SAN JOSE MERCURY NEWS
IN DRIVER'S SEAT ON INTERNET ACCESS
DATE: Sunday, November 29, 1998
Section: SECTION: Business
Page: 1E
DAN GILLMOR column
IF your local telephone monopoly decided that it alone could be your Internet service
provider when you went online via your telephone wire, you would be outraged. Yet that's
precisely what your local cable-TV monopoly insists on when it provides Net access.
This state of affairs hasn't mattered very much until recently. But as cable companies
wire more and more places for high-speed, two-way Internet access, the issue has moved
onto a short list of vital policy questions. It's vital because high-speed, or broadband,
access to the Net is certain to become an essential service in coming years. Today,
television is the most prominent window to entertainment and news. Broadband Internet
access will ultimately combine some of what TV offers now with two-way information and
commerce.
If we want to get to the Internet using their data pipes, the cable companies insist,
we'll have to use their captive Internet access portals on the way. If we force them to
open their systems to other Internet service providers (ISPs), they add, they'll slow
their investments in upgrading their systems -- and slow that needed progress toward wider
broadband connections.
Let's be clear: The cable operators aren't doing anything illegal. Nor, at least in
theory, are they violating the spirit of what Congress intended in its telecommunications
deregulation activities of recent years.
Let's also be clear that the cable companies may be the best near-term hope for forcing
the local phone monopolies to actually compete in offering high-speed Internet connections
into our homes. The cable companies may also provide genuine competition in local
telephone service.
So when the cable companies insist on the absolute right to be the soleprimary Internet
access provider on their systems, and claim they'll pull the plug on two-way broadband
investments, it's worth asking whether consumers would pay too high a price for mandating
fair behavior.
Maybe it's not an either/or situation. Maybe there's a way around the problem. But the
complexities are daunting.
Tele-Communications Inc. runs most cable systems in the Bay Area, and many more around the
nation. It holds a controlling share in @Home, a cable-based ISP, with other cable and
technology partners. TCI customers in Fremont and several other Bay Area cities where TCI
has upgraded its system can get broadband Internet access through @Home. Similarly, Time
Warner, another cable TV giant, owns an ISP called Road Runner, also a joint venture with
a cable company and other technology partners.
On all of these cable systems, customers who want high-speed Internet access through the
cable data pipes can't pick their own ISP. Yet if they signed up for access via their
telephone wire, they could.
TCI, Time Warner and the other cable operators say they'll be happy to let you hook up to
your favorite ISP -- as long as you're willing to pay extra on top of the full rate for
@Home or Road Runner. Thanks for nothing.
The cable giants say the arrangement is entirely fair. After all, they note, they're
investing in their systems, upgrading their networks and other systems to handle fast,
two-way access. Force us to share the system with people who aren't helping pay for it,
they say, and we'll have no incentive to invest.
The threats get even nastier from AT&T, which is trying to buy TCI and has been making
noises about using TCI's systems to compete for local telephone customers. Any change in
the @Home business model, AT&T warns, and we may pull the plug on the deal.
The cable barons' argument has a fundamental flaw: The vast majority of cable systems have
operated as monopolies, more resembling public utilities than traditional businesses in
theory, if not in practice. They built their systems around a series of exclusive deals
that shut out competition, using public property along the way. Only the advent of
satellite services tempered the cable companies' infamously bad attitude toward consumers.
But today's satellite data speed is only fast in one direction -- to your house -- and
with broadband Internet access the cable companies see a new opportunity to put their
hammerlock back on consumers.
When Congress was contemplating telecommunications deregulation, a top priority was
encouraging competition in local phone service. The lawmakers viewed the cable companies
as the most plausible competitors.
So Congress specifically declined to put the cable companies into the same ''common
carrier'' category occupied by the phone companies. A common carrier must open the system
to outsiders.
But Congress didn't tell the phone companies they could exclude competitors if they
upgraded their own systems to DSL, or Digital Subscriber Lines, which are much faster than
today's highest-speed modems of the traditional kind. DSL can work on much of the current
system of copper wires but requires upgrades elsewhere in the phone system. And because
the cable data pipe is fatter than the phone wires -- that is, it can handle more of the
ones and zeroes that constitute digital information -- DSL may never be able to match the
highest speeds that the cable systems can offer.
ISPs ranging from small providers to the giant America Online argue that they should be
given the same access to the cable systems' home connections as @Home and Road Runner.
They make a compelling logical case.
The biggest question is whether the cable giants are bluffing when they say they'd curb
their investment in broadband access if forced to offer their lines to outsiders, such as
AOL. Is it worth the risk that broadband connections to homes -- the bottleneck that is
delaying the true advent of the Information Age -- would be put on hold indefinitely?
This is a very close call, largely because the solution requires some regulation -- that
is, some way to enforce open access. The easiest path would be to do nothing, and hope
that competing technologies would come along quickly enough to make the problem moot.
But there's an even greater risk. The cable companies will surely do what has come so
naturally in the past: Use their power to restrict viewers' choices.
This isn't idle speculation. @Home's contract with cable partners has along list of
services it can't offer consumers as an ISP but which the cable companies can offer
themselves, according to federal securities filings. The cable companies have the right to
block @Home material they don't like, including Internet video ''streams'' lasting more
than 10 minutes at a time -- a blatant move to limit competition on their systems.
So we come back to the tricky part of promoting broadband access, and maybe even
competition, in the near term. How do we get the cable companies to grant more open ISP
access without wrecking their incentive to improve cable systems?
First, allow the cable companies to maintain the status quo in places where they already
have competition. In situations where a given household can get DSL service from the local
phone company -- or, in the future, fast connections from a wireless company -- the cable
company should not be forced to unbundle its service. (Again, I exclude today's satellite
services, which are fast one way.)
Second, in places where no competition exists, the services should be ''unbundled'' --
separated from each other, at least on the companies' books. Let other ISPs pay what @Home
and Road Runner pay for their access to the cable pipes. Congress will have to establish
an enforcement method that would financially penalize the cable giants if they fudged
their numbers to make their connections uneconomic for anyone but their captive ISPs.
All of this is much easier said than done, of course. But in the name of fairness it's
worth trying.
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