Technology Futures

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.

Intel, the big chipmaker, has jumped on the muni broadband train and is helping communities take the issue to state legislatures.

In one sense, this is good news, because like it or not, legislators are more likely to listen to an Intel lobbyist (who can make campaign donations) than they are to the citizens that elected them (for the most part). Intel and other tech companies can provide a counterbalance to the enormous influence of the telephone and cable companies.

But has Intel just suddenly decided that they should do this for the good of communities everywhere. No. Instead, they are angry that the wireline broadband providers are busy arranging de facto service monopolies that are locking out wireless systems, which are the current darling of a lot of vendors out to make a quick buck by selling huge wireless systems to unsuspecting community leaders.

Intel has invested millions in WiMax, the emerging new wireless system that overcomes some of the limitations of WiFi. Intel wants to make sure they sell lots of WiMax equipment to communities and systems integration vendors who are busy telling communities that wireless will solve all their broadband problems.

Wireless has an important role to play in community broadband, but it is not a panacea and it is not a replacement for fiber. The two are complementary, and communities will want and need both.

Beware of "free" advice from vendors. It looks cheap and quick on the front end, but I rarely see it turn out well, and quite often, vendor "solutions" turn out quite badly.

Make your own plans first, using a qualified vendor-neutral consultant (like Design Nine), and then invite vendors in. It takes a little more time on the front end, but your community will save time and money on the back end.

While our FCC dithers about the best way to preserve legacy telephone and cable services, Singapore has pushed VoIP into the mainstream by creating a system for managing telephone numbers assigned to VoIP service providers. Singapore is not requiring VoIP providers to give subscribers access to emergency systems (911 services), but is offering incentives to those companies that do make the effort. This is much more sensible than the confusing and potentially punitive policy the FCC is trying to enforce.

And the FCC is not really the main problem. Our Congress just passed a huge roads appropriation bill, which is terrific. We're trying to fix our twentieth century highway system, while other countries are building twenty-first century highway systems.

Once again, communities can't wait for the Federal government to ride in and fix things; if you want your community and region to be competitive in the global economy, your local leaders and economic developers should be doing all they can to compete globally. And that means paying attention to what countries like Singapore are doing, and why.