Cable's ongoing effort to provide high-speed data service free from intrusive regulation has gained a powerful advocate within the Federal Communications Commission.
In a recent speech, Kenneth Ferree, chief of the FCC's Media Bureau, sided with the cable industry's position that the regulation of high-speed data networks to prevent discriminatory action by their owners is unnecessary and likely counterproductive.
Though he insisted that he was speaking for himself and not for chairman Michael Powell, Ferree said he was unwilling to support calls from Microsoft Corp., Amazon.com, and Yahoo! Inc. for rules that would restrict business ties between high-speed data network owners and Web merchants.
Microsoft and the other companies have urged the FCC to adopt what they call "network-neutrality" rules.
But Ferree said restricting cable companies from certain financial relationships might disable market forces from producing business models that generate profitable Internet-based businesses.
"I know of no policy justification for limiting these arrangements or otherwise shackling those that that might be party to them. And I know of no way of distinguishing in advance between benign commercial arrangements and anticompetitive ones," Ferree said, according to the text of his June 27 speech to the Progress & Freedom Foundation.
Ferree's speech sent a strong signal that the agency is unwilling to tie cable's hands, and many of the deregulatory justifications it contained reflected past statements by Powell that government should not adopt rules that could harm investment in broadband networks.
Last March, adopting recommendations from Ferree's bureau, the FCC decided not to classify cable modem service as a telecommunication service subject to common carrier regulation.
For the last few months, the agency has come under pressure from an organization called the Coalition of Broadband Users and Innovators (CBUI), which includes Microsoft, Amazon.com, and Yahoo! and well as The Walt Disney Co., RadioShack Corp., and Leo Hindery's Yankees Entertainment and Sports Network.
The group's overriding concern is that cable operators and phone companies, with virtually 100% of the residential broadband access market, could use their distribution power in anticompetitive ways.
For example, a cable modem subscriber that wanted to buy books online might have an easier time at the Barnes & Noble web site rather than at Amazon.com site because the cable company had a financial relationship with Barnes & Noble.
The CBUI urged the FCC to adopt rules that would prohibit that kind of conduct. But the National Cable & Telecommunications Association has argued that the CBUI's rules were not needed because cable operators are not using network control to disadvantage unaffiliated content providers. In fact, the NCTA said cable modem subscribers may roam the Internet freely.
Last month at the National Show in Chicago, Microsoft chairman Bill Gates acknowledged as much, saying he was pleased that cable was providing openness on its data platform. But Gates did not indicate whether his company would stop lobbying the FCC for regulations.
In his speech, Ferree said net neutrality rules would shift economic power from network owners to content providers at precisely the time when the FCC is trying to encourage network investment, not just by cable and phone companies but also by wireless, satellite, and power companies.