WHAT'S GOOD FOR BELLS MAY BE GOOD FOR CABLE, ANALYSTS PREDICT
Cable analysts said FCC’s decision to free Bells from unbundling rules for new high-speed networks (CD Feb 21 p1) appeared to presage same kind of freedom for cable operators building out their cable modem services. “It would be horribly inconsistent to deregulate one and regulate the other,” said Stephen Effros, consultant and former cable association pres.: “I think that the Commission has made it clear that on the new services, they're going to let the marketplace proceed.”
FCC last year declared cable modem service to be interstate information service not subject to common carrier regulation -- decision that’s being challenged in 9th U.S. Appeals Court, San Francisco. In making its decision, FCC issued rulemaking that asked whether, “in light of marketplace developments, it is necessary or appropriate at this time” to require multiple ISP access. That remains open proceeding.
Although UNE decision applies only to telephone companies, analysts we spoke with were unanimous in their predictions that Commission’s unbundling decision with regard to DSL could settle issue for cable modem. “This FCC and this [Bush] Administration are strongly opposed to any forced unbundling of cable. Not going to happen,” analyst Scott Cleland of Precursor Group said. However, FCC’s decision to maintain UNE access on existing copper loops makes cable telephony investment bit more complicated, analyst Blair Levin of Legg Mason said. More competitors for local telephony create price umbrella over which no other company would want to go, he said, making those low prices slightly less attractive incentive for cable to get into telephony game. “To the extent that UNE-P has been kept, I think it is marginally, and I emphasize marginally, negative to the cable guys,” Levin said: “It means that the upside is less than it would be otherwise.” Although UNE decision hands much regulatory power on traditional telephony back to states, that question remains undecided for cable telephony. UNE decision also makes it easier for Bells to get into video delivery services in long run, although analysts said that was unlikely anytime soon. However, SBC has expressed interest in DirecTV.
FCC’s UNE decision “increases the confidence that cable is not going to be regulated” for high-speed Internet service, Levin said, and means that cable faces fewer competitors offering DSL. That said, major MSOs already are carrying competing ISPs aboard their networks, having negotiated private carriage deals. Analysts said they saw no reason that practice would end anytime soon. Effros said: “As a business model, it would appear that the cable companies are finding that it might be useful to do that, and therefore, they're doing it. But I don’t think you're going to see the federal government require the lease of facilities.” Former FCC Comr. Andrew Barrett said that while he didn’t think freedom from so-called forced or open access was foregone conclusion for cable MSOs, he believed private negotiations between MSOs and ISPs was preferable to govt. intervention. “That’s where it ought to be,” he said.
Asked about FTC decree that mandated AOL Time Warner offer competitive ISPs, Effros cautioned that antitrust concerns mustn’t be confused with policy: “Those are 2 entirely different things. The government routinely looks at antitrust issues and imposes certain remedies that you would not as a policy matter impose on an entire industry.”
Cox spokeswoman said company, which is cable MSO most deeply involved in offering telephony, is totally facilities- based and therefore not required to open its backbone to others. Although company hasn’t signed any deals with ISPs for Cox’s cable modem service, spokeswoman said it had been actively seeking such deal as long as it got fair market value for its subscribers. “Even if it [the FCC] didn’t make it mandatory, we would still continue to look into that,” she said. Comcast spokeswoman declined to make any predictions about what FCC might do on cable modem service. Comcast CEO Brian Roberts in the past has said he was against forced access, and Comcast already has negotiated several ISP deals privately. Comcast is in process of absorbing former AT&T Broadband circuit-switched telephone customers but also is pursuing VoIP technology with several tests. NCTA declined to comment, except to say that it still was studying UNE decision and assessing its potential impact on cable products.