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Speaking at the FCC Bandwidth Forum, James Love pointed out that at the same time the telephone companies were complaining about congestion caused by ISPs' flat-rate connections, those same phone companies were trying to get into the business of selling flat-rate Internet access. Pacific Bell, for example, the worst- affected phone company, was simultaneously offering cut rates on installing second home telephone lines, with an offer of five months' free Internet access thrown in. Similar schizophrenia seems to be repeated in telephone companies around the world. The head of British Telecom's research labs, Peter Cochrane, has complained bitterly many times that the Internet is a "parasite." And yet, British Telecom itself is in the flat-rate Internet access business and by early 1997 had lowered its prices to match those of the original low-cost British domestic ISP, Demon.

But telephone companies live in what they must think are strange and disturbing times, as country after country sheds its regulated telephone monopoly in favor of new competition. AT&T got MCI, Sprint, and ACC to compete with; British Telecom got Mercury in the long-distance market and, in the market for local calls, Britain's new cable companies, which are offering the first free local calling the country has ever had. True, this service is limited to evenings and weekends and to calls between subscribers to the same cable company (the country is divided up by region), but it's a start. Meanwhile, direct satellite services are talking about using some of their spare capacity to broadcast the most popular Web sites, a few electric companies are experimenting with delivering entertainment and information services, the privately financed Britain-Japan fiber optic cable is challenging the phone companies' traditional hegemony over the telecommunications infrastructure, and wireless networks are the most likely telecommunications future for Third World countries where building the kind of wired telecommunications infrastructure we take for granted in the West is too expensive.[11] According to 2600, getting a telephone line in São Paolo, Brazil, can cost $2,000 to $6,000 (or $1,200 if you're willing to wait a couple of years) compared to $300 for a cellphone.[12]

These changing times have led to a large amount of cross-ownership, which is another potential threat to the Net's current, decentralized infrastructure, just as cross-ownership has put much of the media into the hands of a few large players. Shortly after the Telecommunications Act passed, several of the so-called "Baby Bells," the regional telephone companies formed in the wake of the 1982 court- ordered break-up of AT&T, forged alliances; the same companies have bought local wireless networks, and, in the case of Nynex, even expanded overseas by buying cable companies--Nynex owns a number of the United Kingdom's cable franchises.

It doesn't help that there is a fundamental difference of approach between the telephone networks and the Internet. Telephone networks are circuit-switched. When you place a call, you open a two-way circuit to the person you're calling, and that circuit belongs to you until the call is finished. In a human conversation, as MIT Media Lab director and Wired columnist Nicholas Negroponte likes to say, silence is meaningful. The Internet, however, is a packet-switched network. Any data that gets sent, whether voice, text, or full-motion video, gets divided up into little packets that take any available route to their destination, where they are reassembled into the original message. The consequence is that the Internet is inherently more efficient in the way it sends data; but there is a price, however slight, in terms of the time it takes to do all that work. Further, running an Internet connection over a dial- up phone line is inherently wasteful: all that silence spent reading a Web page is not meaningful to the computer at the other end.

At the FCC Bandwidth Forum, Love raised another point having to do with the number of people who can be connected at any one time. Any network is engineered to handle only a percentage of its paid users at a time--even on Mother's Day just after the rates go down, the whole country doesn't get on the phone at once. The telephone network is engineered to handle about one-seventh of its customers at a time, while most ISPs have enough modems, or ports, to accommodate 5 to 10 percent of their subscribers. AOL was an exception: its metered per-minute rates limited its members' usage, and until the switch to flat- rate pricing it got away with much lower levels of access provision,