NEW YORK-After first admonishing all attendees to turn off their cell phones, William T. Lake, a partner at Wilmer, Cutler & Pickering, Washington, D.C., convened a recent Practising Law Institute conference on Telecommunications Convergence with these remarks.
“Convergence is a word used without knowing what it means. As consumers, we see a glimpse of what it means … Our kids probably won’t remember there were separate boxes for TV, PC, stereos, phones,” he said.
“Old barriers separating industry sectors from each other are crumbling, making sectors vulnerable to interlopers. Success will come not from the dominant technology but to companies that can reinvent themselves.”
In Lake’s view, the law could best serve convergence by getting out of its way in many respects, with one primary exception. That is, the stalwart protection of intellectual property, which can be copied for free from the Internet.
“The converged product could be something you hold in your hand, offering three different kinds of experiences-passive, interactive and all-in-one that follow you as you go,” Lake said.
“In convergence, the question is not so much about the appliance but about the capacity of the system.”
The challenge in convergence is to harness the plethora of delivery systems, be they broadband, digital subscriber line, wireless, satellite or i-Blast, “which uses digital spectrum to deliver massive amounts of data, but with slower backhaul,” said Alan Spoon, outgoing president of the Washington Post Co., Washington, D.C.
“The devices must be easy to use and focus on integration. This will put more pressure on media companies to aggregate,” he said.
Digitalization, the translation of content into dots and zeros, “allows any medium to be used and is therefore a driver of the convergence revolution,” said Timothy R. Graham, executive vice president and general counsel of Winstar Communications Inc., New York.
Although Winstar is best known as the largest owner of fixed wireless spectrum in the country, Graham said he believes “satellite is probably the wave of the future.”
Amid the variety of delivery mechanisms, content will be the king maker in this new media era, said Graham and W. Patrick Campbell, former executive vice president of corporate strategy and business development of Ameritech Corp., Chicago.
“That is why you see Winstar and Ameritech moving into content because that is where the value is,” Graham said.
Winstar, a fixed wireless carrier focused today on small and medium-size businesses, is involved in office.com, a joint venture with CBS Corp.
The site offers information and news on topics of special interest to those in about 150 industries and professions.
Winstar also has a video production and distribution unit for documentaries and educational programs. Additionally, in its markets in the West and Southwest, the carrier provides radio programming.
“This is why some people say Winstar is at the beginning stage of convergence … Our founders came out of the content industry when the issue was getting content to the customer,” Graham said.
The push for companies to own the content they deliver, thereby gaining status as a major electronic commerce force in residential areas, is one of several key imperatives in convergence, Campbell said.
“This was dramatically behind the Time Warner-America Online deal … It was the first time content got together with strong distribution,” he said.
“In broadband, the big, branded companies have an opportunity to dominate. Some of the narrowband players, like AOL and Yahoo!, could be replaced by broadband. This is another huge development that will happen in the next two years.”
The transition from circuit-switched to packet-switched technology and the manipulation and transmission of data for business customers are two other convergence imperatives.
“Packet-switched is a classic disruptive technology, but it’s not ready for prime time,” he said.
On the wireline side of telecommunications, convergence means that companies like the combined SBC-PacTel-Ameritech “could supply 90 percent of North America, half as a [competitive local exchange carrier], half as an [incumbent local exchange carrier],” Campbell said.
The ultimate emergence of a handful of large wireline carriers dominating North America will be mirrored on the wireless side.
“It is clear with the AT&T one-rate plan that there will be three to four major wireless carriers … The SBC-BellSouth deal (to combine wireless businesses) makes obvious sense,” he said.
“What could overwhelm all other factors is that consolidation is only about two-thirds done, and there will be alignments and convergence with international players. Deutsche Telekom looked at Qwest. If Japan opens up, France Telecom might buy NTT.”
