Internet phone services ("Voice over Internet Protocol," or VoIP) are growing rapidly in popularity. However, because they are often offered by smaller telephone companies, such as Skype or Vonage (CallVantage, from AT&T, is an exception), they are often at a competitive disadvantage to more traditional telephony. Sensitive to that, the FCC last year ceased Madison River Communications, a telecom company, from blocking their consumers' access to Vonage.
Cable and Satellite Companies
Facing stiff competition from telephone companies, cable and satellite companies are bundling phone and Internet services with their video services. Typically having infrastructure already in place, cable companies can often undercut the price that telecoms need to deliver video profitably.
Actively competing with the major telephone companies, Comcast, Time Warner Cable, and some other cable companies are selling phone lines into homes; and they are also partnering with Sprint-Nextel to provide mobile phone services, in competition with Cingular (from AT&T-BellSouth) and Verizon Wireless. In addition, Sprint is providing its long-distance network to carry phone calls for cable companies, which are thus less dependent upon AT&T and Verizon.
Although the telephone companies have been pursuing the idea of a "tiered" pricing structure for Internet content providers (See below), cable companies have generally not embraced this controversial position, although they can be expected to side with the telecoms, as it would bring in more revenue.
Other Hi-Tech Companies
Telephone equipment companies, like Lucent (spun off from AT&T in 1995) and Nortel, may find themselves in a more difficult bargaining position, having fewer telephone companies with which to negotiate.
Even electric companies may become involved in the communications market, by offering a new technology of broadband service delivered over their power lines.
Internet Content Providers: "Network Neutrality" vs. "Tiered Service"
Perhaps the greatest debate in the field of telecommunications these days involves the plan by telephone companies and cable companies, normally at odds, to establish "tiered" levels of service on their systems: "fast lanes" and "slow lanes" on the "information superhighway," if you will.
The telecom companies argue that as Internet content providers, like Google, Yahoo!, Amazon, eBay, or Microsoft, increasingly download video and other transmissions that consume enormous amounts of bandwidth (capacity), they should be required to pay a fee -- in addition to the standard access fee paid by end-users -- to the telephone or cable companies, which supply the costly, typically fiber-optic lines.
Moreover, by giving a video transmission priority treatment -- by routing its digital bits together through the system, ahead of less time-sensitive transmissions (such as e-mails) -- the quality of the video will not be degraded, even during periods of heavy Internet traffic.
In the press and before committees in Congress, which are considering and drafting legislation, the telephone companies and, less vocally, the cable companies are promoting tiered levels of service -- a "pay to play" system, if you will -- as a reasonable way for them to recoup their sizable investments and a method by which higher-quality sites can deliver higher-quality content to their users.
Not surprisingly, the Internet content providers -- and most consumers and many legislators -- feel otherwise.
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