Old Media Is Being Unbundled, Just Like Telecom Was

[Commentary] The 1996 Telecom Act was the start of the liberalization of an industry that had been vertical with very little competition. What followed was an amazing transformation of the staid calling industry — not necessarily for the better. One of the basic tenets of the 1996 Telecom Act was unbundled access to the telecom facilities of the local phone companies, which meant competing phone companies could access the so-called “last-mile” that led to people’s homes over the incumbent carrier’s network. The change in law created an insane amount of competition, and turned the economics of the business on its head. It led to kamikaze-style pricing of phone minutes. Voice had been the primary source of revenue for phone companies for nearly a century. The increased competition was coupled with the arrival of Internet and Internet-based telephony. That allowed rivals such as cable companies to further take away voice customers. Skype, Vonage and others only added to the phone companies’ misery. Today, phone companies are happy to give away voice-minutes as long as you buy data from them. Why do I bring that ancient history up? Mostly because as I sit in the crowded Virgin America red-eye flight to New York, I'm thinking about the media business and the parallels I see between it and the media industry. In the media industry, we’re seeing an unbundling of a highly vertical business, with the most lucrative parts being siphoned off by Internet-based low-cost rivals.