Let The Telecom Free For All Begin

Fans of competition were dismayed last year when Bell Atlantic Corp. and Tele-Communications Inc. announced plans to merge. It was offputting to see arch-egos Raymond W. Smith of Bell Atlantic and John C. Malone of TCI making nice for the cameras instead of doing battle.

So now that the biggest phone-cable deal ever is history--it collapsed in February--it's great to hear Malone shooting from the lip again. At a New York news conference on Aug. 9, he scoffed at asynchronous transfer mode (ATM), a sophisticated communications system Bell Atlantic and other phone companies are pinning their futures on. ATM, Malone said, is overkill: "Burning down the barn to get roast pork."

This is more than arcane techno-sniping. Malone and leaders of the other top cable-TV operators--Comcast, Continental Cablevision, Cox Cable, Time Warner, and Viacom--are plotting a rival strategy for the interactive, high-capacity networks of tomorrow. The press conference was called to announce that more than 70 companies have responded to the cable industry's request for ideas on designs for "full-service" networks. The proposals have come not only from traditional phone-gear suppliers such as AT&T and Northern Telecom, but from creative interlopers such as Intel and Microsoft.

This kind of intellectual free-for-all might never have occurred if TCI had been submerged into Bell Atlantic and if other cable-phone mergers had gone through. Sure, cable networks would have added phone service, but they might well have hewed closer to ideas from Bellcore, the research-and-development arm of the Baby Bells. Indeed, the only big cable operator that's doing much with ATM switches, Time Warner Entertainment, is 25% owned by a Baby Bell, US West Inc.

Now, the phone companies could even get some good ideas from the cable operators, traditionally technological laggards. Says Andrew H. Chapman, executive vice-president of Integrated Network Corp. in Bridgewater, N.J., one of the 70-plus companies making proposals to the cable industry: "There is an opportunity to define the next-generation network paradigm, not only for the cable industry but for the entire telecommunications industry."

With cable companies accepting proposals until Sept. 23, it's too soon to say what their network design might look like. But one thing is clear: Many cable operators believe they can come up with something cheaper and more flexible than the ATM switch, which chops and sorts simultaneous flows of voice, data, and video traffic. Instead, they might embrace networking concepts from the Internet or even from cellular nets.

Cable operators certainly run risks by striking out on a new course. Historically a low-tech industry of ditch diggers and wire pullers, cable companies are short on the wherewithal to weigh the competing concepts that are descending on them. The industry's R&D consortium, Cable Television Laboratories Inc. in Louisville, Colo., does a remarkable job, but it has only 45 employees, less than 1% the number at Bellcore. Technologies such as ATM, while imperfect, have been chewed over for years by thousands of people at companies from Siemens to Sun Microsystems Inc. In contrast, cable operators hope to start placing orders as soon as December.

FRESH IDEAS. What could go wrong? Ask any telecom engineer. The state-of-the-art solution might crash when it's loaded with real traffic. Or innovative features might not mesh with existing phone networks. Any such flaw would embarrass cable operators just when they need to prove their reliability.

Still, it's heartening to see new market entrants bringing fresh ideas to a telephone industry whose architecture has always been dictated by monopolists. Good thing Ray Smith and John Malone never made it to the altar.

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