The Great Telecom Debate: (Re)Defining the Internet for the 21st Century

Telephone companies have arguably suffered the most from the inequities of legacy legislation, as the voice market has seen the greatest increase in competition as a result of the growth of the Internet from both cable companies and VoIP providers. Now that the Bells are taking their first steps into the video business, they want accommodations to be made to encourage competition in the wireline—as opposed to wireless--TV market. "Cable entered the VoIP business and did not have to adhere to any of our legacy regulations. Now we’re talking about entering the video world, and cable’s position is that we should have to adhere to all of their legacy regulations," says Morton, such as the video franchising process and network buildout requirements.

The current video franchising system requires that any provider of TV service obtain a franchise from every local municipality in which it wishes to deploy TV services, which is an often-protracted process. Network buildout requires that a new network must reach a certain percentage of homes in a community, which means spending additional upfront capital. Telecoms see both video franchising and network buildout requirements as impediments to their ability to deploy next-generation wireline networks as quickly as possible, while cable companies believe the lifting of these requirements gives telcos an unfair competitive advantage.

While the impact of the great telecom debate will extend across all Internet-based communications, make no mistake that video, both TV and online, is what’s truly bringing these issues to a head. "Video is the driving force that consumers want and that drives bandwidth needs up," says Scott. "Part of the problem, though, is that when trying to create a regulatory structure for a provider that’s offering triple-play services [voice, video, and data], it’s hard to see where their video product leaves off and where Internet video begins. That’s because historically video has been regulated in its own category and broadband in its own, and now they’re mixing together."

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One of the more controversial proposals to come out of the telecom debate so far is the concept of a two-tiered Internet where network operators sell prioritized access to their networks to service providers. Over the last six months, BellSouth has been a leading voice in supporting their rights as a network operator to institute such a model. "What BellSouth envisions is continuing to let the marketplace drive the Internet’s evolution," says Morton. "Making sure we have the ability to manage the video part of our network to ensure that customers get a high-quality product is vitally important to our business. If we’re somehow restricted in our ability to manage our networks, we will fail to compete with cable. If we fail, that’s one less option consumers will have."

For network operators, the ability to sell prioritized access is seen as essential if they are to generate enough revenue to offset the investment needed to drive their networks’ capacities forward so that they’re able to handle multi-megabit video. "For users to get a bigger, better, faster Internet," Morton says, "someone’s got to invest in the network to make that possible. The Internet is nothing more than a bunch of privately owned and funded networks that interconnect. There has to be a sound business case for building out these networks," he continues. "Otherwise they won’t be built."