Warning for Canada in Comcast’s U.S. Internet dominance

Special to The Globe and Mail

Since its acquisition of media conglomerate NBC Universal in 2011, Philadelphia-based Comcast now has power over almost every aspect of Internet access, distribution and content. With the Internet being a utility that people cannot do without, the situation is reminiscent of the late 19 th and early 20 th centuries, where oil and electricity barons ran roughshod over competitors and the public. (Comcast)

Canadians like to complain about their Internet access, but Americans have it just as bad – if not worse – according to a new book by Susan Crawford, former advisor to President Barack Obama.

In Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, Ms. Crawford writes about how one company – cable giant Comcast – effectively owns the Internet in United States, and sets out to prove why that is bad for the country overall.

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Since its acquisition of media conglomerate NBC Universal in 2011, Philadelphia-based Comcast now has power over almost every aspect of Internet access, distribution and content. With the Internet being a utility that people cannot do without, the situation is reminiscent of the late 19th and early 20th centuries, where oil and electricity barons ran roughshod over competitors and the public.

“The sea change in policy that led to the current situation has been co-ordinated over the past 20 years by legions of lobbyists, hired-gun economists and credulous regulators,” she writes. “None of this is good for consumers or American innovators.”

Ms. Crawford is a respected voice south of the border. She’s a professor at Cardozo law school at New York’s Yeshiva University and a fellow at Roosevelt Institute. In 2009, she co-led the Federal Communication Commission’s transition from the Bush to Obama administration, where she helped administer more than $7-billion in funding for broadband development across the country. (The FCC is the U.S. regulatory equivalent of the Canadian Radio-television and Telecommunications Commission.)

Her views on the U.S. market are also relevant in Canada, where there are numerous similarities in terms of concentration of big market players, vertically integrated media companies and business tactics.

Like its large Canadian counterparts, Comcast has the ability to raise Internet access prices at will, constrain those services through usage caps and make life difficult if not impossible for online competitors to spring up and prosper through its media holdings.

Ms. Crawford takes a dim view of Netflix’s long-term prospects, for example. The online streaming company degraded the resolution of its offerings in 2011 in reaction to low monthly usage limits from Canadian ISPs, a move that Comcast is aiming to replicate in its markets.

“Comcast can impose usage caps that make it more expensive for anyone planning to substitute Netflix for their Comcast package. It can make Netflix’s video more uncertain as it reaches consumers, it can raise Netflix’s programming costs in league with the other programming providers,” she said in an interview. “It has a thousand dials to spin that make life uncertain for other online businesses.”

With Americans wanting both Internet access and content, it’s nearly impossible for a Comcast competitor to enter the market on equal terms since it would have to heavily invest in delivering both. Even search giant Google, which is currently rolling out affordable super-fast Internet access in Kansas City, is having trouble providing customers with television service, since Comcast owns the rights to sports programming in that market.

Much of the book documents the cable company’s rise to power, from its roots as a tiny, family-owned business in the 1960s to the largest television and Internet provider in the country. Ms. Crawford also looks at the unspoken non-compete agreements between various cable and telephone companies that have effectively divided the United States into regional fiefdoms, including recent decisions by AT&T and Verizon to pull back from rolling-out their own next-generation broadband networks.

By concentrating on wireless, the phone companies have essentially ceded the wired broadband market to Comcast, giving it the equivalent of a monopoly.

“For somewhere north of 75 per cent of Americans, their only choice for wired high-speed Internet access is their local cable monopolist,” she said. “For most of America’s big cities, that actor is Comcast.”

The solution, she writes, is for government and regulators to treat Internet access as a public utility, rather than a luxury. It should be regulated and overseen just like the electricity market, in order to give Americans “affordable, globally relevant access.”

So far, the necessary authorities have been afraid to stick their necks out and take action, since there have been no political rewards for doing so. But with public frustration and anger mounting, Ms. Crawford sees such justification arriving soon – within the next five years.

“There are already a lot of Americans who are angry that these bills are so high and that they’re cutting into their paycheques,” she said. “A movement already exists, it’s just a question of making it more visible to itself.”