August 13, 2004

The Uncertain Future of Communication 

posted by Paul Smith @ 4:00 PM
We take telephone service for granted, but here in Illinois, that service is firmly under the thumb of the local incumbent and dashing monopolist, SBC. (Well, by and large -- there is a Verizon component to some small town service areas, and a bunch of rural mom-and-pop providers that have existed for eons.) In any case, this control extends beyond our ability to choose (or not choose) who we pay to give us this service---SBC is one of the most powerful political forces in the state, and throughout the Midwest. They can basically ram any favorable legislation through Springfield, usually co-written by their legal team. (How're you feeling these days, MCI and AT&T?) The net effect of this power is that, as consumers, we feel the pinch anytime the marketplace actually does what it should do, that is, innovate and provide competition.

Voice-over-IP (VoIP) is radically reordering the world of telephony. A technology that converts your voice to 1s and 0s, sends these bits out over the Internet, and reassembles them at the other end, VoIP is much less expensive per call, because it costs very little to make a connection between two servers on the Internet, compared to keeping a circuit open on the copper wires of Plain Old Telephone Service (POTS). VoIP makes the concept of long-distance calls obsolete: from Chicago to St. Louis is practically equivalent in terms of Internet traffic as from Chicago to Bangkok. VoIP exploits the best feature of the Internet, which is that it's an agnostic platform for innovative technologies. And the best feature of VoIP is that anyone can get in the game. The reason there are no competitors to SBC is that they literally own the physical wires that voice traffic travels own; prospective competitors are put in the shameful position of having to pay to lease access to these lines and then be subject to the onerous terms of agreement. As MCI and AT&T found out, SBC can just leverage its monopoly power to make the barrier to entry high enough to keep everyone else out.

But if you are a young braniac with a great new idea for a VoIP feature that transcribes your voice messages to email, you just do it: there's no regulatory agency or imposing monopolist to prevent you from accessing the Internet and offering your cool new service to the world. The Internet is called the world's greatest end-to-end network---"end-to-end" means the intelligence, the applications, exist on the end points, the PCs and web-enabled cell phones and PDAs, while the underlying network cares not what kind of applications are passing through its hubs and routers. It's this combination of end-to-endiness and regulatory freedom that allowed for the greatest period of sustained technological innovation in history to occur (i.e., the past decade).

As I'm sure comes as no shock, the major telecommunications companies have been carpetbombing Washington over the past year, seeking to bring VoIP under the same sort of regulatory environment that they have had to live under. Funny that that burdensome environment has created a situation of telecom concentration and monopoly that rivals MaBell. What they seek is to squelch the little guys, the start-up VoIP companies and the medium-sized old-style carriers who are offering low-cost telephone service to their customers. The technology is disruptive to the SBCs, so they want to poison the growth medium in the petri dish. Fundamentally, the scary thing is the precedent Congress might set, a precedent of tinkering with the internals of the world's most successful and useful communications network.

Ironically, all of the major telecoms are and have been furiously changing their core networks over to VoIP, so that the bulk of their communications traffic already flows over the Internet. So their lobbying efforts are not about the technology per se, but about who gets to control it.

Nothing guarantees that the Internet today will look like the Internet tomorrow, and nothing guarantees that the spirit and market of innovation we've seen in Internet technologies will be allowed to persist. As it so often happens, it comes down to who's interests are our representatives responding to, our's or the industry's? Congressman Rick Boucher, filling in over at Prof. Lessig's blog, alerts us to the upcoming rewriting of the Telecommunications Act of 1996. While it is unlikely that Illinois will able to set its own telecommunications agenda without SBC's veto authority any time soon, the nation's Telecommunications Act will set the guidelines by which everyone has to play. I encourage you to take a look at his comments.

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