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Warning: Time Warner-CBS Clash Points Up Big Trouble Ahead

It's a dispute over dollars, a battle one consumer advocate called "a food fight between two haves at our expense."
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You've probably never heard of Susan Crawford. But these days there ought to be dozens of airplanes pulling banners with her name on them flying over New York City, Los Angeles and Dallas -- signs that also read: "DAMMIT SUSAN YOU WERE RIGHT."

That's because Ms. Crawford, a law professor and former White House telecommunications official under President Obama, has been way out in front in warning the rest of us about the dangers that come from our permitting big cable and telephone companies to exercise monopoly or near-monopoly power over our television, cable and Internet services.

The awful result of that power has now been felt by three million people in NYC, LA, Dallas and other cities. Time Warner Cable, which has a monopoly on those services in large parts of those cities has stopped carrying the signals of CBS television stations and CBS-owned Showtime there, so customers can't watch them.

It's a dispute over dollars, a battle one consumer advocate called "a food fight between two haves at our expense." A 1992 federal law empowers CBS to negotiate payments from Time Warner for so-called "retransmission rights" to carry its programs. CBS is now demanding a lot more money from TWC for those rights -- an increase from the current price of less than $1 to around $2 per viewer per month (some or all of which would doubtless be passed on to viewers). The cable company refuses to pay that much, talks are stalled and Time Warner has blacked out CBS to its customers in those cities.

As Susan Crawford points out in her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age, published earlier this year, cable and telephone companies -- mostly cable -- have near or total monopolies of TV and Internet service in different parts of different communities across the vast majority of this country. So if your sole provider cuts off your service, there's generally nowhere else to go.

As a result, TWC viewers in the affected cities have already missed seeing Tiger Woods win a golf tournament Sunday, as well as "60 Minutes," among many other programs. If the blackout continues, TWC pro football fans in Dallas will miss the Cowboys vs. Oakland Raiders pre-season game next Friday, when baseball fans won't see the Rangers play the Houston Astros. And, of course, next weekend's PGA Championship will be off limits to TWC-viewing fans in all the affected places.

This is not the first time that disputes between networks and cable companies have resulted in blackouts, but it could be the longest. Some media analysts even speculate it could last anywhere from ten days to six weeks. And it's unlikely to be the last big blackout because there's a lot of money involved:

Selling retransmission rights has become big business for broadcasteers such as CBS. Research firm SNL Kagan estimates retransmission fees will reach $3 billion industrywide this year and double to $6 billion by 2018.

The 1992 law was supposed to insure competition. Instead, the big telecom companies like Time Warner, the nation's second biggest cable provider, or Comcast, the biggest, or Cablevision or Verizon and other big telephone companies have largely carved up the country among themselves to avoid competition. Crawford points this out in her book and writes:

Traditional wisdom dictated that competition would protect consumers from the cable companies abuses and obviate the need for regulation, but things did not work out that way and now America has the worst of both worlds, no competition and no regulation.

But the monopoly problem that brought about the blackout is not the biggest part of the story. It's a pain, but far from a disaster, for people to miss their favorite TV shows. The really big problem, Crawford insists, is that along with cable TV, millions of subscribers get Internet service. She argues that high-speed Internet service, also called broadband, which millions of Americans aren't getting, is absolutely essential to this country's economic future

Truly high-speed wired Internet access is as basic to innovation, economic growth, social communication, and the country's competitivenes as electricity was a century ago, but a limited number of Americans have access to it, many can't afford it, and the country has handed control of it over to Comcast

[and TWC and the few other biggies].

In a New York Times op-ed, Crawford argues further that:

Both the wireless and wired markets for high speed internet access have become heavily concentrated and neither is subject to substantial competition nor oversight. Companies like Time Warner Cable routinely get their way when they seek to prevent local officials from encouraging competition. At the federal level, Verizon Wireless is keeping the F.C.C. in court arguing over the scope of its regulatory powers -- a move that has undermined the agency's authority.

As a result, prices are too high and speeds too slow, a third of Americans opt not to buy high-speed Internet access at home, often because they can't afford it.

Those too-high prices and too-low speeds can be traced directly to lack of competition and regulation (former FCC chairman Julius Genachowski wants the country to build additional fiber networks that are 100 times faster than most residential connections today). But telecom companies are not eager to foot the enormous expense of having to install fast, fiber-optic cable in areas already dominated by another big firm. They'd rather find other places to monopolize. Crawford is not surprised by the result:

"America lags behind almost every other industrialized country in high-speed access -- even France, the bete noir of American free marketers, has better and cheaper Internet access" [not to mention Japan and South Korea].

"We need reasonably priced, globally competitive, ubiquitous communications infrastructure so that Americans can compete and innovate."

We may need it -- and desperately. But with Big Telecom monopolists in the saddle, badly outgunned regulators having only very limited power and motivation, and a Congress that routinely puts business interests far above the public interest, there's no indication we're going to get it.