The breakup of the Bell System, and the shifting tides in our approach to the regulation of communications in the US, was likely the single-most important precursor to the growth of the Consumer Internet. Without these, consumers would never have been able to purchase dial-up modems from computer manufacturers, would never have connected to ISPs, and would ultimately never have shared kitten photos on Facebook. Kittens aside, I think it need not merit substantiation that we are further ahead as a society because of the Internet, and because of the changes in regulation and innovations that brought it to being.
Yet, you could not look forward from the late 1960’s and early 1970’s and, as Steve Jobs said, connect the dots on the great outcomes that changes in our view toward Telecommunications would bring us. In those days, the behaviour of the AT&T monopoly simply felt wrong. Initiated by the US DoJ and the FCC in 1974, both believed (and were able to prove) that AT&T was price gouging in a number of categories to subsidize its network builds. Established as a government-sanctioned monopoly in 1913 by the Kingsbury Commitment, AT&T held a grip on the population so strong that for most of the 20th century it was actually illegal to own a phone in the United States (and in Canada, which held similar policies) — you needed to rent yours from the phone company.
Predictably, as a result there was very little innovation or diversity in the telephone handset marketplace. The echoes of Ma Bell’s behaviour during this time still resonate today: a key strategy for crushing the independent regional Bell companies in the US was to refuse to connect them to its long-distance network (compare this to the modern refusal of major Instant Messaging networks to interconnect).
A little-known inventor challenged the monopoly in 1968 with his device, the Carterfone. The Carterfone provided operator-assisted calling between ship-to-shore radios and the telephone network, and Thomas Carter sued AT&T to allow his devices access to the phone network. This led to a landmark FCC decision to allow 3rd-party equipment to connect to telephone lines via a protective coupler. AT&T had suggested during the trial that to allow 3rd-party devices onto their network would potentially cause damage to the networks (this was largely BS) or would allow hackers to commit toll fraud (this was true, as the telephone network had very weak controls right up to the 1990s). Eventually the requirement for the coupler was dropped and the phone jack in your home became, legally speaking, yours.
It took roughly 10 years from the instigation of the 1974 DoJ Antitrust case to reach a settlement, which culminated in AT&T’s divestiture from the Regional Bell Operating Companies (RBOCs) in 1984. But it took another 20 years to have a material effect on the industry — largely because the telephone system had been designed around top-down, centralized, monopolistic, end-to-end control. From 1984 to 2004 the telephone network was transformed using more open, decentralized, and interoperable technologies largely driven after the mid-1990s by Voice-Over-IP and technologies which leveraged Internet Protocol signalling. The network shifted from circuit-switching to packet-switching, and voice quickly became just-another-rider on a global network that is now almost entirely optimized to carry data, not voice circuits.
Unquestionably, with increasing openness there has followed increasing innovation, opportunity for entrepreneurship and investment, reduced cost to the consumer, and greater diversity of choice for consumers in the telecommunications marketplace. An early sign of this that I’m fond of pointing out was the Sports Illustrated Football Phone.
By the time of its release, in the mid-1980s, the cost of a telephone was so cheap that the device could be included for free with a magazine subscription. 10 years earlier, families paid $120/year for each phone in their home, simply because there was only one choice for where to get one — the phone company.
Does that sound ridiculous to you? It should. However pockets of this monopolistic verticalization persist today, whether it’s regulators’ continued support of mobile phone subsidies with 3-year lock-in and the right to refuse interconnection with any “unapproved” 3rd-party devices; or more egregiously, the absolute verticalization of the Cable Television monopolies, particularly with High-Definition Cable TV.
In Canada, if you want to buy a Personal Video Recorder you can *ONLY* purchase a unit which is distributed via your cable company (even when you buy it at Future Shop for a ridiculously overpriced sum). These are apples and oranges, but compare the cost in the US of a Tivo ($149) to a roughly equivalent but vastly inferior Motorola ($348) PVR (which is what you get in Canada from Shaw). That Motorola PVR, which was released last year, replaced a unit first released in 2004 — which should give you an idea of the glacial pace of innovation in the PVR market. If that didn’t drive the point home, the Motorola device uses the exact same godawful user interface as its 8-year-old progenitor.
The Tivo, which has a brilliant user interface vastly superior to that of the Motorola or Cisco devices and allows you to skip commercials altogether, is not available in Canada and likely never will be. This is because the CableCard standard, which theoretically allows consumers to slap a PCMCIA card into any manufacturer’s PVR, is not mandated by Canada’s CRTC (the standard was birthed by the US Telecommunications Act of 1996). And even in the US, where CableCard was supposed to open the marketplace to competition from Consumer Electronics manufacturers, the going has been very rough because CableLabs (which is controlled by the Cable companies) must certify each new product offered through a rigorous and tedious certification process. This has caused most CE manufacturers to steer clear.
It is a ridiculous circumstance that results in Cable companies forcing us to use cheap hardware with terrible user experience design, while charging a premium price. They couch their argument for maintaining the status quo in notions such as “copyright protection” and “customer service”. In this utopia of Big Cable, we are still using $20 rotary-dial telephones, and paying $10/mo. in perpetuity for the privilege.
Companies have a right to earn a profit for their shareholders in fair markets. They do not have the right to leverage taxpayers’ resources and government regulation to operate unfair and anti-consumer business practises, stifling innovation and competition. With the epic consolidation currently being allowed to happen in Canada — where the same company can own the hockey and basketball teams, the stadium they play in, the television network which broadcasts their games, and the physical cable company that distributes the signal — we are moving more quickly toward the days of Ma Bell and her predatory behaviour than ever before.
Whereas the CRTC focused its efforts during the 1990s on doing an ineffectual job at tearing apart the monopolies of the major Canadian telecom companies, they were apparently completely unaware of the increasingly monopolistic behaviour of Big Cable. Rogers and Shaw were very late to the party in launching VoIP-based residential phone service, taking advantage of regulations intended to provide competitiveness to “Over The Top” phone companies — and when they did launch, they immediately set about attempting to block and throttle those same companies from effectively servicing Cable broadband customers.
In Canada, there are precious few voices for the consumer. One such voice is OpenMedia. They need your support, whether it’s lending your voice to their campaigns and petitions, or your dollars to fund their operations and administration. Second, you my dear citizens need to get fighting mad. You need to unleash a torrent of reasoned, sane abuse toward the diffident bureaucrats at Canada’s CRTC; and by the same token support them loudly when they undertake a rare pro-consumer initiative, such as their policy against increased volume for television commercials.
Finally, you can do what a large number of Americans are doing during these darker economic times, and pull the plug. There are many ways to consume television media online, from the torrent networks to television networks’ web sites. You can buy internet set-top boxes from Apple and Boxee, and stream your entertainment on-demand. Sometimes markets only respond when you vote with your feet.
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