History may answer debate on Internet access Some experts predict cable firms will be forced to 'unbundle' services

The Outlook

October 18, 1998|By Mark Guidera

IN THE RACE to connect homes to the Internet, the cable industry is pulling ahead of telephone carriers in technology and customers. But a regulatory battle appears to be on the horizon as the Federal Communications Commission examines Internet access and services and the fees charged to customers.

On the one side are telephone companies, or "common carriers," which must allow customers to subscribe directly to any Internet or online service through their Digital Subscriber Lines (DSL). Typically a customer pays the phone company a flat rate for the phone line (including local phone service) and then a fee to the online service provider.

On the other side are cable companies, which want to act as both access provider and online service, charging about $40 a month for such services in addition to television charges. Should regulators require cable companies to "unbundle" their networks; that is, allow customers to access any online service they want? Or should cable companies, which have built their networks with their own capital investments, be allowed to keep their lines proprietary and structure fees as they see fit? Will AT&T Corp.'s proposed $48 billion acquisition of cable giant Tele-Communications Inc. affect the debate?

Scott C. Cleland

Managing director, The Precursor Group, Legg Mason Wood Walker Inc.

What we'll see in the long term is wholesale pricing for Internet access. A number of events and issues could trigger it, like decision on AOL's request for access to customers over cable, or the AT&T-TCI merger. The access issue is loaded with complexity, but one thing that's clear is that regulators have said in the past that consumers rule.

There is so much precedent that says cable companies will have to unbundle their Internet services in the future. They've been made in the past to unbundle their [equipment] and service, and required to carry competitors' channels. Even the prices they charge have been regulated.

Can you imagine a day 10 years, or even five years from now, in which there are, say, 5 million cable customers and 5 million DSL customers and America OnLine can only access customers through the telephone pipe? Only cable gets access to the best customers?

The bottom line is consumers don't want to be told what Internet service provider they must have. And they don't want to pay twice for the same thing. That's called monopoly rent in regulatory parlance.

Neal Goldberg

General counsel, National Cable Television Association.

In light of the government's stated hands-off policy on the Internet, the FCC should not impose new regulations on cable. The Internet is a new industry and still developing. It's way too early to regulate it. In any case, there is plenty of competition out there for access services -- wireless, the telcos' [telephone companies] DSL, satellite and plenty more.

Also Congress made clear that when cable provides Internet services, it's a cable service, not a telecom service. Cable is not a common carrier like the telcos. Some might call that splitting hairs, but that's the law.

The other thing to remember is that Internet access and other services were built with private investment. Why should cable be required to open up its network just because other players have decided they want to invest in content, rather than access? Some analysts believe that if the FCC makes cable unbundle, it will put a chill on further broadband investments in the industry. That wouldn't be good for drawing new investment to the industry. And it wouldn't be good for competition or the consumer.

Rajiv Dewan

Assistant professor of computers and information, William E. Simon Graduate School of Business Administration, University of Rochester.

It's inevitable that cable will have to unbundle its networks. The FCC has already spoken on this issue. For example, it told the phone companies they couldn't require customers for their service to buy their phones. Look what happened after that -- we had an explosion of companies offering all kinds of phones that did things no one had ever thought of before. Most recently they've told the local phone companies they have to open up their networks to competitors.

Even if the FCC doesn't act on this issue soon, I think technology will open up competition. The satellite TV guys, like DSS, USB and PrimeStar, are going to figure out a way to get people Internet access and content from satellite. AT&T is working on a radio-type system that will beam it to homes from neighborhood transmitters. Cable is going to face a lot of price pressures from new technologies. In fact, these new technologies may render the cable-access issue unimportant to consumers.

The good news for the cable companies is that the Internet is growing so fast and going to be so big that there will be customers for lots of players.

Pub Date: 10/18/98

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