The regulatory structure for the cable TV industry is being toppled by new technologies, such as Internet Protocol TV, industry watchers warn, and a new regulatory regime needs to evolve, and quickly, to deal with the changes.
A panel of the Judiciary Committee of the U.S. Senate on Wednesday heard testimony from SBC Communications Inc. (search) and Verizon Communications Inc. (search), two major phone companies that plan to deliver TV and Internet access via an IP network.
At this point, the companies don't face the same regulatory requirements as cable companies, such as building systems throughout a serviced community or the payment of franchise fees to an array of local government agencies.
Local and state agencies are already tackling the issue. In September, Texas laws were enacted governing TV delivered over a wire, whether a phone wire or via cable.
The rule creates a single, statewide franchise fee for companies entering the cable TV business, and does not require mandatory "build-outs" of the technology companies. However, state associations in the cable industry are challenging the legislation.
This kind of legal environment may be the model for other state and federal government officials to follow, experts said.
"The entry of SBC, Verizon and others into the cable television marketplace is great news for consumers and more evidence that competition is reaching every corner of the telecommunications business," said Joseph Bast, president of the Heartland Institute Inc., a libertarian-leaning think tank based in Chicago. "Regulations designed to regulate monopolists ought not to be used to slow down or prevent the entry of these new competitors."
Bast told Ziff Davis Internet that technology innovations that have emerged during the last decade have essentially made most telecom regulations obsolete.
"The last thing we should do is impose these regulations on new entrants in the marketplace," Bast said, adding that to do so would be "counterproductive."
Jim Harper, director of information policy studies at the Washington-based Cato Institute, said the very reason for regulation of telecom regulation may have disappeared with the debut of these new innovations.
"Cable companies may seek to slow competition from these IP video providers by bringing them under the old cable mandates," Harper said. "But the right answer is to reduce regulation across the board and let competition find what best serves consumers."
Others are skeptical about the offerings of the telcos.
"SBC and Verizon are acting like IPTV is a brand new technology that they are implementing and bringing to consumers," said a spokesperson for the Cable & Telecommunications Association for Marketing, based in Chicago. "The reality is that consumers have already been experiencing IPTV from cable companies. Cable has long used Internet Protocol (search) for signal transmission, and they've invested $100 billion in their infrastructure to make it happen."
But the cable industry will face stiff opposition from the telcos.
According to John Logan, a former senior official at the Federal Communications Commission (search), now a lawyer in private practice in Washington, the telecom companies are probably going to win the battle to reshape the rules for new video delivery services.
"Telcos will probably win any legislative and regulatory battles, because of their influence in Congress," Logan told Ziff Davis Internet.
The question is, he said, once they have the rules in place to remake the television delivery market, what will be the future costs?
"The bigger question is can they afford to deliver on these networks," Logan said. "Fiber-to-the-home could cost telcos $1 billion to $2 billion. There are a number of wireless technologies that are faster and less expensive to deploy."
Logan called the wireless technologies a form of "inexpensive broadband."
But analysts, including Mitch Mitchell, chief IPTV (search) analyst at A.T. Kearney Inc., suggest that IPTV is a critical component of the Baby Bell companies' future positioning in the marketplace. The Bells will offer personalized content choices, and offer more diversified content via IPTV.
That will then enable the telcos to market integrated voice, data and video services to the same customers, he said.
Meanwhile, the cable companies have argued before Capitol Hill — and also down in Texas before state legislators — that it is unfair for phone companies not to be regulated in the same way as cable firms. They say that all that they want is a "level playing field."
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