ISP Bid Raises Basic Buy-Through Issue

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Washington -- Cable operators might have to change the way
they market high-speed Internet access if the Federal Communications Commission rules that
operators have to lease channels to third-party Internet-service providers, according to
cable-industry sources.

Under current FCC rules, cable operators are allowed to
sell @Home Network and Road Runner as stand-alone products. That's unusual because the
commission won't allow them to sell Home Box Office or Showtime individually until the
subscriber has purchased the basic tier first.

The FCC said high-speed cable services were exempt from the
basic-tier buy-through requirement because such services were not "video
programming" as defined in the Communications Act.

Video programming is defined in the law as
"programming provided by, or generally considered comparable to programming provided
by, a broadcast-television station."

In a petition filed with the FCC June 1, Internet Ventures
Inc. requested that the commission rule that video streaming over the Internet met the
law's definition of "video programming," as IVI operates a Web page that hosts
at least 75 domestic and international TV stations that stream content over the Internet.

Comments on IVI's petition are due at the FCC July 13. Some
segments of the cable industry are expected to argue that if leased-access rules apply to
ISPs because video streaming is comparable with broadcast television, the commission needs
to address whether cable operators must require cable-modem subscribers to purchase the
basic tier.

As one cable attorney put it, the cable industry could face
"a big basic-tier buy-through problem" if the FCC sides with IVI.

In other words, cable could no longer market @Home or Road
Runner as stand-alone products -- an option that could grow in importance for operators
that have lost subscribers to direct-broadcast satellite services.

In a statement, IVI president Don Janke said it would be
unreasonable for the FCC to reject IVI's petition based on cable's concerns about a
basic-tier buy-through problem.

"This is yet another example of cable's long history
of playing semantic games and twisting the intent of the FCC's rules to maintain record
profit levels by eliminating competition to its own services," he added.

Some cable operators, such as MediaOne Group Inc., have
mentioned that Road Runner has been popular with noncable subscribers, although others in
the industry said they doubted that the number of Internet-only subscribers was all that
big.

MediaOne spokesman Rob Stoddard said that on average, about
5 percent of its Road Runner subscribers are not basic-cable subscribers. In some markets,
the level of Road Runner-only subscribers can rise to as high as 23 percent or go as low
as 1 percent, he added.

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