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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: djane who wrote (47758)	6/1/1998 3:18:00 AM
From: djane	Read Replies (1) \| Respond to of 61433

Sparks fly around Internet-telephone convergence at Vortex98 infoworld.com June 1, 1998 I'm just back from Vortex98, a conference I convened to pursue this year's top story in information technology. What is it? No, not year 2000. Here's a hint. Department of Justice antitrust watchdogs are prominent, but no, I'm not talking about Windows 98, which is just a farewell bug-fix release of the aging Wintel platform. Give up? OK, this year's top story in information technology is the accelerating convergence of the Internet and telephone industries. And because size matters, note that U.S. telephone companies are now charging $200 billion annually to carry voice calls that the Internet is preparing to carry as a sideline for ... free. So here's what I think after listening for three days at vortex98.com. Post-Cold-War power is devolving: from central governments to free markets. Underperforming monopolies, especially in telecommunications, are being privatized worldwide. Technologies underlying Internet and telephone industries are advancing exponentially, and what exponents! Semiconductors continue doubling, following Moore's Law, every 18 months. But now photonics (wave division multiplexing) doubles every 12 months, and wireless communication (spread spectrum) every nine months. Bandwidth in abundance! On the other hand, Internet traffic is doubling every four months. It doesn't matter much whether Internet traffic has already surpassed voice traffic, because if it has not yet, then it will very soon. And right after that, telephone will be only a small fraction of Internet traffic. Of course, the Internet can carry telephone, but not just at today's Bell quality. Internet telephone can be of both higher and lower qualities. We'll soon see what people will pay for telephone calls when quality varies from less than citizens band to beyond hi-fi. And Internet telephones need not stand alone but can be integrated with other modes of interaction -- with Web directories, with Web commerce, with Internet video. It's clear that standard Bell telephone will be incidental, or maybe just thrown in for free. The $200 billion that U.S. telcos now extract from their monopolies is up for grabs. True, some telco monopoly profits are redirected to socially desirable ends, such as lowering telephone costs to schools, libraries, and chalets in Aspen. But, most telopoly profits drop out as excessive returns to telco shareholders, after paying the bloated costs from which those returns are marked up. Internet telephone doesn't simply get around monopoly profits. Internet packet switching is much more efficient than telephone circuit switching, if not for voice, then certainly for the computer-to-computer traffic that will soon dominate. Now, if telephone is regulated, and if the Internet can carry telephone, then the Internet should be regulated. This is what the telephone monopolies are lobbying in Washington. But should the Internet be regulated by our Federal Communications Commission, by state public utilities commissions (PUCs), or not at all? The worst of these choices are the 51 state PUCs, which is where the telopolies rule. The best regulation is none at all, but only after the telopolies are broken up and set against each other. So, telephone and Internet regulation belongs in the FCC for now. Of course telopolies are not sitting back. Their old businesses are still going strong. Spurred by competition from cable television companies, they are investing in Internet infrastructure. Huge amounts of fiber bandwidth are now coming online. Wireless is spreading spectrum everywhere. And the telopolies are promising, as they did for ISDN, to deploy digital subscriber line (DSL) technologies to break the local bandwidth bottleneck. But none of this compares in scale and audacity to the outbreak of mergers and acquisitions in the Internet and telephone industries. Cisco and 3Com have long been growing rapidly by buying other Internet companies. SBC and Bell Atlantic have been snapping up local telcos. Soon a frenzy of cross-industry mergers will start. Lucent and Cisco have rejected various combinations, but for how long? Merger activity is good for Wall Street, but what about us? The proposed SBC-Ameritech merger should be rejected. The MCI Worldcom merger is less dangerous, but only with rules to keep interconnection among ISPs a tool of competition and not monopoly. Cisco, its market cap approaching Lucent's, has to be watched the same way Microsoft and Intel are watched. The FCC and Department of Justice must ensure that Internet markets don't fall to monopolization just as telephone markets are rescued from it. ------------------------------------------------------------------------ Internet pundit Bob Metcalfe invented Ethernet in 1973 and founded 3Com in 1979. Send e-mail to metcalfe@idg.net. See idg.net. Missed a column? Go back for more. ------------------------------------------------------------------------ Copyright c 1998 InfoWorld Media Group Inc. \| SiteMap \|Search \| PageOne \| Conferences \| Reader/Ad Services \| \| Enterprise Careers \| Opinions \| Test Center \| Features \| \| Forums \| Interviews \| InfoWorld Print \| InfoQuote \|