LOS ANGELES -As the open-access debate entered a new and uncertain period, the cable industry last week implored the Federal Communications Commission to allow operators to strike deals with competitors unfettered by government regulation.
The FCC, moving along a course set by chairman William Kennard in June, is beginning to study whether open-access rules that apply to phone companies should be grafted onto cable-a thought that has some executives fearing for the safety of billions of dollars poured into system upgrades.
"This inquiry holds the potential for sweeping impacts-salutary or otherwise-or investment, innovation, and the Internet," Comcast Corp. told the FCC on Friday, adding that the FCC had to squelch "advocates of regulatory overreaching."
Kennard, who is expected to step down if Gov. George W. Bush (R-Texas) is elected president, decided to plunge into the open-access debate after three federal courts came up with different notions of how to classify cable provision of Internet access. Since he took office in November of 1997, Kennard has refused to inject the FCC into the access debate.
In addition to Comcast, the National Cable Television Association, phone companies, and Internet-service providers weighed in with comments in an effort to shape the FCC's deliberations in the months ahead.
Procedurally, the agency is many months away from adopting any rules. But some in the cable industry view the FCC's decision to study access-related legal issues now as a prelude to the adoption of open-access rules in the future.
Before adopting rules, the agency would have to launch a formal rulemaking, an event which would undoubtedly trigger one of the fiercest battles in Washington since rate re-regulation legislation in 1992. The battle would likely involve Congress, the White House and, once again, the federal courts.
"There is probably no other proceeding as significant for our business at the commission as this one," said NCTA president Robert Sachs. "Without overstating its importance, this proceeding could have as much bearing on the future of our business as any marketplace development."
One FCC leader said the outcome at the agency has not been pre-ordained.
Deborah Lathen, chief of the FCC's Cable Services Bureau and the regulator to whom Kennard partly handed the access issue, said the agency had correctly resisted calls to regulate cable's provision of high-speed Internet access.
Speaking at the Western Show here, Lathen said that when the open-access issue first surfaced in 1998, many people expected the FCC to step in with regulations to ensure competing Internet-service provider had access to data-over-cable facilities.
"We resisted that impulse," Lathen said. "I think we took the right approach here."
In comments filed Friday, the NCTA told the FCC that cable-modem service is not legally subject to telephone- industry rules. Any contrary ruling that included forced access mandates would violate federal law and the First Amendment, the association said.
In a talk with reporters, Sachs said if the Federal Trade Commission decides to require the merging America Online Inc. and Time Warner to provide other ISPs with access to Time Warner Cable's broadband network, FCC regulators and cable competitors should view those actions as unique to the merger.
"I would not say that the terms of those agreements are necessarily going to become models for anyone else," Sachs said.
Time Warner Cable, which is embroiled in merger talks with the FTC, was not expected to participate in the FCC's current cable-access proceeding.
Some in the cable industry are concerned that if AOL and Time Warner eventually merge under an FTC mandate to carry competing ISPs, the new company might have the incentive to see comparable mandates apply to the rest of the cable industry. Few in the cable industry are eager to take on forced-access proponents as a team divided.
Although the FCC has refrained from adopting open-access rules, Lathen said the agency believes cable systems should not be the exclusive domain of the MSO-affiliated ISPs, such as Excite@Home Corp. and RoadRunner.
It's "important for the industry to show that is going to open up its systems," she said. "Openness is what made the Internet what it is."
But Lathen said the FCC has yet to say how open a cable system should be or how the agency is going to define open.
"Those are very, very difficult questions. We're just starting," Lathen said.
Cable operators are already moving in Lathen's direction. Comcast last week announced a Philadelphia trial in early 2001with ISP Juno Online Services Inc. Two weeks ago, Time Warner reached a deal with EarthLink Networks Inc. that's contingent upon the closing of the AOL merger. And AT&T Broadband is conducting an eight-ISP trial in Boulder, Co. that includes Juno and EarthLink.
Assuming Bush becomes president, the FCC that initiated the cable access proceeding is unlikely to be the same FCC that completes it. A Republican-controlled FCC might even decide that it has no immediate interest in deciding which regulatory bucket fits Internet access over cable.
In his Western Show speech, Sachs said the cable industry would provide consumers choice among ISPs, but the development of choice had to flow from private negotiations.
"Agreement dictated by FTC lawyers should not be confused with business deals based solely upon economic consideration. If it were otherwise, the recently announced agreement between Time Warner and EarthLink would not be expressly contingent upon the AOL-Time Warner merger closing," Sachs said.
Regarding the broader regulatory landscape next year, Sachs said a closely divided Congress and continued FCC support for allowing the market to solve ISP carriage issues should be sufficient to insulate cable from new federal regulation for a while.
He said the Republicans' narrow control of the House-and the probable 50-50 GOP-Democratic split in the Senate for the first time in 120 years-would require strong consensus to pass any kind of legislation directed at cable.
"While most communications issues tend to be non-partisan, they are seldom without controversy. Add to this the fact that the Congress is narrowly divided, there is not much likelihood that any major cable legislation will be enacted over the next couple of years," he said.
Yet, Congress won't be entirely inactive in areas of concern to cable. Sachs indicted strong bipartisan support for legislation dealing with on-line privacy and the digital divide. In the last two years, several bills surfaced calling for subsidies and tax credits to firms that provide high-speed Internet access in poor and rural high-cost areas.
Though the FCC remained cable's chief focus, the industry is confident the agency's current policy of overseeing cable with a light regulatory hand would prevail with either Bush or Vice President Gore in the White House, Sachs said.
"Whether the next FCC chairman is a Republican or Democrat, the FCC is very likely to continue to foster the growth of new technologies through a market approach," Sachs said.