Cable conundrum

Dear FCC Commissioners, AOL executives, AT&T top brass, mahogany row at every telco in the U.S., guys with golf shirts and anyone else willing to listen:

During the last few months, I have been watching with some concern as AT&T, in its new role as top dog in the cable industry, has battled to keep AOL and other undesirables off its broadband cable network. It seems that after it paid about $48 billion for access to 17 million households on the former Tele-Communications Inc. system, AT&T has the audacity to think it can protect that investment.

I write to you today not just as a meek reporter but also as a customer of the conglomeration that is supposed to provide me with not only high-speed Internet access but also unique content that takes advantage of that speed.

Sometimes it's hard to tell, as a mere user, what's unique and what's not. Everything on the "@Home" reports are lifted from various sources, but they look so pretty on their Java pages with all those nifty buttons and tabs encircling the page that I often don't think that really matters.

Last week, the FCC did what two senators told it not to do. It stepped into a local fray by filing a friend of the court (or "amicus curiae" for those who like legalese) brief arguing that if a federal appeals court upholds the right of Portland, Ore., authorities to force open AT&T's new cable network, the result will be mayhem and (gasp!) confusing regulatory schemes.

The FCC has some powerful arguments, the most compelling of which is that the esteemed commissioners have not decided whether cable modem service is a cable service or an information service like most other forms of Internet access. In its "friend" brief, the FCC acknowledges that under the 1996 Telecommunications Act, a cable service is classified as "video" or "other programming." Classifying cable-based Internet access as a cable service gives it a distinct advantage over other forms of broadband access but mutates the definition. The "cable service" argument circumvents logic in the same way that gerrymandering political districts to get the "proper balance" in the legislative branch does.

The FCC also argued in its comments that it blessed the AT&T/TCI merger without forcing them to open the network to competitors. In so doing, the commission said it "relied upon the undesirability of undermining the potential for intermodal competition at this nascent stage in the development of broadband capability."

Like most American sports fans, I tend to cheer for the underdog. I wanted to see Sergio Garcia steal the PGA Championship. I like watching the remnants of the americast alliance chip away at cable's dominant video position. And I want to see AT&T hand every RBOC its lunch in the residential telephony market.

However, AT&T already has shown, by the price it will shell out for cable-based access to plain old residential telephony, that it is willing to bleed some red ink to get its name back on consumers' bills (recall the Time-Warner joint venture).

In the same review of the AT&T/TCI merger, the FCC relied on AT&T's assurances that customers could access other content providers. AT&T held up its end of the bargain. From personal experience, I can attest to the fact that users can access both proprietary content, such as that delivered by AOL via @Home's infrastructure, and the general Internet - but only if customers are willing to pay two Internet access fees. Airline passengers also can pretend they're sitting in first class if they buy two side-by-side coach seats.

The real issue seems to be whether the market benefits from having local entities of the FCC decide who has access to cable systems. People much smarter than I have been saying for some time that the whole issueis headed for a settlement in the near future. Rumors regarding a proposed alliance between AOL and AT&T reinforce those predictions.

Or perhaps the entire case will become moot as DSL begins to reach mass audiences. Just last week, U S West, by far the most aggressive RBOC to deploy the high-speed access service, reported that it is adding DSL customers at the rate of about 10,000 per month. AOL hasn't even begun to offer DSL access.

With numbers like that, AT&T and its ISP opponents may soon be playing catch up.