Triple play

It is the middle of baseball season. For us diehards, especially those whose teams already are almost mathematically eliminated not just from the division race but from contention for the wildcard, we've been forced to savor small purist pleasures while we "wait till next year." A steal of home, Boston Red Sox third baseman Bill Mueller's grand slams from both sides of the plate in a single game (a major league first), a perfect game and of course the elusive triple play.

In the communications industry, as we know, the rush is on to make the elusive, commonplace, infamous "triple play." A sprint is on between cable companies and telecom carriers of all types and sizes to bundle: any/all distance voice, broadband Internet and entertainment (broadcast and interactive) video. Recently SBC and Qwest cozied up to the satellite industry to dish out (pun intended) punishment to the cable guys. Meanwhile CableVision announced it will soon offer all of its cable subscribers voice service, and Cox's latest financials showed robust telephony growth.

The conventional wisdom is that whoever executes the triple play flawlessly wins. Unassisted would be nice, but around the horn is OK too. Conventional wisdom also once said there was a small market for wireless phone service in the U.S.--a niche of wealthy people in cars. This led AT&T to give up at their AMPs units at divestiture, and MCI to sell its cellular operations to Craig McCaw. But I digress.

My favorite industry triple play occurred this past month. Try and figure out if you see the common thread amongst the following:

• AT&T and Verizon joining forces to elevate MCI's circumvention of the access charge regime to scandal status in an attempt to "finish off" the company.

• Niklas Zennstrom, founder of the largest peer-to-peer (P2P) music-swapping network, KaZaa, recently told Boardwatch, that he is working on a P2P voice project. He says it will end the need for "big hummer" telephone switches.

• The July 29th revelation that the FBI's Electronic Surveillance Technology Section is actively lobbying the FCC for new Internet eavesdropping rules.

Give up? The answer is the VoIP tsunami is closer than the industry wants to admit. 

The 38,000 users of Pulver.com's "Free World Dialup" service (yes, that is "Free" as in, if you have a hard or soft SIP phone and connect to the server you can talk free to anyone else on the server) are the first wave. "The Big One," is coming. Let's touch all the bases and see what we can discern.

First, the outcome of the industry food fight over carrier access charges circumvented, and whether that constitutes fraud, is a fabulous summer blockbuster. It may end up leading to the demise of MCI (and we all have our feelings about whether that is a good or a bad thing), but it highlights the old industry's fixation on old issues. Circumvention of access charges is kind of like paying taxes--most people wish to execute strategies for paying the legal minimum. This is one of those arcane areas where it depends on what the definition of "legal" is. God bless the Federal Communications Bar Association. 

It is actually fun to see an entire industry engaged in a discussion about access charges, their legal or illegal circumvention, and the finer points of industry pie-splitting of revenues that traverse multiple entities. After all, prior to the imposition of the access charge regime in 1983, at industry insistence, with regulatory forbearance, private lines for decades were exempted from the separations and settlements process part of which went to supporting universal service. This legal circumvention could be viewed as an indirect way of making residential consumers subsidize business users, turning the history of subsidization debates on their head.

Further, one wonders if regulators, emboldened by the persuasive arguments of the industry, will now go after "leaky PBX" customers. As aided and abetted by virtually every carrier in the U.S., the question arises about the "legality" of giving large enterprises the ability to use their private networks to terminate long-distance calls on their private switch and route them to a local number, thereby avoiding significant charges. It could get ugly if carriers had to make public the names of all those major customers that circumvent the access charge regime, thus depriving additional funding for universal service. This sounds like one of those cliché cases of, "Be careful what you wish for!" That's potentially a lot of "perp walks."

This is not to cast aspersions at those raising the questions. The laws are the laws, and restoring confidence that fraud will be rooted out and prosecuted is important. Plus, businesses have every right to pursue whatever legal remedies are at their disposal to gain competitive advantage. As Sergeant Esterhouse used to say at the opening of the old hit TV show, "Hill Street Blues," "Let's be careful out there, people."

Second, Zennstrom threatening to disintermediate the voice business--i.e, kill the service provider voice cash cow well in advance of when it is expected, and out of the control of incumbents--best be taken seriously. As the music moguls know, and the movie ones are finding out, things change fast. Not having a strategy for defending one's livelihood that can be executed quickly can be fatal. 

Finally, it is ironic, given the view of government as backwards and slow to move on technology, that the FBI has the best grip on the future. They understand if the bad guys can get around being tapped, the country could be place at considerable risk. The gap needs to be filled now before the flood gates for untappable communications are fully opened. The good news is they have been on the case of investigating how to implement legal digital intercept technology and policy for almost a decade.

Is the above an alarmist view? Is this "Apocalypse Now"? It could be, but it does not have to be. 

If we all understood better how the service providers are going to turn the VoIP juggernaut into a profitable business model in the future, their obsession and distraction with MCI might not be so discouraging. In addition, P2P voice faces some daunting technical obstacles. For instance, this alphabet soup of industry jargon--VoIP via SIP over a shared 802.11 WLAN with dynamic IP address assignment through a cable modem that sits behind a NAT--is not uncommon in the homes of individuals who might wish to indulge themselves of Mr. Zennstrom's vision. Yet, even those who know what all the terms mean, and know how to work with the technology they represent, find making such an infrastructure perform at respectable levels is problematic at best. 

Not alarmist but certainly a cautionary tale. This triple play may have happened in a game that did not have an impact on who will be in this year's world series, but to ignore it could be ignoring the real future of the industry. Like I said above, we purists of the game savor our pleasures when we find them as we patiently wait for the results of rebuilding to bear fruit. As late great pitcher Satchel Paige supposedly said, "Don't look back, they may be gainin' on you!"

Peter Bernstein is President of Infonautics Consulting Inc. He can be reached at pb111451@optonline.net.