The following text is copyright 1998 by
Network World, permission is hearby given for reproduction, as long as
attribution is given and this notice is included.
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
TCI.
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
right.
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.