The fact is that the universality of telephones iscrucial to their usefulness; yet universal service usingcurrent technology is totally uneconomical and impractical.
It simply does not pay to lay, entrench, string, protect,test and maintain miles of copper wire pairs, each dedicatedto one household that uses them on average some 15 or 20minutes a day.
Butbecause the lines are short and often bundled together, citytelephony benefits from economies of scale and convenience.In rural areas, however, the copper lines cost between 10and 30 times as much per customer as they do in cities.
What saves us is socialism. Closing the hugedifferential between the costs of serving rural and urbancustomers is a Byzantine web of cross-subsidies, wherebyinner-city and business callers in urban areas subsidize theworthy citizens of Kirby, Vt.; Vail, Colo.; Mendocino,Calif.; Round Rock, Texas, and Tyringham, Mass., among otherbucolic locales, to the tune of billions of dollars.Overall, subsidies from business and urban customers torural and other expensive residential users total some $20billion a year. In case the cross-subsidies do not sufficeto guarantee universality, Congress has established a $700million "Universal Service Fund." For all that, some 5% ofhomes still lack telephone service (compared with 2%unreached by TV, which faces no universal servicerequirement).
The minimum replacement cost ofthese lines deployed over the last 50 years or more--andstill being installed through the mid-1990s at a rate of atleast five million lines a year--is some $300 billion. analysts termed telephony a naturalmonopoly because the system could handle additional callsfor essentially zero incremental cost and because networkexternalities ensured that the larger the number ofcustomers, the more valuable the system. These assumptionshad led to government endorsement of the Bell monopoly as acommon carrier committed to universal service.
Regulators, politicians and litigators always imaginethat they can control the future of telecom, awardingmonopoly privileges in exchange for various high-minded goals, such as universal or enriched services. But theiractual role is mostly to promote monopoly at the expense of such values as universality,which ultimately depend not on law but on innovation. As a form of tax, regulations reduce the supply of the taxed output. It is technological and entrepreneurial progress,impelled by low tax rates and deregulation, that brings once-rare products into the reach of the poor, always the world's largest untapped market.
In the "above-890-megahertz" decision of 1959, madepossible by new Klystron tubes and other devices that openedup higher frequencies to communications, the FCC permittedcreation of private microwave networks. On the surface, itwas a narrow decision affecting a few large corporations.But it represented a clear break from the previous principles of common carriage,cross-subsidy and nationwide price averaging in thetelephone network. Combiningmicrowave with fiber, long-distance telephony became atechnologically aggressive and openly competitive arena;AT&T's monopoly was a thing of the past.
After the invention of cellular at Bell Labs in 1947, some34 years passed before the FCC finally began grantinglicenses for cellular telephony. However, the FCC allocated half themetropolitan licenses to existing RBOCs, which had nointerest in using wireless to attack the local loopmonopoly. The other licenses it assigned by lottery togamblers and financiers with no ability to create analternative local loop. The process of buying out thespectrum speculators required leading wireless carriers tohobble themselves with huge amounts of junk-bond debt. As a result, the idea persists that wireless telephonyis an expensive supplement to the existing copper colossusrather than a deadly rival of it.
At the foundation of the information economy, from computersto telephony, is the microcosm of semiconductor electronics. In computers, engineers lay out the wiresand switches across the tiny silicon substrates of microchips. In telecommunications, engineers lay out the wires andswitches across the mostly silicon substrates of continentsand seabeds. But it is essentially the same technology,governed by quantum science and electrical circuit theory.
The elements of quantum physics intrinsically combinethe characteristics of particles--definite specks ofmass--with the characteristics of waves-- an infinite radianceof fields and forces. Entirely unlike particles, wavesmerge, mingle and mesh in vectors and tensors propagatingboundlessly through space. It is this paradoxical combination of the definite withthe infinite that gives the microcosm its promise as amedium, not only for computation in one place, but forcommunications everywhere. Spectrum unfolds in a globalethersphere of interpenetrating waves that reach in a self-similar fractal pattern from the plasmas of semi-conductorlasers through the ethers of the planet.
Wires may seem more solid and reliable than air. But thedistinction is largely spurious. In proportion to the sizeof its nucleus, an atom in a copper wire is as empty as thesolar system is in proportion to the size of the sun. Whether insulated by air or by plastic, both offerresistance, capacitance, inductance, noise and interference.In thinking about communications, the concept of solidity ismostly a distraction. The essence of new devices emergesmore and more as manifestations of waves.
The world of the telecosmis subtly shifting from electronics, with its implicitprimacy of electrons, to what might be termed spectronics,seeing the particle as an expression of the wave rather thanthe other way around--moving from Bohr's atom andHeisenberg's electronic uncertainty to Maxwell's rainbow andSchrodinger's wave equation.
Using new digital radio technologies, such as codedivision multiple access or smart and directional antennasystems, you can similarly beam the same frequencies throughthe atmosphere, insulated by air. The chief difference isthat the wire system costs far more to install and inhibitsmobility.
One fiber thread the width of a human hair canpotentially use about 25 trillion of those hertz forcommunications (the rest tend to be fraught with moisture).This span is enough to carry all the phone calls in Americaon the peak moment of Mother's Day, or to bear three millionsix-megahertz high-definition television channels--all downone fiber thread the width of a human hair.
The Shosteck chart is a bellcurve relating the incomes of the world's households totelephone penetration rates. He shows that telephony has sofar penetrated only to countries representing the top tailof the curve, where national wealth suffices to reduce thecost of telephony to a threshold of between 4% and 5% ofincomes. As incomes rise around the globe, more and morepeople cross the telecom threshold. A chart of GDP in realdollars per capita versus telephone penetration shows that a40% rise in incomes could bring a 1,600% increase inpotential customers.
But telephony is becoming a branch of the computerindustry, which doubles its cost effectiveness every 18months. The wireless convergence of digital electronics andspectronics will allow the industry to escape its coppercage and achieve at least a tenfold drop in the real priceof telephony in the next seven years.
By transforming the technical landscape ofcommunications, spectronics are also transforming thelawscape. Indeed, by entirely closing the gap between thecosts of serving rural and urban customers, digital wirelessphones will obliterate the need for cross-subsidies thatunderlie the entire regulatory edifice.
Today, in the name of deregulation, politicians arepreparing to impose a series of new competitive requirementsupon the Bell operating companies, on the assumption thatthey still wield monopoly power. Pundits still seem tobelieve that the copper cage protects local telephonecompanies from outside competition. But in fact, the cageincarcerates them in copper wires, while the world preparesto pass them by.
The digital future is not wired or wireless. It isspectronic and spectacular. To participate in thisexplosive market, all telephone companies will have toescape from their copper cages into the infinite reaches ofthe spectrum.
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