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Tuesday, March 30, 2004

AT&T's VoIP Play
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"Phone calling over the Internet is about to go mainstream" is the WSJ's lead on its story [subscription required] about AT&T's announcement that it will begin offering Internet calling in two states.

The story notes that cable companies are moving aggressively into the Internet calling space, and it chronicles the head-start of Vonage. Then it concludes that, "the biggest potential victims of this wave of Internet calling offerings are the Bells. Goldman Sachs esitimates that Internet calling can take 7% of the residential phone lines from the Bells by the end of 2006."

It is true that the Bells are the biggest potential victims of this new technology--if the policymakers do not avail themselves of the reform imperatives presented by what I've called this blast from Shumpeter's trumpet to rationalize a regulatory regime essentially devised in a monopoly era. Probably the most fundamental issue of telecommunications policy over the next several years will be the fight over whether facilities-based service providers like the Bells and other wireline companies--and cable, wireless, and satellite operators--will be compelled to provide access to their facilities at regulated prices to companies like Vonage, AT&T, Microsoft (?), without their own networks.

In other words, the non-discrimination and unbundling requirements developed in Computer II in 1980 were perfectly appropriate in a monopoly telecom environment. And they may have been appropriate through the 80s and into the late 90s as the Computer II access requirements turned into the Computer III Open Network Architecture requirements and the early post-1996 Act UNE requirements. But all of these "compelled access" requirements--"network neutrality" is just the latest appellation, "Computer IV" would do just as well--no longer represent sound policy in an environment in which we have multiple facilities-based broadband competitors.

I think we'll see the telephone companies and the cable companies, along with others who have or aspire to have their own network facilities, joining together to try to beat back the proponents of the compelled access regimes. It's likely to be a long, tough fight for the free market forces.

posted by Randolph May @ 12:10 PM | General

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