AOL Watching ISP Leased-Access Debate

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Washington -- America Online Inc. signaled last week that
it supports Internet-service providers that want to rely on leased-access rules to compete
with ISPs that are affiliated with cable operators.

"We think that it's an interesting approach,
which we are watching," AOL spokeswoman Kathy McKiernan said. "We certainly
support the efforts of all of those who are trying to work for openness and competition in
the cable-broadband marketplace."

Probably sometime next month, a small California ISP plans
to ask the Federal Communications Commission to adopt a rule that would open the
leased-access market -- traditionally the domain of video programmers -- to ISPs.

Internet Ventures Inc. of Redondo Beach is pushing the
leased-access proposal, which hinges on whether the FCC agrees with the company that
Internet video streaming is "video programming" under the Communications Act.

The OpenNet Coalition -- an AOL-led lobbying grouped formed
to convince the federal government that cable facilities, like phone networks, should be
open to ISPs -- said IVI's leased-access proposal was under review.

"We haven't taken a position on this, but our
mission is open access to broadband systems," OpenNet spokeswoman Kristin VanHook
said.

Under federal law, leased access is available at regulated
rates to third parties that want to provide "video programming," which the law
defines broadly as "comparable to programming provided by a television-broadcast
station."

Few would say today that Internet video streaming is
qualitatively in the same class as TV pictures. But in a few a years, or perhaps sooner,
the gap could close.

"This puts the FCC in a really tough position, a really tough position. Because if
the Internet is not video programming, does that mean that the Internet cannot evolve to
include video programming?" said Scott Cleland, managing director of Legg Mason Wood
Walker's Precursor Group. Cleland has written extensively about cable Internet-access
issues.

From a technical standpoint, it is not difficult for an ISP
to utilize cable facilities for downstream purposes and a telephone line for the return
path, according to Jeff Krauss, a telecommunications consultant based in Rockville, Md.

"Now to do two-way, that's a different
story," Krauss said. "Just to make a cable system two-way requires a substantial
re-engineering, because there are problems with noise ingress in the upstream path."

Even if the FCC backs IVI's petition, Cable
Telecommunications Association (CATA) president Steven Effros said cable operators would
be within their rights to deny leased-access requests filed by ISPs.

Cable operators with established written policies, he said,
are authorized to refuse to transmit any leased-access programs that contain obscenity,
indecency or nudity. In fact, cable operators can be held liable for a host of illegal
actions by leased-access programmers, including copyright infringement and gambling.

However, cable operators that are also ISPs would not face
similar liability because ISPs have exemptions from that kind of liability under federal
law, Effros added.

Effros said ISPs seeking leased-access channels could never
guarantee cable operators facing legal liability that their Internet content excluded
criminal activity.

"The cable operator has the right to protect himself
or herself against video programs that violate the law," Effros said. "[ISPs]
can't make assurances that we can force them to make."

Donna Lampert, a Washington, D.C.-based telecommunications
lawyer who represents AOL, said Effros' statement illustrated the unequal treatment
afforded to ISPs, depending on whether they rely on the phone network or the cable network
for access.

"If that's the case [that cable can exclude ISPs
on indecency grounds], then this really does highlight, in big bold letters, with an
exclamation point, what's wrong with this regime," Lampert said.

According to several sources, IVI might try to obtain cable
access under a provision of the Communications Act that has received little notice to
date. Passed by Congress in 1984, the provision allows the FCC to "promulgate any
additional rules necessary to provide diversity of information sources" over cable
networks.

But the FCC can't consider adopting any rules under
the provision -- section 612(g) -- until 70 percent of U.S. households have access to
cable systems with 36 or more channels and 70 percent of those households actually
subscribe to such systems.

"[Section] 612(g) gives them broad authority to
explore new policies and regulations on cable," IVI president Don Janke said.

According to industry sources, the FCC has not collected
the data under section 612(g), and it is worried that the information might be expensive
to obtain. Sources said at least one private company (not a cable operator) has offered to
fund the FCC study.

Lampert said she wouldn't be surprised if the cable
industry had crossed the 70-70 threshold. "It seems to me that they are extremely
close, if they are not there," she said.

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