TCS Daily

No 'Digital Ditente'

By Duane D. Freese - June 25, 2002 12:00 AM

If President George W. Bush were to declare that broadband is to the new millennium what a) the telephone b) the television c.) the Internet d) the automobile or e) sliced bread were to the last century, well, you'd get no argument here. Broadband is a big deal. It has as much potential to improve productivity, health and national welfare as any of them.

In slathering on the accolades for the medium before technology executives earlier this month, Bush may have laid it on a bit thick by declaring it a vital tool in the battle against terrorism. But when you have Sen. Joe Lieberman saying "we can't let this fertile field of technology lie fallow," and threatening to blizzard Congress with broadband legislation if you don't deliver a broadband strategy in six months, well, you've got to have a plan, don't you? A political leader simply can't in this day and age let markets work, can he?

Of course not. In "looking over the horizon," as Lieberman wanted him to do, Bush found "the country must be aggressive about the expansion of broadband."

Still, in the rapture about what to do to create the broadband revolution, some sober, thoughts arise, and from some of the oddest places - such as the normally left-leaning (but certainly tech savvy) home of Teddy Kennedy, good old Massachusetts.

Paul B. Vasington, the new chairman of that state's Department of Telecommunications and Energy told a U.S. Senate hearing on broadband last month that those complaining that the government wasn't doing enough to promote broadband investment may be asking the wrong question.

''The so-called problem is that most people do not want to pay what it costs to deliver the services because they don't see the value as being equal to the cost,'' he said. ''The question we should be asking is: Are there customers willing to pay what it costs to serve them who can't get services?... If the issue is just that people are not willing to pay for services that we think they should want, then there is little role for government.''

The fact is that deployment of broadband around the nation isn't a big problem, except in sparsely populated areas and poorer sections of inner cities. So, what is the federal government going to do to get them to buy it? Give everyone a voucher for $30 a month if they hook up to broadband?

No doubt, some telecom companies would like that. After all, the regional Bell operating companies laid out their $300 billion worth of old copper phone loops with the aid of massive subsidies forced from business and long distance callers. So, the nation could try doing that all over again.

But, that would be taking a step back in time, for no good reason. The price of creating a system of subsidy was a monopoly that neither innovated nor accommodated modern telecommunications needs. You couldn't even buy your own phone, but had to lease it from Ma Bell. And had the local phone monopolists had their way, you wouldn't have been allowed to hook up to the Internet except at per-minute rates.

The break up of AT&T in 1984 successfully created a competitive long distance phone market; the Telecommunications Act of 1996, less successfully, began opening up local telephone service to competition as well.

Broadband future potential rests upon the opening of the telecommunications system to competition with sufficient regulation of the old legacy monopoly system to ensure it can't kill it. Without both, the Internet might well have died in its crib.

President Bush in proposing an aggressive broadband strategy, laid out no details of a federal plan. Many pundits, though, took it to mean he was ceding authority for developing a broadband policy to the Federal Communications Commission and its Chairman Michael Powell.

And the thought is that Powell will relieve the Bell monopolies of their obligations under the 1996 Telecom Act, which they agreed to during its negotiation, to open their local telephone loops to competitors of broadband services. The reason: to give them the incentive to invest in new high-speed infrastructure to roll out their brand of broadband -- digital subscriber lines -- more quickly.

As for competition, he will rely on so-called "facilities based competition" between different technologies, telephone, cable, satellite, wireless and, maybe as Scientific America reports, even laser light, to provide consumers what they want.

"If you have competition between platforms, consumers will be better off," said Randolph May, a communications policy expert with the Progress and Freedom Foundation, told Salon, before Bush's speech. "The problem is that [regulation] impedes investment and new entrants to the market."

But as a report by the National Research Council last fall noted, while facilities-based competition is important, you can't just assume you're going to get it. New platforms remain a matter of speculation. And the ability of competitors to access the legacy system to provide modern services that the Bells, over decades, failed to promote or encourage, remains vital.

As another man from Massachusetts, Rep. Edward Markey remarked at a Massachusetts Broadband Summit, "Only when we have sufficient competitors out there can we be sure that innovation will continue. Verizon vs. AT&T Broadband will simply result in a 'digital detente.'"

A telephone cable duopoly for broadband is not a future likely to breed the kind of improvements in price for quality and innovations to attract users that will lead to broadband's advance.

As a McKinsey Quarterly report, "Pipe Wars," recently noted, the Bells will roll out broadband because they want to keep others from taking away their business. Take away that incentive and they'll do what they always have done, sit back and do nothing.

Thus, the most aggressive broadband policy the federal government can have is to spur competition, among platforms and within them.

And that's why those who truly want broadband to succeed can only hope that Powell is a man of his word when he says: "My policy goals are, consistent with the Act's mandates, to vigorously promote competition, investment and innovation in all communications markets to help drive sustainable long-term economic growth and the proliferation of new communications technologies (such as broadband and HDTV) for the benefit of all American consumers."

He's right. Competition in all communications markets is the answer.



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