By Preston Gilmer and Rick Mallon

Deregulation’s failures have been in the headlines lately. Most stories revolve around banking, but the aftermath of telecom’s undulating deregulation has pitted cable operators against telcos in today’s market. The Internet bubble’s burst can be traced, at least in part, directly to establishment and subsequent manipulation of the 1996 telecom act. That act aimed to create a competitive telco environment in which it was believed CLECs would lead the charge in reducing telecommunications costs and driving broadband adoption. That is, until the CLEC market had the rug pulled out from under it.

RBOCs, led in particular by SBC with career lobbyist and former commerce secretary Bill Daley at the helm, convinced Congress to change the rules around loop unbundling and UNE-P. This turned the tables on many funded CLECs who’d planned to kick start their businesses on resale and shift over time to various infrastructure-building strategies. What we have today is one end result of a set of compromised regulatory goals. Telcos and cable operators have invaded each other’s turf and are engaged in escalating price wars in a battle for wallet-share.

The battle really ought to be for market share based on who can deliver more value. It’s true that consumers and businesses are looking to cut costs any way they can, but because communications are critical and central to every day life and business, what customers really need is more value for their money. Telcos and cable operators both face resource and budget constraints that will necessarily limit how much they can throw at each other in the coming year. Prices can only be cut so far before lose-lose propositions dominate.

The battle for customers continues, however, which means that CSPs can’t afford to dial back investments too far. There’s plenty of fat to trim – skunk works projects, shadow

their networks. As these companies begin to feel the squeeze from an economy that may be even worse than anticipated, questions revolve around where budgets can be trimmed and where new investment should be focused. If roll outs are going to be throttled back, it makes sense to invest in systems that cut the clearest path to new revenue and recognize the economy’s impact on end users.

A simple example takes us to the center of the cable versus telco frontlines. Cable companies have put a large dent in the consumer telephony market with low cost, all-you-can-eat services. While this pricing model has impacted the market, there’s little that’s