TCS Daily


Breaking Barriers to Competition

By Sonia Arrison - August 4, 2005 12:00 AM

Recently, legislation was introduced in both the Senate and House to spur communications competition by encouraging the entry of telecommunications firms into cable markets.

While technology already is driving change in the sector, the benefits can't be fully realized until the laws overcome local obstacles to competition.

Now that video can be delivered over high-speed Internet connections, telecom companies can compete with cable companies to provide service. That's great news for consumers. Just as cable entry into the telephony market using voice over Internet protocol (VoIP) brought down telephone prices, telecom entry into the video market will slash prices for entertainment.

But tradition stands in the way.

In order to offer cable service, providers are being required to obtain franchise agreements from local governments, which often require huge fees and set all sorts of other conditions.

The local governments are following the traditional system by which cable firms got their licenses. But that system was based on the idea that cable companies were monopoly powers. Things are different now. Technology is redefining the communications industry, making it imperative that old rules be scrapped.

As it stands now, there are 8,000 cable franchise authorities, and more than 30,000 incorporated cities in the United States. With a market controlled by thousands of different local, state and federal standards, new video programming entrants must endure a hornet's nest of red tape to even begin providing service to customers. Any movement to streamline this process will help to spur broadband deployment and video competition to the benefit of consumers.

The recent bills introduced in Congress will help, if they pass.

Both the House bill, introduced by Reps. Marsha Blackburn, R-Tenn., and Albert Wynn, D-Md., and the Senate bill by Gordon Smith, R-Ore., and Jay Rockefeller, D-WV, would allow telcos to offer video service without having to obtain a franchise in communities - and this is important -- where they already have access to local rights of way.

That one provision alone would be a huge boon to consumers, as it would speed rollout of services such as SBC's Internet protocol TV (IPTV) or Verizon's FiOS TV.

When diverse broadband platforms are allowed to compete on different levels, such as speed, reliability, and services such as telephony and video, prices tend to drop and investment increases as each broadband provider attempts to outdo the other. Think, for instance, of the discounts consumers can get if they buy voice, video and broadband all from the same provider. Cablevision is currently offering its "Triple Play" bundle for $29.95 a month for each of the three services - a huge savings.

And while Cablevision is trying to pick up customers at record speeds, Verizon is investing in fiber technology they believe will be so superior to cable that customers will naturally flock to them like bears to honey. SBC, which is buying AT&T in an effort to become stronger, hopes to win customers over with its project Lightspeed.

This competition offers the potential to boost economic growth and jobs. And cable and telephone companies need not be the only players in town.

Satellite, wireless and broadband-over-powerline technologies also may vie for consumers. One of the most fascinating innovations soon to enter the market is an airship known as a stratellite. Once launched, the stratellite will deliver line-of-sight wireless broadband to an area the size of Texas from a single transmission point hovering at 65,000 feet above the Earth. The technology is similar to a satellite, but better in that it doesn't face the upload problems that have dogged the higher-altitude firms.

Competition and convergence can help Americans reap the benefits of innovation, economic growth and lower prices, but government will need to tear down old laws that stymie progress. The cable franchise bills recently introduced are a good place to start.

Sonia Arrison is director of Technology Studies at the California-based Pacific Research Institute.

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