Time for a new Bell breakup
AT&T shocked the world recently when, in answer to an FCC request for comment on its move toward IP (Internet Protocol) services, it suggested doing away with the Public Switched Telephone Network (PSTN) entirely.
(Steve Coll's book on the 1984 Bell break-up is one of many great values waiting for you at the Telecom History Store.)
On the surface, a bold move. And very much in AT&T's best interests. Everyone and their mother is moving toward a world of cell phones and broadband connections. Who wants a number that doesn't move with you?
But there is a bigger problem AT&T's proposal to dump its cost sink does not address. Which is that owning the line still means owning the customer, and that the incentives for AT&T and cable operators are still to limit the number of bits they deliver and charge more for those bits.
This violates the desires of the market. Just because I have Cablevision does not mean I don't also want my Food TV. Who is Time Warner to tell me I can't watch The Simpsons?
For that matter, consider your cell phone. FCC antitrust chief Christine Varney wants unused wireless spectrum re-auctioned, as the agency desperately seeks to release more frequencies to keep your iPhone synced to the Google cloud.
Let's go back to AT&T again. Remember those Verizon ads about 3G coverage that got AT&T upset enough to hire a Wilson brother for its response? They were prompted by news that AT&T has been cutting its wireless network investment ever since the iPhone was launched.
Why do such a thing? Incentives. The iPhone is exclusive to AT&T. It does not have to compete for the business of iPhone customers. It has monopoly rights over them. So it is taking monopoly profits, cutting its spending and putting money into its (and shareholders') pockets.
The problem here is basic. The incentive for people who own network capacity is to reduce the number of bits they deliver, not increase them. The acquisition of NBCU by Comcast just makes this more explicit. Comcast will get its money back by using its control over the delivery of bits to get more for its content, and by limiting rival content providers' access to its subscribers.
This is a conflict of interest.
The solution is equally basic. Separate the movement of bits from the delivery of any digital product. However the bits get to you, whether by wire or wireless, separate that business from the content and the device you're using.
Break up Comcast, and break up the Bells, too.
What does that do? It changes market incentives. If you're in the bit delivery business, not in the services business, your incentive is to deliver more bits. Period. Or as Visicalc co-creator Bob Frankston wrote recently, spectrum is dirt.
Dirt is dirt. Bits are bits. We should be regulating for plenty, not for scarcity. Let the wired and wireless worlds become one big IP network, with every provider interconnected, and peering just as current IP networks peer, in the background, transparently.
Moore's Law means our ability to run bits through existing infrastructure is growing every year. There is demand for that supply, and that demand is best satisfied if there are no gatekeepers between you and what the bits are doing for you.
That's Internet Economics 101. People will pay more for what bits do. Bits themselves are a commodity. Bits is bits.
Separate the delivery of the bits completely from the content and device, regulate the bit market for plenty instead of scarcity, only give the suppliers of bits an incentive to deliver more bits, in more ways, for less money, and the wireless market will take off like the Internet itself did 15 years ago.
And no one will have any reason to keep you from watching Good Eats again.
This post was originally published on Smartplanet.com