In a Shift, AT&T; Says It Will Share Cable Access
Bowing to pressure from consumer groups and policymakers, AT&T; Corp. will announce today that it will eventually give competing Internet providers access to its high-speed cable lines.
The concession is a dramatic reversal from AT&T;’s previous stance that it would be too costly and technically unfeasible to open up its cable network--the nation’s largest--to rival companies seeking to connect consumers faster to the booming Internet.
High-speed Internet access is expected to play a crucial role in transforming how people navigate the World Wide Web, as tedious waits for data to be delivered over analog modems give way to lightning-speed connections that can send huge audio files and even video clips through broadband cables at the click of a mouse button.
AT&T;’s shift could influence Los Angeles and other municipalities that are currently formulating policies about control over access to this next generation of the Internet. How data will be delivered to homes and offices in the future and whether accessibility should be regulated have become contentious public policy issues. Because AT&T; will control most of the nation’s cable lines, policymakers have focused on the company’s potential for monopolizing broadband access.
AT&T;, best known as the world’s largest long-distance telephone company, has recently bet much of its future on the promise of high-speed Net access. The company has spent more than $120 billion to acquire about half the nation’s cable franchises, serving 27% of cable households. It plans to upgrade its nationwide cable network to provide not only high-speed Internet connections, but also local phone service and video entertainment through the same lines.
Today, AT&T; will outline a plan it has developed with the nation’s No. 2 Internet service provider, MindSpring Enterprises Inc., in a letter to be sent to Federal Communications Commission Chairman William E. Kennard. In it, AT&T; has pledged to let consumers choose any ISP and not penalize them with extra monthly fees for choosing a non-AT&T-affiliated; ISP.
The company said it will implement the policy change over the next two years as its exclusive contracts with its current affiliated ISPs, primarily Excite@Home Corp., expire. The plan is designed to lead to formal agreements with MindSpring and other companies that provide Internet services, content and electronic mail. The new policy has no effect on other cable systems, although industry officials are hopeful it will influence them to open up as well.
Experts say AT&T; may have been motivated to change its stance on opening access to its lines to shore up support with Federal Communications Commission and Justice Department officials who are now reviewing its bid to acquire cable giant MediaOne Group Inc. Moreover, AT&T; may also be under pressure from a competing high-speed service--digital subscriber line, or DSL--provided by Internet service providers and local phone companies, that is growing more rapidly than high-speed cable access. There are forecasts that DSL subscribers will number 1 million by the end of this year, but that still trails cable’s 2 million high-speed Internet customers.
A source close to AT&T; said, however, that the company did not change its position to curry favor with regulators but rather “evolved” to the new position through discussions with industry representatives.
What remains to be seen is how AT&T; structures the terms of granting access to its cable lines. Some industry officials complained Sunday that the policy appears to fall short of the totally “open access” that local phone companies are required to provide to the nation’s more than 4,000 Internet service providers.
Even an official close to MindSpring said the company signed AT&T;’s letter only “in the spirit of cooperation.” The source said Atlanta-based MindSpring plans to send a separate letter outlining its concerns about enforcing AT&T;’s new position as well as ensuring that other cable operators open up their networks.
“Unless these principles are turned into enforceable conditions, I don’t think it means anything for open access,” said Greg Simon, a former White House domestic policy advisor who now serves as co-director of the Open Net Coalition, a group of more than 900 Internet service and commerce companies. “Two years in real time is like eight years in Internet time. A lot can happen between now and then.”
Nonetheless, AT&T;’s announcement is likely to be cheered on Wall Street, where its shares have struggled as the company has come under attack in the courts and among some municipalities for its earlier refusal to open up its cable network. AT&T; Chairman C. Michael Armstrong will discuss AT&T;’s new policy during a presentation to financial analysts today.
“The enlightened people on Wall Street will see this as a step in the right direction,” said Richard P. Nespola, president of Management Network Group Inc., a publicly owned Internet and telecommunications consulting firm based in Overland Park, Kan. “The question is, would you rather have zero revenue [from ISPs] or some increment above that? This also provides an opportunity for AT&T; to deliver content” that few ISPs now provide, he said.
AT&T;’s policy change won grudging plaudits from America Online Inc., the nation’s largest Internet service provider and a key proponent urging the government to intervene and force cable networks to open up.
“It’s a positive development and a significant move toward open access,” said George Vradenburg III, a senior vice president at AOL, which has more than 17 million Internet subscribers. “But we will continue to work further to ensure consumer choice” and true open access for all, he said.
A recent federal court decision upheld the right of the city of Portland, Ore., to require AT&T; to give access to Internet service providers as part of AT&T;’s cable franchise agreement with the city. The ruling, which is being appealed, is being closely watched as other cities, including Los Angeles, weigh their options in the high-speed Internet access debate.
Indeed, in Los Angeles the issue has sparked intense debate: The City Council has publicly favored open access, but Mayor Richard Riordan has resisted the idea, saying he believes that consumers would not necessarily be ill-served letting access to high-speed service be decided by the marketplace.
It remains unclear what impact AT&T;’s letter will have at the FCC. Neither Kennard nor FCC cable services bureau chief Deborah A. Lathen could be reached for comment Sunday.
For months, the FCC has adopted a hands-off approach toward high-speed Internet access over cable TV lines, saying it wants the marketplace to decide its own fate.
As recently as last month, Lathen said that although the FCC strongly favors open telecommunications networks, it has no plans to intervene in the marketplace.
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