The heavy black cable snaking across telephone polls or buried in the ground is an unlikely candidate for making headlines. For more than 20 years, cable has delivered to subscribers an ever-increasing number of television channels. The biggest issues for most subscribers have been the monthly rates charged by cable operators and the quality of their services. Responding to FCC regulations imposed in the 1970s, most cable operators also make available to subscribers and programmers public, educational, community, and access channels. These efforts have frequently been criticized as inadequate or unresponsive to community needs. By federal law, telephone companies in most locations have been prohibited from operating cable systems.
Cable service has traditionally been regulated by local municipalities operating under legal and regulatory guidelines propounded by Congress, the FCC, and state legislatures. Municipalities award "franchises," licenses to use local rights-of-way, in exchange for cable service that is universally available and meets specified quality standards. These franchises must be renewed periodically, as well as whenever ownership changes.
Broadband cable operates as a carrier of television signals. The peculiar construction of cable -- usually a coaxial arrangement of a central wire surrounded by a reflective shield -- permits the transmission of many extremely "wide-frequency" signals (like television channels). By comparison, most telephone lines can only transmit a few "narrow" voice signals.
But the telephone operates in two directions, while cable, until recently, has been one-way. Today, however, enhanced broadband cable technology -- new switches and modems -- permit cable to accommodate the transmission of two-way signals. This advance in technology is the source of the current controversy.
For the first time, broadband cable can provide telephone service. In the near-future, cable systems that serve as many as 60 to 70 percent of all households will be able to offer telephone service in competition with traditional local telephone companies. This has thrown the local telephone companies, which to date have managed to preserve their local monopolies, into a panic. Most Americans would welcome competition in the local telephone service market, where prices have increased while service quality has declined.
Even more disturbing from the vantage of the local telephone companies is the distinct possibility that cable systems will leapfrog the telephone companies' capabilities. Cable systems are beginning to offer access to powerful networks of communication, including the Internet, that the telephone companies have been slow to provide.
The local telephone companies, in an attempt to forestall competition from cable systems, have launched a two-pronged campaign.
First, they have accelerated the roll out of their own high-speed data service, Digital Subscriber Line (DSL), to compete head-on with cable. DSL prices have dropped dramatically wherever cable service offers a competitive alternative.
Second, the telcos are conducting a public-relations campaign to deflect attention from the absence of local telephone competition. Led by regional monopolies like SBC Communications and GTE, the local telephone companies are asking policy makers to impose onerous carriage conditions on cable broadband service. The local telephone monopolies want policy makers to force cable systems to "open" themselves to any and all information providers, at prices and under regulations that remain conveniently mysterious.
Were cable systems to comply with this demand, it would vitiate any serious planning for the future of cable and could eliminate the cable operators' incentive to upgrade their systems. Why renovate existing cable infrastructure, at an estimated cost of hundreds of billions of dollars, if this infrastructure will immediately benefit your competitors?
There are two pernicious aspects to the local telephone companies' campaign.
First, the telcos have aligned themselves with AOL, the largest online information provider. Joining AOL in the anti-cable camp are several smaller ISPs, companies that manage switches which make possible access to the Internet. The involvement of these entities is premature. They have almost no current dealings with cable operators. Moreover, other technologies are either available now or will be soon to provide ISPs with multiple options for high-speed Internet access. Creating animosity between cable operators and ISPs serves no useful purpose.
Secondly, the local telephone companies have stirred up local municipalities' unrealistic fear that cable operators will deny their citizens unfettered access to the Internet at reasonable prices. The City of Portland and surrounding Multnomah County, and Broward County in Florida, have responded to this campaign of fear with cable ordinances that require cable systems to open their facilities to all information providers, even their competitors. For reasons I discuss below, cable operators are unlikely to restrict access to the Internet. But Portland's and Broward's reactive, knee-jerk policies portend the disturbing imposition of new and complex regulations on the provision of Internet service.
Next: A closer look at the contenders' positions