Bring Us Broadband!

The Inappropriate Role of Regulation in the Evolution of High Speed Cable Internet Service

After decades of neglect, America's cable network is about to undergo a major renovation. AT&T, which has a good reputation for the quality and reliability of its long-distance telephone service, recently purchased TCI, MediaOne, and other cable properties with the intention of upgrading their networks to provide local telephone service and high-speed Internet service. Cable is one way that AT&T and other providers of telecommunications services can reach customers in the otherwise monopolized local telephone market.

An additional service being rolled out for future cable customers will be high-speed, always on Internet service. Compared to earlier T-1 and ISDN services offered by the monopoly telephone companies, broadband cable Internet access will be cheap, reliable, and diverse: everything that consumers and small businesses say they want from Internet access, but can't obtain easily or cheaply today. For this to occur, however, the new owners of cable networks need reasonable assurances that their investments in improved cable service will be financially rewarding.

Local telcos know that the new cable services pose a threat to their monopolies and are doing everything they can to delay their rollout. They want to apply regulations to cable Internet service in order to discourage cable operators from deploying new services, or make it difficult for cable operators to recoup their investments in new infrastructure.

The telcos have enlisted AOL and a few other giant Internet companies as their allies and "front men." AOL, which has its own sordid history of consumer abuse and censorship, and a close hold over its 18 million customers, is now touting a familiar local telco line: AT&T and other cable operators, AOL claims, must open their cable networks to AOL and every other Internet service provider. Who will pay for all the extra cable capacity this would require, who decides which Internet service providers get access, and at what price, AOL doesn't explain. Killing the goose before it lays the golden egg, AOL would rather AT&T didn't build a network at all. Just like its telco cronies, AOL fears competition from the cable operators who just might provide a better and cheaper way to access the Internet. It wouldn't be hard.

Knowing they can't win in the marketplace, AOL and the local telephone companies are trying to protect their respective market share with the help of well-meaning local regulators, for whom "openness" has become a policy mantra. If only AT&T and other cable operators will open their networks to every comer, so goes the usual argument, everything will be all right. In fact, if the cable operators open their networks as requested, chaos will result, including endless regulatory hearings and a spate of lawsuits. Ultimately, there will be no cable network or new services.

Local regulators need to be made aware of how they can be used to keep competition out of the local telecommunications market. In the name of an abstract principle of openness, they may act in a way that results in a complete absence of real competition in the local market.

Similarly, the courts have been used to make the case for "openness" without regard for what it means in real terms. Forcing AT&T and the other cable operators to adhere to technically and economically unrealistic "open" service standards -- a possible outcome of the recent ruling by a Portland, OR, judge -- could end up delaying for a very long time the arrival of alternate local telecommunications service and high speed Internet service.

The Federal Communications Commission (FCC) has resisted regulating cable service, first because it believes that any regulation of Internet services is inappropriate; and second, because it understands how regulations can stifle development of more advanced, consumer-serving technology and service. NetAction applauds the FCC's caution.

We've seen over and over again how regulation for a supposedly good cause can be turned to an ill purpose. Regulation that impedes the ability of cable operators to provide competitive local telephone and Internet services is not in the public interest. In cities like San Francisco and Los Angeles where policy is being debated, local regulators must keep in mind the big picture and what is at stake: good, cheap, reliable, and easy to use local telephone and Internet services for everyone.

Next: What You Can Do to Guarantee a Competitive, Consumer-Serving Market in Local Telecommunications and Internet Service

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