Why telcos drag their feet on residential broadband

In the fall of 2007, Ralph de la Vega, AT&T's group president for regional telecommunications and entertainment made a pronouncement with profound implications that were largely overlooked in the mainsream media.

de la Vega told Investor's Business Daily that AT&T would ultimately shut down its existing voice network and replace it with a VOIP (Voice Over Internet Protocol) system in metro areas where U-Verse is being deployed.

Since U-Verse deployment has been delayed and scaled back, it calls into question the future of AT&T's wireline residential market segment. Essentially de la Vega pronounced the beginning of the end of the Publicly Switched Telephone Network (PSTN) and its replacement by the Internet with Next Generation Telephony.

That also means telcos' proprietary central office switches are on a fast track to obsolesence, destined to be replaced with Internet servers and field-based fiber optic distribution equipment. Industry observers like Bob Frankston are right to accuse telcos of foot dragging by creating artificial bandwidth scarcity and restricting broadband access in order to live in the copper-bound PSTN world for as long as possible. This is the unspoken subtext to the larger Strum und Drang on this blog and elsewhere over the pathetically poor state of broadband availability in much of the United States. It's typically explained as a simple return on investment problem, but there's more to it than that.

As the Internet wreaks massive disruption in mass media, it also threatens an end to the days of Plain Old Telephone Service (POTS) delivered over twisted copper. Just as people are canceling their newspaper subscriptions, they are also ditching their residential land lines. And who can blame them when all they can get over them is POTS and perhaps DSL (an acronym that should mean Doesn't Serve Lots)?

It also explains why first tier telcos like AT&T are redefining the residential wireline segment as "personal wireless" services since this segment can remain proprietary if residential wireline moves out of the old proprietary, closed system scheme and into one where last and some middle mile infrastructure is owned and operated by small local providers, local governmental entities and telecom cooperatives.