The cable vs. telecommunications battle for the hearts, minds, and most especially, the wallets of America's data services consumers has at this point cost billions of dollars. What we've gotten out of the deal is an environment that a decade ago would have seemed impossible -- the agglomeration of media services into packages that one company can provide.

Do you want phone, Internet, and cable TV service from the same company? It's possible, thanks to the billions spent by companies like Cox (NYSE:COX), Comcast (NASDAQ:CMCSA), and others to upgrade their networks and the wiring going into millions of homes. You can live in Georgia and be a customer of BellSouth (NYSE:BLS) without having it provide you phone service, since BellSouth and the other regional Bell operating companies (RBOCs) have also spent in the billions upgrading their high-speed access capabilities. With voice over Internet protocol (VoIP), the last vestiges of a separation between voice and data are being swept away. And with SBC's (NYSE:SBC) announcement last week that it intends to spend some $6 billion to extend its fiber local loop to customer premises (FTTP), the arms war between cable and telecom companies promises to get even more expensive. What it also most likely is, is a nice pipe dream for investors in these companies, or their equipment providers.

SBC is positioning its network to deliver bandwidth-thirsty services like television and video on demand, high-speed Internet, and voice to consumers and small businesses. SBC is anticipating the integration of IP-enabled products like digital TVs, set-top boxes, and telecommunications devices onto a single network. Clearly, what this signals is a massive buildout for the RBOCs. Again. Upon the announcement, network gear companies such as Ciena (NASDAQ:CIEN) leapt higher, perhaps in anticipation of swelling orders as another spending binge gets under way. The timing, coming on the tail end of a spending spree on fiber and network upgrades that has generated little more than rivers of red ink and bankruptcies among telecommunications companies, may seem puzzling. But it isn't.

Two things are driving the RBOCs to upgrade their networks. First, the aforementioned competition coming from non-traditional telecommunications providers, particularly cable companies, continues to succeed in taking customers from the local telecom companies. Cablevision (NYSE:CVC) recently announced a program in limited markets to provide video, broadband, and voice services for about $90 total per month. The cable companies are using VoIP to steal customers away from the carriers. This points to something obvious: The price that carriers (or any other company) can charge for voice services is likely to continue to plunge.

The second driver for the RBOCs comes from Washington. Last week, as we noted in a story about AT&T's (NYSE:T) intention not to provide further service in seven states, the Federal Communications Commission demurred to appeal a court decision that struck down its rules governing the amount that the RBOCs could charge other companies to access their networks. In multiple occasions over the past several years, the RBOCs (including SBC, Qwest, BellSouth, and Verizon) have elected not to undertake capital spending projects on the basis that these investments would not create any further advantage for them since their competitors automatically had access to these facilities at rates that the RBOCs claimed were in some cases below cost. As I noted in July 2001 in How Regulation Constrains the Internet:

The Baby Bells, against whom the CLECs were to compete, had no incentive whatsoever to improve their copper networks, as the investment to do so is massive, and they had to automatically grant access to their competitors. And with the Baby Bells being barred from participating in high-speed data provision, and with a lock on local provision of cable service, they've got precious little motivation to improve their networks. It's called an uncertain return on investment, and unfortunately, Baby Bells are being responsible to their shareholders by not making these investments.

With last week's decision, the Bells no longer have this excuse. The price to pay for this, naturally, is that those investment dollars the companies have held back over the last several years need to be deployed. The Bells have starved off their telecom-based competitors, but meanwhile have been blitzed on all sides by the cable, satellite, wireless, and VoIP companies; these are not necessarily separate entities. The Bells have the same problem that bedeviled AT&T -- their core business is losing any semblance of economic profitability. To recapture profitable growth, they have to spend. VoIP allows competing companies to add a voice service offering with a small investment: The earnings power of the telecom companies' multibillion-dollar investments in telecom switches and other equipment is being marginalized. These costs are sunk, yet the return on these investments is increasingly at risk. Though the RBOCs don't have much to gain by hastening the commoditization of voice services, that's essentially what is taking place. Their sudden embrace of FTTP isn't a sign of strength: It's a gambit.

What investors, as well as consumers, need to keep in mind is that the benefits to either from FTTP are extremely unclear and likely to be long in coming. It is not that likely that the Bells will come into existing loops, tear out existing infrastructure, and drop in fiber any time soon. More likely will be a scenario where the Bell companies substitute spending that they would have made in traditional phone equipment in new buildouts with FTTP.

As we've noted before, FTTP is an extraordinarily important element for the continued hypergrowth of data services. In the last building binge, companies from the hopelessly decrepit Viatel to the enterprising Level 3 (NASDAQ:LVLT) spend billions on high-speed long-distance fiber networks. These investments by and large have been exercises in massive capital bloodletting, for though demand continues to rise, the lollapalooza growth anticipated hasn't happened for the very reason that the copper-based on-ramps to this supernetwork remain insufficient to do the job. Cable companies have moved rapidly to digital technology to provide such things as high-definition television, with about 30% of all cable customers using digital services at present. FTTP would represent a quantum leap in capacity over these digital services. It would allow, for the first time, that great Rosetta Stone of data services to happen: video on demand.

Were this an immediately realizable goal, companies far and wide would be quaking in their boots, from Intel (NASDAQ:INTC) with its commitment to wireless broadband technology to past Motley Fool Stock Advisor selection Netflix (NASDAQ:NFLX) and its 18,000 entertainment titles available by mail. They aren't, because it isn't.

Let's not lose sight of the fact that FTTP will likely hasten the promise of everything that the data networks were supposed to provide consumers. It likely will also bring about some increased revenues at many of the equipment and service providers for the industry. But quite simply, the buildout is going to be slow, and the greater the pressure on the RBOCs' core business in the meanwhile, the harder it will be for them to commit additional capital budgets to FTTP. The cash flow from their bread-and-butter voice services simply aren't sufficient.

Bill Mann owns none of the companies mentioned in this story. Beat the price increase! Consider a subscription to The Motley Fool's Hidden Gems newsletter today. The Motley Fool is investors writing for investors.