In the mid 1990s, the Federal Communications Commission and a number of state public service commissions were forced to notice that the moat that surrounded the Baby Bells was being breached by alternative access providers and competitive local exchange providers. The facility based alternative providers wanted to expand from just providing by-pass networks to and for their large corporate clients. They also wanted to provide consumers with an alternative to incumbent local providers such as GTE, Centel, and BellSouth.
The large corporate clients served by alternative local exchange and alternative access providers wanted to avoid the fees paid to incumbent local exchange carriers for moving traffic from one say a satellite office to the corporation’s headquarters. They determined that competitive providers gave them a less expensive and more efficient alternative. Regulators, prompted by emerging competition and calls from incumbents to remove the regulatory handcuffs, moved forward with modifying statutes to create on the state level new baskets of competitive services that qualified for alternative, non-rate based pricing. On the federal level, by-pass services, provided by cable companies and long distance companies, contributed to the passage of the Telecommunications Act of 1996, which saw local exchange markets opened up to competition by long distance companies and cable companies.
Notice I referred to GTE, Centel, and BellSouth. These companies are no more having been swept up in acquisition activity that succeeded the passage of the 1996 Telecom Act. By-pass and a revamped regulatory scheme for the 1990s introduced disruption in the telecommunications markets and with this disruption came innovation in cellular telephone services, video distribution services, and broadband services. Cable companies, legacy long distance companies, and incumbent local exchange carriers were adding reality to the convergence that AT&T’s C. Michael Armstrong envisioned in the late 1990s.
We are witnessing more convergence and disruption again; changes and innovations that will require the FCC to again loosen the shackles impeding investment in the broadband and Internet world.
Readwrite.com today posted an article describing the efforts of large Internet companies such as Facebook, Google, and Amazon to build networks with the capacity to move more data traffic across their own networks while avoiding potential fees that could be assessed by large telecoms such as AT&T and Verizon. Instead of having CLECs build their networks, Facebook, Google, and Amazon have the cash to do it themselves. This tells me that AT&T and Verizon will need to rely on other revenue paths to maintain their profitability; profits necessary for reinvesting in broadband deployment and spectrum acquisition necessary for meeting consumer hunger for broadband, wireless services, and app usage. AT&T and Verizon, as well as other classic Internet providers, will also need to seek out other revenue streams if they are to compete with Facebook, Amazon, and Google’s Internet protocol-based networks.
In order to facilitate reactions to changes in the market, the FCC must take another set of handcuffs off, primarily the requirement that AT&T, Verizon and smaller telecom-based broadband service providers maintain old legacy telephone networks that cannot compete with the capacity that Google, Facebook, and Amazon are investing in. The FCC will also have to recognize that competing on the Internet will require not just deploying higher capacity networks but also for the regulatory agency to look at these companies in a different light. Google, Facebook, Comcast, and Verizon are no longer Internet or broadband companies. They are morphing into something beyond being a carrier, a search engine, or a social network. They are becoming one stop media hubs with the ability to attract consumers with content while building the networks necessary for getting the eyeballs to the content. These evolving Internet entities are nothing the 1996 Act envisioned and the regulatory framework expressed by the 1996 Act is too confining for these new breed knowledge and information companies.
Not only are Google, Facebook, and Amazon taking network bypass to a new level, they are forcing us to bypass the traditional lenses that we use to look at these companies.