Counting on cable and wireless

Well, it appears that the over-zealous FCC is once again on the verge of diminishing choice and competition in an area that has been dominated by monopolies for years. An article from CNet this morning discusses the likely overriding of state laws that currently require (in some jurisdictions) the incumbent phone companies to provide DSL without local phone service (otherwise known as "naked DSL").

So, what am I doing lobbying to keep state legislation alive when I could be talking deregulation? Well, the answer is simple: utilities are different. Especially the telephone and cable industries. If we are not careful, we are likely to create a situation where, barring wireless technologies, the internet is going to become dominated by two local providers in every jurisdiction and those two are among the slowest-moving, least-responsive organizations in the western world.

We are already dealing with the potential fall-out of the decision to let lapse the requirements for the phone company to offer competitive access to their phone lines into user's homes and businesses for the purposes of providing an alternative to the local telephone company without requiring the construction of multiple parallel complete physical plants. And now, when we are on the verge of seeing wireless and Cable TV networks as the only real alternative to the phone company for internet access, the FCC is about to grant them the ability to lock users into a bundling agreement which would decrease the effective efficiencies in the VOIP network.

For those unfamiliar with VOIP (Voice-Over-Internet Protocol), the idea is to get your telephone service through your internet connection, thus not requiring the use of your local phone line for anything other than DSL. As a matter of fact, if you have high-speed (and reliable) wireless or cable TV, you can make use of those technologies instead and have no service over the phone company's lines at all.

Enter the FCC and their brilliant plan to allow the local phone company to require you to buy local phone service to purchase DSL. In Verizon territory, this means an additional $33.51 in charges for a phone line that you will not be using to talk to anyone. Since you can get a VOIP telephone line (including free unlimited long distance to the US and Canada) for $24.95, that seems way too much money to be paying for nothing.

Add to this the refusal of the FCC to regulate Internet bundling from the cable companies and you have a nasty mix. Right now, in my region, you can purchase DSL service for $29.95/mo (with a 1 year commitment, $37.95/mo without). Until recently, you could only get cable internet service in my area from our provider (Cox Cable) by bundling it with digital cable. In this instance, it used to cost $24.95 for the lowest quality of Internet service, plus at least $41.95 for the Expanded Basic cable service. Add to that $24.95 for VOIP and the DSL folks looked pretty tasty as an option.

Now, with no pressure on the DSL providers to unbundle, it's going to be interesting to see if the cable folks continue their move toward unbundling their internet service. Cox has (as of March 1,2005) announced that they will offer their lowest-grade of internet service for $24.95 for both cable subscribers and non-cable subscribers. However, their web site doesn't even mention the service except in their PDF brochure and gives no details about it. So, stepping up to the first available plan, you'll pay $39.95/mo if you have cable and $54.95/month if you don't. I'm thinking it's hardly surprising that DSL+local phone line=$63.46/month, especially when COX is offering VOIP telephone service for an additional $24.95/mo (that'd be $79.90 per month for VOIP/Cable/Internet and $63.46 for Local/Internet from the phone company).

All things considered, I'd rather pay $50/month for high-speed internet and VOIP from my preferred provider with unlimited long distance.

But, with the regulatory incentive gone, why would cable and the phone company drop their prices? There's only one competitive reason left: high-speed wireless. I don't think that the cell phone companies are going to be competitive for a while, but there is some hope in medium-density areas replete with single-family homes in the right income levels for companies to provide high-speed internet access using UWB or some of the other emerging technologies. But, we're going too have to wait for that, and there's little hope that it will trickle down to areas where there is too much interference, too little density or too many high-rises.

At least you can still get together with other tenants in your building and buy a couple of T-1's from a competitive provider for a few hundred dollars and share some internet that way. Who knows, maybe the urban areas will remain competitive, but only if your building is near a big business area or the FCC doesn't further roll back the competitive carry rules.