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| From Contract Professional, July/August 1998 A Troubled Convergence . . . . . . . . . . . . . By David Brittan The Gordian Knot: Political Gridlock on the Information Highway, by W. Russell Newman, Lee McKnight, and Richard Jay Solomon (MIT Press, $20) WITH THE HIGHLY publicized antitrust complaints against Microsoft—sparked by its inclusion of a Web browser in the latest version of Windows—two things have become clear: Bill Gates is looking more and more like George Will, and information technology is getting harder and harder to regulate. The task of ensuring fair competition was complicated enough in the days when each sector of communications had a clearly defined turf. For most of this century, there has been little doubt about the functions to which different media, such as radio, television, telephone, and print, were suited. Today, however, all information can be reduced to a single form: a string of bits. In this age of "digital convergence," telephone lines can (in theory) deliver movies, cable systems can provide two-way voice, and your PC operating system can connect you to the Internet. Disparate networks can (again in theory) be melded together to form a flexible, high-bandwidth information highway. But the question of who gets to carry what sort of information using which media has regulators and industrialists tied up in gridlock. In The Gordian Knot, three social scientists—W. Russell Neuman at the University of Pennsylvania and Lee McKnight and Richard Jay Solomon at MIT—attempt to explain how the gridlock happened and to suggest an alternate route. This is scholarly writing at its dullest. A large chunk of each chapter is devoted to telling you what this chapter is going to be about, and another large chunk to telling you what the next chapter is going to be about. Worse, the reader is often abandoned in dense thickets of regulatory history with no clue as to where the discussion is headed. But the authors do succeed in demonstrating that the current regulatory system needs fixing. The latest effort at reform, the Telecommunications Act of 1996, turns out to be a bureaucratic morass. It tries to ensure competition within each of the communications sectors by, for example, permitting local phone companies (telcos) to offer long-distance service and allowing vendors other than cable companies to provide set-top boxes. At the same time, the act perpetuates the now quaint policy of imposing different rules on different providers. Cable companies may deliver video; telcos may not. Broadcast video is subject to VChip requirements; Internet video is not. Broadcasters may get ancillary spectrum for free; telcos must bid for it at auction. Then there is the little matter of Federal Communications Commission oversight. "The act," the authors complain, "requires the Commission to make numerous decisions about the existence or absence of effective competition, the fairness of prices, possible discrimination among vendors, possible cross-subsidy between different types of communications services, the technical viability of interoperability, the physical location of telecommunications switching facilities, the character of communications content, and the impact of regulation on market behavior." Whew. Is this any way to run a communications revolution? The authors compare the present tangle of regulation and vested interests to the devilish knot supposedly tied by King Gordius of Phrygia. What is needed, they argue, is a way to slice through the knot, just as Alexander the Great is said to have done in the fourth century B.C. They draw hope from a number of historical instances when telecommunications combatants have managed, at least temporarily, to cut the Gordian knot. In the 1880s, for example, J.P. Morgan took an imaginative swipe at the telegraph monopoly held by Jay Gould's Western Union. Morgan invited Gould's enemies aboard his yacht in Long Island Sound and refused to let them leave until they had hammered out an agreement to thwart Gould's rapacious buying. A byproduct of this conclave was the founding of AT&T as a foil to Western Union. AT&T went on to cut its own Gordian knot in 1913. Under investigation by the Justice Department for driving independent phone companies out of business, the corporation offered a dramatic quid pro quo. In exchange for maintaining its monopoly over the territory it controlled, it agreed to allow outside companies to connect to its system and pledged to provide universal service at reasonable cost. The agreement held more or less intact until AT&T's breakup in 1982. The authors write: "We are suggesting that a similar paradigm shift is necessary to release us from today's gridlock." Their answer is an approach they call open communications infrastructure, or OCI. Promisingly, it is a moderate solution, a middle path between public ownership of communications networks, as advocated by those who fear corporate greed, and complete laissez-faire, as advocated by those who fear government meddling. Under OCI, the private sector owns and manages the system, while the government encourages competition and allocates electromagnetic spectrum. The scheme rests on four pillars: 4 Open architecture—interoperability and interconnectivity among all communications systems as needed. 4 Open access—connection to networks by any means available, whether hardwired or wireless. 4 Universal access—never actually explained, but has something to do with making wireless telephony and direct satellite service available in remote areas. 4 Flexible access—the ability to "make a call on the cable, send a fax over the radio, and watch television from the telephone line." The above account of OCI is abbreviated, but not by much. While it sounds good and feels good, the plan is maddeningly short on specifics. What incentive, one wonders, do all these different industries have to make their networks interoperable? Who is supposed to make the first move—the industries that lobbied so hard for special protection, or the bureaucracy that gave us the Telecommunications Act of 1996? Do consumers want or need so much flexibility? And would OCI make the concept of fair trade any clearer? Or would Bill Gates still get hauled into court over a few lines of code? OCI may, as the authors state, be intended merely as a starting point for further discussion. But a proposal that leaves so many details to the imagination is not so much a plan as a plea for harmony—as in "People, can we all just get along?" db |