OPINION
The Future of Advanced Communications

This week, the California Telephone Association met in Monterey, Calif., to think about the future of advanced communications. The topics that these small telecom companies discussed will affect consumers across the country.

Predictions are difficult, but as musician Webb Wilder once said, it's easy to "take a hint." The hints in communications fall into two general categories: regulatory policy and technological innovation.

Regulatory policy is incredibly important, because when government rules become onerous, they quash commerce and innovation. That's what happened after the Telecom Act of 1996. The act allowed the Federal Communications Commission (FCC) and state public utilities commissions around the country to impose price controls and "forced access" rules on telecom firms.

Deregulation Spurs Growth

Companies like SBC and Verizon were forced to share their lines with so-called competitors at below-cost, government-set rates. This type of policy is a disaster, not only because central planning was shown to be faulty many years ago, but also because when people are told they have to share their property with others, they tend to not want to invest in the "commons." And that's precisely what happened.

In California, for example, SBC slashed spending from $8 billion in 2002 to $5 billion in 2003. Jobs followed this trajectory. While general employment in California has been slowly growing over the last couple of years, there have been huge job losses in the telecom sector.

In order for the communications industry to have a brighter future, government needs to step out of the way and let firms serve consumers. That means deregulation, which comes with a number of benefits such as increased flexibility and activity. And when that happens, there's greater competition and economic growth.

Technological Innovation

Growth creates more jobs, which leads to faster innovation, more capital investment and a stronger America. Then there's technological change.

The future is just as dependent on new technologies as it is on the proper environment in which those inventions can thrive. There have been many tech advances in recent years, but perhaps most important to the communications industry is voice over Internet protocol (VoIP).

VoIP works by taking sound and converting it into packets of computer data that are sent across the Internet and reassembled into sound at the specified destination. What this means is that telecom companies now compete directly with cable companies, wireless, satellite and broadband over power lines, because VoIP calls can be made over any of those networks.

And now that telephone calls can be turned into packets of data, it opens up the possibility of networking all consumer communications and data streams -- in other words, the centralization of data.

Tomorrow Looks Different

Think about phone use for a moment.

We are moving to a world in which someone can call me and I'll have the choice of whether to answer it using my cell phone, my office land-line phone or my at-home VoIP connection, depending on where I am. That's the decentralization of tools, but the centralization of data in the sense that it's all together. I won't need to have three different numbers; I can have just one, and access it at different points. But the telco companies at the CTA meeting were also interested in content.

The current thinking is that in order for communications companies to compete with one another, they will have to offer different content from their competitors. That means partnerships with Hollywood types and independent artists.

One of the CTA participants discussed partnering with a hip-hop star who is offering his own ring-tone/screen-saver package every month. With the U.S. ring-tone market now in the billions of dollars, that makes good sense.

The future of communications looks much different than it did a few years ago when government micromanagement was the rule and technological change more difficult. In the year 2005, things will look better if there's a serious reality check on regulatory structures and if technological innovation is allowed to thrive.