A Look at Regulating Internet Access

from the An-Idea-Whose-Time-Never-Came dept

Kenneth Brown, SR. VP of the Alexis de Tocqueville Institution has written an op-ed piece about the internet open access regulations. This is a story that made a lot of news a few months back, but often was not clearly explained. This piece looks at it in much more detail and is definitely worth a read. Click below to read more.

REGULATING INTERNET ACCESS: An Idea Whose Time Never Came
Kenneth Brown, Sr. VP., The Alexis de Tocqueville Institution

The City of Portland, Oregon's 1998 decision to obligate its cable company
ATT to agree to "open access" regulations, opened the door to one of 1999's
hottest policy debates:  whether government should regulate high-speed
internet cable access.  ATT lost its challenge to the Portland ruling in
Federal Court in June 1999, and is awaiting a decision in the Ninth U.S.
Court of Appeals.  However, diminished consumer, local, and overall support
for cable access legislation has made the outcome of the case near moot.

Interest has dissipated for a number of reasons.  Throughout 1999, phone
carriers began hastily deploying high-speed Internet access services called
Digital Subscriber Lines (DSL) to compete with cable.  Within months, DSL
prices dropped as much as 50% in markets around the country. Commenting on
the price cutting, The San Jose Mercury-News editorialized, "Whenever [a]
cable company announces its Internet service, the local phone monopoly
expedites the roll-out of digital subscriber lines, or DSL, telephony's
high-speed equivalent, and sharply cuts its price."

The Federal Communications Commission (FCC), inevitably responsible for
recommending a national standard for access regulations, repeatedly urged
states and localities not to pass open access bills.  FCC Chairman William
Kennard commented in June 1999, "There are 30,000 local franchising
authorities in the United States. If each and every one of them decided on
their own technical standards for two-way communications on the cable
infrastructure, there would be chaos."

In October 1999, the FCC issued a report detailing burgeoning competition
and new technologies offering high speed Internet access. The report
highlighted the AOL/Hughes satellite internet access system slated for
availability by Spring of 2000, and mentioned how wireless firms and
electric utilities were spending billions to perfect their high speed
internet access systems. On February 18, 2000, the FCC punctuated its
position on cable access by rejecting Internet Ventures' petition to have
regulators mandate the "leasing" of cable lines.

When the focus of local legislators shifted to the specifics of access laws,
enthusiasm for regulation dropped precipitously.  Miami Mayor Alex Penelas
commented last October, "though the proposed ordinance was originally
presented as a very simple matter, the Board and my office quickly learned
that this is a complex regulatory issue with implications far beyond the
borders of Miami-Dade County." Penelas later described access regulations
as, "a policy that would create a chilling effect on investment, competition
and consumer choice..."

Reactions were similar on the West coast.  In a white paper, The Los Angeles
Information Technology Agency commented, "the cost to the City to address
these unbundling disputes is likely to exceed hundreds of thousands of
dollars per year at a minimum, not including the initial costs associated
with developing the pricing methodology and rules regarding dispute
resolution.  These costs would increase if additional open access
obligations, such as interconnection, resale and network element unbundling
were also required of cable operators."

ISP relationships have also changed the landscape of the debate.  In
December 1999, AT&T announced an agreement with ISP MindSpring, and publicly
committed to providing consumer choice to ISPs on its cable platform. In
January 2000, America Online and Time Warner announced their merger.
Subsequently, AOL one of the biggest proponets for access regulations, began
ordering its lobbyists to stop advocating the position. The AOL reversal was
not warmly received, by William Schrader, Chairman of ISP PSiNeT who
commented, "I don't like hypocrites, and Mr. Case is a hypocrite. He is a
self-serving businessman who's into hypocrisy and I'm not." AT&T and
AOL/Time Warner jointly represent almost 50 percent of the market, with both
firms making public commitments to consumer choice of competing ISPs. ISPs
accounting for nearly 25 million subscribers have already negotiated access
agreements.

Despite organized efforts of access proponents, barely a dozen localities
have agreed to enact access provisions.  Major cities such as Pittsburgh,
Miami, and Richmond have all rejected such regulations and similar efforts
introduced this year have also failed in New Hampshire, Idaho, Pennsylvania,
Utah, Virginia, Kansas and Minnesota.

One by one, editorial boards of major newspapers such as USA Today, The New
York Times, and The Washington Post have sided against access regulations.
Representative Mike Oxley, of Ohio echoed Washington's sentiment commenting,
"legislation to mandate open access to cable systems and other broadband
networks has no legs whatsoever in the House Commerce Committee."  Many see
the uniform opposition to cable regulation linked to the increased public
enthusiasm and support for the Internet.  Rejecting the access regulation
idea, Kennard argued, "If we've learned anything about the Internet over the
last 15 years, it's that it has thrived quite nicely without the
intervention of government."

As opposed to spending time creating cable regulations, lawmakers are
shifting their focus to making Internet high speed access a nationwide
priority.  Leaders want hi-speed access for their communities, regardless of
whether its DSL, satellite, wireless or cable.  The regulation debate has
become equated to hindering the Internet, a very unpopular idea.  It would
be safe to predict this time next year there will be zero interest in access
regulation.

What a difference a year makes.