Fall Broadband Battle Looms

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Consumer groups are hoping to make off with the punch bowl at this fall's Federal Communications Commission broadband deregulation party.

Later this month, the FCC will begin to review the record in multiple proceedings that are collectively designed to create new rules governing high-speed Internet-service providers — mainly established cable and local phone companies.

Since late last year, Republican FCC chairman Michael Powell has voiced support for policies that put more power into the hands of network owners, in order to spur investment in facilities and stimulate competition at a point in the Internet's end-to-end network diagram where Powell considers it to be most needed.

In the view of some, Powell's policies would come at the expense of scrappy entrepreneurs who want the right to pay reasonable rates to access advanced-data networks they could never afford to build on their own.

Consumer Federation of America research director Mark Cooper said last week he'll fight Powell's policies in court, in the media, and on Capitol Hill to ensure cable and phone companies are required to provide access to competing ISPs.

"Michael Powell has declared very loudly what he stands for," said Cooper. "I will not change his mind. I may prevent him from pursuing that extremist policy."

Cooper is hopeful that Powell's policies might be derailed if Democrats take control of both houses of Congress in the November election. An industry source, however, said plenty of Capitol Hill Democrats — including Rep. John Dingell (D-Mich.) — favor Powell's moves to overhaul broadband policy.

Both cable operators and the Baby Bell phone companies are lobbying the FCC for maximum deregulation for themselves. The agency has not been more specific than to say it expects to unveil its broadband decisions in the fall.

Cable broadband access has not been regulated, so the industry is really fighting to preserve the status quo. Phone companies, by contrast, have been required to provide access to competing ISPs at regulated rates and lease their facilities to competing carriers. Citing cable's regulatory advantage, phone -industry incumbents are demanding deregulatory parity with cable.

PARITY COMING

FCC observers expect the agency to create deregulatory parity, with an outside chance that both cable and phone companies would need to offer wholesale access to a reasonable number of competing ISPs at rates set through private negotiations.

As Republican FCC member Kathleen Abernathy has warned, the FCC could encounter legal problems if it perpetuates a regime under which the Baby Bells face compulsory network-sharing requirements, but cable operators do not, at a time when cable serves 8 million data subscribers and digital subscriber line providers serve 3.9 million, according to May data from Kinetic Strategies Inc.

The National Cable & Telecommunications Association is vigorously opposed to the idea that cable needs to adhere to forced access mandates for the sake of parity with phone companies if, in the end, the FCC decides that phone-company access requirements are still appropriate.

The NCTA said regulatory disparity between firms providing some of the same services appears to be the norm in federal law.

"For example, cable, [direct-broadcast satellite] and broadcast are subject to differing regulatory regimes, even though each industry provides similar video programming services," the NCTA told the FCC, adding that even phone companies are regulated differently depending on whether they are established incumbents or new entrants.

The FCC is probably intending to establish deregulatory parity between cable and phone companies rather than require each to comply with modest access requirements, Schwab Washington Research cable and telecommunications analyst Paul Glenchur maintained.

"They are trying to get away from the shared-network approach to things," Glenchur said. "By keeping regulations light on the cable side, it philosophically bolsters what they are trying to do on the telco side."

In the past, consumer groups have had to fend for themselves in regulatory battles against media and telecom giants. But the broadband debate has not broken down into a pure consumer-vs.-business struggle.

NAB BACKS ACCESS

Last week, the National Association of Broadcasters broke its silence, telling the FCC that both phone companies and cable operators should provide access to competing ISPs and should be stopped from discriminating against unaffiliated Web content.

"History has shown that network owners inevitably control access to consumers so as to minimize competition," NAB said in July 1 comments.

The FCC "should retain the access and nondiscrimination policies that have been consistently applied in the narrowband, Internet marketplace, and continue to apply them to high-speed Internet access provided over wireline facilities," the NAB added.

An NAB source said the group's support for open access should not have come as a surprise, because it took essentially the same position in a separate FCC proceeding on interactive TV — and in connection with the 2000 federal review of the America Online Inc.-Time Warner Inc. merger.

Amazon.com, the giant online book retailer, took the same stand as the NAB, concerned that network owners would use their control either to block access to sites like Amazon.com, or steer consumers to its affiliated competitors.

The Consumer Electronics Associations did not embrace forced ISP carriage by cable operators, even though it endorses the NAB's view that cable operators ought to be required to carry both analog and digital TV signals during the DTV transition

The CEA — a partner in the High Tech Broadband Coalition, which also filed comments last Monday — said the FCC should allow the "market for broadband over cable to develop without heavy-handed regulatory intervention."

The trade group favors dual must-carry because cable dominates the pay-TV market with 70 million subscribers, said CEA spokesman Jeff Joseph.

"Competition exists in the broadband arena, so there is no need to impose regulatory requirements. We view this as two different issues, two different services," Joseph said.

AOL Time Warner Inc. is lobbying the issue in a manner consistent with its role as the No. 2 cable operator with 10.8 million subscribers, and the world's largest ISP, with 34 million subscribers.

The company argues it would be "premature" to impose access rules on cable, as other MSOs need time to realize that AOL Time Warner's multiple ISPs choice policy is the best business model.

Yet in connection with ISP access to a phone company's DSL transmission platform, AOL Time Warner offers an argument that echoes the consumer-group view of cable and phone companies.

"To ensure that these [phone] carriers do not compete unfairly in their unregulated information services, they must continue to be required to offer on a nondiscriminatory basis to competing ISPs the same access to wholesale transmission and related features. as they use themselves," AOL Time Warner told the FCC last month.

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