Kennard Reminds Cable Access Could Still Sting

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Los Angeles -- Federal Communications Commission Chairman
William Kennard last week warned cable that it could face a consumer revolt similar to the
Boston Tea Party if cable-modem subscribers are forced to pay twice to reach the
Internet-service provider of their choice.

In a Western Show speech, Kennard indicated that he would
continue to straddle the access issue, calling for open access in public statements while
refraining from using his power to impose it on the cable industry.

Kennard said he remains confident that market forces will
produce a business model beneficial to both consumers and Internet companies that do not
have financial ties to cable.

"I am putting my faith in the marketplace,"
Kennard said.

But he said cable could lose the political fight it is
currently winning in Washington if the perception spreads that cable operators are acting
as Internet gatekeepers that charge too much for content and interconnection while denying
consumers their choice of ISP.

"If you ignore this access issue for now -- or worse,
if you stonewall it -- I am afraid it just gets worse for you," he said. "Don't
underestimate the power of this issue to capture the attention and the ire of the American
consumer."

Cable should rely on recent history to guide its actions in
the access debate, Kennard said. He cast the cable industry as an arrogant King George II
who mistreated his colonial subjects with autocratic policies.

"Remember the lessons of the 1992 Cable Act when, I
believe, too many in your industry went into denial and as a result, you paid a heavy
price for it in Washington," he said. "And remember the lessons of the Boston
Tea Party."

Shortly after Kennard spoke, FCC commissioner Susan Ness
raised another controversial issue: the debate over copyright protection for Hollywood
movies and TV programming is delaying consumer purchase of digital TV sets, she said.

"If we are going to see widespread availability of
quality programming, the copy protection issues must be resolved," Ness said in a
Western Show speech. "The process is taking too long, and the American public
deserves resolution of these issues now."

In his remarks, Kennard indicated that cable should adopt
access policies that appear to be no different from FCC common-carrier rules, which govern
phone companies. He again praised AT&T Corp.'s recent agreement to open its platform
to MindSpring Enterprises Inc. after AT&T's exclusive deal with Excite@@Home Corp.
expires in June 2002.

But aides to Kennard said the chairman is not trying to
harmonize cable and phone-company rules with regard to Internet access.

"All he was saying is that the discussion has begun
about what an open system really means, and let's continue that dialogue and let's make it
more than just rhetoric," said Deborah Lathen, chief of the FCC's Cable Services
Bureau. "I can assure you that there is no intent for him to say that we want (cable)
to privately make it common carrier."

For now, Kennard said he is keeping the FCC out of the
fight, because no one in the ISP community or the ranks of local government has made a
compelling case for FCC intervention.

NCTA president Robert Sachs said the FCC and Congress have
resisted intervening despite enormous pressure from America Online Inc. and GTE. Corp.

"Unfortunately, some of our competitors are trying to
use government regulation and litigation to forestall cable's deployment of high-speed
Internet and local phone services," Sachs said. "The good news is that their
efforts have failed to gain much traction."

AOL and GTE should abandon their effort to get the
government to handicap the cable industry, he said.

"To our Internet and telephony competitors, I say take
a page from cable's playbook: market competition, not government regulation, should
determine a company's success or failure," Sachs said.

In her remarks, Ness implied that consumers wouldn't buy
expensive digital-TV sets unless they gain broad access to digital content and their sets
are compatible with cable-system technology.

"It's going to take compelling content to drive the
transition to digital," she said. "We are making progress, but we could be are
doing even better."

The cable industry, Hollywood studios and equipment
manufacturers are attempting to reach agreement on preventing mass copying of digital
content that effectively robs copyright owners of maximizing revenue.

Because digital technology allows for flawless copying on a
mass scale and easy distribution over the Internet, said Ness, content producers are
rightfully concerned that the foundation of their business is threatened.

But industry concerns should not block consumers from easy
copying of TV shows or pay-per-view programming for replay and viewing at more convenient
times, she said.

"They ought to be able to do so," Ness said.
"The Supreme Court said as much, and consumers have come to expect it."

Ness also discussed the debate between the National Cable
Television Association and the Consumer Electronics Association over the labeling of TV
sets as "cable ready." Cable is concerned that the "cable ready" label
will cause confusion if applied to low-end sets that lack copy protection and can't work
with VCRs. The CEA wants scaled-back sets to reduce costs.

"The key is to have simple-to-understand labeling
systems and consumer education to make sure the consumer truly knows what he or she is
buying," Ness said.

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