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EchoStar Fears Cables Broadband Edge

12/17/2000 7:00 PM Eastern

WASHINGTON -EchoStar Communications Corp. has officially conceded that it's not technically equipped to compete with cable's two-way broadband Internet-access service.

The No. 2 direct-broadcast satellite provider-with 5 million subscribers-said the introduction of two-way Internet access via direct-broadcast satellite is probably no match for cable's high-speed Internet service bundled with digital video and, in some cases, local phone service.

In comments filed Dec. 1 with the Federal Communications Commission, EchoStar said one-way Internet access via DBS "simply cannot compete" against cable and that recently launched two-way service "is relatively cumbersome to consumers."

EchoStar is a partner in StarBand, which offers two-way high-speed Internet access and 150 video channels for a combined monthly price of $99. The service, which does not rely on EchoStar's satellites for data transmission, requires consumers to obtain a new, larger dish to receive both data and video.

"Cable operators control the only truly broadband conduit to and from the home," EchoStar said. "DBS companies are technically disadvantaged in offering truly interactive products."

EchoStar's comments were filed as part of the FCC's initial proceeding to determine the regulatory classification of cable-provided Internet access. Although the agency is many months away from adopting rules-an outcome some view as doubtful-it might decide to require cable operators to provide access to competing Internet-service providers.

As expected, the cable industry-led by the National Cable Television Association, AT&T Broadband, Comcast Corp. and Cox Communications Inc.-insisted that regulation of cable broadband service was unnecessary, harmful to investment and prohibited by current law and the U.S. Constitution.

"In the face of a competitive broadband marketplace, the [FCC] has no sound policy basis on which to impose 'open access' on broadband service providers," Cox said. "The far better course is to let participants in the developing marketplace choose their own business model."

Major cable operators provide high-speed Internet access through the exclusive sale of service through an affiliated ISP. In response to regulatory pressure, however, key MSOs have decided to conduct multiple-provider trials or have agreed to conduct such tests in the future.

While not explicitly calling on the FCC to require access to cable Internet facilities, EchoStar said cable likely has enough power in the video-distribution market to justify "subjecting cable modem platforms to open-access requirements."

Given its own bandwidth constraints, EchoStar said it "needs such access to compete on a more even footing with the video/broadband bundles increasingly being offered by cable operators." On that basis, cable facilities should be open to DBS carriers as well as ISPs, EchoStar said.

EchoStar said the FCC should not consider imposing access mandates on DBS because satellite providers neither control essential facilities nor possess the market power of cable operators.

In a related development, a Texas agency headed by an appointee of Texas Gov. George W. Bush is urging federal regulators to impose non-discriminatory open access on cable operators.

In its FCC comments, the Texas Office of Public Utility Counsel said, in part, that the U.S. agency must "quickly commence a rulemaking to implement nondiscriminatory interconnection for cable systems." Cable should devote some of its Internet-access revenue to the universal-service fund designed to keep phone rates affordable, the agency added.

The Texas OPUC is an independent state regulator that represents residential and small business consumer interests. Suzi Ray McClellan, a Bush appointee, runs the agency.

Rick Guzman, the OPUC assistant public counsel, said last week that the FCC filing was not necessarily an expression of the views of Bush or Pat Wood, the Texas Public Utility Commission head and reportedly a candidate for FCC chairman, should Bush become president.

"OPUC is an independent agency, so it's not that [McClellan] cleared it with anybody in state government," Guzman said.

OPUC based its support for open access on June's 9th U.S. Circuit Court of Appeals decision that cable transmission of Internet content is, in part, a telecommunications service.

But all the 9th Circuit concluded was that cable Internet access is not a cable service, MSOs such as Cox have emphasized.

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