The long-simmering policy debate over cable Internet access
has now bubbled to a full boil. Two controversial June decisions reached opposing
conclusions on mandated access.
U.S. District Court Judge Owen M. Panner upheld an
ordinance in Portland, Ore., imposing open access as a condition of the cable-franchise
transfer from Tele-Communications Inc. to AT&T Corp. And the Los Angeles Information
Technology Agency issued a report rejecting regulatory intervention.
The Portland decision upheld the power of local franchising
authorities to order open access as a condition of approving cable-franchise transfers --
irrespective of whether this is good or bad public policy -- under residual "police
powers" of local government.
It rests upon findings that the cable plant is an
"essential facility," and that the franchising authority has the power to
mandate open access to prevent future antitrust violations from occurring. Underlying the
ruling is a notion that localities may regulate competition.
In contrast, the ITA staff addressed solely whether it
would be good public policy for Los Angeles to order cable operators to provide open
access to unaffiliated Internet-service providers.
After months of study, the staff concluded that the best
public policy was to refrain from imposing new regulations. Despite the possibility that
some projections for competition in the residential broadband-access market might be
overly optimistic, the ITA found that the case for government intervention had not been
This was true for both claims of cable's alleged
monopolization of the broadband "access/transport" market and for claims that
business arrangements between cable operators and their affiliated ISPs would compromise
access to information sources and services over the Internet.
The ITA concluded that the goal of attaining cable-modem
and cable-telephony deployment in a reasonable and timely manner outweighed any potential
benefits from mandated access and its attendant regulatory and opportunity costs.
This is precisely the right approach. Decisions of law
divorced from public policy, like the Portland decision, produce strange and undesirable
Twice this year, the Federal Communications Commission
rejected calls from ISPs and cable's broadband competitors to mandate access to cable
because it found that the "preconditions for monopoly appear absent" in
residential broadband markets.
The FCC's Section 706 Report to Congress and its
decision approving the AT&T-TCI merger clearly demonstrate that the pre-eminent
public-policy goal is encouraging broadband investment and facilities deployment in all
The FCC's decisions not to move toward mandated cable
access were made to foster infrastructure deployment. Historically, decisions to refrain
from burdensome regulation are more important than decisions on how to regulate.
Charges that the FCC has abdicated its responsibilities to
provide guidance in this area are utterly baseless. FCC decisions not to regulate are
affirmations that regulation would not achieve policy goals.
These decisions should have been understood by the Portland
court as determinations of federal policy that preclude inconsistent action at the state
and local level.
Surprisingly, this was not the case. The appeals process should set the matter straight.
The extremity of the Portland decision's claim for
local regulation of cable's Internet "on-ramps" brought swift reactions
from the FCC.
Chairman William Kennard and commissioners Michael Powell
and Gloria Tristani recognized that where cable upgrades and cable-modem service have been
deployed, other firms have responded by heightened investment in alternative broadband
Kennard affirmed the FCC's policy decision to refrain
from additional regulation in an effort to "get these pipes built " by letting
"the marketplace do it." He reiterated that the FCC has affirmatively chosen a
national broadband policy that takes a "hands-off, deregulatory approach to the
Kennard predicted "chaos" if each of the 30,000
LFAs in the United States sets its own technical standards or regulatory structures for
Powell articulated a market-based competition policy in
mid-June remarks. He proposed that regulators first ask why they should act, rather than
simply exploring modes of possible action.
A clear anti-competitive effect on consumers should be the
prerequisite for regulatory intervention.
Although the risks that cable Internet access may pose to
firms such as dial-up ISPs and other broadband providers are easily identifiable, it is
less clear to Powell that there are substantial anti-competitive effects on consumers.
He warned that premature labeling of cable as an
"essential facility" to justify a mandated right of access "may well stifle
aggressive attempts to develop competing methods of bypassing the cable plant."
Powell identified cable's rollout of high-speed
Internet services as "a very high-value proposition for consumers." A
"disjointed policy melange" would result if cable access were mandated in
hundreds of different ways by states and LFAs.
Kennard's and Powell's remarks echo an earlier
FCC order resolving a franchise dispute between TCI and the city of Troy, Mich.
The FCC there warned of the need to avoid "a patchwork
quilt of differing local regulations [that] may well discourage regional or national
strategies by telecommunications providers and, thus, adversely affect the economics of
their competitive strategies."
While recognizing that "each local government may
believe it is simply protecting the interests of its constituents," the FCC declared
that the "telecommunications interests of its constituents, however, are not only
local." They are statewide, national and international, as well.
"Our concern is that some localities appear to be
reaching beyond traditional rights-of-way matters and seeking to impose a redundant
'third tier' of telecommunications regulation, which aspires to govern the
relationships among telecommunications providers, or the rates, terms and conditions under
which telecommunications service is offered to the public."
Cable Internet policy is no different: It is national and
global in its implications. Each locality facing a cable-franchise transfer or renewal
will likely be asked to consider the imposition of an open-access requirement.
Before taking that plunge, localities should also consider
how the FCC's admonition in the Troy decision might apply to expansions of
cable-franchising authority to govern the relationships between cable operators and ISPs.
Pursuant to the Telecommunications Act of 1996, the policy
of the United States is to promote the continued development of the Internet, interactive
computer services and other interactive media and "to preserve the vibrant and
competitive free market that presently exists for the Internet and other interactive
computer services, unfettered by federal or state regulation."
Consistent with national policy, the FCC has unmistakably
favored reliance on markets sorting out the thorny issue of ISP-to-ISP connectivity and
its attendant business arrangements. With no evidence of market failure presented, indeed,
with accelerating markets, this is as it should be.
In the 1970s, the FCC had the wisdom to recognize that the
fact that it could regulate data communications did not mean that it should. That the FCC
declined to regulate the business arrangements by which cable operators provide Internet
services should not be construed as an invitation for local governments to step in.
It may be a hot summer for the FCC, but one expects that
cool heads will ultimately maintain the current "hands-off" national policy for
Internet over cable, satellite, wireless and other similar networks.
Barbara S. Esbin is an attorney specializing in regulatory
policy and strategic planning with Washington, D.C.-based Dow, Lohnes & Albertson.