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Despite the withdrawal of AT&T from the residential marketplace, coupled with the apparent unwillingness of other major players to continue aggressively pursuing the consumer telecom market, Virginia Secretary of Technology George Newstrom remains confident about the future of telecom competition in the state.

In an exclusive interview this past week with Telecom Policy Report, Newstrom expressed dismay at AT&T's decision to withdraw from the consumer business (see TPR, July 28), but added that the company's decision didn't really surprise him. Changes in the regulatory landscape have compelled AT&T and other telecom competitors to make some hard choices, Newstrom says.

"We can't control what happens at the federal level, much less at the corporate level," he says. "However, we can do things to make Virginia an attractive place for these companies to compete and do business -- and that's what we have been doing and will continue to do."

AT&T's decision, Newstrom said, leaves the door open for other players to carve up what remains of a healthy, competitive telecom consumer market in the Commonwealth of Virginia. But he also acknowledges that the state's dominant incumbent telco, Verizon, cannot be expected to roll over and play dead.

"All of these [incumbent] carriers are looking for ROI [return on investment]," Newstrom says. "That's what it's all about -- ROI. They have hundreds of millions of dollars invested. Most of that money is either in the ground or hanging on poles. They're not going to simply turn their backs and let competitors chip away at their business. They want that ROI, and they're bound and determined to get it."

Still, Newstrom is something of a futurist. For example, he does not believe that wireline telephony will dominate the telecom arena for much longer. "We're already beginning to see major shifts in that paradigm," he says. "Let me tell you something ... You've heard of China Telecom. They recently opened an office right here in Northern Virginia. And I can assure you that no one at China Telecom is thinking about deploying cooper wire or coaxial cable. They're looking at putting a wireless broadband network together. And they have the skill and the know-how to do it."

Newstrom points to countries like China and South Korea as examples of nations that have wasted no time in jumping with both feet into the broadband arena. "These countries are committed to delivering broadband services to their citizens in the fastest, most economical way possible," he says. "And they're doing it with wireless technology."

Meanwhile, the incumbent U.S. telcos and their would-be competitors continue to wage policy wars over a question of access to a legacy technology that Newstrom believes is nearing the end of its lifecycle.

"We're trying to raise the bar in Virginia," he told TPR. "We want U.S. companies to be thinking about the future, about the global economy and how to effectively compete in it." And in Newstrom's view, the future is wireless.

Newstrom's familiarity with developing nations predates his March 2002 appointment by Virginia Gov. Mark Warner (D) as Virginia's Secretary of Technology. He previously served as president of EDS Asia Pacific-Information Solutions where he was responsible for EDS' operations in Australia, China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand.

"Those countries are not trying to wire every residence and every business for broadband," Newstrom says of the Pacific Rim nations. "They're going wireless. It's quicker and it's less expensive." ROI is achieved in a few years, not decades, he adds.

Even so, Virginia is not quite ready to totally abandon tried and true technology. With respect to encouraging telecom competition, Newstrom points to the state's recent launch of a $12 million initiative to deploy broadband technology to rural areas. He says Virginia is investing some of the tobacco settlement proceeds it received to fund a project known as the Regional Backbone/Roots of Progress Initiative (RBI), as announced by Gov. Warner in mid-June.

As part of the RBI project, about 700 miles of new fiber optic cable will connect five cities, 20 counties, 56 industrial parks and provide high-speed Internet access to nearly 700,000 Virginia residents and more than 19,000 businesses throughout the state, Newstrom says. The cost of the service is expected to be about 20 percent less than what an incumbent telco or Internet service provider (ISP) might otherwise charge for high-speed Internet access. "That will help drive down the price of broadband throughout all of Virginia," Newstrom contends.

Construction on the project is scheduled to get under way this October and should be completed by January 2006.

The RBI project is very similar to one in Utah known as UTOPIA (an acronym for Utah Telecommunication Open Infrastructure Agency), a consortium of communities jointly funding construction of a wholesale broadband network of "dark fiber" that broadband service providers can contract to use in order to reach business and residential customers.

AT&T has already signed on as UTOPIA's first wholesale customer. The company, despite its withdrawal from the wireline consumer marketplace, continues to press forward with a variety of Internet Protocol (IP)-based services, including Voice over IP (VoIP). Indeed, if AT&T isn't snapped up in an acquisition by one of its competitors, the company could do in Virginia what it's planning to do in Utah. If that happens, Virginia's dominant incumbent local telephone company, Verizon, could see its wireline customer base shrink dramatically.

"We're creating a competitive environment in the Commonwealth," Newstrom says. "And its projects like this one that will make Virginia stand out as an ideal location for businesses wanting to compete in the global marketplace."

And make no mistake: Competition in the global market is a concept that drives Newstrom. "When Gov. Warner took office, the Center for Digital Government ranked Virginia in the bottom half of states using IT resources to connect people to government," says Newstrom. "This year, we placed No. 3 on the list."

Headquartered in Folsom, Calif., the Center for Digital Government examines best practices, policies and progress made by state governments in their use of digital technologies to better serve their citizens and streamline operations. Michigan emerged as this year's leader, followed by Washington and Virginia. Indiana placed fourth on the list; Arizona placed fifth; South Dakota placed sixth; Tennessee placed seventh; Utah placed eighth; and Arkansas came in at No. 9. Colorado and North Carolina tied for 10th place.

"Under Gov. Warner, Virginia has made a quantum leap in progress," Newstrom asserts. "During his first year in office, the Commonwealth went from the bottom half of the survey to the No. 8 spot. And this year, we're ranked third. That's the fastest leap forward of any state in the nation."

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