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FCC Report Supports Regulatory Restraint of Cable Access

The Federal Communications Commission this week decided market forces should rule over the emerging cable Internet access industry, not federal regulators.

The study released late Wednesday by the commission's cable services bureau doesn't rule out the possibility that the FCC may mandate cable companies share their lines with competitors sometime in the future. But the study reaffirmed current FCC policy that government regulation is not warranted at this time.

William E. Kennard, FCC chairman, said the study concluded that the broadband industry is in its infancy and regulatory restraint needs to be exercised.

"This report provides an objective and detailed snapshot of the broadband industry and a thorough overview of the technical and public policy issues related to this dynamic and promising market," Kennard said. "I'm sure the report will prove to be a valuable resource to those seeking to understand the many competing issues and interests that must be balanced to insure that American consumers soon will be able to receive advanced services at competitive prices."

Kennard promised to continue monitoring the neonate broadband market and asked the Cable Services Bureau to oversee the process.

"The commission pledged that we were going to monitor this industry and this is a step in that process,'' Kennard said. "It's going to be an ongoing process. We're really going to step up the intensity of our information gathering and analysis.''

FCC staff said there are about 1 million consumers currently using cable access to connect to the Internet in the U.S. The staff study said that the group represents a mere fraction of the 40 million home access users and that there is no evidence that cable operators will dominate the market in a way that may be anti-competitive.

By the end of 2005, more than 11 million consumers will be using these cable connections. But the majority of Internet users will still rely on the traditional dial-up modems, according to the report.

Public interest groups and some Internet providers have argued that unless cable companies are required to open their systems to competitors, consumers won't have access to a variety of information sources. The pro-open access groups say that without free competition, cable companies could gain a monopoly on high-speed service and limit choice on the Internet.

The report recognized that there is a threat of a cable monopoly within broadband services, but that the current course of action demands regulatory restraint.

Kennard said that customer demand is likely to force cable companies to give other Internet service providers access to their systems. Repeating earlier decisions, the FCC staff report said competition from Digital Subscriber Line and other new services would keep cable companies from misusing their portion of the marketplace.

"We believe for now that the emergence of alternative broadband providers, with their competitive service offerings, features and prices, mitigates the risk that cable will become the gatekeeper of the Internet,'' the report said.

Several consumer and public advocacy groups blasted Wednesday's report, which they said ignored concerns they had raised with the FCC.

In an open letter to the commissioner, the Center for Media Education, the Media Access Project and other consumer groups told Chairman Kennard that the Internet's future is jeopardized by the cable industry's broadband plans.

Andrew Jay Schwartzman, Media Access Project founder, said cable architecture could discriminate one service over another and that consumers would be underserved by a closed Internet environment.

"The impact of potentially discriminatory policies on competitive content providers would have a devastating impact on the capacity of the Internet to promote diversity," Schwartzman said. "The fundamental nature of the Internet-its ability to support a wide range of distinctive applications and content providers-would be sacrificed if broadband networks are allowed to create traffic-management policies that can openly discriminate against competitors."

Jeff Chester, Center for Media Education executive director, said fees cable companies might demand for broadband services would dramatically increase the digital divide.

"The ability to monitor every packet and create new classes of service based on ability to pay threatens to create an even larger digital divide," Chester said. "Under such a scheme, the costs for Internet access will skyrocket, making it unaffordable for many. The cable industry's gain will be American society's loss."

Former White House Press Secretary Mike McCurry and former U.S. U.S. Rep. Susan Molinari, co-chairs of iAdvance, a public interest group, issued a very different statement in response to the FCC staff report.

In their response, iAdvance recommended that the FCC remove regulatory burdens placed on telephone companies to further encourage broadband deployment nationwide.

"Unfortunately, what the FCC report doesn't say about deregulation of the Internet is that they continue to reduce consumer choice by restricting the local phone companies' ability to offer complete high-speed Internet services."

"If the FCC really wants to encourage both broadband deployment and choice, they should lift the restrictions that have prevented local phone companies from competing and guarantee that consumers can access any Internet service provider they choose."



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