Orange County Register, July 21, 2004

Perhaps deregulation finally is ready to turbocharge telecommunications. One of the more striking advances will come in October to Huntington Beach, when the city will become one of three cities nationwide where the telephone company Verizon will begin equipping homes with a new high-speed fiber-optic network. The other two cities are in as-yet-undisclosed areas of San Bernardino and Riverside counties.

A little publicized action by the Federal Communications Commission earlier this year was a key factor in Verizon's move into this high-speed broadband technology.

Fiber-optic systems transfer data approximately 10 times faster than cable, 20 times faster than DSL and 534 times faster than a dial-up modem. Verizon's new service will deliver "phone, data and even video programming," reported the June 20 Register. "The effort is aimed at keeping it competitive with cable operators such as Time Warner," Surf City's cable company.

Why is it happening now?

"We think it's a right thing to do from the big perspective," Tim McCallion, president of Verizon's Pacific Region, told us. "Like money, you never can have too much bandwidth. The voice [phone] business is becoming very competitive, and will continue to be extremely competitive. We feel what consumers will want now and in the future is broadband."

But it is a change in public policy, he said, which "clarified the economics" of the business, that might have been a key factor.

Home fiber optic investments now make sense because of changes in regulations earlier this year, explained Sonia Arrison, director of technology studies at the Pacific Research Institute.

The February triennial review of the Federal Communications Commission "said broadband would be treated as Internet communications services, not telephone services," she said.

The ruling means that broadband transmission over fiber-optic cables will be freed from regulations that currently hamstring telephone companies.

Chiefly, the FCC review means that Verizon and other firms can invest in laying down their new fiber-optic networks without being forced to share them with other companies, meaning they get all the profit. Verizon will "not be forced to share this network with our competitors, as we were with the existing copper network," Mr. McCallion explained.

So "it's not any surprise now that Verizon is installing fiber-optic," Ms. Arrison added. The FCC action got rid of "a lot of uncertainty in the market."

Adam Thierer, director of telecommunications studies at the Cato Institute, agreed: "The FCC said it was going to carve out a new area for fiber, providing an incentive to roll out the new stuff."

He also pointed out that cable has gained an advantage against the telephone companies (telcos) in recent years by offering "a triple play: voice, video and data, all in one bundled bill for the consumer." This meant "cable was eating the telcos' lunch." Also hurt by wireless taking a chunk of voice communications, "the telcos are panicking."

Now, Verizon and other telcos can respond with a "triple play" of their own on the new fiber service. The winner is the consumer, who will have even more choices and competitive prices.

When government gets out of the way, good things happen - fast.