The Winter Consumer Electronics Show (CES) in January was a coming-out party for several of the nation’s leading service providers. For the first time, public network service providers such as Comcast, Cox, and SBC Communications exhibited at the show, which is geared toward retailers and dealers of home audio, video, and entertainment systems.
Traditional telephone and cable TV companies now see themselves as part of a larger consumer technology value chain. They aim to compete to provide the broadband network glue that brings together and manages personal computing, digital television (DTV), on-demand home entertainment, portable communications, and even “hybrid” appliances, such as refrigerators and washing machines, that can all link to a home network. Their success will depend on how well they make this information technology for the home simple and manageable for the average consumer.
Making that task more difficult are regulators and lawmakers who, even as they broach reform, still see telecommunications as if it were primarily a monopolistic, wireline, geographically defined, voice-only single-line service.
Worse, many believe pricing and discriminatory tax policies, all dating from the monopoly era, should be extended to cover the new competitive and diverse services that until now have thrived in an unregulated market. Witness continued attempts by states to regulate and tax Internet telephony and e-commerce, although the nature of the Internet makes it impractical to do so.
Wiser policymakers endorse the opposite approach. When today’s technology offers the potential of maximum service diversity, they say it is in the best interest of all to foster a market where suppliers are free to create value for consumers through integration of network technologies and service bundling across platforms.
It makes sense to allow service providers the same freedom as their counterparts in the consumer electronics business. For example, we don’t regulate the price of or place special taxes on DVD rentals from Blockbuster. Why then propose to do so with videos downloaded via DSL? The services compete head-to-head. The only difference is the method of delivery, storage, and playback.
The 2005 Opportunity
Regulatory sunset provisions and/or telecommunications reform plans are on the agenda in several states, including Illinois, Indiana, Texas, and Wisconsin. With the consumer electronics industry placing big bets on converged entertainment and media services, policy decisions made by these and other states, and any reform laws they pass, are going to get more attention than they have in the past.
Until now, the benefits of “convergence” have been largely conceptual. But judging from CES, 2005 will see a mass market emerge for integration of consumer IT, telecom, and entertainment. Marketing and advertising by all segments of the industry will increase.
Already TiVo digital video recorders can connect to PCs and download programming. Set-top boxes can integrate and manage information from satellite, DSL, and home networking connections. By May, the CES vendor demos will have moved to Best Buy’s selling floor. Consumer awareness about convergence will soar. People will cry, “I want my DTV!”
At that point, state-to-state differences in telecom regulations that restrict flexibility will stand out in high relief. Reporters are consumers, too, and the local and national media, which until now largely has ignored the simmering debate on telecom reform, is going to take more notice of the progress–or lack of it–at the legislative and public utility commission levels.
The upcoming telecom policy battle involves products and services everyone wants: TV and home video, games and music. State legislators who believe these debates are too arcane to gain voter traction do so at their risk.
The pending U.S. Supreme Court decision on direct-to-consumer sales of wine over the Internet may foreshadow the kind of consumer uprising we’ll see in telecom. Today, wine lovers in New York State cannot order wine from out-of-state vintners, even though wine lovers in 26 other states can. By November, consumers will be asking why they can’t program their DTV set-top boxes from their cell phones the way their relatives who live two states over can.
Telecom consumers are not going to be enthused to learn they’re technologically less free because their state government is in the midst of a 36-month study as to whether the local phone company should be allowed to handle content to a wireless device via Internet protocol.
Constraining Consumers
Telephone service no longer can be viewed as something independent from consumer electronics, home computing, operating systems software, and portable wireless devices. Consumers understand this.
Applications networking has become integral in the delivery and added value of integrated broadband services. Yet government regulations today constrain the growth and expansion of easy, economical applications networking. This will frustrate users–read voters–more and more.
The only way to ensure healthy growth in this sector, so Americans can enjoy the tangible benefits and flexibility of integrated IT applications, is to lift from telecom providers the burden of heavy regulations and high taxes that pre-date the convergence of telephone, data, and home entertainment. The public interest is measured not by the availability and price of single-line dial-tone, but in the value and choices of integrated services and applications.
Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute and managing editor of IT&T News.
Steven Titch is a policy analyst focusing on telecommunications, Internet and information technology. He is also a policy advisor to The Heartland Institute.
