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Magic words and real competition

By Scott Bradner

Network World, 7/13/98

Judging from AT&T's recent stock price drop, the second-guessers
don't much like what they have heard about the carrier's plan to buy

There may be real reason to question some of AT&T's and TCI's
Pollyanna-like beliefs that transporting voice, video and data over IP
will be easy and inexpensive enough to permit the new merged
organization to compete with regional telephone companies. But the
deal is a good development if you ignore some of the specifics, such
as the quality of much of TCI's cable network.

Ever since the Telecommunications Act of 1996, telephone customers
have been waiting in vain for any sign of real competition in any part
of the fixed-line telephone business. Cellular phone service is about
the only segment of the telecommunications industry where actual
competition has emerged - I was able to reduce the cost of my cell
phone service by over 50% by changing providers.

Competition in the long-distance market is constrained by the
regulation of AT&T - the company sets its rates and its "competitors"
price their services a bit lower. Competition in the local phone market
is constrained by the fact that there is a monopoly supplier of phone
wires into houses.

Thus the AT&T/TCI deal does offer some potential for the
introduction of an alternative to the phone company wires into
houses, and the alternative offers hope for real competition. But this
hope hinges on the merged company being able to upgrade TCI's
cable infrastructure, which most commentators say is the worst of any
major cable company. AT&T and TCI also must develop the IP-based
magic box that will integrate voice, data and video services.

Experience has shown that a good cable infrastructure, when operated
by a competent cable company, can do a very good job of supporting
broadcast video and Internet services. My home Internet service
comes by way of MediaOne and has been amazingly reliable and has
delivered high performance. Adding reasonable quality voice service
has been successful in England, so it can be done.

Fighting the often well-deserved reputation for poor customer service
may be as hard for cable TV companies as getting the new technology

I am curious about whether there is more than the muttering of magic
words behind the assertions made by AT&T engineers to stock
market analysts following the announcement of the proposed deal
with TCI. "IP" and "Cisco" are nice magic words, but the
development of a comprehensive set of home-to-network equipment
may be quite a challenge, particularly in light of AT&T's Lucent
Technologies spinoff two years ago.

The pundits may be right about the specifics of the AT&T/TCI deal.
The Wall Street Journal said the "technical underpinnings are more
faith than science," but finding a way to introduce actual competition
for the local phone and Internet businesses would be a boon to us all.

Disclaimer: Harvard deals with both faith and science (with a bit of
law and business thrown in). But the above is my optimism.