Interviewer: Why should we have a public option for Internet access?
Interviewee: We need a public option for Internet access because Internet access is just like electricity or a road grid. This is something that the private market doesn't provide left to its own devices. What they'll do is systematically provide extraordinarily expensive services for the richest people in America, leave out huge swathes of population and, in general, try to make their own profits at the expense of social good.
When it comes to fiber penetration, that's the world class network we should have. We're behind Sweden, Estonia, Korea, Hong Kong, Japan, I mean a whole host of other developed countries. We should be looking the rest of the world in the rear-view mirror. Instead, for more than 77% of Americans their only chose for high capacity connection is their local cable monopoly. So just as we have a postal service that's a public option for communications in the form of mail, we also need public options in every city for ubiquitous very high capacity, very high speed fiber Internet access. That way we'll make sure we can compete with every other nation in the 21st century.
Interviewer: How does the market fail to offer Internet access that you see is acceptable?
Interviewee: Well, here is the problem. This is a very expensive thing to build in the first place, like the highway system also very expensive to build, and so as a profit making company, what they're going to try to do is focus on those areas where they feel they can reap the highest rewards and those are often the richest neighborhoods, richest suburbs. They're going to leave out less dense areas and places that are more remote, but we're one country and every American needs this access just the same way as every American needed a telephone line.
Interviewer: It seems that core to this argument is the idea that Internet is almost a right, and not just Internet, but extremely high speed Internet, fiber Internet. Why should we see that as a right and not a luxury?
Interviewee: I wouldn't frame in terms of a right, I think it's just a utility other countries just take it for granted. I went to Stockholm in December they pay about $30 a month for gigabit access something we can't even imagine in the United States.
Interviewer: How fast are we, typically?
Interviewee: Ten megabits per second or less. So this is 100 times faster, what's happening in Stockholm and Soho and Japan and Hong Kong and a whole bunch of very reasonable Northern European countries. They just say that this very high capacity connection is needed to power many screens with very high resolution so that, for example, many people in your house can be using this connection, businesses can populate entire walls with information.
Look the historical analog here and the reason that this is the utility when electricity was first invented my grandmother would have called it the light bill, the electric bill because it was only used for one device in the house. Same thing here we have this image of Internet access just being for a single PC or a single connection by one family member inside of a building. That's not where we're going. Everything we're doing is going to be powered by Internet data. In order to make the new things that it will be useful in that world, we've got to have those very high capacity networks.
Interviewer: You talked about Internet as you a utility, but when you explain it, it sounds almost like a platform. If the argument is that this is a platform for the next economy much as roads are a platform for the inter connected economy that we had prior, much like the postal service ended up being a platform for the integration of the country and that in order to have all kinds of other things because they doesn't exist yet, it can't pay for the services it'll need.
Interviewee: I call it a utility because that's the model of oversight that it should have, but the larger vision is just to what you roll out, it’s an input in absolutely everything we do particularly as economy moves more towards being an information services based economy. We're not making things as much as we used to. We're certainly not an agricultural nation. So this is the essential input into entertainment, social life, cultural life, economic growth, everything else we do.
Interviewer: So one way of understanding your argument is that it's highly government centric. Something you really emphasized is that the problem here is actually a lack of competition. That for most people in most cities you don't have a bunch of choices for the Internet. You have one choice and because that choice ends up being a local monopoly, they can charge too much and deliver too little. Why has it ended up that way?
Interviewee: Well, what happened is we deregulated this entire sector about 10 years ago. The cable guys already had exclusive franchises across the country. They were able to very inexpensively upgrade those to pretty high speed Internet access connections. Meanwhile, the telephone companies have totally withdrawn from this market. They had copper line and the ground is expensive for them to build it over and replace it with fiber.
So, because of both deregulation and sweeping consolidation in the cable industry we've ended up on this plateau where about 80% of Americans their only choice for a high capacity Internet access connection is their local cable monopoly.
In a sense, I'm trying to have it both ways. What I'm saying is that this is by nature a natural monopoly. It really makes sense to have one wire going to your house. The problem is we've gotten stuck with the wrong wire. We've got a cable wire and it should be fiber and it should be then shared by lots of competitors. That’s what drives prices down, that's what gives people choice. But if you hand to one company, the ability to control that market they'll just reap their rewards and price discriminate and make lots of profits that are in their interest and not maligned, but not in our social interest and having a complete coverage for the entire country.
Interviewer: I think the numbers tend to say we're 26, 27, 28, worldwide in terms of cost for Internet access holding speed constant. Yet, we are by far, it seems the best at innovating and top Internet and the best at taking advantage of what it has to offer. Does that argue that this infrastructure that making it better and better and better actually isn’t that important that that may not be the operative binding constraint here?
Interviewee: Oh, that's so interesting. No, actually, it turns out that their culture in these other countries is not as innovative as ours and that has been a comparative advantage for us. I went to Stockholm. The Swedes there say we have a very fast network, but our city is too neat. Nobody bumps into each other. There's no grit. There's no energy for innovation. Same thing in Seoul. I visited there and the kids there said, "Well, if we invent anything, Samsung will just crush us." So we've got this huge advantage in an innovative culture, but if we don't have the networks to play with, we won't be the new place where new ideas come from. They take advantage of very high capacity applications. Those other countries are catching up.
Interviewer: Something you've done a lot of work on is the idea of the open Internet. The road where anybody can travel upon it no matter how heavy the truck is, so to speak. There's recently been a series of court decisions that have put that a little more into threat where net neutrality has become somewhat more under question. There has been news that Netflix is paying Comcast in order to get direct access to the Comcast backbone. What is the open Internet and is it actually something that we need to be concerned about?
Interviewee: Well, the reason why the Internet is the most exciting thing that happened in my adult life is that it doesn't require permission.
Interviewer: Have you seen the Bachelor?
Interviewee: I love the Bachelor. It's great. The reason why the Internet is the most important development in my life is that you don't have to ask anybody for permission to start something new. You can launch something in your garage and it becomes this extraordinary thing like Facebook or Google.
What has happened is that because of deregulation, what the FCC did 10 years ago, they're trying to simultaneously say here are some rules for the open Internet, but we're not going to label Internet access as a utility. The court, the DC circuit, just a month ago or so said, "You can't have it both ways. You can't both say that Internet access is a luxury, and a regulated product and have these rules about keeping these permission list Internet open."
That's why net neutrality, which is the idea that anybody can use the Internet for whatever application or service they want to is under such threat. It’s because our regulator has given up its authority to say anything to the providers of high speed Internet access. And, in that vacuum we've got tremendous consolidation. Comcast this enormous company, largest media company by revenue in the world at this point, has been able to force Netflix to pay tribute in order to reach Netflix's subscribers that's possible because again our regulator has given up all oversight of these high speed Internet access networks.
Interviewer: If Comcast were sitting here they would say, I think, that you began that answer by saying that the beauty of the Internet is that any new company can come on to it. But then at the end of the answer it was about Netflix, a massive incumbents, who uses massive amounts of bandwidth. They would argue in a limited bandwidth world of which they are in with their technology, that in order to keep space the new entrants there needs to be help from the folks who are picking tremendous amounts of bandwidth who are at this point are massive established incumbents. You don't, I think, think that is a reasonable response?
Interviewee: Oh, no, not at all. Actually, right now they're charging Netflix. Netflix got a pretty good price because it's so big, this incumbency you mentioned. What about the next person, the next company that uses a lot of capacity? It could be a telemedicine service, could be a distance education, they're also going to have to pay tribute to Comcast. Comcast is making north of 95% profit on its prevision of high speed Internet access services. Its capital expenditures as a percentage of its revenue are down to 14%. It's in harvesting mode it's making tremendous amounts of money. It doesn't need to charge those companies that want to reach their subscribers, it's just it can, and so that's what's going on.
Interviewer: What is constraining cities now? Is the problem a money one is the problem regulatory?
Interviewee: It's almost funny. In 20 states the Unites States, states have passed laws saying cities don't have the choice to do this. These laws have been ran through often by incumbents cause they just hate change they're happy with the way things are. So one thing that needs to happen is we need to, it's called preempt block the effect of these state laws so that cities can make the decision for themselves. The FCC to its credit, Chairman Wheeler has announced that this would be a good direction to investigate making clear that state legislators can't stop cities from at least having this threat of a public option in mind.
Interviewer: What are the arguments that a state legislator makes when it stops a city? Why do they say it should be illegal for the city to build a fiber backbone so it has faster Internet?
Interviewee: We went through exactly the same story with electrification. Often the state legislators don't quite understand what's going on or they think of this as a luxury that should only be provided by the private market. And so they just say it's going to be a waste of money for cities to have anything to do with this and so it's in the state's interest to constrain the cities from wasting their own money. That's the argument. It's all a complete canard as it was in the time of electrification.
Interviewer: Do you think of the political circumstance under which a project of the size that you're talking about could happen? Historically, what have been the forcing mechanisms that have made it possible to make these tremendous investments and changes in the way we deliver fundamental infrastructure?
Interviewee: Well, this is fundamentally a question of leadership. In the absence of Eisenhower at the time of the federal highway story, it wouldn't have happened. In the absence of Roosevelt who really took on the electrification special interests and decided he was going to fix the situation it wouldn't have happened.
The first step is actually leadership and someone who understands this issue and understands that we're falling further and further behind and is concerned about our future. As a nation, this requires long term thinking, but these infrastructure issues are not partisan by nature. The free market only functions if it has these level playing field inputs that are in place like electricity, communication services, and roads.
It isn't at all unusual for the state to get involved in these kinds of things. So, you add together leadership, plus great unhappiness on the part of the American people, plus some ability to tell this story plainly so people understand it and they're not confused and I think in time you'll see quite a movement towards mass fiberization in the Unites States.There may be small errors in this transcript.