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Game Over on Outdated Phone Regulations


Landline phones and video arcade games might not seem to have much in common, but they’ve both been around since the beginning of the 20th century (when they were called ‘penny arcades’); and they both offer services that are “fixed” – they can’t travel in your pocket.

I thought about this after reading an article about the ‘life and death of the American arcade,’ and another about the bankruptcy filing of Atari.  Consider the fate of both services. The most striking similarity is that each was marginalized due to the same massive – and swift – technological changes: broadband and mobility.  The same customers that have abandoned the landline phone in droves for mobile voice and VoIP services don’t spend their spare time playing Pac Man in the local video arcade.  Instead, they’re playing Angry Birds on their smartphones.

‘Sassony Arcade’ photo used under a Creative Commons license provided by jericl cat.Consumers that replaced their plain old telephone service with Skype aren’t playing Asteroids at the corner arcade.  They’re playing Call of Duty on the X-Box in their living room.  And while a call on the phone or a game of Donkey Kong used to cost you a quarter, today these same – and, in fact, enhanced – services are being offered for free.  Indeed, in a statement accompanying its bankruptcy filing, Atari said that its bankruptcy filing was necessary to secure the investments it needs to grow in “mobile and downloadable video games.”

Now before you dismiss the comparison, keep in mind that during the so-called Golden Age of video games in North America, annual revenues in 1981 were estimated to be as high as $10.5 billion – three times the amount spent on movie tickets during the same period.  Adjusted for inflation, that’s $26.3 billion in 2012.  Not only that, but there were 24,000 full arcades, 400,000 arcade street locations and 1.5 million arcade machines active.

Landline phones, of course, have been subject to enormous amounts of regulation that continues to stay on the books despite significant market erosion. What if video game arcades had been regulated the same way?

Should video game arcades have been required to file tariffs with state and federal agencies disclosing the costs and rates for each of their games?  Should they have been subject to strict rate regulation, limiting the cost of all video games to just a quarter, and not say, fifty cents?  Should they have been required to wait 60 days before discontinuing their service?  Of course not!  Indeed, absent the ‘dominant regulation’ of video arcades, there were fewer than ten arcades remaining in New York City by 2011, and that includes this place.

From 2000 to 2011, total wireless voice connections – business and residential – have grown from one-third-to two-thirds of voice connections, while the reverse is true for wired connections. A newly released report from the FCC on local phone competition lends credence to a USTelecom petition asking the Federal Communications Commission to ease regulations for traditional telephone voices services.

While video arcades can still be found in the United States, they are certainly aren’t dominant.  It’s time for the FCC to make the same determination with respect to landline phones.

Sassony Arcade’ photo used under a Creative Commons license provided by jericl cat.

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