A Dark Day for the Internet


A Dark Day for the Internet

Nov 17th, 1999 3 min read

F.M. Kirby Research Fellow in National Security Policy

The federal government's jihad against Microsoft has been grabbing all the headlines, but another legal fight recently underway could play just as large a role in shaping the future of the Internet. The case is AT&T vs. City of Portland, and at stake is whether the development of so-called "broadband" Internet service will be governed by thousands of local regulators or by the free market.

"Broadband" service is as much as 100 times faster than conventional phone lines and opens the way for greater use of electronic commerce, "video streaming" (which allows people to view live events over the Internet), desktop teleconferencing and a vast array of other Internet-based services. Although not widely available today, broadband service is the wave of the future for web surfing and e-commerce.

Cable TV lines provide one of several ways broadband service can be delivered. Over the last several months, AT&T has invested more than $140 billion in acquiring cable-TV systems, and the company will spend billions more upgrading them for broadband traffic. Subscribers will be serviced exclusively by a subsidiary, at least through 2002.

Fearing this would mean an AT&T broadband monopoly in their city, Portland officials used their cable-licensing powers to require AT&T to open its local cable system to competing Internet Service Providers (ISPs) at a city-determined price. AT&T is suing, saying that when it comes to new Internet technology, the market -- not regulators -- should determine what constitutes reasonable service and a fair price.

Portland is the first but not the only place this issue is being fought. Officials from Broward County, Fla., to Fairfax, Va., to Cambridge, Mass., have followed Portland's lead. Denver may have an "open access" referendum item on the ballot next year. Miami and Los Angeles recently rejected similar proposals. The GTE phone company went to court in Pittsburgh last month, suing for "open access" nationally. And in St. Louis, the mayor signed a measure on Nov. 12 that forces AT&T, which owns the local cable franchise, to open its high-speed lines to all competing ISPs.

Regulators in Portland and other municipalities argue that there's not enough broadband competition out there right now and that cable providers should be required to let other companies use their systems. But many cable companies -- and virtually every major telecom and Internet player -- are already investing or planning to invest in broadband capacity. Just two weeks ago, SBC Communications announced that it will spend $6 billion to speed deployment of DSL technology, which will give broadband service to nearly 61 million of its customers over ordinary phone lines. Earlier this year, Hughes Electronics and America Online announced a $1.5 billion deal for delivering broadband service via satellite.

If the courts allow it, mandated or "open" access will almost certainly halt this rising tide of broadband competition. As they await the outcome of the AT&T case, members of the communications industry can be expected to put their broadband plans on hold. They will ask themselves whether it makes sense to risk billions of dollars if any or all of the 30,000 local authorities across the nation can expropriate their broadband capacity.

After all, if broadband cable investments can be regulated in this manner, won't someone find a way to do the same for satellite, DSL, wireless and whatever other broadband technologies emerge in the next several years? The communications industry will look at this example of Romper-Room economics -- "Sharing is good, private ownership is bad" -- and say, "Who needs this?"

If Portland regulators prevail in this case, the decision will give other localities a green light to move forward with "open access" regulations that mimic those Portland is trying to impose on AT&T. Eventually, every cable provider in the country could be required to offer its rivals access to their networks at regulated rates. This application of old Soviet-style collectivist decision-making to American communications technology threatens to lead where it's always led: to lower investments, stunted technology and higher prices.

The challenge before the Ninth Circuit is to realize that "open access" is in fact "forced access" that will discourage true broadband competition and increase the power of regulators over an industry Congress already started deregulating three years ago. For the sake of consumers nationwide, let's hope the judges in Portland understand how much of the future of America's most promising new technology is riding on their decision.

Adam D. Thierer is the Walker fellow in economic policy at The Heritage Foundation (www.heritage.org), a Washington-based public policy research institute.

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