The Federal Communications Commission today completed a long-expected set of rules that will give telephone companies more options to offer a host of new video services, especially telecommuting and videoconferencing systems.
The FCC was mandated by the federal Telecommunications Act to create new rules for what are called open video systems (OVS), a phrase that replaced the term "video dialtone," and refers primarily to a new kind of business model that will let phone companies compete with cable operators by offering video over public networks.
However, companies looking to jump into video delivery aren't sure that OVS will provide competitive advantages over regular cable service. A lot of phone companies are dissatisfied with the FCC's definition of OVS, which requires them to make two-thirds of their service open and available to others on a first-come, first-served basis, just as they are required to provide basic telephone service to all comers.
The FCC rulings do open the door for telecommunications firms to make final plans about how to deliver video services by giving them 90 days to explain how they intend to deliver video to consumers, be it over regular cable, wireless, or other kinds of networks. Pacific Bell, for example, has already decided to provide cable service, placing the company in head-to-head competition with established operators like TCI in offering the new breed of digital video services.
So far, though, no phone company has committed to using OVS for delivering service. Under the new rules, an open video carrier can control only one-third of the content on its system, selling it to private businesses or individuals. Cable carriers, on the other hand, are free to sell any part or all of their networks.
Another thing scaring the telcos is that the FCC hasn't clarified how companies can charge for the first-come, first-served programmers.
Even FCC Commissioner James Quello has expressed concerns about how the FCC is implementing the rules. "I remain concerned that this accelerated timeframe for completing final rules may result in unintended consequences."
OVS carriers wouldn't need the permission of local authorities to open; they would be regulated only by the FCC. In contrast, cable carriers must apply for and receive a local cable franchise as well as follow FCC regulations.
"Cable offers a system customers are used to, and for [video] programmers, there is already an established business model," said Pac Bell spokeswoman Cheri Feiner. "OVS might not be as friendly to customers and programmers as we'd like."
Yet consumers should expect a wave of new services to be announced after the 90-day explanation period. Pac Bell is also exploring the possibility of establishing wireless cable systems in Los Angeles, San Diego and the San Francisco Bay Area by early 1997 that would fall under the FCC's new OVS jurisdiction. Before making a decision, the company will have to examine the fine print of the ruling, Feiner asserted.
Consumer advocates are pretty optimistic about the impact of OVS. "Since OVS will make two-thirds of a provider's service open, it should stimulate the competition and quality of programming," said Lisa Briggs, project attorney at the Privacy Rights Clearinghouse, a San Diego-based consumer education group. "If digital compression moves forward, there could be no limit to what we can see on these services."
Briggs also had some reservations. "Are those applications going to be relevant to the communities being reached, and are all communities going to be reached? Will we get telemedecine or distance-learning applications? When you're dealing with technology that purports to be broader, you hope these types of applications will come forward, even when the profit motive isn't so high."
In other FCC decisions, the commission's Mass Media Bureau is expected to announce its plans next week to distribute digital television licenses to current broadcasters. Because the number of channels in use will double with the distribution of digital licenses, the commission will explain its plan to revamp the channel spectrum, which currently ranges from 2 to 67.
Republican presidential candidate Bob Dole said in his economic plan unveiled this week that if elected, he would raise money by auctioning off these digital channels. Congressional opposition to such a plan, however, has been strong among both parties.