The story has changed dramatically in some ways since then. The Bells and cable giants are fighting a fierce war over broadband among Americans, prompting the local phone companies to lower prices, and cable providers to nearly double download speeds, over the past two years.
Within the next 12 months, Verizon and SBC Communications expect to launch their own pay TV services, to put more competitive pressure on cable companies. In late April, Verizon said it would sell to some customers DSL access without requiring people to buy a local phone line — a long-time demand from consumer groups.
Providers are also trying to add bells and whistles to the basic data pipe into the home. Some of the phone carriers, including Verizon and SBC, have partnered with Web portals Yahoo or MSN, or both. Cable giant Comcast runs its own broadband portal, which emphasizes high-bandwidth features such as video clips and video email. Time Warner Cable's Road Runner service comes packaged with America Online.
"Broadband services are maturing enough where it's not just high-speed access to the Internet," said Mike Paxton, an analyst at In-Stat. "There's a lot more that can be done with a broadband connection now than in the past, and that is very attractive and beneficial to consumers."
Appealling to the states
The stakes for the winners are huge. So it's hardly a surprise that the Bells and cable companies are lobbying hard to keep government out of the race. They're working to support anti-municipal broadband bills at the state level and funding publicity campaigns to squash these projects. The message: local governments should not compete against private industries, which have spent billions of dollars on infrastructure to serve residents and on city taxes.
The industry also argues that governments are in over their heads when they try to operate a complex citywide network. And if the city's plans go belly-up, opponents say residents will have to bail out the projects through higher tax bills.
"Our major focus — either through the legislative branch or through working with regulators — is to make sure... we have provisions in place that the resulting competition that we engage with is fair," BellSouth spokesman Joe Chandler said.
Fairness in the eyes of the Bells means implementing a series of "safeguards", according to Chandler. These include barring cities from using taxes to fund their ventures; requiring city networks to pay the same taxes as private companies; and requiring the public to vote on proposals before construction.
Many cities claim that they are not competing against the Bells and cable but rather are serving their communities. Legal experts wonder whether municipalities are addressing legitimate problems ignored by the telecoms, or whether they are trying stifle competition.
"I worry about the political economics of it," said Matthew Spitzer, Dean of the University of Southern California Law School. "Once the city gets into a business that's directly competitive with private companies, there are temptations to regulate the private companies in ways that disadvantage them."
