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Internet service providers want to offer customers access through cable's broadband

By Maurice Martin

From the January 28, 2000 Washington Business Journal

Internet service providers that plan to be in business five years from now know they need broadband. With streaming audio and video and other bandwidth-hogging functions on the rise, customers want more speed than traditional phone-and-modem connections can deliver.

Broadband access -- the term refers to connections up to 100 times faster than dial-up -- can be delivered in a number of ways. Many ISPs in the D.C. area would like to offer it via the cable TV infrastructure.

"Of the different forms of broadband, cable access holds the potential for highest speed at the lowest cost," says Timothy Edwards, president of privately held Hub Internet Services, an ISP in Arlington.

To offer Internet access via cable, Edwards and other ISP operators first need access to cable lines. Therein lies the problem.

Cable companies don't want to share their lines. They find it more profitable to offer cable access in partnership with a single ISP. Cable companies restrict access to their lines or impose fees on customers of all other ISPs -- effectively cutting those nonpartner ISPs out of the cable access game.

ISPs say that, as government-sanctioned monopolies, cable companies don't have the right to do this and should provide "open access" to their lines.

"Open access is best for consumers," says Edwards. "It will spur more competition, and prices will go down."

Cable companies say they own the lines and can do as they please.

The outcome of the open access argument will affect not only local consumer options for broadband but also the future of area ISPs -- a category of local businesses whose numbers have been shrinking dramatically over the last few years.

According to a report by Forrester Research of Cambridge, Mass., the number of dial-up Internet subscribers in the United States will peak next year, then begin to fall. However, the number of broadband subscribers, currently around 2.6 million, will rise to 27.4 million subscribers by 2003.

"At present, we haven't lost any of our subscriber base to broadband," said Bernard Andrys, president of Online Gateway, a privately held ISP based in Upper Marlboro with revenue of approximately $2 million. "However, in the next three to five years, offering cable access will be more of a necessity."

Edwards, Andrys and other ISP managers have been watching with interest as the "open access" fight has spread across the country. It began in Portland, Ore., when that city told AT&T that it had to open its cable lines to multiple ISPs. AT&T took the matter to court. The US Ninth Circuit Court of Appeals in Los Angeles is currently considering the case.

Meanwhile, other cities across the United States followed Portland's lead. In September, the Fairfax City council told Cox Communication of Atlanta (NYSE: COX) that it had to open its lines. Cox has been offering cable access in Fairfax city exclusively through Road Runner, an ISP based in Herndon. The city council said that if another ISP asks for access to Cox lines within the city of Fairfax, Cox has to oblige.

"If that happened, we would consider challenging the Fairfax law in court," said Amy Cohn, director of corporate communication for Cox.

So, far no other ISP has asked to use Cox lines.

"Small ISPs don't want to pick a fight with Cox," said Scott Silverthorne of the Fairfax City council. "I've had people tell me that they're with us in spirit, but they can't afford a lawsuit."
AOL's end run

Small and mid-sized ISPs may be intimidated by Cox and content to wait for the AT&T vs. Portland case to set a legal precedent. But Dulles-based AOL (NYSE: AOL) -- the world's largest ISP -- has already bought its way out of this problem. When AOL acquired Time Warner earlier this month, one of the assets it gained was Time Warner's cable system -- one of the largest in the country with more than 13 million customers.

Before the AOL-Time Warner deal, George Vradenburg, AOL's senior vice president for global and strategic policy, said, "We believe open access promotes consumer choice in high-speed Internet service and will encourage innovation in new Internet applications."

After the deal, an AOL spokesperson reaffirmed the company's commitment to open access, saying that AOL would open up Time Warner's cable system to competing ISPs.
Comcast's `forced access'

AOL may make good on this promise, but Time Warner's cables wouldn't help other local ISPs who seek to do business close to home.

According to David Nevins, spokesperson for Comcast Corp. of Philadelphia (Nasdaq: CMCSK), his company will gain control of the cable franchises for D.C. and most surrounding counties within the next six months (see sidebar). And Comcast does not support open access.

"We don't call this issue `open access,'" said Nevins. "We call it `forced access.' Market forces should prevail, rather than government intervention."

Comcast offers cable access exclusively through the ISP Excite@Home (Nasdaq: ATHM) based in Redwood City, Calif.

Local ISPs could gain access to Comcast lines if:

• The AT&T vs. Portland ruling goes in Portland's favor.

• This area's many governments -- D.C., Arlington, Montgomery County and Prince George's County -- all pass open access laws.

Alternately, the federal government could create a national open access policy for cable. But in public statements Federal Communications Commission chairman William Kennard has favored a hands-off approach while encouraging cable companies to voluntarily move to open access. Twenty-eight congresspersons, including Bob Goodlatte, R-Va., and Rick Boucher, D-Va., have cosponsored a bill (H.R. 1686) that would require open access. It is currently referred to the House subcommittee on telecommunications, trade, and consumer protection.

AT&T has said that it will voluntarily grant open access to its lines in 2002. However, AT&T has not dropped its lawsuit with the city of Portland.
Open access ahead?

With Comcast standing firm on the issue, what do local ISPs see for their broadband future?

Online Gateway's Andrys said a national open-access policy has to take shape eventually, despite what the FCC now says. In the meantime, he plans to attend meetings of cable advisory boards in Montgomery County where open access will be on the agenda.

Edward Fineran, president of Atlantech Online, a privately held ISP in Silver Spring, said that cable isn't even in his business plan.

"We supply broadband for businesses rather than consumers, and digital subscriber line is a better choice than cable for business. DSL provides the speed and security they need and can continue to do so for at least another five years."

Timothy Edwards of Hub, whose company also offers DSL, disagrees.

"DSL will satisfy our customers' appetite for broadband for another 18 months," he said. "After that, we'd like to offer a faster form of broadband."

Edwards hasn't yet contacted Comcast about access, but plans to do so in the next 60-90 days.

"They'll probably turn us down, but who knows?" he said.