Cable Access Terms Brings Out Goliath in David

Small-town ISP sends its open access solution to the FCC, recommends real remedy for AOL-Time Warner restrictive cable sharing terms.

by Jim Wagner of internetnews.com [November 1, 2000]

An ex parte filing on behalf of independent Internet service providers was sent to the Federal Communications Commission Tuesday, calling for the halt to what many consider Time Warner's anti-competitive broadband Internet access practices.

In a report to the FCC titled, An Open Access Business Model For Cable Systems, author Stephen Heins, director of marketing for Oshkosh, WI-based ISP NorthNet, called for Time Warner to rescind the requirements it is placing on ISPs to provide independent cable Internet access.

Parte on
Heins drafted the white paper after FCC Chairman William Kennard launched a formal inquiry, soliciting responses that would help the Commission build a business model ISPs and cable network owners could abide by to ensure open access standards for cable Internet services.

The conference call, held Oct. 19, was also attended by Gene Crick, Texas ISP Association executive director, David Robertson, vice president of south Texas-based ISP STIC.net and Douglas Hanson, Rocky Mountain Internet president and chief executive officer.

Heins said he expects the other three ISP representatives will give its blessing to the ex parte filing, as fair and open access for all is the end result of the report.

"The cable companies should certainly be allowed to manage their networks to ensure service quality," Heins said. "But they should not be allowed to dictate and control the business of unaffiliated ISPs, and they certainly should not be allowed to charge outlandish prices for using they network."

The report calls for Time Warner to adopt the standards as part of an open access policy based in part on recommendations made by America Online to the city of San Francisco last year. The major points in the report call for Time Warner to:

• Build a system whereby ISPs are free to provide any service that is compatible with the chosen form of interconnection without prior approval from the network owner.
• The network owners should make technically feasible and reasonable modification to accommodate new functionalities and be compensated for the costs incurred.
• ISPs should be required to provide only the minimum technical information necessary to implement new functionalities and services in a manner that does not disrupt network management.
• Information for network management purposes should not be used by network owners to develop competing services.
• Data passing to or from a customer to a competitive Internet Service Provider shall be considered private and proprietary and may be logged or analyzed by the cable network provider for network management only.

TW's rules
The term sheet gave Time Warner sweeping powers over the financial, marketing and network operations of individual ISPs on its cable network.

In addition to a $50,000 upfront fee, ISPs would have to pass on to Time Warner 75 percent of its subscription revenues and 25 percent of its cable-access, Web hosting and e-commerce advertising.

Moreover, the cable network owner would have direct control over the customer, setting the termination policy, handling the billing and enforcing standards.

"Cable companies have proven they will not provide truly nondiscriminatory access voluntarily," Hein said in his report. "If the remarkably competitive and innovative environment of the narrow-band Internet is to be preserved on the broadband Internet, the Commission must make open access a binding obligation. The combination of offline content, the dominant narrow-band Internet service provider and the nation's second largest cable operator in the AOL Time Warner merger makes the need for an open access obligation especially critical as a condition of the merger."

Lip service
Hein points to a history of words and deeds Time Warner and AOL officials have made in the past year that belie the company's official statements of competitive willingness to the FCC.

"There's a historical pattern to what they've said in the public and what they've said to the FCC that they should be aware of," Hein said. "A week ago, I heard AOL chairman and chief executive officer Steve Case said he couldn't see a reason to put conditions on the merger between AOL and Time Warner. I'm putting together a history of their words and deeds and making an ex parte filing to the FCC tomorrow."

But it's unclear how much influence the Hein's report will have on the FCC, which said last month it would wait for a ruling by the Federal Trade Commission before making its own decision. The decision came after the FTC asked the FCC to put a halt to the merger process after seeing a copy of the terms being imposed by Time Warner.

Play fair
Quyen Truong, associate bureau chief for the FCCs cable system bureau, said the commission's stand isn't required by law, but one the government agency decided to take in everyone's best interests.

"We have decided that it's in the best interest of both processes to wait for a ruling by the FTC," Truong said. "We have been coordinating information with the FTC since the beginning and will pass on any information we receive when it comes to us."

The FCC stance is based on the premise that cable networks do not fall under the purview of telecommunications regulation, which the commission oversees. This despite AOL's own assertion that open access for cable is simply a connection between two networks, which network owners and ISPs could easily implement.

Policy barrier
Dave McClure, US Internet Industry Association president, said the FCC is stalling until a new administration in November is elected to deal with the problem.

"The FCC has really put themselves into a corner from a policy standpoint," McClure said. "If they come down too hard on AOL and Time Warner and don't approve the merger, people are going to wonder why they rubber-stamped the merger of AT&T and MediaOne. But they're also in a bad position if they approve the merger because there are so many issues that haven't been addressed as far as open access is concerned.

"It's a lose-lose situation for the FCC," McClure stated. "In either case, we're not getting the crisp, authoritative FCC we should have."

—End

Related articles:
	[Oct. 23, 2000]	AOL Foresees Clear Sailing for Merger
	[Oct. 11, 2000]	AOL-Time Warner Deal Gets European Approval
	[July 27, 2000]	AOL-Time Warner Make Merger Case Before FCC