One Year Makes the Difference in Access Debate

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Portland, Ore.'s 1998 decision to oblige its cable company, AT & T Broadband, to agree to open-access regulations opened the door to one of 1999's hottest policy debates: whether government should regulate high-speed Internet cable access.

AT & T lost its challenge to the Portland ruling in Federal Court in June 1999, and awaits a decision from the 9th U.S. Circuit Court of Appeals. However, diminished consumer, local, and overall support for cable-access legislation has made the outcome of the case near moot.

Interest has dissipated for a number of reasons. Throughout 1999, phone carriers began hastily deploying a high-speed Internet-access service called digital-subscriber line to compete with cable. Within months, DSL prices dropped as much as 50 percent in markets around the country.

Commenting on the price cuts, The San Jose Mercury-News editorialized: "Whenever [a] cable company announces its Internet service, the local phone monopoly expedites the rollout of digital subscriber lines, or DSL, telephony's high-speed equivalent, and sharply cuts its price."

The Federal Communications Commission, inevitably responsible for recommending a national standard for access regulations, repeatedly urged states and localities not to pass open-access bills. FCC Chairman William Kennard said in June 1999: "There are 30,000 local franchising authorities in the United States. If each and every one of them decided on their own technical standards for two-way communications on the cable infrastructure, there would be chaos."

In October 1999, the FCC issued a report detailing the burgeoning competition and new technologies that can offer high-speed Internet access. The report highlighted the America Online Inc.-Hughes Electronics Corp. satellite Internet-access system slated for availability by spring 2000, and mentioned how wireless firms and electric utilities were spending billions to perfect their high-speed Internet-access systems.

On Feb. 18, 2000, the FCC punctuated its position on cable access by rejecting Internet Ventures Inc.'s petition to have regulators mandate the "leasing" of cable lines.

When the focus of local legislators shifted to the specifics of access laws, enthusiasm for regulation dropped precipitously.

Last October, Miami-Dade County Mayor Alex Penelas said: "Though the proposed ordinance was originally presented as a very simple matter, the Board and my office quickly learned that this is a complex regulatory issue with implications far beyond the borders of Miami-Dade County." Penelas later described access regulations as "a policy that would create a chilling effect on investment, competition and consumer choice."

Reactions were similar on the West Coast. In a white paper, The Los Angeles Information Technology Agency opined: "The cost to the city to address these unbundling disputes is likely to exceed hundreds of thousands of dollars per year at a minimum, not including the initial costs associated with developing the pricing methodology and rules regarding dispute resolution. These costs would increase if additional open-access obligations, such as interconnection, resale and network-element unbundling, were also required of cable operators."

ISP relationships have also changed the landscape of the debate. In December 1999, AT & T announced an agreement with ISP MindSpring Enterprises Inc. and publicly committed to providing consumer choice to ISPs on its cable platform. In January 2000, AOL and Time Warner Inc. announced their merger. Subsequently, AOL-one of the biggest proponents of access regulations-ordered its lobbyists to stop advocating the position.

The AOL reversal was not warmly received by William Schrader, chairman of ISP PsiNeT, who commented: "I don't like hypocrites, and Mr. Case is a hypocrite. He is a self-serving businessman who's into hypocrisy and I'm not."

AT & T and the combined AOL-Time Warner would jointly represent almost 50 percent of the cable market. Both firms have made public commitments to allowing consumers choice among competing ISPs. A number of ISPs, accounting for nearly 25 million subscribers, have already negotiated access agreements.

Despite the organized efforts of access proponents, barely a dozen localities have agreed to enact access provisions. Major cities such as Pittsburgh, Miami, and Richmond have all rejected such regulations and similar efforts introduced this year have also failed in New Hampshire, Idaho, Pennsylvania, Utah, Virginia, Kansas and Minnesota.

One by one, the editorial boards of such major newspapers as USA Today, The New York Times, and The Washington Post have sided against access regulations. U.S. Rep. Mike Oxley (R-Ohio) echoed Washington's sentiment, commenting, "Legislation to mandate open access to cable systems and other broadband networks has no legs whatsoever in the House Commerce Committee."

Many see the uniform opposition to cable regulation as linked to the increased public enthusiasm and support for the Internet. Rejecting the access regulation idea, Kennard argued, "If we've learned anything about the Internet over the last 15 years, it's that it has thrived quite nicely without the intervention of government."

Instead of spending time creating cable regulations, lawmakers are shifting their focus to making high-speed Internet access a nationwide priority. Leaders want high-speed access for their communities, regardless of whether it comes via DSL, satellite, wireless or cable.

The regulation debate has been equated to hindering the Internet, a very unpopular idea. It would be safe to predict that this time next year, there will be zero interest in access regulation.

What a difference a year makes.

Kenneth P. Brown is senior vice president of The Alexis de Tocqueville Institution.

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