CABLE VS. TELEPHONE : NEWS ANALYSIS : Regulators’ Telecommunications Dilemma : Technology: They don’t want to stifle innovation but must protect the consumer.
As phone and cable companies trample old legal and regulatory barriers to bring new voice, video and computer services into their customers’ homes, telecommunications policy-makers face a couple of tough questions.
The first, of course, is what should they do? A less obvious but more important question is, what can they do?
Increasingly, federal and state regulators are beginning to seem overwhelmed by the lightning pace of change in what was once a set of discrete businesses that are now plunging headlong into one another.
Regulators face some difficult choices. On the one hand, they don’t want to stifle what appears to be one of the most promising parts of the American economy. On the other, they are under pressure to maintain low rates, broad if not universal access and free competition.
The problem is, can the regulators catch up with the marketplace?
These questions have assumed new urgency in the wake of moves within the last 10 days that further blur the historic boundaries among telephones, televisions, computers--and the companies offering them.
American Telephone & Telegraph Co. last week said it would buy McCaw Cellular Communications Inc., gaining the right to offer local wireless phone service in direct competition with local phone companies. On Tuesday, the nation’s No. 3 cable company said it will offer video access to the sprawling Internet computer network, bypassing local phone services. Also on Tuesday, a federal district judge cleared the way for the nation’s phone companies to begin offering video programming in their home territories.
Earlier this year, U.S. West, the Denver-based telephone company serving the Rocky Mountain territory, bought a 25.5% stake in Time Warner Communications of New York, the nation’s No. 2 cable operator. And late last year, Southwestern Bell, the St. Louis-based telephone company for five southern states, bought two cable companies in Virginia.
“It’s absolute chaos,” said Alfred Sykes, former chairman of the Federal Communications Communication and now president of Hearst Corp.’s new media and technology group in New York. “In a rapidly changing environment, the old regulations are proving to be arbitrary and unnecessary. The regulators should just get out of the way.”
Congress and the regulators aren’t likely to oblige.
With huge monopoly operators such as the phone companies and cable systems rushing onto the other’s turf, there are lingering suspicions that the much-heralded competition between the two titans will quickly give way to cozy deal-making. The result: one monopoly operator controlling both television and telephone service instead of the current two.
“Preventing one monopoly from buying another in the same territory may be the most important job regulators can have today,” says Peter Hampton, a telecommunications analyst at the Yankee Group, a Boston technology research firm.
However, after that, adds Peter Bernstein of Probe Research in New Jersey, the regulators should scrap existing zoning law-style barriers that prevent businesses from competing with each other--and stand back.
Rep. Edwin Markey, chairman of the House telecommunications subcommittee, who has been among the most influential legislators on this subject, disagrees.
He says government must insure that the consumer is protected from price gouging by monopoly phone companies. Legislation, says an office aide, is already in the works to insure that telephone ratepayers are not forced to subsidize phone companies’ speculative forays into cable TV.
Arguably, legislators and regulators over the last decade have created much of the situation they face today.
To spark competition for existing monopoly communication providers, such as the phone and cable companies, they have rewritten laws and rules to encourage new service offerings and lower prices for consumers. And to protect the new entrants from being pounced upon by the old monopoly operator, they established artificial business barriers in the form of a web of regulations.
But now these barriers are under assault by both business interests and a rush of technology that is blurring the distinctions between traditional telephone and television services.
As the signals that carry each service are translated--or digitized--into electronic blips, telephone and cable television networks become interchangeable. These developments are giving rise to a host of new, so-called multimedia services that combine video images with interactive telephone calling through the TV set.
These services include at-home shopping, video-on-demand entertainment and paperless bill paying.
