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A good idea at the time
September 13, 2006

On Tuesday, September 12, Representative Edward J. Markey (D-Mass.) spoke on the exhibit floor of the Fall VON conference and exhibition. Markey was the Ranking Democrat on the House Telecommunications and Finance Subcommittee at the time the Telecommunications Act of 1996 was signed into law.

In his VON speech, Markey said he has advocated that Internet access should be available to all and the Telecommunications Act was designed to do that. It let telcos offer TV service and cable TV operators offer phone service. Markey told the gathering that the Act was written to "open the door to competition that would result in lower prices." But, something went wrong.

The Telecommunications Act did open the door to competition, but not price competition. Instead, cable operators and telcos compete on services. Why did things backfire? I happened to ask that question at VON the day before Markey made is comments.

On Monday, I attended lecture by Dr. Neale Martin of NTELEC, who spoke about the consumer's mentality when it comes to communications services (and why engineers don't understand it). Martin told his audience that the telcos offering video services were claiming "we can offer everything the cable operators can offer, but with caller ID on your TV." Following the presentation, I asked Martin "why don't the telcos offer the same services as cable operators at a lower price?" Martin explained that content providers such as CNN and ESPN charge operators for each subscriber, thus all video providers have those same costs per subscriber, which makes competing on price extremely difficult

It's too bad that communications service providers don't compete on costs. If they did, they might pick up many more subscribers on their existing networks. I know plenty of people who don't subscribe to cable TV because of the cost. In my opinion, cable operators and now telcos just don't get it. Many people including me want to pay only for the channels we watch. If someone offered me fewer channels at a lower monthy rate, I'd jump at it.

Posted by Martin Rowe on September 13, 2006 | Comments (0)