Washington -- America Online Inc. chairman Steve Case took
his cable-bashing campaign to Capitol Hill last week, but the cable industry and some
important lawmakers were ready to bash back this time.
Case, appearing before the Senate Commerce Committee,
called once again for adoption of a new law that would require cable operators to offer an
open platform to competing Internet-service providers.
Case said the cable industry's Internet strategy of
bundling the ISP and high-speed transport would deny cable-modem subscribers the right to
pick their own ISPs, as they do today over the narrowband phone network. The lack of
choice, he added, would stifle the Internet's seemingly boundless growth and promise.
"Let me be clear: I oppose regulation of the Internet.
But the broadband infrastructures on which the Internet rests -- whether cable, telephony
or other -- must be open," Case said.
Consistent with his understated manner, Case described his
open-cable legislation as a "light-touch" approach.
He compared it with current rules that bar cable operators
from filling their channels with networks that they own and from forcing subscribers to
buy tiers of programming that they don't want in order to receive programs that they do
want to watch.
"That kind of light touch at the infrastructure level,
I think, is the right approach," Case added.
Defending cable's position was James Robbins, president and
CEO of Cox Communications Inc., a cable operator and partner in high-speed-data service
@Home Network, which is adding about 43,000 subscribers per month, and which hopes to
reach 1.1 million by the end of the year.
Robbins told the panel that if Congress adopted Case's
idea, it would destroy the stable regulatory regime that gave his company and the
investment community the confidence to pour billions of dollars -- $4 billion by Cox alone
-- into network upgrades to support Internet services. (He made similar arguments during a
panel presentation at the Western Show in December.)
Robbins said Case's plan would make it more expensive for
consumers to buy @Home. He added that cable's alliance with @Home includes sharing
advertising and transaction revenue to keep the retail price of @Home affordable. But
companies like AOL, he said, have refused to sign agreements that include
"meaningful" revenue splits.
"Make no mistake: This is not an argument about open
access; it is an argument between competing business interests," Robbins added.
Before the hearing, cable-industry officials made the
rounds to members of the Commerce Committee to drum up support. Cable operatives have
stressed that a company like AOL, with a world-leading 17 million subscribers, is no
position to portray cable as a menace to competition.
The effort appeared to pay off.
Sen. Ted Stevens (R-Alaska) said he opposed government
"I'd like the marketplace to decide, not
Washington," he said. "I think that regulation at this time is unwarranted. A
wait-and-see attitude is probably our best course."
Sen. Ernest Hollings (D-S.C.) was probably the most
confrontational, suggesting at one point that AOL's dominance might deserve a look from
antitrust regulators in the Department of Justice.
"Right now, [AOL has] got 16 million [subscribers],
and cable's only got 300,000," Hollings said. He backpedaled a bit, though, by
saying, "Mr. Case may be right later on."
Sen. Conrad Burns (R-Mont.) warned that AOL's proposal
would frustrate his hopes that rural states like his would gain high-speed connections to
"If we impose a regulatory regime on cable operators
at this early stage, it could jeopardize their access to venture capital and threaten to
derail the very efforts that we are trying to promote," Burns said in a prepared
Case's view, while strongly supported by MindSpring
Enterprises Inc. CEO Charles Brewer, was criticized by William Schrader, chairman and CEO
of PSINet Inc., a major facilities-based ISP.
Schrader claimed that cable would ultimately feel
marketplace pressure to open its networks. He said his chief concern was about the wisdom
of allowing the Baby Bells to compete for Internet subscribers on a deregulated basis
before they have fully opened their voice networks to competitors, as required under
"I am not for changing the rules in any way,"
Schrader said. "Don't add any additional regulations [on cable] until there is a
Brewer disagreed, saying that it was vital for the Federal
Communications Commission to say that cable provision of Internet access is a
telecommunications service, subject to various open-platform requirements.
"It is not a technically difficult task," Brewer
said. "MindSpring has a working open-access arrangement with one competitive cable
company in the Southeast right now."
At the end of the hearing, Commerce Committee chairman Sen.
John McCain (R-Ariz.) said he would introduce a bill requiring the FCC and the Commerce
Department to study the facts and issues related to the deployment of advanced
broadband-data networks, especially in rural and low-income areas.
Robbins said after the hearing that he did not view the
bill as a first step toward legislation favored by AOL.