Last Access Act Still Months Away

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Cable-modem service is an unregulated information service — for now.

That's what the Federal Communications Commission declared two weeks ago. In so doing, it immunized cable operators from opening their lines to high-speed-data competitors, as phone companies do.

Internet-service providers have lived in the privileged world of being neither cable operators nor phone companies, thus skirting the nest of regulations that have traditionally applied to both industries.

But cable's victory in the open-access game could prove temporary — and the industry won't know whether it can finally spike the ball in the end zone for another nine months or so. That's because the FCC launched a new rulemaking in which it asks if ISP access rules should apply to cable, even if cable-based Internet access is an information service.

There's also no guarantee that the Republican-led FCC will ultimately decide that cable-access requirements are neither necessary nor appropriate. The outcome is likely to depend on developments within the cable industry, and how the political winds are blowing at the agency at year-end.

POLITICALLY PRUDENT

The cable industry could evidently render the whole debate moot by moving aggressively on carriage deals with unaffiliated ISPs. If the FCC sees that nearly every major cable operator has offered customers a legitimate choice, it's likely to refrain from enforcing network-sharing rules.

"Even though the FCC has cleared the way where they don't have to provide open access, it still may be politically prudent for them to do that," said Leichtman Research Group cable analyst Bruce Leichtman.

Aside from Time Warner Cable, cable operators have not moved at a pace that inspires confidence, a point FCC commissioner Michael Copps has made. And Rep. Edward Markey (D-Mass.) recently sent AT&T Corp. a letter with questions about the rollout of multiple ISPs in Massachusetts.

In recent weeks, though, Comcast Corp. reached a deal with United Online in Nashville and Indianapolis, and AT&T Broadband concluded an arrangement that will bring EarthLink Inc. to Seattle, and then Boston.

The MSOs need FCC and Justice Department approval for their $72 billion merger, and deal opponents are likely to zero in on the access issue.

The fate of open access over cable could be tied to FCC access rules that eventually apply to phone companies with broadband products.

As the FCC mulls imposing open-access rules on cable, it's also deciding whether to lift access regulations that apply to the telcos' digital subscriber line high-speed-data services. The DSL debate promises to be fierce, and the company leading the charge to retain those access rules is AT&T Broadband's parent, AT&T Corp.

In a March 1 FCC filing, AT&T staked out its position. It said the phone industry's voice service monopoly is so pervasive that it has "market power over residential broadband services, even where there is competition from cable." It called the removal of various access and network-sharing requirements on phone carriers unjustified.

NCTA'S AWKWARD SPOT

AT&T's lobbying puts the National Cable & Telecommunications Association in an awkward position. The NCTA does not subscribe to the notion that it is appropriate to seek deregulation for its members while supporting the continued regulation of its competitors — especially in the nascent broadband market.

FCC insiders are aware that the cable industry isn't speaking with one voice, and that AT&T's position has been exploited by Bell-friendly lawmakers on Capitol Hill. They claim that market-leading cable-modem providers should not enjoy more regulatory freedom than lagging DSL services.

In the months ahead, the FCC will ask itself at least one key question in the wake of those mixed messages: How can it justify the asymmetrical regulation of cable-modem and DSL service, especially if cable is seen as dragging its feet on ISP choice, and the political fallout from deregulating the Bells proves too costly to accept?

At present, the FCC consists of three Republicans — chairman Michael Powell, Kevin Martin and Kathleen Abernathy — and one Democrat in Copps. Its vote to classify cable-modem service an information service was 3-1, registered along party lines.

But Abernathy signaled that her vote to keep cable free from ISP access obligations today was no sure thing for tomorrow. She would not be comfortable with having to justify total freedom for cable, but access rules for the Bells, she said.

"As the owners of the nation's most extensive broadband architecture and as the leading providers of broadband service, cable operators have the potential to suppress competition," Abernathy said. "I believe that the [FCC] should not yet dismiss proposals to impose some kind of access requirement without better evidence that robust competition among broadband ISPs will develop on its own."

POSSIBLE TIE

Were Abernathy to vote with Copps, the FCC would be deadlocked over cable-access rules. The outcome could be decided by Jonathan Adelstein, an aide to Senate Majority Leader Tom Daschle (D-S.D.), whom President Bush intends to nominate for an FCC seat.

But Adelstein's FCC slot is in limbo because Senate Minority Leader Trent Lott (R-Miss.) announced he would oppose his nomination.

Cable lawyers and analysts indicated that Powell would not lose control of the issue and allow a split in the FCC's GOP majority. As a matter of law and policy, they said, the agency can easily justify access rules for the Bells, but not for cable.

Former Republican FCC commissioner Harold Furchtgott-Roth said the agency is not required to mandate regulatory parity between cable modem service and DSL for its own sake.

"I would simply observe that regulatory parity is not a concept you'll find in law," Furchtgott-Roth said. "It makes a great speech, but it's a losing argument in court."

Any attempt to impose access rules on cable without clear legal authority would likely backfire, he added.

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