September 19, 2005
From National Journal's 'Wired In Washington'

The starting gun for telecommunications overhaul has been fired, as key members of the House and the Senate have released initial legislative proposals. And as Congress gears up for a potentially significant revision of the 1996 Telecommunications Act, it's worth pausing to consider what is the same, and what is different, from a decade ago.

The hype about the 1996 law was that it would usher in the age of the "information superhighway."

It was sold on the premise that competition would replace regulation — as cable, long-distance and local telephone companies each got into the others' businesses. As if to underscore its epochal nature, then-President Clinton "signed" the law digitally, as well as with the more traditional ink pen on paper.

In fact, the law mostly cleaned up lingering disputes between the regional Bell operating companies – the so-called Baby Bells — and long-distance carriers such as AT&T and MCI.

The Bells had chafed against restrictions of the 1982 consent decree they signed as part of the Reagan administration's antitrust case against Ma Bell. They were particularly irked they couldn't get into long distance. AT&T, MCI and newer carriers also hungered for access to the local telephone market.

Congress was mistaken to focus so much on the artificial division between long-distance and local telephone service. The distinction essentially evaporated as the average Jane shifted cross-country calls to a cell phone with its bucket of free minutes.

Moreover, the 1996 Telecommunications Act essentially ignored the World Wide Web — except for the ill-fated part about banning indecency on the Internet.

Overlooking the Internet meant the law gave little guidance on broadband and Internet phones. But on the positive side, neglect allowed digital applications to develop and flourish in a laissez-faire climate.

Today, the battle lines are different. The long-promised digital convergence arrived once the Internet triumphed as the chosen information superhighway. Phone calls, television programs and Internet content are flowing over the same broadband pipes, and telecom and the cable giants are pumping up investments and competing aggressively.

Bundles of voice, video and data together make up cable's "triple play" — and some telecom carriers are seeking a "home run" with the addition of wireless service. But with Congress rewriting the law, there will be a rumble on K Street between the Bells and big cable. More likely than not, they'll be punching each other over the future of video programming, the most profitable of the four services.

But before leaving this story of telecom past and present, we need to say one word: Google.

In Silicon Valley, the Internet search company Google is a god, or at least what Microsoft once was. Soon-to-be-flush with $4.4 billion from a secondary public offering, Google is buying and building Internet applications. By now, it is probably more feared than loved.

Google's new business initiatives push at traditional legal boundaries and raise fascinating public policy questions. As National Journal's Technology Daily reported last month, Google's AdWords program — which sells keywords that include trademarks such as "Geico" — has effectively reverse-engineered trademark law. Google Print, a project to scan and make millions of freshly published books searchable, promises to do something similar to copyright.

Google also is emerging as a "telephone company." Last month, it launched GoogleTalk, an instant message program that doubles as a voice-over Internet protocol, or VoIP, headset. If you've got Gmail, you can Google Talk for free with anyone in the world, something I've done with my brother in China.

Google is only the latest entrant into this field of free phone calls. Users of Microsoft's Xbox Live! broadband gaming system are among the most talkative VoIPers. And, last week, eBay made a splash when it agreed to acquire Skype and its 54 million users for $4.1 billion.

Congress should be on notice that just as paying for "long-distance" service died as a category in less than 10 years, conventional "telephone service" is likely to fall even faster. But if consumers won't pay for long-distance or for local phones, surely they'll still buy broadband, the necessary ingredient to use a free Internet phone, right? Not if Google's yet-to-be-announced strategy of free WiFi, or wireless Internet service, proves successful.

The company is reportedly building a fiber-optic network to connect data warehouses on the East Coast. And people familiar with Google's free WiFi hot spot in San Francisco say it is a model for extending the "last mile" with free broadband networks in tandem with municipalities.

Google declined to comment, but the company apparently plans to make money on geographically targeted local advertisements. Now that's a changing business model!

Last month, National Journal's Insider Update: The Telecom Act published a 16-part series showing the striking diversity in the way cities are deploying broadband for a wide variety of citizen and employee needs. The House and the Senate telecom proposals each take different approaches to municipal networks, forcing that issue, too, onto the table.

The lesson for Congress is that in drafting Telecom Act 2.0, it should stop trying to craft inter-industry compromises, and do more to ensure it doesn't get in the way the next time technology and business models change.