Broadband Cable: The Open-Access Debate

3. Environmental Factors: Law, Regulation, Technology, and Markets

Despite the heated opinions of all involved, NetAction believes that the current controversy will prove short-lived. Several factors conspire to make this case.

Legal and regulatory factors. Much of the current debate evolves from the conflicts that characterized an earlier period of cable's growth, when it was solely a one-way transmitter of television signals. In the 1970s, for example, the FCC imposed a series of rules pertaining to cable television and how it could be regulated by local municipalities, in the interest of national policy. These limited the over-reaching of local governments, which heretofore had engaged in stupendous (and often scandalous) negotiations with cable operators as a condition of approving local franchises for use of rights-of-way. A casualty of the FCC's action was local governments' ability to impose content requirements on cable operators. The operators characterized themselves (like Internet information providers today) as publishers immune from content requirements. Local governments went along, wanting little to do with potential Constitutional conflicts.

In 1981, in California, a bill was introduced to release the state's cable operators from onerous franchise requirements in return for a form of common-carriage designation, overseen by a Cable Commission. The bill was soundly trounced by the cable industry, which instead championed and passed its own more freewheeling law. This law eventual became the model for the federal Cable Communications Act. The cable industry enjoyed the cooperation of the cities and counties, who accepted cable revenue fees as sufficient compensation for granting cable franchises. From that point forward, common carriage became a bête noire within the cable industry, to be avoided at all costs. Regulation by the public utilities commissions was more feared by the cable industry than municipal regulation, which has tended to be weak and spotty.

That was then and this is now. The early cable laws and those propounding them never considered cable a two-way medium, despite reports from RAND Corporation[8] and elsewhere predicting an expansive future for cable. A closer examination of the cable laws reveals that all of the many expressive freedoms enjoyed by cable operators -- freedoms upheld by the U.S. Supreme Court -- do not take into account two-way cable service.

It can be argued that under state laws, the Communications Act of 1934, and the 1996 Act, two-way cable communications may be regulated as telephone or data service. When cable is used for voice communications, it is telephone service; when it is used for data communications, it meets the definition for data service. Cable operators may resist state-level regulation, but in fact state regulation would impose on cable operators several desirable conditions:

The potential down sides of state regulation of cable include:

Whether regulation is or is not applied will vary by jurisdiction. Even if cable is not regulated at the state level, it is still unlikely that local jurisdictions can successfully impose an open-access policy. The cable industry has been very busy in past decades bolstering its legal position. State laws, federal laws, and court decisions insulate cable operators from local carriage requirements except for minimal access-channel requirements (public, educational, governmental, and leased).

Local regulation of cable has generally been ineffective and local regulation of broadband access would effectively splinter regulation of the Internet, leading to conflicts and confusion. Historically, local government oversight of cable has been passive, limited to wrist-slapping the worst operators for minor malfeasance. Local governments are inexperienced in making decisions regarding access and content -- nor are they legally empowered to make these decisions.

A case can be made that the regulation of local rights-of-way is a basic element of common law that can be extended to include access requirements. This argument is a weak one. In a similar situation, the U.S. Supreme Court affirmed cities' power to regulate the location of newspaper dispensers for reasons of public safety and convenience, but specifically prohibited them from determining what is put into the boxes for sale. Piecemeal regulation at the local level is simply bad public policy.

Technological factors. The notion that cable systems can impose a communications monopoly is a chimera. Local telephone companies serve over 95 percent of American households and nearly all small businesses. At least theoretically, the local telephone companies' infrastructure is ubiquitous and capable of supporting telecommunication services that are equal or superior to what cable can manage. That cable presents a clear and present danger in terms of competition for local telephone customers is (a) not cable's fault and (b) in the national interest, as expressed in the 1996 Act.

Wireless telephony, too, serves tens of millions of Americans and is in the process of transforming itself into a data-capable service. Satellite data services exist and are getting faster, more capable, and globally pervasive. These services are competitive not only with local telephone companies but also with cable systems. Infrastructure competition is emerging everywhere. While it is impossible to predict "The Next Big Thing," the new communication technology that will radically revamp the playing field, it is certain to appear. Telecommunications is a highly volatile industry. Overnight, new "ultra-broadband services" could make today's cable and high-speed data services obsolete. Acting as if cable operators are guaranteed success is both unfair and bad policy.[9]

Market Factors. Regarding competitive choice, consumers are fickle. In California, competitive energy production has proven a bust. Most utility customers remain with their accustomed providers, the big utilities. On the other hand, Internet users (with the exception of AOL's captive customers) are known for their momentary fascination with online information services, flitting from one to another. How will these customers react in a crowded telecommunications marketplace? Ultimately, which technology will the consumers favor? No one can say for sure.

Regarding telephone service, the long-distance market is not merely competitive but wildly so. Even the players are changing. AT&T's dominance has gradually diminished and it now competes vigorously with MCI Worldcom, Qwest, and other companies not on the telecommunications map a decade ago. Local telephone service largely remains a monopoly, although there are indications of change as competition comes to the intra-LATA market. Cable telephone service could challenge this complacency.

There is no consistency of consumer behavior within the markets in which local telephone companies and cable systems will compete. Perhaps customers will pick and choose, mixing and matching services provided by telephone companies and cable systems. Perhaps they will choose an entirely alternative communication medium. Once online, how will they go about selecting an ISP or online content provider? Billions have been staked on this question without achieving a satisfying answer. To impose rules and regulations given the great uncertainty inherent to popular preferences and consumer behavior is premature at best and potentially threatening to future telecommunications users' genuine freedom of choice.

Next: Policy recommendations