What’s Needed Is Competition in Services
It is largely taken for granted today that “market forces” will determine our technological future. But what the market is likely to deliver in telecommunications may not be what we need, nor what we could have.
Assumptions about the benefits of a specific kind of competition lie at the heart of the mammoth telecommunications deregulation bill now being considered by Congress. That bill, if passed, will largely determine the architecture of the fabled information highway. But it’s based on the notion that the public good will be served by competition in wires, whereas what we should really be trying to foster is competition in services.
The large telecom companies have billions of dollars invested in their wires and switches--either in copper wire and fiber, for the telephone companies, or coaxial cable and fiber for the cable companies, or in satellites. Deregulation means that each will be able to use its wires and switches to encroach on the other’s business--telephone companies will start to offer such video services as movies on demand, while cable companies are gearing up to offer telephone service.
Consumers, according to the theory, will get better and cheaper service with these industries competing against each other.
But how many consumers will really care when everyone is are offering similar services for comparable prices? Most people are already baffled trying to sort out the claims of long-distance providers like AT&T;, Sprint and MCI. And a lot of people are angry about the constant harangues of these companies, especially their dinner-time telemarketing calls. Try multiplying that by 10.
A completely different arrangement is possible. If people were given access to a universal, public network, especially one based on fiber-optic cables with virtually limitless carrying capacity, we’d see an explosion of entrepreneurial energy instead of more marketing appeals. We’d build an entirely new economic sector instead of divvying up the current telecom business differently.
The city of Austin, Tex., where I live, is pursuing an innovative and controversial plan that many communities around the nation are watching with intense interest.
Austin reportedly has the highest Internet usage per capita of any major metropolitan area in the United States. The city is home to a booming home-grown multimedia industry, largely made up of small start-up firms, some of them run on kitchen tables. It’s also a growing world center of semiconductor manufacturing.
To serve this population, city officials have proposed an unusual public-private partnership to wire all Austin homes and businesses with high-speed fiber connections within two years. The private partner gets to manage the network and collect leasing fees in exchange for its investment in the hardware. The city offers its rights-of-way, permission to tear up the streets, and an exclusive arrangement with the contractor, in exchange for some important public interest principles.
These include universal service, interoperability of components, and open systems, which all add up to a public network infrastructure open to all users with maximum available bandwidth available to everyone.
What the city officials hope will result from this kind of arrangement is an Internet-like network model, but with bandwidth that can carry video, data, voice and sound all at once. With new technologies appearing that make the World Wide Web more and more capable of exploiting this capacity, entrepreneurs could blossom all over town. And the network could carry conventional cable TV, telephone and on-line services as well, producing true competition between large companies instead of a zero-sum scramble for market share.
This plan is especially important for low-income neighborhoods, because what typically obstructs economic development in those communities is the reluctance of people with money to shop or do business in poor areas. A network presence would remove that barrier--geography would no longer matter.
Southwestern Bell and Austin Cablevision, a subsidiary of Time Warner, oppose the Austin plan. They envision a model in which they own the wires and lease their bandwidth to content providers they select and then market to consumers in “bundles,” the way cable TV, America Online, Prodigy or CompuServe works now. Their networks would not be open, and it’s likely that their interactivity would be highly constrained--enough for users to send e-mail and a credit card number, but not enough to have a full-blown interactive video presence on the network that could rival their own offerings.
This is a battle that will be waged all over the country; it is already apparent in the telecommunications reform bill passed by both houses of Congress, which reinforces the model preferred by large corporations. Unfortunately, most citizens don’t understand the first thing about this debate, either what’s at stake or which alternatives are feasible. This is true even in Austin.
Television commercials from the large telecom companies are now filled with encomiums to the information superhighway. But our concrete highways are a genuine public resource and, at the same time, the arteries of our economy. They carry all vehicles, old and new, commercial and private, sleek and homely. Is it too late to start thinking about the information superhighway in the same way?
