Blah, blah blah dot com translates to billions of dollars in equity for people who only a couple of years ago flipped burgers and were failing gym class. Now the suits are wanting in on this action. Some of them are obvious pieces in the puzzle like IBM, but perhaps the most obvious old schoolers to jump into the nerd-laiden internet economy are telecom providers. Most of the web world is linked by phone lines. As the merger craze and laissez faire public policy continues, the stodgy old telephone companies are becoming more like Microsoft and less like the Water Works.

The biggest gain from the increasing number of telecom competitors is the improved connections to the internet. It seems very unlikely that the new technologies such as ADSL would have surfaced in the old cramped Ma Bell system. Austin has dozens of companies offering ADSL to hook the computered citizens to one another. In an effort to separate themselves from the pack, many of these telecom firms are becoming internet providers (ISPs) too. A few are taking it even further and are adding pagers, cell phones, cable TV, and anything else they can think of. In order to compete, bundling has become a standard in the industry.

Public officials don’t have a clue what to do about this monumental shift from the old phone company to the dollared, high tech telecom firm. A few years ago, the FCC and state utility commissions created a most peculiar system called reciprocal compensation (recip comp for short). The theory is that one phone company should pay the cost to the other for completed its customers phone call to the customer of the other company. Most figured that the money would just about cancel each other out, but policy created an odd wrinkle. The new competitors realized that ISPs only receive calls and the calls often last a long time. That translates to big recip comp money for the firm that can rope in ISP customers. For the especially aggressive company, they could create their own ISP, and it would of course be their customer. Rumor has it that one very small company made over $10s of millions last year in recip comp by keeping a room full of computers using Southwestern Bell hooked to their ISP. The days of this strange game are likely to end soon, but it has helped fuel the muddying of the line between the phone company and the cyber world.

Web sites, phone companies, and computer firms are buying each other at a break-neck pace and joint ventures are making the whole thing a bit incestuous. Southwestern Bell serves as a great example of the painfully interlinked mess. The parent is SBC with three subsidiaries: SWBT, ASI, and CNET. SWBT is the old phone company that is still bound by the few regulations that they have lobbyied to their demise. ASI is the advanced services compnay. They will provide fancy gizmos, like ADSL. CNET is a website with information on computers and the internet so you can hook to the system and repeat the loop. SBC is not special is the respect. Time Warner is a cable company, a phone company, a bunch of web sites, and is about to be part of the biggest ISP.

One concern that is arising from the kissing cousin telecom world has been dubbed the digital divide. The homogeneity of the industry means that they are all going for the same customers--the rich city-slicker. For those of us who are poor and/or in the boonies this may spell trouble. Though the role of high speed data connections is probably blown out of proportion, the importance of the internet is real. This has become one of the hottest topics in policy circles with an odd combination of state and federal agencies trying to get in on the action. Perhaps the funniest is the Texas Comptroller’s Office. It dreams of a telecom world that would cost about $50 billion to do, and the punchline is the fact that Carole Keeton Rylander has her name in huge print all over it. Rick Perry, the Boy Scout Lt. Gov., has also caught this bug with a series of workshops in which he gets credit and promptly leaves after ten minutes of butt kissing. The hot air is not going to find a solution. It is going to take some hard core grassroots efforts of a level that this nation has not seen since the rural electrification efforts of the 1930s.