Internet’s Trojan Horse
In a campaign breathtaking in its cynicism, the Internet giant America Online and the Baby Bells are trying to use local governments as weapons to stifle competition for local phone service and high-speed Internet access. Pacific Bell and GTE have joined AOL to advocate so-called “open access,” which would have the city of Los Angeles set regulatory traps for their competitors. Although “open access” sounds as if it is a pro-consumer position, it would ensure residents have fewer choices in broadband Internet and in telephone services.
Just ask yourself: Do you trust Pacific Bell, GTE and AOL to have your interests in mind? Let’s consider the evidence.
Earlier this year, consumers in Northern California who wanted high-speed, broadband access to the Internet had one choice: For $89.95 per month, Pac Bell provided service over a digital, or DSL, connection. Yet when a cable company in the same area announced that it would provide broadband access via cable lines for $39.95, Pac Bell cut its price by $40 a month.
Obviously, Pac Bell set the original price before competition developed. Keep in mind that Pacific Bell, like most of the Baby Bells, has been sitting on its broadband technology for years, despite calls from industry and consumers for higher-speed connections.
And what about local phone service? “Open access” proponents never talk about the fact that cable broadband systems can provide local phone service using Internet protocol. For many cable broadband customers, the opportunity to save money on local phone service could be a major factor. In Orange and San Diego counties, Cox Cable offers basic local phone service for $9.95 per month. By comparison, Pac Bell charges $11.25 per month, and GTE charges $17.25.
Again, who is the consumer’s better friend? The cable company, which is offering the first real choice in local phone service at a competitive price, or the phone companies, which want local government to put regulatory hurdles in the way of competition that could benefit the consumer?
Even though AOL has 20 million subscribers, and cable companies combined have fewer than 1 million broadband customers, AOL has asked Congress, the FCC and now local governments to require “open access” to cable’s high-speed Internet service. But if “open access” is such a good idea for cable, why is it a terrible idea for AOL’s instant messaging feature?
When Microsoft and Yahoo developed their own such software, the idea was to allow customers to communicate instantly with anyone on line. But AOL insists that its own software is the only one that should be used to reach its subscribers. To make sure no one would horn in on its lucrative online messaging service, AOL has altered its software to block people using a competitor’s software from communicating with their customers, using the excuse that its rivals just want to steal AOL members’ passwords. As a result, instant-messaging customers are forced to use AOL’s software to communicate with friends on AOL. Perhaps next they’ll block all e-mail from Internet users who don’t use AOL’s e-mail software.
Consumers are primarily interested in how quickly broadband Internet access will become available at competitive prices. The city’s Information Technology Agency’s report recommends against imposing the complex and protracted open access regulatory scheme on cable franchisers today. Instead, the agency recommends that the City Council require rapid deployment of cable broadband by all its franchisees.
To allay concerns about a cable monopoly, the report recommends reopening franchise contracts to impose the “open access” regulatory model--but only if a cable franchise winds up controlling more than two-thirds of the market for high-speed Internet access. Most industry and consumer experts consider such a scenario unlikely, but this provision is a sensible response to the concern.
Imposing “open access” today would be the height of irresponsibility from the consumer viewpoint. It would slow deployment of broadband to a crawl. It would remove competitive incentives from all broadband providers and eliminate local telephone choice. “Open access” is a classic Trojan Horse--a dangerous gift consumers must ask their elected representatives to reject.
