Tech Bytes – Tid Bits in Tech News: …And Open Access for All?

In a surprise move last week, the Federal Communications Commission (FCC) decided to postpone its notice of inquiry (NOI) on ISP open access to cable systems. At the urging of Commissioner Gloria Tristani, FCC Chairman William Kennard delayed the NOI vote for two weeks.

Tristanti requested the delay because she believes the NOI should wait until the FCC completes its review of the AOL-Time Warner merger. Although the two-week delay is not time enough to allow for this, the merged company’s response to the FCC cable bureau’s 5-point open access inquiry will likely be on the record at that time. These responses will allow the FCC to better understand the specifics of open access mandates.

The consequences of open access will be the end of the thriving overbuilding industry, limitations on consumer choice, and the relegation of data transfer to old telecommunications and cable lines; no one will invest in new lines if FCC policy divests them of their property.

It has become clear during the FCC’s merger review process that the imposition of open access on AOL-Time Warner cable lines may be a precondition of approval. However, many in Congress, including Reps. Goodlatte (R-Va.) and Boucher (D-Va.), argue that an open access mandate on AOL-TW’s cable lines would place the company at a competitive disadvantage if its competitors are not required to do the same. Thus, the FCC’s AOL-TW merger review may lead to industry-wide open access regulation.

This doomsday scenario illustrates why merger review proceedings should not include non-existing regulations as a precondition of approval. Fairness concerns are legitimate, but a harmonization towards industry-wide regulation based on concerns surrounding one merged company would be disastrous given the abundance of news concerning broadband competition.

Broadband Service Providers (BSP), also known as “overbuilders” represent a growing percentage of the broadband market. Many of these telecommunications firms offer consumers discounted bundles of video, broadband Internet, and telephony services. At Tuesday’s East Coast Cable 2000 Conference in Baltimore, Maryland, several senior cable executives expressed their concern about the competition presented by overbuilders. More than a dozen BPSs have entered large and mid-sized markets across the nation. Over the past two years, such firms have collected over $10 billion from Wall Street investors. Many of these companies plan to continue their strategy of ambitious cable rollouts as long as the financing continues.

A precondition of open access regulation seems to be the notion that putting a third wire into an apartment or home, i.e. “overbuilding,” is a prohibitive cost and would not occur. Otherwise, no regulation could be justified as competitors could just as easily build their own wires. It seems that FCC regulators are either ignorant of these developments, or simply regard them as inconvenient factual speed bumps on the road to regulation.

Hopefully, this two-week delay will serve as a reprieve for misguided open access regulation. The economic consequences of open access will include the end of the thriving overbuilding industry, new limitations on consumer choice, and the relegation of data transfer to existing telecommunications and cable lines. No one will be willing to invest in new lines if FCC policy divests them of their property. Tragically, the FCC seems intent on ensuring an outcome that hurts consumers and ignores the ubiquity of private alternatives.