News

DATA ACCESS FIRES BURN

6/27/1999 8:00 PM Eastern

Los Angeles -- The debate over local regulation of
cable's high-speed-data platform sparked all over the West Coast last week, led by a
political wildfire over the issue here.

The failure by the Los Angeles Board of Information
Technology Commissioners to act on a report either endorsing or rejecting government
intervention on the high-speed-data open-access issue left opposing sides on the issue
dueling by press conference.

The issue -- a heated topic when AT&T Corp. was closing
its deal to buy Tele-Communications Inc. -- flared up again when a federal judge recently
ruled that local franchising authorities in Oregon could impose open-access conditions on
AT&T.

AT&T is appealing the decision. But the ruling could
spark similar actions by LFAs weighing transfers of MediaOne Group Inc. franchises to
AT&T.

The Los Angeles report has been eagerly awaited by LFAs
around the country. Dade and Broward counties in Florida, for example, passed open-access
regulations, but they put off implementation until after the Los Angeles report came out.

The OpenNet Coalition -- the lobbying group for
Internet-service providers such as Prodigy Communications Corp. and MindSpring Enterprises
Inc. -- blasted the inaction by the board, an advisory commission to the Los Angeles City
Council. OpenNet claimed that Mayor Richard Riordan unduly influenced the agency.

Conversely, executives at AT&T -- the object of the
most open-access lobbying -- called the activities of OpenNet and others a "smoke
screen" designed to slow the deployment of cable modems long enough so that
competitors can come up with a competitive product.

"The [Los Angeles] Information Technology Agency spent
five months studying this issue and eventually agreed with the [Federal Communications
Commission] that no government intervention is necessary," AT&T president of
consumer services Lois A. Hedgpeth said. "Let the consumers pick the winners and
losers."

Excite@Home, the data-over-cable provider partly owned by
AT&T, also approved.

Chief technology officer Milo Medin said in a prepared
statement that the agency's staff "invested a great deal of time and energy to
understand the issues, and it has come to the right decision. Their recommendations will
encourage greater investment and competition among providers that will stimulate true
consumer choice and deliver advanced broadband services that are fast, affordable and open
to all content providers on the Internet."

The city's telecommunications advisory committee was
to review and vote on a staff report this month that reviews the technical and policy
ramifications of requiring cable operators to open their high-speed-data platform to
competitors.

The city did not include such a provision when it approved
the transfer of TCI's cable properties to AT&T. But the BITC and the City Council
asked the staff to research the issue to see if it could be a requirement during upcoming
transfers and renewals.

Virtually all of the city's 14 franchises will undergo
the process in the next 18 months, including the transfers of MediaOne systems to
AT&T, Century Communications Corp. systems to Adelphia Communications Corp. and Falcon
Communications Inc. systems to Charter Communications.

But when the report was finished, board members indicated
that they found themselves under pressure from Riordan's office. According to
reports, the pro-big-business mayor opposes any conditions on the transfer of cable
franchises.

During his monthly radio appearance, Riordan indicated his
belief that the FCC should set policy on the issue. Regulation could dissuade private
industry from investing millions of dollars in improving the communications
infrastructure, he added.

The 53-page report (posted at www.lacity.org)
includes the opinion that open access is technically feasible. However, the report
concluded that Los Angeles should not unbundle content from access and should not order
open access, adding that the market should be monitored for three years.

The only reopener clause that was suggested would allow the
city to renegotiate for an open-access order if an operator controls more than two-thirds
of the broadband Internet access in any given geographic area.

During the week prior to the public release of the report,
the chairman, vice chairman and another member of the BITC -- all Riordan appointees --
resigned, rather than voting for the study.

In his resignation letter, member Robert Duggan said he
believes open access is "sound public policy" for the city. "Clearly, the
benefits of open access far outweigh any marginal costs. Ultimately, without open access,
Angelenos lose," he wrote.

Duggan added his belief that Riordan's office is
leading cable operators to believe that they will have exclusive control over
"protocols and prices" without any checks and balances by regulators.

"The city should not, however, kowtow to the wishes of
the industry seeking monopoly power at the expense of all Angelenos," he wrote.

OpenNet members, on a conference call last week, decried
the comments made by FCC chairman William Kennard at the National Show. Kennard said there
would be "chaos" if local governments try to regulate open access.

"The FCC has taken a position that will let AT&T
put its monopoly together again. Cities are smarter than that," OpenNet co-director
Greg Simon said.

He also cited AT&T Broadband & Internet Services
CEO Leo J. Hindery Jr.'s comments, quoted in USA Today, about more system
consolidations. Simon called the strategy -- which Hindery has said would be completed
within the next six weeks -- the "'RBOCization' of the cable
industry."

If that happens, it will mean the "end of the ISP
industry as we know it," Simon added.

OpenNet members vowed to take the issue to each city that
faces a transfer of MediaOne properties to AT&T. By one FCC calculation that includes
partial stakes in other operators, AT&T will control 60 percent of cable households
after that deal closes. "They're the iceberg, and the consumers are on the Titanic,"
Simon said.

While the Sturm und Drang played out on the West
Coast, pro-access forces -- including attorneys from the National Association of
Telecommunications Officers and Advisors and members of the Consumer Federation of America
and the Media Access Project -- met with Kennard in Washington, D.C.

The FCC chief was criticized for attending the cable
meeting and "all but inviting the [cable] industry to file a request to open a
docket" on the access issue, according to participant Andrew Jay Schwartzman,
president of the MAP.

Participants at the meeting argued that there is no
question that access could be regulated. The only question was whether federal or local
authorities would do it.

FCC Cable Services Bureau chief Deborah Lathen was lobbied
by officials from Los Angeles, San Francisco and Dade and Broward counties, all of whom
support local regulation of the cable-data platform.

Meanwhile, the decimation of the Los Angeles BITC did not
end the progress of the report through the required channels. It was presented to the
Information Technology and General Services committees of the Los Angeles City Council
last Tuesday, where the parade of opposing attorneys began again.

The committee will review the report for two weeks before
it decides to accept or reject its anti-regulatory conclusions.

Further up the coast, the Public Utilities and Deregulation
Committee of the San Francisco Board of Supervisors got its look at the long-awaited
agreement on the transfer of the former TCI properties to AT&T.

The report from the head of the telecommunications
department, Julia Friedlander, focused on requirements that would prod AT&T Broadband
to upgrade the city's antiquated cable plant.

According to the proposal, the city will only require an
open high-speed-data platform if AT&T Broadband agrees to give that concession to some
other community.

But committee member Tom Ammiano, president of the Board of
Supervisors, said he would not support that resolution, and he vowed to write a
substitute, pro-access draft.

At least one of the other supervisors at the committee
meeting also indicated support for open access. Ammiano said he would present his version
during a closed board meeting July 6.

The City-County Cable Advisory Board of Spokane, Wash.,
further fanned the flames of competitors' hopes late in the week.

The regulators -- sparked by a request by Internet Ventures
Inc., which wants to lease channels on AT&T Broadband's cable system there and
elsewhere to deliver Web content -- held a public hearing on the issue.

After five hours of testimony from students, ISPs and area
cable operators, committee members announced that they would reconvene Wednesday (June 30)
to decide if they should enter the fray.

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