Technology Futures

USA Today has an interesting article about telco giant SBC and the company's plans to deploy IP TV to 18 million households.

In the article, SBC COO Randall Stephenson shrugs off the $4 billion cost of the effort as "not much money for us to burn." That statement ought to make FCC officials sit up and take notice, since recent FCC decisions, we are told, have been designed to help the telcos fight off competition.

If SBC can blithely shrug off a $4 billion gamble, I would say the company does not have enough competition, rather than too much.

But don't be mislead by the article. SBC's IP TV is not the kind of freewheeling and open IP TV envisioned by groups like Participatory Culture are already rolling out.

Instead, it's a completely closed system closer in concept and execution to today's cable TV. You'll need a special set top box designed by Microsoft and available only from SBC, and you'll only get to watch what SBC offers--just like current cable TV.

If relying on Microsoft to make it work doesn't give you a big, queasy knot in your stomach (can you spell "virus," "malware," and "Internet worms?"), how about relying on the phone company for service?

SBC's vision of the future is one in which the Internet access they provide is a "walled garden," where they control everything we see or do.

There are two meta-issues at play with the future of TV.

One is control of the distribution network. If you buy your Internet access from SBC or one of the cable companies, they can control the way data flows over their network to discourage accessing free or alternative video content from sources outside the company. It is critically important for communities and regions to build telecom infrastructure so that citizens and businesses have choice in Internet services.

The second meta-issue is content development. The SBC model, which they are disingenuously calling IPTV, is really the old cable/satellite TV distribution model, using a more efficient transport system. What's already in play are systems like Bit Torrent, RSS, and software from groups like Participatory Culture that enable any individual, group, or company to get into the content creation and distribution business.

SBC's model is evolutionary; it uses new technology to increase the efficiency of a fifty year old business model. The Open Source systems are revolutionary; they are using new technology to enable entirely new business models.

It's easy to throw rocks at the FCC, but recent rulings have clarified the lines of battle. It's the economic future of communities against the telecom cartel. It need not be a long or ugly battle; communities that choose to invest in the future will force the cartel to play fair and offer competitive services.

Communities that don't invest are giving their future away, and may shut out economic development.

This article on Ethiopia's countrywide broadband project, which is four years old and beginning to deliver results, puts U.S. states to shame. Impoverished Ethiopia gets what many rural states and communities in the U.S. are still trying to understand. Here is the money quote from the Ethiopian prime minister:

Because we are poor, we can’t afford not to use ICT.

Exactly. Distressed rural and urban communities in the United States can't afford not to invest in IT. What is important about the Ethiopan effort is not what they did (the technology choices they made are tied to other infrastructure issues), but the fact that they recognized a problem, created a plan, funded a plan, and followed through.

Does your community or region have a technology plan? Or is your region's motto going to be, "Our region...almost as good as Ethiopia."

With the recent FCC decisions that have classified cable modem services as an "information service," which frees it from telephone-style regulation, and the decision a week ago to drop the requirement that phone companies sell DSL access to third party providers, we now have, for all intents and purposes, a broadband duopoly in the United States.

Either you buy broadband from the cable company or from the telephone company. Not a thrilling choice.

Expect the phone companies to really push hard to sell DSL services. They will begin rolling out higher speed DSL (e.g. ADSL2, ADSL2+) that can offer download speeds of 8 megabits/second and as high as 24 megabits/second. They will try to get new phone subscribers to sign up for bundled DSL services that include voice telephone, and DSL will become the new "basic" phone service. But instead of basic phone service (e.g. local calling) costing about $25/month, "basic" service will include local, long distance, and broadband in a bundle costing $50-$60/month. Long distance will be thrown in for free, essentially, and the Bells plan to try to kill the long distance companies by doing so. And they will likely succeed.

The higher speed DSL services will also let the phone companies begin to offer cable TV programming, which will let them cut out their current TV providers, the satellite firms, killing another potential competitor.

In some markets where there is little or no competition from a cable company, we will be back to 1984, when you bought telecom services from Ma Bell, whether you liked it or not.

The cable companies, though, have most of the broadband marketshare already, so the phone companies, which are universally reviled for poor service, have a very difficult battle ahead of them. Current cable broadband service, though not as fast as some of the newer DSL flavors, is more reliable, and the cable companies already have excellent TV services, compared to the emerging DSL TV services. And phone service via cable modem is already available.

So the two competitors are will slug it out in the marketplace, and it may help keep prices down for a while. But in the short term, expect to see new DSL rollouts only in markets where cable competition is weak.

But the real problem with DSL is that it is a lousy technology. Based on trying to squeeze more capacity out of old copper cables, it has been tried in Japan and found lacking. Japanese users regard DSL as inferior, and the market there is being driven by fiber.

As the phone companies make big investments in new DSL equipment, they will be less and less inclined to do anything with fiber, which requires different cable plant and entirely different equipment. Finally, one huge problem with DSL is that it is distance-sensitive. The fastest ADSL2+, which can run as fast as 24 megabits/second, can only push those speeds about 3000 cable feet or only one-sixth the distance of "old" DSL, which can go about 18,000 cable feet.

What this means is that you may or may not get fast DSL in any given area, and the phone companies will continue to confuse legislators by playing the zip code game--which is to say, "We offer DSL in 95% of the zip codes in your area." That's literally true, but what they leave out is that perhaps only 50% of homes in a zip code may be within reach of DSL service. In rural areas, it could be much less.

So what are communities to do?

The "third way" is to invest in broadband infrastructure than can be used by service providers to deliver broadband. To sit by and let the cable-telephone duopoly determine what level of service is available and where it is available is to let your community's future be determined by a few corporate bean counters many states away from your community.

Unlike a lot of other folks, I'm not greatly worried that SBC and Verizon spent millions to influence some new laws in Texas. The Texas legislature, after a lengthy fight, has agreed to give the phone companies a statewide franchise to offer television content in Texas. This saves them the trouble of going to every community in Texas and negotiating individual franchises.

But let me also be perfectly clear--I don't like this, but--but--I'm not greatly worried by it. Two different things.

Here's why I don't like it.

First, it takes authority away from local communities and gives it to the state. This actually has nothing to do with telecom per se; I am always troubled when communities lose decisionmaking power.

Second, this will only be "fair" if the state also declares all cable companies immediately have a statewide franchise as well. Despite all the noise about "leveling the playing field," this bill just tilts in a different direction by changing the rules.

Here's why I'm not greatly worried.

Legislating old, copper-based technologies is a waste of time. If Texas legislatures think the campaign contributions will help them get re-elected, fine, but this whole effort is an exercise in futility. I can deliver video programming to anyone in Texas right here from Blacksburg, and I don't need to negotiate a franchise with anyone.

Are there still problems? You bet.

Some have objected to this on the grounds that it simply helps re-monopolize local markets. In that long term, I agree, but in the short term, this will help put pressure on cable TV prices and should stop the knee-jerk annual increases in cable TV bills. It's not the kind of competition I prefer, but at least it is competition.

The danger over the long term is that in many communities, we will see cartel-like behavior. As the playing field between the phone and cable companies becomes more even, both will be happy to keep prices comfortably high. So we have not really solved the basic problem of choice and affordability.

What I hope is that more communities will realize that broadband is tied tightly to economic development, and that it is not healthy to have just one or two companies deciding the economic future of the community. The unintended consequences of this bill may be to help a few more communities understand the need to create a truly level playing field, with more than just two teams playing.

That's my hope.