necessarily serving our interests And there's a certain irony which you write a little bit about of theodore roosevelt The head at one point of the republican party Uh leading the charge, right? I mean like he was adamant like his people were like this is bad We have to fix this and get things straight in it like I mean To me it was sort of interesting in that something has clearly flipped In the politics of today Right. Well, this really isn't a right left issue in my view this problem of communications infrastructure You can't have a free market where Communications capacity is constrained you can't have a free market where the ability to Open a new business with the input of communications as part of it is always a little uncertain You can't have a free market where competition is A matter of choice by the gatekeeper who owns this essential infrastructure So in the progressive era Rock-ribbed republicans. I have a great grandfather who was a golfer from new jersey on the far right at the political spectrum He was very irritated at the at the power of the private utility companies in new jersey To constrain capacity For transportation to price at will to make the running of businesses in new jersey quite uncertain And actually in during that era farmers from the midwest and conservatives from the east coast Joined together to say we can't stand the power of standard oil and the railroad something has to be done And what particularly irritated teddy roosevelt was that the combines treated him as a peer They said don't don't prosecute us. Just come and talk to us. We'll make a deal He said no, no I'm the president We played different roles in society And I think we've lost a little bit of that sense So I worry that we've lost it that you don't actually have to wait to hear what the Stakeholders tell you is okay to do You're allowed to act in the public interest And say well, no these these consumers aren't being protected Prizes are too high speeds are too slow. We've got to do something. How do we get there? Roosevelt thought that corporations of this kind, especially in the transportation infrastructure businesses left unchecked would harm capitalism And so he said let's just stay involved. We're going to have oversight government has a role to play That's the big picture for this book not that regulation in and of itself is the positive but that government has a role to play in Making sure that everybody has a very high speed Inexpensive available resilient public safety friendly connection. That's just part of our function as a society And today's joint ventures. I mean we have sort of a merger acquisition Craziness that's happened over the last 10 15 years now But I look at some of these joint ventures And it's like if I just substituted a couple names standard oil JP Morgan for so like I mean would the headlines and stories be meaningfully different today versus 100 years ago Look, I think this is the tendency of large Infrastructure-based industries, but they want to be able to have lower unit costs over a great scale. That's the goal The problem is when that tendency isn't accompanied by an obligation To serve everybody in the case of something fundamental like communications or transportation And to serve them in a non-discriminatory way. They will price discriminate They'll just make more money from the same number of people and that's what's happening today um, I think the joint marketing venture between uh, Verizon wireless and spectrum co, which is the cable companies acting together is again just Exemplifying what's happened in the communications world that they're not going to be fiercely competing That it's in their interest to divide the wireless market from wired and cooperate and jointly develop technology and Make things work better for their shareholders. There's nothing bad about this. It's just not great for us And it'd be nice to talk maybe a little bit about this competitive Problem we have in terms of a what like what is meaningful competition because you hear all these numbers of like We've got eight bazillion providers here in the united states and i'm always like Why do I always have one or two no matter where I seem to go in the united states? Uh, but the FCC agrees so in the national broadband plan, uh, they have a little pie chart It's like page 37 or something like that. It's like 96 percent of americans 96 percent of americans have access to two Or fewer Wireline broadband providers and you talked a little bit about how wireless and wire line are not Equivalent and satellite obviously is not equivalent so If 96 of americans have access to two or fewer providers How do we end up with claims of meaningful competition in this space regularly being made? Well, a lot of this has to do with market definition So in the book i'm particularly focused on the future When it comes to what we're going to need for a very high capacity low latency connections It's very clear that cable has won And and phyosis has backed off and that the word stuck on this plateau A non fiber plateau with cable in charge And no path to a fiber upgrade which would give us the symmetrical upload and download Um, if you say that broadband is anything from 1.5 megabit crappy wireless service to a fiber connection You could say yeah, there's a lot of competition But that's like saying the redskins are competing with gonzaga high schools football team. They're just they're in different worlds And uh, so I think it's important to really focus on what we're going to need as a country So in soul if you move into an apartment in soul You have a choice of three symmetric fiber competitors at least And they'll come to your house within a day Because competition is so fierce if they don't get there in a day You'll give up on them. It's we can't imagine that here That's possible because the mayor of soul even when it was illegal to do so Decided that a wholesale fiber ring in the subway made sense and he was going to make sure that that was subsidized and built Um, and so retail competition is fierce in that city There are also lots of wireless competitors there too. So I think We've got this problem of not being very clear about what we need by basic A basic high speed internet connection for me. It's 100 megabit per second Symmetric connection and new america did a nice report about the cost of connectivity around the world And how much more expensive That basic connection is in america than it is in many other countries and that for me is the salient world we need to look at Yeah, I mean we looked at 22 cities And found that we were paying more for worse service More for worse service in the united states. Yeah, and so it's 30 a month for that 100 megabit service Which includes television Say that again 30 30 dollars a month for how much 100 megabit per second symmetric service with including television Anyway, that's just so painful Soul is a very dense area with lots of apartment buildings So people will say well that you can't compare that to any other city. That's apples and oranges But as america thinks about leading the world They're going to be big ideas coming from all corners of this country And we didn't say to people with electricity Oh you over there in indianapolis you don't get a real electrical connection because nothing great is going to come from indianapolis We decided that it made sense to have a standard connection for the entire country so you could plug in any device And get it at a reasonable cost We should be doing the same thing when it comes to high speed internet access. It's just a utility It's just a commodity So let's let's talk a little bit about price gouging because I've often heard this thing about while soul is very different They've got population density and So i'm like well, that's why 100 megabit symmetric lines in new york city are 30 bucks a month, right like obviously not Exactly and so there's something else going on here But one of the interesting things we did is we looked at The differentials in costing so minimally we're paying 20 dollars more a month For worse service And if we game that out, so there's over 100 million lines in the united states that people are paying for It's like two billion extra dollars a month over that. It's over 25 billion extra dollars. This is extra dollars so over the next 10 years one decade What we're really talking about is a quarter of a trillion dollars They were over paying for worse service than a growing list of other countries and Given that graph you showed about the average revenue per user going in this linear line I mean it was like well, that wasn't just a one-off thing. This is clearly like just a unbelievable trend without end There's something clearly Weird going on here and I'll bring it back to like a very individual level so 15 months ago I bought Comcast for the first time and I got my special 29 99 a month for A small pittance of what apparently they're getting in so right now today In 15 months it went from 29 99 to 47 99 to 64 99 to 69 99 this is just 15 months And I can't fathom like how my price has gone up 130 percent And that's okay in the united states I can't fathom how over the last 10 years average revenues have been sky rocking the profit margins Have been skyro I thought like price gouging was Not legal, you know if you're calling it names This is just the ability to when you're when you have a market cornered It's a monopoly essentially you can just keep raising prices and no competitor is going to enter To make it more difficult for you to charge more prices. They're so high above your margins right now A competitor in infrastructure for high-speed internet wired access has to enter two markets at once Not only the market for building the infrastructure itself, but also the market for programming So the people trying to compete with a cable provider in any american city Would have to somehow buy access to the sports and other things that americans want to watch What people may not know is that Smaller startup Fiber providers will end up paying three or four x What a large distributor of cable access is paying for programming because there are volume discounts that are given to the large Distributors not given to the new ones So all of this ability to charge more for programming raise your arrivals costs by Making it difficult to enter any any new market Just allows you to raise prices and so as long as americans Don't do anything about this. It's not illegal to raise your price. It's only illegal To act in any competitive fashion to leverage your monopoly control over one market and do another That's not necessarily happening here. So this is all about In large cities where competition is possible Opening up wholesale fiber rings would fix this and allowing for a lot of retail competition on top of that And then gradually rolling out into the suburbs and making sure that everybody gets fiber to the home It's not magical. It can happen. It just takes a few steps and some political will to get it done So if I went to my neighbors on my street Like here we are we're like a hundred meters away from each other I just said like let's all discuss how much we're paying for our connectivity What do you think the probability is that we'd all be paying the same rate? Oh, uh, probably pretty low because there are a lot of special offers that people maybe you're not a very good negotiator Maybe somebody else got a better Right but this this very uncertainty and one offness of the pricing is also frankly a problem Because if you're a business starting off, you want to be able to have this input be reliable There's a famous story about a startup in that becomes a very big tech company in brooklyn launching in brooklyn and wanting very fast very reliable service And hearing back from verizon that that'll be $3,000 a month without any, you know accounting for what that cost means or what they're going to be getting in terms of service level remits for that cost There's no oversight of this particular part of american society so So how do we do it? Well because one of the one of the arguments I hear a lot is like well it costs us a lot of money Yeah to bring broadband to rural america and some like well, you know, it also costs a lot of money to move to rural america oil gas And yet the differential Between gas and a port city where it's coming in and say the heartland of america isn't all that great So we looked at broadband pricing turns out between Cities like san francisco And rural america the pricing for one unit a symmetric meg of connectivity Can differ between ten dollars in san francisco And $1,300 in rural america So 13,000 markup for this commodity That's not price gouging. I mean like this like what is going on here? And of course part of the problem is like With oil you have big science. It's like you can see exactly what's going on and people would riot if you know gas cost eight thousand dollars a gallon in illinois, but Broadband it seems like we've completely foregone any sort of balancing of pricing Structures right and this is a big historical point which people should be aware of that for telephone service We Took all these steps. We said it's essential to have a universal interconnected non discriminatory You know service of very high quality that helps public safety available nationwide and we accomplished that through The obligation to serve everyone at a reasonable price and through cross subsidization So people in urban areas were paying perhaps more than people in rural areas, but To enable the people in rural areas to not pay 1,300 percent more With the idea of a universal service and with the idea of A basic wholesale network that's available to anybody to provide Competitive service above it, especially where competition is possible in the cities You can accomplish this kind of reasonable pricing. There does have to be A price control in some fashion in place in order for this to work nationwide And there does have to be a One other method could be to ask cable companies and other providers in urban areas to be universal service Contributors to ensure that they're helping to subsidize the more rural areas What we're doing right now is charging rich people a lot of money Leaving out poor people you're much more likely to be without a wired connection at home If you're a poorer minority or you know low socioeconomic status And then having the state take charge of those people who can't afford it wholly which is putting a Larger burden on the on the rest of us And another large mistake we're making is saying that smartphone access is going to do it for people who don't have a wired connection at home That I think is a fallacy because right now 83 or more of people who have smartphones also have a wired connection at home And people in soul told me they would never rely on a smartphone by itself because of the usage caps and because of the Communication characteristics of a wired wireless connection not enough to have Americans in the middle of the country stuck using only wireless We've got to have fire running deep all around the country to make sure that everybody gets adequate connectivity So we've talked about robber barons and oil and trains and how They were able to leverage control in one to prevent Access in another let's talk about barbershop quartets Okay Let's uh, you're speaking of robert polsky indeed. So the guy who discovered the bit torrent reset package story and for comcast the idea that comcast was It's in a sense telling computer connections To hang up if they try to access bit torrent files It was a barbershop quartet enthusiast probably still is and Discovered this and documented it and it became the big kerfuffle which leads to the open internet order and everything else What's interesting about that story is that it shows that an amateur discovered something Very important about how a network was running its operations sort of almost by accident and got an ap reporter to report on it We have no real visibility Into how these networks are being run Computer scientists aren't allowed to go in and examine what's happening We don't know what kinds of discrimination are occurring And that the asymmetry of information in this area is stunning the FCC Knows much less than it should about how the networks are actually working where the outages are Where backup power doesn't exist we saw that in sandy in spades So We somehow need to raise this issue from amateurism and coincidental barbershop quartet You know discovery to a much more professional truly overseen Industry that is recognized for what it is which is the heartbeat the pulse of everything else we want as a country We want to make sure that our kids get a great education and health care is first rate and that climate change research happens All these things and yet we're leaving the basic input for all of those efforts all those policy directions Untouched by oversight Of course originally when rob was reporting this out. Comcast said we're not doing that and then ap Documented it was and then we're like well, we're just doing it with illegal materials And they were like well, we've just tried to download the king james bible I believe is what they were going for And like well that was a mistake and the nasa was like well our space photos are also being blocked But there was a period of time right where Evidence versus denial was being equally weighed as sort of like maybe we should balance this out and What we were told in the open internet order and etc was like well, we've We've addressed this problem And so now I want to talk about FaceTime and AT&T Because this is breaking kind of now and What AT&T has done is they've blocked access to an application that In essence competes with one that they want to charge you for And the solution as far as I'm now understanding is that they've said well, we're now not going to block it for everyone We're just going to block it for some Users I see all of these stories as just symptoms of a larger market power structure if you've got a few actors that are controlling High-speed internet access in america They will have the right and ability to constrain and price discriminate and pick what happens on those networks That's a natural outgrowth of their role in society right now To focus entirely on what they're doing in the discriminatory area Isn't of as great interest to me as to look at the market dynamics underlying that that if there was In urban areas a lot of competition For high-speed internet access and if there was a role for government in examining the you know consumer protection elements of those competitive networks Then we wouldn't have the net neutrality spat. It wouldn't exist. It's just an outgrowth of the market mechanics here So I'd I'd rather go down to the lower level Then try to tussle through One approval or not by one actor of a particular application I'd like to see open networks that are just a public input into everything we do Like electricity We're going to open up for questions in just a moment So i'm going to ask one more so get them ready and hopefully we'll have a microphone at the ready very soon You call for a hundred megabit per second symmetric Connectivity, I think someone needs to say what's basic. So that's going to be my job today. That's a starting point. So The United States has set a national broadband goal by 2020 Of four megabits by one megabit What are what are the opportunity costs? Because this is something we do very badly. Yeah in the United States. So if we don't get to a hundred megabit or a gigabit plus connectivity by 2020 if we're like Let's aim. Let's aspire to four by one Is that right? I thought that the national broadband plan called for a hundred megabit 400 million homes by 2020 That was after the national broadband fund but the universal goal everyone gets access to a four by one the hundred million to a hundred Sorry a hundred megs to a hundred million homes basically is like The cities of America. I mean like I feel sorry for the rural republicans because y'all are gonna get totally left out of that one But I mean what What what's the cost? associated with I'm looking into my crazy magic eight ball and I'm gonna tell you exactly what we're missing here I don't know what we're missing. What I do know is that we but other countries are investing because they must have some inkling Like well, here's the story The united states was the source for the first generation of internet innovation We were it we came up with this idea and we invented the things that use this network For the second generation Not so clear and so for me. That's the big missed opportunity Not to be having the not to have the sandbox the large marketplace That allows us to experiment build new things create new jobs Give everybody a chance to make a different kind of living get a better education This should be part of the dignity and respect we accord to every american The ability to have just like they have electricity a connection that is part of the 21st century economy We have no path at the moment to get there And other countries see large markets opening up So china has said that for every new house that's built They should be capable of this kind of fiber to the home connection Lots of other countries have set major goals for this This precise connectivity for some reason in america. We're focused on scarcity and sort of a drawing in a lack of enthusiasm for That what might be possible with these side capacity connections and and I don't get it that doesn't seem like the country that I signed up for All right, so we're going to take some questions if folks could raise your hand I'm going to start in the front. Let this be a lesson to everyone to come on down in the front in the future We'll start with these two right here Yeah Thank you very much. I'm fascinating presentation. I look forward to reading your book. Oh good You could just say who you are. My name is sue rutledge. Um, I have just retired from the world bank My question you mentioned in the prepared remarks that uh, the google project for kansas Well, actually was so powerful that it caused an upgrade for the debt rating of the city of kansas Um, I'm wondering if you think that particular model of google projects is applicable for other cities as well There's there's tension about this because I don't want to have uh, google Running fiber for the country. I don't think that's appropriate. I think that um Other cities will see what is possible in terms of economic growth and development from having a gigabit symmetric section and that is interesting having all these startups move to kansas city Understanding that you can run a meeting from four different corners of the country that appears to be real to the attendees Understanding what's possible with telemedicine monitoring older people going to the doctor without having to actually visit the office All of that is very exciting. So for me Kansas city Is like the world's fair was to electricity When we first started off electricity in the united states, we thought it was only good for street lamps Our imagination was very constrained and so World's fairs were held all over the country and hundreds of thousands of people went to see what was possibly these great illuminations and electrical kitchens and all these things we As a country are only convinced when we can see something and kansas city allows us to see What symmetric connections make possible and that's what I mentioned in The model of making sure that there's very high connectivity in a country in a city Is going to be echoed by other cities as the mayors mayors republican and democrat want to see this happen where they live And so gradually they're moving towards it. There are barriers. There are lots of these terrible state laws And incumbents will likely do all they can to block the building of these very fast networks But you're from the world banks. So you will appreciate that there is Strong economic evidence of the correlation between increases in productivity and increases in GDP as a result of Advanced communications networks. We're going to see that I believe in kansas city Good evening. It's a pleasure to meet you It's a fascinating subject. My name is todd wiggins I wanted to ask you one of the things that I noticed that you have you have such great storytelling Capabilities if you could somehow craft your story so it could be developed towards a popular Venue such as the ellen show or you know, one of the late night television or jimmy kimmel I mean you could some weave some stories some jokes into you know, sort of make it more Pedestrian in some ways, right? Yep. You can do that So I want to ask you have you had a chance to speak with mr. Jackson Mr. Jesse Jackson because he seems to be on a similar path With trying to help educate people about the potential of access and a necessity To minority communities across the country and the last thing I had a question I have is when you I'm sure you've met mark cuban who was Great cable entrepreneur. He made predictions about several years ago about how broadband would affect the cable industry How much of that has come to pass and what is your prediction as far as industry-wide? How we should lay this out in the future should it be in detroit Should be in in the other impoverished so so-called cities in the country where we could build industry How how would you see that layout? So john stewart jesse jackson mark cuban. Yeah, these are people. I don't know and I would be my my goal all of you well connected people My goal is to get on one of the major cable shows So if you could help me do that I would I would appreciate it and I will I will tell stories I will do anything. I'll twinkle all night long Just get me on one of those shows Because really that the only priority for me is getting this on the radar screen Just making sure that americans understand that they have Responsibility for this that is not something that the market is not going to produce this by magic There is a role for intervention by policy officials to ensure that everybody gets this basic level of connectivity and We can't you know eisenhower republican president built the interstate highway system so that Cities and towns wouldn't be isolated There are places where government steps in And we need to change the rhetoric about this so that we can't have this knee-jerk response That government is always bad. There are some collective action problems that can only be resolved by involvement of policy Let's get some hands right here Thank you, susan in great presentation. Earl Comstock former CEO of comptel and one of the staff that worked on the 96 act um I was fascinated by your presentation and particularly by your proposed solution and as a law professor. I guess my question really is Very little mention of the communications act And the availability of existing law to solve this problem the solution you seem to suggest would imply Uh that we need some kind of new action and i'm curious to hear your thoughts on couldn't the FCC frankly undertake much of what you're talking about because I will say From my experience with comptel While it sounds great to talk about individual cities building these fiber rings You got to get the infrastructure all the way to the home and that's what's proven to be prohibitively expensive even to even the most business Offices it's proven to be expensive And so I really question whether just having fiber rings is going to really make a difference But I mostly was curious in your book you you you mentioned these things But there's not really any discussion of the fact that it seems to me under existing law You could fix this problem if an administration were so inclined Having spent some time in washington i'm impatient with uh the ability of federal policy To change things quickly And what i'm looking for is a tipping point where it becomes the air of inevitability just sweeps over the land People say well of course everybody needs a fiber to the home connection And that is only going to happen by a series of incremental moves first to patchwork across the country Where people see what's possible with these networks So that's why my first move is to the cities because if we try to do this in the abstract Just in this town I'm not sure it's going to happen. We really need a lot of action locally I think under existing law the FCC could accomplish many of these goals As you know, I think you did a fine job drafting the you know 96 act. It's all there. We just need to use it But that's proven to be politically extraordinarily difficult here So, you know, let's move out into the rest of the country show what's possible and then have the political apparatus react That's that's my direction at this point We go here My name is rafael DiGenero another duopoly in america Delivering a substandard product that high cost is the democratic and republican parties Can I use that? That's really funny. That's really good Well, what's the connection between those duopolism monopolies and What signs of hope do you see in either party or in independent voices? Yeah I think both of these in both of these sectors wired and wireless the political connections are are very deep and and strong And there's no particular upside right now for anybody on the hill to take on this issue It's proven to be extremely difficult at the commission to do anything Um because the existing companies could just march on the hill if the FCC chairman tried to act and gut his agency's budget So I I actually don't see that much hope in the current political construct I am hoping that this issue as it becomes more visible and popular and accepted Becomes a rallying cry for politicians at the moment They'll just lose a lot of campaign contributions if they dig into this one And I would like to change that situation, but it's not going to change overnight So I wish I could be more optimistic. I'm sort of abdulliant by nature But this one is this is hard and I don't want to pretend that I'm going to switch that Right back here Mr. Felicima I'm a graduate student at the university of colorado So one of the slides that you had showed the wireless service revenue per capita And it was decreasing for europe and it was increasing for the u.s. Yeah, and I'm just wondering as in Doesn't that make the u.s market more attractive in which we've seen as in terms of 20 billion dollars from soft bank for Sprint or D mobiles acquisition of metro pcs and there's an article in the rafters this sunday Which showed that the european markets were finding it really hard to Get investment to upgrade to 4g networks in america is leading the way in 4g So does isn't that how markets work where if the revenue is increasing it's more attractive investment comes in The infrastructure is upgraded and europe is lacking in in 4g right now. So i'm wondering what your thoughts are about that Well, uh, these companies have made their investments and now they're harvesting so um You know you could say yes, that's that's terrific It is good thing that the at and t t mobile merger was blocked And t mobile has its voice back now And if we can make sure that the next auction is run in such a way that t mobile gets access to low-band spectrum They could really be quite a maverick and it puts some pressure on at and t and verizon I'm hoping for that But without a change in policy The existing companies are just going to keep making more money from the same numbers of people Which is and they have no incentive to run fiber to all of their towers To ensure that everybody has a reasonably priced service there. That's not in their business plan Again, there's nothing bad about this It's just that what you want to do as a wireless or wired company is keep your capital expenditures as low as possible And make as much revenue as possible on top of that the capital capital expenditures have been made and now they're harvesting All right, so let's go to the mid-back area here. We'll go over here Hi matt star from tech freedom You said that wireless is not a viable substitute for a wired connection that the two are not competitors I was curious then If there was potentially, let's just totally hypothetical a merger between say time Warner cable and verizon wireless Would you be okay with that? And if not, why not? Um I think the reason i'm focusing on the separate Markets here is that we need to stop being confused about the level of competition for high speed internet access in this country And that the fact that netflix usage on wireless connections is in the low single digits And yet is the most popular application user for a wired connection I think it's quite indicative that people are using these two things in different ways Wireless is very useful, but it's a separate market. So the reason I go into all that is to try to dispel some of the Just fog around what is uh, you know, what the wired high speed internet access market looks like And how much you get to include in that circle when you're talking about the state of american policy All right, I don't think a merger between verizon wireless and time Warner cable is a great idea Um, because at least now time Warner cable has some incentive to push out more wi-fi in its areas To share its wires or allow people to share wires Um, has some incentive to you know Think of other wireless parts of its operations that don't necessarily involve verizon. By the way, they have essentially They have essentially merged through the joint marketing agreement. They are operating together So maybe a formal merger isn't really necessary Gentlemen in the back there Thank you. My name is stew whittaker and uh, I first uh, started working in telecommunications in 1980 Uh, which seems it was it was literally decades ago and So I've seen decades worth of a battle similar to what I hear you describing here I haven't read your book, but I Loved your article. I think it was in the new york times Um a week or so ago. I had just been to an entrepreneur's meeting here in washington dc Where a young entrepreneur less than half my age This uh, was describing how he was going to introduce red boxes uh to the uh H march and the other kinds of uh, communities around here that aren't native english speaking And I and I thought about that and I said, okay, he looked at it as a great opportunity He said the people that I want to serve can't afford internet They can't afford for broadband and I thought to myself from a public policy perspective I really would have loved to have seen him get on board with the idea of bringing broadband and internet to his Uh to his community, but instead what he saw was a profit motive in in delivering h box type Uh movies to non-english speaking Communities, so I say all that to say look they're they're tremendous Economic forces here and and and profit forces that that are at work and and you know when I look at At senator warren in massachusetts. She succeeded in and and getting a great voice in the senate So if you run for the senate, I would I would love to support you otherwise. I'm not certain how this is going to happen So can we talk a little bit about maybe business models because I think this alludes to that right, so a reason to have Fiber rings and in municipalities and all a reason to free up the 19 states that right now have limitations on alternate business models is I'm assuming Maybe spurs some competition lower pricing create opportunities for self-provisioning and alternate Ways to bring connectivity to underserved communities Do you see glimmers of hope in that or oh sure? I think that it's a it's a reframing problem to take what we now think of as a luxury Sort of like a first run movie a media event Which is high speed internet access and make it into something that disappears It's just an input like electricity or water into everything we do in life That's the big shift there. There's lots of money to be made on top of that facility And lots of new markets to be opened, but unless we get this Basic infrastructure in place those markets don't get a chance to flourish And that that's what I'm worried about is the creation of new markets on top of the business model of a essentially utility And to give you an example of just how absurd some of these state barriers are I was part of a group that helped set up connectivity after Hurricane Katrina And part of that was a network that was in and around New Orleans And when they lifted the state of emergency there They had to shut down the network because by state law it was too fast For a municipality to provide Right and there's a bill that's just been introduced in georgia that says that if in any locality You can get access to 1.5 megabit service, which is essentially crappy wireless The municipalities are not permitted to act not permitted to call for the creation of higher speed internet access Whether they own it or not not permitted to do anything. That's a sledgehammer of a bill That's a bill that would keep the status quo in place in georgia forever So it's being opposed by a bunch of players will see what happens, but there have been Efforts like this across the country and the same thing happened in electricity the same thing happened The private utility company said don't we it's it's bolshevik To have a cooperative involved in providing electricity to you know Community that that that's just surely inappropriate So i'm i'm being reminded something that I forgot at the last time I gave a book talk Which is that part of my purpose here is to actually ask you to buy the book I completely forgot I said oh it's been so great to talk to you But in fact you need if even if I've already given you a copy even if I've already given you several copies You need you need to buy the book because the publisher needs to see that people are buying it So I would appreciate that it would be a great gift to me. So thank you All right, we're gonna take one more And then open it up for more wine and conversing with season before she has to run out I know you've got a train. So we'll take one more in the back here Thanks, I'm drew Bennett I definitely support the thesis that this is a public good and high-speed connectivity You know is in the public interest I think some of the anecdotes and particularly the pricing discussion Actually draw attention away from that and do a disservice For example the san francisco versus rural town 1300 to 10 I mean if If it cost me $10,000 to build out to 1300 people And even you know half of that to build out to 10 then of course. Yeah, I can see charging 13 times as much for the 10 Um and the comparison with oil and gas 130 times as much you said 1300. Okay 100 still I mean over over time like a year and a half a monthly bill like that Can do that in no time with those types of disparities in population density And then when it comes to like comparing to oil, I I don't see where that goes I'd love to see the cost of what it costs to get oil out to rural areas. Um, I don't think it's that much in comparison So let's focus that attention on Things like soul and on the cost of building out networks and cities like that And you alluded to, you know, some of the benefits they have there not just density but political So what would it cost to turn Kansas City into soul? I think we're getting an idea of that but I think like that type of focused attention to talk about what is going to cost a mayor In terms of, you know, well the politics of it What are the policy steps that a mayor would have to go through? Uh, and then what's again, I'm costing that taxpayer an analysis like that from the america foundation or others Would really be helpful if we're going to make all if the comparison we're going to start with is soul versus the us Then that should be the the analysis that that comes next Look, I think very simply if you treat this as a long-term investment that's going to pay over many decades And that it is going to be expensive to build but it pays for itself over time Government costs of providing connectivity to government actors go way way down in stock home. They went down by 40 percent New industries have that input available to them become more productive offer more jobs There's lots of evidence that Just as it's expensive to build electricity, but then it pays for itself over time this kind of connection does the same thing Right Yeah, that's very helpful. Thank you. I appreciate that So a number of us are going to be descending next monday and tuesday to david eisenberg's freedom to connect to continue These kinds of conversations see this gentleman if you want a nice intimate atmosphere to ponder and conspire In the interim, please stick around for more wine and drinks And please join me in thanking susan crawford for being an amazing