Some thoughts on the state of telecomunications in the USA

Not too long ago, you phone from the Phone Company could be any color you like as long as it was black. Now, the choices for voice communications are legion. We have hardwired services we have good old Plain Old Telephone Service (POTS), Voice over IP (e.g, Vonage, etc.), Skype, wireless connections using cellular technology (i.e., GSM, CDMA), and now VoIP over WiMAX (at least in Baltimore). We can ask the question of whether all of this is actually good for us?

Well, of course, having multiple ways of doing the same thing is a way of fostering competition and technological innovation. If companies did now work in developing VoIP technology and if Internet Service Providers (ISPs) did not work on improving their quality of service, then we would not have the technology tools, systems, and services that enable the rich communications environment that we now enjoy.

But, is all of this good for us and for the industry? It's hard to say, and I am not going to draw a firm conclusion here. But let's look at some of this issues that this diversity brings:

1. As indicated previously, multiple technical directions fosters innovation and new technologies, services, and applications
2. However, with multiple approaches do we dilute the ability to achieve economies of scale in the deployment of any technology?

VoIP and its benefits is an example of issue one. However, there are areas where issue two may have impact for years to come.

What will happen with the current dramatic decrease in wired POTS users? Since these networks (predominately provided by the old Bell Operating Companies' systems), what happens when the user base falls below the threshold that causes the cost of providing services to the remaining user set is so expensive that is become prohibitively expensive provide?

• Do we simply turn off the old system and make the remaining users go to a new technology or simply turn them off? This is exactly the scenario that is playing out with the elimination of Analog (i.e., NTSC) television transmission, scheduled to be virtually retired next year.
• Who pays for this?
• Which company is going to be the first to demand the required changes in the current regulatory environment?

Currently, in the United States of America, we have at least three existing mobile cellular technologies at play and now there is a third. The first three are GSM (used virtually everywhere around the world), CDMA (used almost exclusively in the USA), and iDen (used almost exclusively in the USA and some areas of Latin America). Now, we have added WiMAX as the very distant fourth, trying to take a share of the mobile data user and fighting against the so-called 3G services provided by GSM and CDMA - good luck.

These three standards compete in the US for a user population of around 150+ million users. Currently this means that that largest provider has only on the order of 50 million customers. In a few years, if it not already true, this will not even be the size of the smallest cellular provider in China. We can identify some serious issues:

• Is the competition in the US going to provide better services, or leave us behind as our mobile voice and data services are diluted over carriers that will not have the capital to expand their services to meet emerging application requirements?
• Will the USA fall behind in advanced wireless applications as availability of high-speed data services becomes fragmented and non-ubiquitous?

Finally, how do we balance the requirements of wireless to wired? Clearly, no current technology (or with known physics) is going to provide mobile gigabit services delivered to tens of thousands of users in a city. How then do we start valuing the the contribution of traditional wireline providers? And, how to we incent companies to provide the 20 Mbps to each business and home that will be needed to keep up with countries like South Korea and Japan?

Some issues?

• Building fiber into building costs a lot of money. However, permitting, franchise fees, and in general lack of government support makes this more expensive and sometimes impossible
• The apparent business environment for investing in companies trying to build new metropolitan infrastructure is extremely poor at best
• The business case for building is getting worse and worse

I will finish the blog with a short summary of the worse and worse, which may lead to a new entry later. The phone company invests heavily in the development of fiber to the home and business. The business case for the service includes the sale of voice, data, and video services. However, they do their job only too well, as they enable 20 Mbps or so to their customers and (as may be likely in several years) almost none of them use the video or voice services provided by the service provider. This is because customers can get their TV shows directly from the source of the material and by using one of multiple VoIP providers.

What happens in this scenario?

• Does the phone company stop investing in the fiber deployment?
• Doesn't the same situation exist for cable companies?
• Is there room for other companies to make an investment?

The bottom line is the simple question: Where is the value that enables investment? And, with the government now dealing with other monetary crises, can companies make the investment without a least more cooperative local, county, and state governments to make it easier and less costly to install new facilities?