Section IV
The market in telecommunications, which is growing rapidly, is in a
state of flux both in terms of corporate structure and in terms of
technology.
Two factors have greatly increased the competition in computing and communications.
First, with communication becoming digital the boundary between computation
and communication has disappeared. Communication corporations have moved into
computation and vice versa. For example, AT&T bought NCR, a computer firm, and
IBM has several communications ventures. Second, competition in communication
has greatly intensified with the breakup of the Bell system. As you may know,
several years ago the courts broke apart the Bell system into AT&T(long
distance) and the seven baby Bells (local service). Over time the court-imposed
restrictions on the baby Bells have been eliminated. Some competition between
the Bells and the cable TV companies has begun in that both can now offer high
speed internet access through their respective technologies.
The Telecommunications Act of 1996 opens up all communication to competition.
AT & T split into three firms: AT &T in communications, Lucent in communications
equipment, and NCR in computers. In Texas, Southwestern Bell, by lobbying, got
the state local competition act to make local competition more expensive for
potential competitors. The Telecommunications Act of 1996 failed to stimulate
local phone competition because the act was fundamentally flawed. The Baby Bells
were supposed to allow competitors to use their lines in order to compete against
the Baby Bells. As an incentive they were offered the right to compete in long
distance communication once local competition existed. What the Baby Bells did
was to merge into stronger competitors than the long distance firms. They obtained
the right to enter the long distance markets when only nominal local competition
occurred. Competitors must pay the Baby Bells access charges and the Baby Bells
have absolutely no incentive to make competitors profitable. The act is basically
a farce. A much more daring act would be to make local commucation lines a common
carry and allow firms to compete over the common carrier that would act as a
regulated monooly. Under such a scheme, the Baby Bells would have to split into
a services company and a common carrier company. This is the route taken with
competitive electricity markets. Given the fisaco in California, I doubt whether
this approach with gain much support.
Today, we have some competition in the long distance markets, and the beginnings of competition in the local markets. Competition in the local markets did not come about by firms competiting over the Baby Bells' networks, but rather through competing networks. With VOIP or phone service over the internet, the cable firms have become direct competitors to Baby Bells. Also, many consumers, especially younger consumers have switched to only having a cell phone. The next competitor on the local scene is running the Internet over power lines. This gives another way to deliver cable TV and VOIP phone. The Baby Bells to compete are beginning to implement fiber optic networks that will have a much greater capacity than their rivals.
a. Short Run: The most important fact in the growth of communications traffic is the rapid rate of data traffic relative to voices traffic. All communications systems will gradually merge. One possibility is to merge into the internet using the TCP/IP protocol and its descendants.
b. Long Run: In your lifetime, computers at all levels may
become 10,000 times as fast as they are now and also increase that
much in memory. At a super computer conference I went to a few years
ago, they were conjecturing about when today's supercomputers would
be desktop computers for engineers. Advances in voice recognition
will make computers much easier to use. New devices such as neural
networks will increase pattern recognition so that languages can be
based on voice recognition of structured English.
Paper as a media of communication is on its way out. All office equipment is currently being linked into a network so that documents and data can be transmitted over the telephone system. Paper will gradually become the secondary media. Existing one time write optical disks could fulfill the legal requirement for a media which can not be easily tampered with. This system should be in place in thirty years. With bandwidth on demand, the phone system becomes a multiple dynamic interactive video voice communications system called the social nervous system. By the social nervous system we
mean:
a. A broadband digital communication system capable of carrying any
media-voice, data, symbols, or video which links every home and
office.
b. Every home and office would have at least one smart terminal
capable of handling all the various media.
c. All man's knowledge or recorded experience whether in the form of
documents, books, video, or sound cassettes would potentially be
available from any terminal (provided the individual has access).
d. Electronics will replace paper as the primary media for text. One
time write optical disks will become the legal media for recording
important documents.
The speed at which such a system is installed depends on economic
incentives. For example, currently optical fiber is about as cheap as
copper wire. Hence, new subdivisions will be increasingly wired with
optical fiber as opposed to copper to anticipate the future system.
With the lifting of the restrictions on the phone companies, they
should move quickly to replace the existing copper wire system with a
fiber optics system into every residence in order to sell video
services. My forecast is that in 20 years broadband communications
supporting all types of communication will be as common as narrowband
phone communications is currently.
The usefulness of the existing copper wire phone system depends
on the speed of modems. Check out The DSL Forum. This modem can get quite wide bandwidth
through copper wires. The two types of communication technology you
need to understand are:
There are also a large number of sites discussing communications policy. Check them out.