Technology Futures

The FCC has approved the SBC-AT&T merger and the Verizon-MCI merger. What these deals really mean is that long distance as a service is dead, dead, dead, as I like to say.

The baseline for telephony service is now nationwide flat rate calling, or some variant of that that includes a lot of long distance minutes in the base rate and something around or below five cents a minute if you go over.

AT&T and MCI have dwindled in recent years to nearly nothing because they could not look past the long distance cash cow. Both companies had millions of customers paying around twenty or twenty-five dollars a month for long distance service, and it was easy money.

But the whole long distance business was built decades ago on private, long distance networks that connected to local switches. It was a big, expensive business to build all those trunk lines, so even after Ma Bell was deconstructed in 1984, there were really only three major players--AT&T, MCI, and Sprint. Most other long distance companies just bought wholesale and resold capacity.

Like everything else, the Internet has been the big spoiler. What has happened over the past several years is that most long distance traffic has been switched over to packet-based Internet trunks, which is cheaper and easier to do, and the old dedicated long distance networks became irrelevant.

The death of long distance has been inevitable, but it remains to be seen if it these mergers do any good. We have fewer and fewer companies owning a larger and larger share of telecom services. I remain steadfast in believing, as many others do, that the only way out of this marketplace monopoly (not a good thing) is distributed ownership of networks. Communities and governments have to get involved in creating open service provider networks to create a balance to the monopolies we have in most communities.

If we don't do this, the future of many communities will be increasingly grim, as high telecom costs will make these places noncompetitive from an economic development perspective.

The Kansai Electric company in Japan has deployed new equipment that enables them to transmit 1 terabit of data per second over their company fiber lines.

That is 100 times faster than most of the fiber transmission electronics currently in use, and shows why fiber, while somewhat more expensive on the front end, is such a safe bet. Research in laboratories has actually achieved even higher speeds, but the Kansai equipment has actually been deployed in the field. Fiber can be upgraded without replacing the fiber and duct lines in the ground or on poles, which is a big advantage, and it makes fiber future proof.

Taiwan joins the growing list of countries that have nationwide strategies for providing some kind of broadband everywhere. The government has inked a $209 million dollar agreement with Intel to build an island-wide WiMax network.

Taiwan is much smaller than many U.S. states, but nonetheless, can you point to a single U.S. state that has put any significant funds behind a statewide broadband initiative?

Neither can I.

The odd thing is that states continue to dump tens and hundreds of millions of dollars into traditional economic development recruitment strategies to bring (typically) Manufacturing Economy businesses into a state, rather than attending to basic infrastructure improvements that would boost the opportunities of thousands or tens of thousands of smaller businesses. And keep in mind that all the job growth is in those small businesses (25 employees or less).

So state leaders dump millions into a single business and ignore all the businesses already in the state. And in Virginia, the state has had to sue some companies that took millions in incentives and then did not create jobs or move.

There are no technology problems. We have a lot of leadership problems, though, and the only thing that will fix that is an ongoing program to better educate our leaders on the issues and what we expect them to do.

What I and others have been predicting for years is starting to come to pass. As the number of broadband providers has narrowed to a duopoly of the cable and phone company in most regions, these firms are starting to muscle out third party service providers. VoIP startups are the first target because both the phone and cable company want VoIP customers of their own, and the simplest way to do that is to simply block all VoIP data packets except their own. Evidence of this is clearly visible as hardware manufacturers begin to sell VoIP blocking appliances.

This is the strongest argument of all for community broadband infrastructure, which is offered as a level playing field for all service providers. Community leaders that simply hand over the economic development keys to a monopoloy broadband provider by doing nothing are consigning their communities to a slow death. Businesses will avoid regions where there is monopoly control of services (that is, all telecom costs will be higher there). New businesses will have a harder time starting, and entrepreneurs will pick up their families and move elsewhere.

The opening shots are being fired. The goal is to kill competition and create monopoloy markets where a private company decides what services your community and businesses get, and at what price. How will your region respond?