EQUAL FOOTING

Comcast's winning bid to take over AT&T's broadband unit is as clear a signal as any that regulators need to create the long-sought-after “level playing field” for cable operators and telecom service providers. When the 1996 Telecom Act allowed cable operators to create and deploy cable modem service, the idea of forcing them to share access to their network with competitors was shot down. The theory — appropriate for the time — was that because the concept of cable operators providing data service was novel, they needed some protection from market forces as an incentive. That theory, evidenced by the lead that cable modems enjoy in the residential market, is now outdated. Cable operators, given their ever-growing size and power, no longer need protection from competition and in fact would be served well if faced with a threat. Even more damaging is the telco reaction to the unleveled field. In the past, carriers would whine about what they perceive as unfair regulation but would go along with the game knowing the incentive of getting into long distance was enough to endure the pain of sharing their networks. With the drying up of the capital markets, the outcome was significantly altered. Instead of getting a robust competitive network as envisioned in the embryonic years of broadband, telcos and Congress are now in the final stages of what amounts to an expensive game of chicken, with carriers holding capital expenditure budgets hostage. In December, Qwest Chairman and CEO Joseph Nacchio told analysts that unless telcos can convince regulators to scrap TELRIC pricing rules, there is no economic incentive to continue deploying DSL service. The ball is now in the feds' court. Regulators and lawmakers could call the telcos' bluff and codify open access for both sides or they could allow both sides the option of operating closed networks. Regardless of the direction, it's finally time to put everyone on equal footing.