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Feds struggle with new cable landscape

As cable companies like AT&T and Time Warner leave the days of simple video service behind, Washington policy makers are struggling to figure out if their old rules can apply to these new broadband leaders.

If a cable company looks like a telephone company, walks like a telephone company, and carries voice and data traffic like a telephone company, should the federal government treat it that way?

The answer, for now, is no. But as cable operators like AT&T, Time Warner, and Comcast leave the days of simple video service behind, Washington policy makers are struggling to figure out if their old rules can apply to these new broadband leaders.

The topic has caught fire in Washington and on the Internet, as broadband services have finally hit the mass market. Cable modems are the cheapest and most powerful version of high-speed Internet connections--and any change in the government's cable rules will likely affect the rollout of cable Internet services.

The issue has sparked a series of congressional hearings slated for next month and continues to fuel an ongoing debate inside the Federal Communications Commission.

"I am very troubled by the disparate treatment of the telephone platform and cable systems," said Congressman Rick Boucher (D-Virginia), who co-chairs the House Internet caucus and is one of the leaders looking into the issue of cable rules.

Boucher said he and fellow Internet caucus co-chair Bob Goodlatte (R-Virginia) may introduce legislation next month aimed at ensuring "parity of regulation" for cable and telephone Internet services. The details of the measure--which would be part of a larger Internet omnibus bill--have not yet been solidified, he said.

Several other lawmakers are planning hearings on the rollout of broadband Internet services next month, and an appeal from a small Los Angeles ISP could bring the issue of access to cable networks back in front of a reluctant FCC.

But despite the spotlight on broadband issues, the promise for real change in the way cable networks are governed appears slim--at least in the short-term.

At the crossroads FCC chairman William Kennard reiterated in a speech yesterday that the agency is loath to impose any new regulations on cable Net access. Meanwhile, most observers doubt that a pro-deregulation Congress would write its own new rules for cable companies.

"It's difficult to conceive of a Republican Congress passing a bill that would be the most regulatory act since the 1992 Cable Act," said Blair Levin, a former FCC chief of staff and current consultant to @Home, the AT&T-controlled cable Net access service. The 1992 Cable Act was responsible for federal caps on cable rates, a set of controls that will disappear at the end of this month.

Nevertheless, policymakers are in the early stages of figuring out how to manage the convergence of cable and telephone networks, a debate that will likely remain on the front burner for some time.

Isn't it all the same bits?
Some regulators argue that the bits and bytes streamed through cable and telephone company wires are increasingly the same pieces of information, and so it makes little sense for the law to treat them differently.

The rules affecting telephone companies stem from a 15-year-effort to break up the telcos' historic monopoly over voice service. Federal cable regulations are much less strict, and have largely been geared at encouraging new competition, such as satellite broadcasts.

Telephone companies are required to allow anybody to use their network for transmission purposes. This means that any ISP can offer dial-up service over telephone companies' lines.

The picture is a little muddier for new high-speed DSL, or digital subscriber line telephone services. The FCC has yet to rule on how open this system must be to competing ISPs, but has proposed that the telcos treat all ISPs identically.

Cable's forays into this brave new world of voice and Internet services have been treated differently, however.

On the voice side, the law is clear, and cable telephones are treated the same way as any other competing telephone start-up. But unlike telcos, cable companies are allowed to bundle their Net service with their ISPs, making services like @Home or Road Runner the mandatory default ISP for cable Net subscribers.

Telcos and ISPs say this isn't fair, and are lobbying heavily for what they call a "more level" playing field.

Open access: An open question
Led by America Online and MindSpring Enterprises, a coalition of ISPs and telephone companies has lobbied hard in Washington to force cable companies to open their networks to rival services.

Although telephone companies and wireless services do provide competition to cable Net services, cable is in many cases the most attractive--or the only--option, these critics say. This gives cable companies substantial market power, and reduces consumers' ability to choose from a wide variety of Internet providers, they add.

"In large parts of the country, cable See special report: 
When worlds collide is the de facto monopoly broadband provider," notes Mitchell Lazarus, a Washington attorney who has represented ISPs.

But to date the FCC has been unreceptive to the lobbying efforts. Regulators refused to take up the issue as part of their review of AT&T's merger with Tele-Communications Incorporated, and declined to add it to another recent report to Congress on the availability of broadband services.

Kennard has said the agency would continue to look at the issue, but that the industry was still too immature to act.

The coalition's best hope may be in Congress, where Boucher and Goodlatte--both of whom represent AOL's home state--have proven receptive to the argument.

Any quick change in policy appears unlikely, however, since the vast majority in Congress still remains hostile to the appearance of any new regulation of Internet functions.

A cable backdoor
A small Los Angeles ISP believes it has another way into the cable companies' networks, and is preparing to take its argument to the FCC next month.

Internet Ventures, which runs a broadband ISP service dubbed PerkiNet, argues that current law should force cable companies to lease ISPs their own channel on cable wires.

The argument is based on a requirement that cable companies lease between 10 and 15 percent of their capacity to alternative broadcasters whose programming is not carried by the basic cable service. Internet Ventures CEO Don Janke and his allies say the Internet, which is increasingly characterized by streaming video services, is similar enough to broadcast programming to qualify.

Janke's company has petitioned for access to cable wires in four cities, and has already been denied once. Next month he plans to ask the FCC to clarify its rules on the issue, hoping to win federal regulators' backing for his efforts.

"It's like a domino effect," Janke said. "If cable is allowed to keep its pipes closed, then the RBOC [regional Bell operating company] lobbyists are going to be right behind them arguing that they don't have to open their networks either." That could eventually create a broadband "duopoly," pushing small ISPs out of the high-speed Net altogether, Janke warned.

Levin predicted that PerkiNet's FCC bid would have little success. Regulators are unlikely to agree that Internet services, like email and file transfers, are the equivalent of broadcast television, he said. And the cable companies have other technological and policy arguments to make, he added.

"It's actually possible to have an infinite number of ISPs connect to the phone system," Levin said. "It's possible, but unbelievably expensive, to have an infinite number of ISPs connect to the cable network. Cable was not designed that way."

An issue with legs
Even if nothing is done this year or next, those close to the debate say policymakers will keep an eye on the cable industry, to determine whether companies are getting any kind of unfair advantage.

"I am very concerned by the problem," Rep. Boucher said. "The goal is to have all platforms regulated the same way."

In an appearance in front of a Senate telecommunications committee last week, FCC chairman Kennard noted that the whole industry is changing quickly, and that his agency needs to change along with it.

"In a world where old industry boundaries are no longer and competition is king, we need a new FCC," Kennard said. In a report released the same day, the FCC said it would reevaluate its cable rules in the fiscal year 2000, along with a five-year plan to restructure the agency.

But Kennard's comments also reflected the unwillingness of most policy makers to impose any new requirement on any technology companies.

"In this atmosphere, where technology is like popcorn on a hot skillet, government's role is to stoke the coals and encourage growth," he said, "not try to mandate how or when these kernels will pop."