Broadband Firms Can Close Their Networks

In a bid to accelerate the roll-out of high-speed Internet service, federal regulators Thursday permanently exempted cable Internet companies from a federal law that requires telecommunications carriers to open their networks to rivals.

The industry had been gripped with uncertainty about how high-speed cable Internet service, or broadband, might be regulated by the government after the Federal Trade Commission forced AOL Time Warner Inc. to open its cable lines to at least three independent Internet service providers as part of a December 2000 merger consent decree.

But the Federal Communications Commission voted 3 to 1 Thursday not to place other cable operators under a similar requirement. Instead, it voted to classify cable broadband as an unregulated “information service,” leaving cable operators free to close their networks to independent Internet service providers such as Atlanta-based EarthLink Inc. and Princeton, N.J.-based RCN Corp.

The decision will “promote our goal of fostering a minimal regulatory environment that promotes investment and innovation in this competitive market,” said FCC Commissioner Kathleen Abernathy, a Republican.

Thursday’s vote represents the latest move by FCC Chairman Michael K. Powell, also a Republican, to rollback federal oversight of the financially troubled telecommunications industry.

The vote was the clearest sign yet that Powell does not intend to propose new ground rules to accelerate the roll-out of broadband--a critical technology that experts say could provide thousands of new jobs and stimulate the nation’s economy.

Cable firms, as well as the Bell telephone companies--which are seeking a similar line-sharing exemption from Congress and the FCC--supported the decision.

But consumer groups, lawmakers and Internet service providers blasted the ruling, saying it favors cable monopolies over upstarts and will foster higher prices and less competition for broadband, which the FCC defines as any connection that transmits data at 200 kilobits per second, four times faster than a standard dial-up modem.

“This decision simply defies common sense and logic,” said Rep. Edward J. Markey (D-Mass.), ranking member of the House telecommunications subcommittee. “For cable consumers, the FCC actions will likely mean fewer choices and higher prices.”

Some representatives of independent Internet service providers praised the FCC ruling, saying it lifts a cloud of regulatory uncertainty and will encourage cable operators to partner with more experienced ISPs, whose help cable firms will need to market broadband to the 90% of U.S. households that don’t have the service.

“Reclassifying broadband as an information service is the correct decision,” said David McClure, president of the U.S. Internet Industry Assn., a Washington trade group representing 300 ISPs. “Granted, we have seen a move by some cable companies to shield their networks from competition. But they can’t deploy broadband quick enough all by themselves. They are going to need to fill their networks with other Internet service providers.”

Some analysts agreed with that assessment.

“Regulation generally slows down deployment of new technology,” said Blair Levin, a former chief of staff at the FCC during the Clinton administration and now a technology analyst for the investment firm Legg Mason Wood Walker Inc.

“The cable operators have figured out that having multiple ISPs helps bring traffic on their network, and they make money when there is traffic on their network,” Levin added.

Unlike telephone companies, cable operators have never been legally required to open up their networks to rivals. They must share their cable lines only when ordered to do so by the government.

But in recent months, some cable operators have struck deals to carry independent ISPs on their systems, along with video channels such as MTV and CNN and even cable telephone service. Over the last six years, cable operators have spent $55 billion to upgrade their systems and become “one-stop shops” for consumer communications services.

AT&T; Corp., which operates the nation’s largest cable network, announced a line-sharing deal this week with EarthLink, for instance. And a number of smaller cable operators and ISPs have reached similar accords.

Cable companies control about 70% of the nation’s broadband subscribers, mostly residential users who have cable TV service. The National Cable Television Assn. said cable carriers serve about 7.2 million high-speed users, compared with about 5 million for phone companies.

However, frustration with the rate of deployment of broadband technology--especially in costly-to-wire rural areas--has been growing in Washington. In a move that mimicked the FCC, for instance, the House last month voted overwhelmingly for a measure that would free the regional Bell telephone companies from having to share their high-speed networks with rivals.

The bill, however, faces an uphill battle in the Senate where a bipartisan group of lawmakers oppose it, fearing that the Bells are seeking to dominate broadband the way they dominate local phone service.

The FCC’s lone Democrat, Commissioner Michael Copps, cast the dissenting vote Thursday. He said the agency should have delayed its vote until it could determine whether additional rules were needed to ensure competition in cable broadband. The FCC is expected to undertake such a inquiry in the coming weeks, but Copps said it may be too late by then.

“Some access requirement is necessary in order to ensure that some consumers have choices of” Internet providers, Copps said. “With so much at stake I would have hoped for a little more modesty and measured pace on our part.”