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The FCC rearranges the deck chairs on the Titanic

There they go again. The other day (see http://www.nytimes.com/2006/12/21/business/21cable.html?_r=1&th&emc=th&o... ), the FCC ruled in favor of local phone companies and ordered municipalities to respond within 90 days to requests by phone companies to offer cable services. The Times quotes a Verizon spokesman saying, “This means an end to the automatic skyrocketing in cable prices and means greater choice in service and programming."

Please.

The U.S. telecom/cable/broadcast industries are a mess, and they are likely to stay that way under the current regulatory framework in which every incursion of one kind of service provider into the territory (technical, geopgraphic, or media) of another comes along with a few years of lobbying, rule-making, and litigating.

Here's the real problem: the FCC is living in the past, man--specifically, in the world of the 1970's and 1980's, a world created by a few (in retrospect) diasterous antitrust setttlements, principally with IBM and then AT&T.

These rulings created a simple, black-and-white world that divided up communications and kept competition out. Computer companies could not offer phone services, phone companies could not offer data services. Cable companies didn't exist yet.

This made sense when the infrastructure and protocol of communication was specific to the type of communication involved.

Then along came TCP/IP.

Now there's no meanginful difference between a phone call, data stream, or video transmission. It's all, in the ever-prophetic words of Nicholas Negroponte, "bits." Bits are bits. Cable can be used for data, phone lines can be used for television, computers can be TVs, telephones, or anything else that handles bits.

The FCC's playbook is the unfortunate 1996 Telecommunications Act (see "Cure for the Common Carrier," http://www.cioinsight.com/article2/0,1540,1923142,00.asp). The 1996 Act enshrined and encased the pre-Internet world in the definition of two terms, "telecommunications service" and "information service," the former of which is subject to common carrier rules and the latter of which is not. The 1996 Act has been up to the Supreme Court over a dozen times, most recently--and with reference to those definitions--in FCC v. Brand X Internet Services, in which the Court evaded the real issue (again).

Allow me to state the obvious. There is no difference between "telecommunication" and "information," but the FCC has consistently ruled that anything that looked like telecommunications in 1980 still is, and anything that doesn't is an "information service." When a (historical) phone company offers Internet access, it's a "telecommunication service;" when a cable company offers telephony it's an "information service." It's as if the late Judge Harold Greene, who oversaw the AT&T breakup, still runs the U.S. information services industries--but whether from heaven or hell is hard to say.

There's an easy solution. Eliminate the false distinctions between cable, phone, and computer services (and whatever else comes along that deals in bits). This also means scrapping the common carrier rules--ineffective and wasteful in any case.

Until that happens, the U.S. will continue to lag behind slightly more forward thinking Europe in offering innovative and cost-effective services. And in a global market, that's a dangerous legacy to have to drag into every market, every product, every decision.

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