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Are You Ready For a Revolution?

Original Article
Mississippi consumers got some good news over the New Year weekend. Ten months after AT&T first proposed the buyout of BellSouth, the state’s primary wire-line carrier, the merger received final regulatory approval.

An old and proud brand but a new and improved company, the “2007” AT&T is a combination of baby bells (Southwestern Bell, Ameritech, Pacific Telesis, Southern New England Telephone and now BellSouth) the wireless carrier Cingular and the long distance “AT&T.”

But don’t think this is about cobbling back together the old “Ma Bell.” The old “Ma Bell” and the regulatory mindset it represented died two decades ago. Cause of death: competition.

As any telephone executive will tell you, wire-line voice telephony is a dull and declining business. Fortunately for the old Bell-heads, the broadband side of the telecom business is enjoying explosive growth and is proving to be an enabler of and the hothouse for innovation and wealth creation in the American economy.

For that reason AT&T’s management team is pursuing the broadband opportunity with a vengeance and a big pocketbook. This is why Mississippians should be excited.

Why are this pursuer and this opportunity significant? Don’t ask me; ask Forbes and Time magazines, two outfits dedicated to keeping their fingers on the pulse of America’s economy and culture.

Forbes selected AT&T as its 2007 Company of the Year. The rationale: a seasoned and aggressive management team which is embarking “on a digital video revolution” by “building an all-Internet network, encompassing 40,000 miles of newly laid fiber-optic lines.”

Time magazine was on the same digital broadband wavelength at year-end when it put a mirror on its cover and chose “You” as its 2006 Person of the Year. “You,” as in everyone – but especially those among us who have taken to the Internet to reinvent their world – a new media courtesy of bloggers – a new economy of eBay entrepreneurs – and new social communities by way of Facebook, MySpace and You-Tube.

Reminiscent of the famous Apple Computer ad of two decades ago, Time powerfully describes “You” as the “many wresting power from the few and helping one another for nothing …. We’re looking at an explosion of productivity and innovation, and it’s just getting started, as millions of minds that would otherwise have drowned in obscurity get backhauled into the global intellectual economy.”

A choke point on the road to this broadband future is the tradition of local video franchising – a throwback to the mindset of “natural monopolies” in cable TV.

The challenge of negotiating individual agreements with thousands of municipal governments is a daunting one. With this in mind, 11 states, anxious to encourage broadband investment have passed statewide laws. Carriers still pay the 5 percent franchise fee but need only one agreement at the state level.

AT&T has now rolled out its U-Verse IPTV service in 11 metropolitan areas and it is no coincidence that all of them are in states (Texas, Indiana and Connecticut) with statewide franchise laws.

We are still in the first inning of video offerings from the wire-line carriers but the impact is already being felt. For example: In Texas, the first state to pass a statewide franchise law, both AT&T and Verizon have aggressive build-outs under way.

The American Consumer Institute recently found that cable customers in Texas markets where the “Bells” had video offerings saw their cable bills drop by roughly 30 percent.

Out of 50 states, 11 have now passed statewide franchise laws, creating what may be new digital divide. Passage of a statewide franchise law will go a long way toward putting Mississippians on the right side of that divide.

Ashby M. Foote III is president of Vector Money Management in Jackson, MS and serves on the board of the Mississippi Technology Alliance.