Digital Beat: Broadband & the Future of the Internet

Gary Handman (
Fri, 20 Aug 1999 15:05:21 -0700 (PDT)

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>Subject: Digital Beat: Broadband & the Future of the Internet
>Comments: To:
>The Digital Beat v.1 no. 14
> By Veronica L. Breckheimer and Kevin Taglang
> Introduction: Speeding Up The Internet
> What is Broadband?
> The "Open Access" Debate
> Current FCC Broadband Policy: "Un-regulation" and Deployment
> The Role of Local Government
> The Current Legislative Agenda
> Solutions on the Horizon?
> Conclusion: A Role for Communities
>"As we leave the Industrial Age and enter the Information Age, it's clear
>that despite all the technical advances and globalization, the formula for
>economic success has remained the same: economic prosperity relies on
>high-speed access to the critical network of information and commerce. That
>network is the Internet, and the type of access needed is broadband. "
> -- William Kennard, Chairman of the Federal Communications
>"In a field where exaggeration is common, it is fair to say that this issue
>is regarded as the most important public policy question in
>telecommunications for the decade. In the near term, there's billions of
>dollars in revenue at stake. Over the longer term, the outcome of this fight
>will play a large role in determining who will be the dominant
>telecommunications and Internet players for the next decade."
> -- Andrew Jay Schwartzman, President of the Media Access
>I. Introduction: Speeding Up The Internet
>>From Wall Street to Washington to the Silicon Valley, anticipation is
>building for the transformation of the Internet: from the World Wide Wait to
>a ubiquitous, instantaneous information and communications delivery system.
>For that to happen, the first (or last, depending on your perspective) mile
>of Internet connections to the home must be transformed from a two-lane
>byway into a super highway.
>Metaphors aside, a number of companies are vying to be the dominant Internet
>provider over high-speed networks called broadband. Given enough bandwidth
>(the capacity of a medium to transmit data), the Internet can evolve from
>today's primarily text- and fixed images-based services into a medium that
>can easily deliver high-quality, real-time audio and video services like
>telephony and movies. But in order to deliver these services, consumers will
>need access to broadband networks. Cable companies, telephone companies and
>wireless companies have the technology to provide broadband networks, but
>they have not yet deployed them on a grand scale.
>With AT&T's purchase of TCI, the nation's largest long distance provider
>moved to become the largest broadband provider -- promising to upgrade the
>capacity of TCI's cable television systems so that these networks can
>provide a host of services in addition to cable TV such as local and long
>distance phone service and high-speed Internet access. Public interest
>advocates and competitors grew wary of the deal, however, when it became
>apparent that AT&T and other cable companies were not planning to allow
>independent Internet access providers (ISPs) to provide service to customers
>on the same terms and conditions as they do their own affiliated ISPs (such
>as Excite@Home and Roadrunner). In this environment, if consumers want to
>use a non-affiliated ISP, they must pay twice -- once for the cable
>company's ISP and once for the service provider they want. The case
>highlights an important question for the future of Internet access: who will
>be the intermediaries of broadband networks and what choices will consumers
>be offered? What's at stake is the openness, diversity, and consumer choice
>that have allowed the Internet to flourish.
>This Digital Beat briefly introduces broadband technology, highlights the
>fight to open broadband networks and looks at the current policy landscape.
>Although broadband is a nascent market, it is not too early to consider
>basic values such as equitable deployment of information and communication
>technologies, consumer choice, a vibrant marketplace of ideas and the civil
>rights - and responsibilities --of citizen-consumers.
>II. What is Broadband?
>Broadband refers to the greater bandwidth (or data traffic capacity) offered
>over upgraded cable lines and phone lines, and through wireless or satellite
>transmissions (1). The leading competitors today in the race to build
>broadband facilities and gain market share are telecommunications carriers
>and cable operators.
>Working over standard copper phone lines, digital subscriber line service
>(DSL or xDSL) provides data downloads at speeds of up to 1.544 megabits per
>second (Mbps), and uploads at speeds of 128 kilobits per second (Kbps) -- 26
>times faster than the conventional 56 Kbps dial-up modem. Faster DSL speeds
>are under development and the maximum speeds will ultimately depend on
>factors such as the distance between the home/business and telephone
>company's local central switching office. By the start of 2004, DSL should
>be available to 70% or more of U.S. homes, predicts The Pelorus Group's in
>its latest study, "DSL: New Opportunities and Winning Strategies."
>Cable modem technology allows hook-ups between PCs and cable networks with
>data rates reaching 1.5 - 3 Mbps (on up to 10 Mbps as currently being
>advertised by cable providers). Cable modem technology can also be
>integrated into television set top boxes allowing a TV to become an Internet
>device. One estimate is that 63% of all cable systems will be
>broadband-ready by 2001.
>III. The "Open Access" Debate
>Today's "narrowband" technologies, dial-up access to thousands of small and
>large ISPs and online service providers over traditional phone lines, will
>shortly start giving way to the broadband networks described above. Although
>fewer than 1 million homes now have broadband Internet access, that number
>is expected to grow to 10-16 million by 2002 with 60-85% using cable
>connections (2). Broadband access, at least in the coming months, will be
>offered primarily by a few providers at most and will be concentrated in
>metropolitan areas. With the change, comes an important danger: certain
>companies building and providing the new high-bandwidth services may not be
>committed to maintaining the open environment that has let free expression
>flourish on the Internet.
>A fundamental tenant of the Telecommunications Act of 1996 was a reliance on
>competition for all services, including broadband services, to drive
>infrastructure investment and deployment. The Act aimed to open local
>telecommunications markets to competition by, among other things, reducing
>incumbents' economic and operational advantages. The Act requires incumbents
>to share their networks in a manner that enables competitors to choose three
>methods of market entry: 1) constructing new networks, 2) using unbundled
>elements of the incumbent's network and 3) resale of the incumbent's retail
>services. Some phone companies are building high-speed digital connections
>to the home and seeking to get out of their obligations under the
>Telecommunications Act to "unbundle" access and let competitive ISPs connect.
>At the same time, cable giants, like AT&T, are providing cable modem
>Internet access in settings where the cable companies own the broadband
>"pipe" into the home. Some cable companies also own a stake in an ISP, own
>it outright or have specific contractual obligations to an ISP, all of which
>leave the ISP and the content it provides in the decision-making hands of
>the cable company. As regulatory authorities around the country review
>AT&T's purchase of TCI, AT&T has taken an adamant stance: since the company
>is investing billions to upgrade its cable networks to support Internet
>data, AT&T should have exclusive rights to determine how those systems are
>used for Internet access.
>As we reported in April, public interest advocates filed a petition with the
>FCC earlier this year asking that cable broadband be opened to unaffiliated
>ISPs as soon as possible. "We're at a fork in the information superhighway,"
>said Andrew Schwartzman of the Media Access Project. "One way leads to open
>access, boundless innovation and free expression. The other has us follow
>the same path that made cable TV the closed, unresponsive and overpriced
>monopoly Americans have grown to hate."
>The Media Access Project is joined by the Center for Media Education, the
>Civil Rights Forum on Communications Policy, Computer Professionals for
>Social Responsibility, the Consumers Union, the Utility Consumer Action
>Network and other groups in a concerted effort to open broadband networks to
>competitive ISPs. The effort is showcased online at The
>groups are dedicated to educating the public, local and federal
>policymakers, advocates, and the press about the importance of open
>broadband networks and the need to preserve competition in the Internet
>access market in order to protect consumer choice, privacy, and freedom of
>A similar effort, the openNET Coalition, is dedicated to promoting the
>rights of all consumers to obtain affordable, high-speed access to the
>Internet from the provider of their choice. The Coalition believes that
>competition among Internet service providers over last mile broadband
>networks will lower prices, spur innovation, and advance the social and
>economic benefits of the Internet. The Coalition's members include: America
>Online, BNS, Cable & Wireless USA, GTE, Juno Online Services, MCI WorldCom,
>MindSpring, Netscape, Prodigy, Sprint, US WEST, and many, many more
>providers of consumer Internet services.
>IV. Current FCC Broadband Policy: "Un-regulation" and Deployment
>Last year, while reviewing the merger of AT&T and TCI, the FCC had an
>opportunity to impose open access stipulations. The FCC ruled that since
>cable telephony and broadband Internet access are in their infancy, AT&T
>would not have to offer open access to the merged company's broadband
>facilities. AT&T did agree to target more than just high-income areas for
>system upgrades. The FCC has adopted a plan of "un-regulation" to encourage
>investment in and deployment of broadband networks.
>Chairman Kennard has been speaking openly about the role of government and
>the broadband open access issue. In June 1999, at the National Cable
>Television Association's annual meeting, he defined his national broadband
>policy in a speech entitled "The Road Not Taken: Building a Broadband Future
>for America":
>Here is my vision for broadband in America. Multiple broadband pipes serving
>America's homes. At least four or five facilities-based competitors. Digital
>Subscriber Line (DSL), cable modem, terrestrial wireless, and satellite.
>That's my vision for our broadband future. Because that is the best way to
>serve America's consumers. Multiple facilities-based carriers, competing
>robustly to bring all sorts of wonderful content to America's homes…. But
>how do we do it? We let the marketplace do it.
>Chairman Kennard defended the FCC's hands-off, deregulatory approach to the
>broadband market and the approval of the AT&T-TCI deal without imposing
>conditions to open the combined company's networks. He noted that the
>reliance on the marketplace has paid off as proved by staggering investment
>in broadband - in the wireless arena by Motorola and Nextel, in satellites
>by DirecTV, Lockhead Martin and TRW, in DSL by Prodigy, Microsoft, and AOL.
>"Where cable modem service has been introduced," Chairman Kennard noted,
>"DSL is following."
>Kennard acknowledged the complaints of the Baby Bells who claim they have to
>open their networks, but cable doesn't; that there's a lack of parity. "But
>let's look at the facts," Kennard said, "we put a proposal on the table for
>the Baby Bells to operate advanced services in a de-regulated environment.
>The Bells have been given the roadmap to their liberation." The FCC has
>proposed that incumbent telephone companies be allowed to establish separate
>affiliates to provide broadband services that would not be subject to the
>Telecommunication Act's resale and sharing obligations.
>V. The Role of Local Government
>In January 1999, the U.S. Court of Appeals for the Fifth Circuit ruled that
>local governments have the authority to require wired video system operators
>to obtain franchises, which gave municipalities and counties extended legal
>leverage in the battle over local authority over cable networks. In
>addition, the National Association of Counties (NACo) passed a resolution in
>June, stating that its 1,800 associated counties believe that "local
>government franchise authorities have the authority to require that all
>cable companies provide open access to all ISPs." NACo also stated that if
>they pass regulations on this topic, the FCC and Congress should work to
>create an open access system that encourages competition. The FCC has
>decided not to act on the open access issue, but some counties have taken
>action on it.
>1. Portland
>The Mt. Hood Cable Regulatory Commission, the cable franchising authority in
>Portland and Multnomah County, Oregon, recommended that open access be
>required as a condition of the approval of the change in control of TCI's
>local cable franchises to AT&T by the city of Portland and Multnomah County
>(3). The city council and county board of commissioners upheld the
>recommendations - becoming the first government entities to impose such a
>condition in a cable regulatory process. AT&T and TCI then filed a suit
>claiming the requirement of carriage of unaffiliated ISPs was unlawful and a
>violation of the company's civil rights.
>Federal District Judge Owen Panner dismissed the case finding that 1) the
>city and county have the authority to impose an open access requirement, 2)
>open access is content-neutral, and 3) the provision does not make a cable
>company a common carrier (prohibited by the 1996 Telecom Act). AT&T has
>appealed the decision to the 9th Circuit Court. Though the ruling applies
>only to Oregon, it sets a precedent because it was the first ruling on open
>access. The AT&T brief to the 9th Circuit Court of Appeals was filed
>recently. Portland will file September 7th and final briefs are due
>September 14th. Oral arguments are expected to begin in October.
>Although Internet access is the focal point, Broadcasting & Cable reported
>in June that AT&T officials privately acknowledge, the implications are more
>far-reaching. Their great fear is that AT&T will be forced to open their
>cable network to all competitors, including those in voice and video, as
>well as data. This would mean the long-distance giant spent $119 billion on
>cable properties only to have squatters given legal access.
>AT&T says the ruling in Portland is a catch-22 because the company's
>contract with @Home grants @Home exclusive distribution rights on AT&T's
>cable network. "They have put in place an ordinance we cannot comply with
>legally or technically, " says James Cicconi, AT&T's general counsel. "It is
>not a condition with which we can comply and still deploy the @Home offer.
>The real losers in this decision, until its overturned, are the people of
>2. Broward County, Florida
>Broward County in Florida followed the Portland decision by voting 4-3 on
>July 13, 1999 to force AT&T to open its network to competitors, saying
>consumers need a choice in an increasingly information-driven society. On
>July 26, 1999, AT&T sued in U.S. District Court in Miami to overturn the
>county's decision.
>3. San Francisco
>San Francisco's Board of Supervisors voted July 26, 1999 to adhere to the
>Portland Appeals Court ruling regarding opening access to cable lines for
>rival ISP's. The Board will file an amicus brief supporting Portland's open
>access decision and decided to revisit the issue in December of this year.
>The Wall Street Journal reported on July 27th that AT&T suggested it would
>be reluctant to continue upgrading San Francisco's system if the vote went
>in the wrong direction. After the vote, the
>company said it would proceed with its plans to spend $50 million over four
>years to upgrade the cable networks there. Scott Morris, AT&T's vice
>president of local government relations, said the supervisors gave the
>company enough confidence to continue its investment in San Francisco.
>4. Jurisdiction
>Within the open access issue, the most important legal issue for
>municipalities is jurisdiction over "telecommunications" and "cable"
>entities. These issues involve authority over systems that do not fit
>traditional regulatory divisions between cable systems and common carrier
>telecommunications systems. In the Telecommunications Act of 1996, the FCC
>defined "cable systems" in such a way that the term is being read
>differently by different courts with respect to local jurisdiction in cable
>matters. Various local authorities have received applications from companies
>that want to install facilities that could be used to provide cable
>services. In many cases, the companies claim to be building a different type
>of system under state or federal authorization -- so municipalities have had
>to reevaluate basic codes. Local authorities are trying to create a
>structure that protects the local interest in the streets, in obtaining
>compensation for their use and ensuring that competition proceeds fairly for
>the publics' interest. A problem for many cities is that the FCC has not
>clearly articulate definitions of "cable system" or "telecommunications."
>Thus, jurisdiction is not clearly divided for federal and local authorities.
>On July 16, the FCC filed a friend-of-the-court brief with the 9th U.S.
>Circuit Court of Appeals arguing for the "national broadband policy"
>articulated in section IV above. Chairman Kennard has stated emphatically
>that the FCC has the authority to set national policy -- but he has not
>delineated the scope of that authority. Kennard wants to ensure a
>no-regulation policy, rather than letting local governments impose rules.
>VI. The Current Legislative Agenda
>With so much at stake and questions of jurisdiction hanging in the balance,
>current initiative in Congress take on special import. The outcome of such
>legislation could promote or hinder the deployment of new technologies. Many
>of the bills discussed below may not be taken up in the current session, but
>similar legislation is likely to be presented next term.
>1. Senate
>The Broadband Internet Regulatory Relief Act (S.877 ), sponsored by Sen. Sam
>Brownback (R-KS), was designed to assure that rural areas are not left out
>of the broadband revolution. Sen. Brownback said, "the bill is intended to
>speed up the deployment of broadband networks throughout the United States
>and to make residential high-speed Internet access a widely-available
>service." The bill provides "regulatory relief to telephone companies
>willing to deliver broadband connections to rural areas." One key provision
>provides that incumbent local telephone companies will not have to sell or
>make available their broadband access services to their competitors, under
>the Act, if they make 70% of their loops ready to support broadband access.
>This provision is designed to create an economic incentive for these
>companies to invest in high-speed technology such as DSL. The bill also
>prohibits the FCC from regulating prices for broadband Internet access
>offered by the these companies, if a competitor is present in the market.
>There are two technologies that are likely to provide access to large
>numbers of people immediately: cable and DSL. However, Sen. Brownback
>contends that cable networks are prevalent in urban, but not rural areas:
>"cable penetration is much lower in rural areas whereas the ubiquity of the
>telephone network makes telephone penetration rates close to one hundred
>percent even in rural areas. Thus, for many rural consumers…, high-speed
>Internet access may only be available in the next several years through the
>telephone network."
>Sen. John McCain (R-AZ) introduced the Internet Regulatory Freedom Act
>(S.1043) in May. This bill is similar to Sen Brownback's in that it would
>also relax the requirements of the Telecom Act for local telephone companies
>that deploy DSL service. But the McCain bill also states "it is the policy
>of the United States to assure that all Americans have the opportunity to
>benefit from access to advanced Internet service at affordable rates by
>eliminating regulation that impedes the competitive deployment of advanced
>broadband data networks." In a letter to the Senate Judiciary Committee, the
>Competitive Telecommunications Association (CompTel) stated that these
>measures would effectively destroy competition by eliminating incumbent
>telephone companies' "incentives to open up the 'last-mile' bottleneck"
>contained in the Telecom Act. CompTel said that the Telecom Act provides
>"ample economic incentives" for the deployment of advanced services while
>preserving competitive safeguards. United States Telecommunications
>Association (USTA) President Roy Neel has said that legislation that would
>deregulate incumbents' broadband data services has a 50-50 or better chance
>of being approved by Congress.
>2. House
>Rep. Billy Tauzin (R-LA), Chair of the House Subcommittee on
>Telecommunications, and the House Commerce Committee's Ranking Member John
>Dingell (D-MI) have introduced a bill to free incumbent local telephone
>companies to compete with incumbent cable companies in offering high-speed
>Internet access to consumers. The Internet Freedom and Broadband Deployment
>Act of 1999 (HR 2420) states that ISPs could interconnect with a phone
>company's high-speed network so that ISPs could have access to at least one
>broadband network and consumers are guaranteed a choice among providers.
>Rep. Dingell wants to make sure that Internet service will not be ruled by
>one provider. Rep. Tauzin wants companies such as AT&T to help create
>competition, and if not, Rep. Tauzin would move to take away the protection
>the bill gives companies from federal and state regulation. Rep. Tauzin's
>bill has not met with favor from Commerce Committee Chairman Tom Bliley
>Rep. Dingell spoke to the Commerce Committee saying, "First, the bill makes
>sure that Internet service will not become a de facto monopoly for any one
>provider. As technological convergence allows the cable and telephone wires
>in every home to deliver virtually the same services to the American people,
>it makes no sense to treat these wires differently under the law. It grossly
>distorts the operation of the market by giving one wire an artificial
>advantage over the other. Our bill protects consumers from a new monopoly in
>the business of Internet access and guarantees all Americans the freedom to
>choose the very best service at the lowest possible price."
>Other bills being considered are the Internet Growth and Development Act (HR
>1685) and the Internet Freedom Act (HR 1686). Both bills were sponsored by
>Rep. Rick Boucher (D-VA) and were introduced last May. These are broad bills
>that cover more than just speeding the deployment of broadband Internet
>access. The bills encourage large cable companies to open their networks to
>competitors who want to offer ISPs and high-speed Internet access. AT&T sent
>a letter to House members denouncing both bills.
>Title V of HR 1685 is designed to force broadband access transport
>providers, including incumbent local telephone companies with DSL loops and
>cable companies, to unbundle their broadband transport and Internet access.
>The purpose is to stop the practice of cable companies bundling their cable
>modem services with their Internet access services. This will protect the
>competitiveness of the many ISPs, online services and other Internet access
>services. The bill states that incumbent local telephone companies which
>fail to provide conditioned loops, are presumed to violate the Sherman Act.
>VII. Solutions on the Horizon?
>Beyond legislation or new regulation, additional developments - like
>competition, community network ownership and broader alliances -- may offer
>some solutions to the open access issue. A brief example of each follows.
>The Montgomery County Council in Maryland recently granted Starpower
>Communications a 15-year franchise, ending Cable TV Montgomery's 16 year
>monopoly in that market. Starpower offers cable, Internet and telephone
>services. Starpower is building fiber-optic cable networks quickly.
>Starpower subscribers pay roughly 40% less per channel than other customers
>in the area subscribed to systems with similar programming lineups. These
>new competitors, building their own networks, could force incumbents to
>upgrade their systems so that they can offer new services.
>In Pocahontas, Iowa, residents voted in June to build a municipal
>telecommunications network capable of competing with AT&T broadband Internet
>services. Voters in the rural community of 1,000 households voted 306-18 to
>construct a network that will vie for 750 AT&T subscribers, as well as for
>phone customers served by U S West, the state's dominant local-exchange
>carrier. City administrator Greg Fritz said local officials elected to
>pursue an overbuild after the Iowa Supreme Court ruled that local
>governments can offer telephone service if they also provide cable
>television to their residents. Poor telephone service and rising cable rates
>were the reasons for pursuing a municipal network, Fritz said.
>On August 9, the New York Times reported on a possible deal that would end
>America Online's opposition to AT&T's broadband offerings. The two companies
>were reportedly considering an arrangement that would diminish the role of
>Excite@Home by giving AOL (and perhaps other ISPs) enhanced access to AT&T's
>broadband systems. In the current configuration of the networks, AT&T owns
>and operates the physical cable systems, and Excite@Home handles local
>network management, routing and distribution, and content. Although AOL may
>really want to tap in directly to AT&T's customers at the local network
>management level, the two companies may compromise and allow AOL to act as
>the content portal to the Internet. In return, AT&T could possibly entice
>AOL's 18 million subscribers to use its cable networks.
>VIII. Conclusion: A Role for Communities
>Although Chairman Kennard and Mr. Schwartzman frame the gravity of the
>broadband debate, for many, the question of high-speed Internet access seems
>impractical when so many people in the country still do not have "low-speed"
>access to the Internet. But as we examine of the digital divide in 1999, we
>should be mindful of creating a "broadband divide" in 2005. If national
>policy relies on "un-regulation" to encourage the investment needed to build
>these networks, how will the public interest concerns relating to choice and
>content be protected. If companies threaten to withhold investment and
>deployment if they must open their networks, what is gained by winning a
>regulatory fight that results in no networks at all?
>Over the next 5+ years, 50% of American cities will be renewing cable
>franchises. This provides a golden opportunity for citizens at the local
>level to become involved in communications policy and to experiment with
>local solutions that can provide models for the rest of the country. Without
>local franchises, AT&T may not be able to provide cable Internet services at
>Citizens have the opportunity to negotiate equitable distribution of cable
>broadband technologies and to use these upgraded systems to improve the
>dissemination of government information. For each major merger, citizens
>should begin to ask, What's the public interest return here? And not just
>let Wall Street determine what the stockholders' return will be.
>1.) Access to your home is available today through two technologies --
>satellite and "wireless cable" systems (also known as Local Multipoint
>Distribution Systems, LMDS, and Multichannel Multipoint Distribution
>Systems, MMDS). Satellite connectivity requires a small (21 inch) satellite
>dish mounted outdoors and the service is available almost anywhere in the
>United States. Data rates reach up to 400Kbps. A new class of wireless
>service, often called "wireless cable", is rapidly being deployed in several
>metropolitan areas. These systems use microwave radio frequencies to provide
>one-way data transmission. LMDS service requires a 12" externally mounted
>antenna. Both LMDS and MMDS can deliver data at over 1.5 Mbps. One drawback
>with today's wireless technologies, is that only one-way communication is
>possible. Users can obtain high-speed downloads but uploading requires use
>of a conventional telephone line and modem. In the near future, however,
>two-way wireless systems will be available.
>2.) Labaton, Stephen. Fight For Internet Access Creates Unusual Alliance.
>New York Times. August 13, 1999 (page A1).
>3.) As adopted by the City of Portland and Multnomah County, the text of the
>"open access" provision is as follows:
>"Non-discriminatory access to cable modem platform. Transferee shall
>provide, and cause the Franchisees to provide, non-discriminatory access to
>the Franchisees' cable modem platform for providers of Internet and on-line
>services, whether or not such providers are affiliated with Transferee or
>the Franchisees, unless otherwise required by applicable law. So long as
>cable modem services are deemed to be 'cable services,' as provided under
>Title VI of the Communications Act of 1934, as amended, Transferee and the
>Franchisees shall comply with all requirements regarding such services,
>including but not limited to, the inclusion of revenues from cable modem
>services and access within the gross revenues of the Franchisees' cable
>franchises, and commercial leased access requirements."
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Gary Handman
Media Resources Center
Moffitt Library
UC Berkeley 94720-6000

"Everything wants to become television" (James Ulmer -- Teletheory)