ANALYSTS SEE LITTLE PHONE-CABLE COMPETITION COMING

In speech before opening of Society of Cable Telecommunications Engineers’ (SCTE’s) Emerging Technologies conference here late Tues. Levin said current govt. regulation of telco high-speed data lines had had “only marginal impact” on Bell broadband deployment. “I think the Bells will gain very significant broadband deregulation [this year],” he said. “But that won’t change things much because their costs are too high.” He noted that cable industry had “35% to 40% cost advantage” over phone industry in upgrading its lines for digital high-speed service.

Levin argued that broadband service wouldn’t be in every home until federal govt. invested heavily in making it so. “There’s never been a communications product that [reached this mark] without sufficient government support,” he said, citing phone, radio, broadcast TV and even cable: “We're not doing that in broadband. It’s hard to see how we get to universal penetration without government support.”

Levin also questioned desire of phone companies and cable operators to battle for same customers. Despite competition goals set by Congress in 1996 Telecom Act and persistent public claims by both industries, he said, there was little evidence that either industry truly longed to invade other’s turf. Instead, he sees both industries largely acting defensively, with Bells defending their core voice services and cable operators protecting their core video franchise. “It’s not quite clear to me that cable and the telcos actually want to compete with each other,” he said. “Everybody in Washington says they want competition” but “nobody really wants it.”

Blaming that joint resistance partly on need of both industries to raise large sums of cash on Wall St., which abhors uncertainties of competition, Levin also argued that, like nuclear powers, neither industry wanted to trigger full- scale hostilities with other by acting too provocatively. Similarly, he said, phone companies had largely avoided entering each other’s region despite much talk about out-of- region competition since Telecom Act passed 7 years ago. “They've not done it because they don’t want the others coming into their territory,” he said. He said Bells now were competing with each other in wireless space “only because they have to.”

Similarly, despite strong Bell rhetoric in past, Levin doesn’t see phone companies moving into cable’s core video business even if cable operators make big push into IP telephony and wireless communications services. He said high costs and lack of many competitive options were main barriers. He also said Bells believed they could trump cable in telephony by offering wireless service, bundling their products and marketing their services aggressively to consumers. “I don’t think the Bells have to have video,” he said.

Kagan World Media head Paul Kagan dismissed latest notion of phone companies’ competing against cable in video by deploying VDSL technology. “All telephone industry concepts for competition in video have failed,” he said, speaking at conference’s opening session Wed. “The telephone industry didn’t have a handle on it They didn’t have a clue.”

Despite plight of telecom industry, which has shed 500,000 jobs in last 3 years, Levin said he saw little in President Bush’s proposed $674 billion economic stimulus plan to spur that depressed industry. “There’s nothing in the economic stimulus package to promote demand,” he said. Levin said Bush also had disappointed telecom officials by not dedicating much of federal homeland security funds for upgrading of nation’s communications infrastructure. But even though Homeland Security chief Tom Ridge eventually may realize that “his real job is to be CIO of the U.S. government,” Levin said, “it doesn’t look like the technical and IT communities will benefit.”

Only other thing govt. could do to spur demand for communications services, Levin said, is to resolve digital TV copyright impasse between Hollywood and Silicon Valley. He half-jokingly suggested that federal officials adopt late President Richard Nixon’s “madman” strategy of seeming angry enough to impose their own solution on deadlocked industries. But Levin, who was chief of staff to former FCC Chmn. Reed Hundt, warned that that approach could well fail because govt.-imposed solutions rarely worked.

Also scheduled to appear on Levin’s panel were Mike Perko, chief of FCC Media Bureau’s communications and industry information office, and Patti Reali, principal telecom analyst for Gartner/Dataquest. But both were felled by Norwalk virus, Reali just before she left for Miami Beach and Perko just after he arrived here for show.