Net loss

The cable companies, led by giant AT&T, want to turn the Internet into their own private cash register. And the government's doing nothing to stop them.

by Dan Kennedy

A few months ago I criticized AT&T's efforts to prevent competitors from offering Internet access on the company's cable-television lines. The response I received should inspire intense jealousy from anyone who's ever experienced the frustration of trying to get the local cable company to provide a little bit of customer service.

Within a week I was sitting down over coffee with Charley Manning, a local consultant who's advising the cable industry, and Christopher Wolf, a high-powered Washington lawyer who's the president of the Hands Off the Internet Coalition, a cable lobbying group with a breathtakingly disingenuous mom-and-apple-pie name. Wolf politely but directly made his pitch, arguing that Internet-by-cable already faces competition from high-speed telephone technologies and that the cable industry would have no incentive to provide Internet service if government regulators gummed up the works.

"There's no obligation for the cable companies to upgrade their systems, and it costs hundreds of millions of dollars," Wolf said.

The details of Wolf's critique are not unimportant. Far more important, though, is the underlying message: that this is such a big deal that the massive cable industry -- led by AT&T, a company with a market capitalization of $173 billion -- would not pass up any opportunity to schmooze and spin anyone who wasn't on its side.

Try getting that kind of attention the next time you complain about receiving six home-shopping channels but no MSNBC.

Without question, the media story of 2000 is going to be broadband -- that is, Internet access at speeds that are some 20 to 40 times or more faster than those available with a standard-issue 56K modem. From a purely utilitarian view, the stakes are high: fast access is the key to long-promised features such as live video and the rapid delivery of large music and graphics files. Say goodbye to the World Wide Wait.

But the implications for We the People are even higher. The fight for open access -- that is, the fight to require cable companies to sell wholesale access to their high-speed lines to any Internet service provider -- promises to emerge as one of the most important public-policy battles of 2000. It's going to be on the Massachusetts ballot this November, ensuring months of expensive, deceptive television commercials. In addition, four Massachusetts communities -- Cambridge, Somerville, Quincy, and North Andover -- have demanded that AT&T provide open access, and AT&T has appealed to state regulators. At the national level, Representative Ed Markey (D-Massachusetts) has filed legislation that would mandate open access.

Unfortunately, the media have portrayed the open-access battle as taking place between two unsympathetic corporations: AT&T, the largest cable company following its purchase of TCI and MediaOne, and America Online, the largest Internet provider (20 million subscribers), which is demanding that cable companies open up their wires. The fact that AOL uses its near monopoly on the inexperienced-user market to steer customers toward its own content, coupled with suspicions that AOL would cut a deal with AT&T in a minute if it could, has led some who genuinely care about preserving an open Internet to declare a pox on both houses.

What's at stake, though, is nothing less than the future of the Net. As critics such as Jeff Chester, head of the Washington-based Center for Media Education, have noted, the most important open-access issue is that the cable companies are seeking to use their monopoly on broadband to transform the Internet into a private network for their own benefit. In a recent essay, Chester and Gary Larson warn of a cable-controlled Internet in which public-interest groups would have to pay a fee in order to make their content available, and certain types of information -- such as live Internet video, which might compete with cable channels -- would be banned. Indeed, USA Today recently quoted a top AT&T official as saying that Internet TV simply wouldn't be allowed on its cable lines, because "AT&T didn't spend $56 billion to get into the cable business to have the blood sucked out of our veins."

For anyone interested in the survival of a truly independent media, that kind of control is a horrifying possibility. Already shut out of the mainstream, alternative media outlets have focused on the Internet as their last, best hope for getting their message out. Now that door could be closing as well. Take the case of Free Speech TV, a Boulder, Colorado-based, left-leaning news-and-documentary service. Unable to win a place on the cable box, FSTV has reinvented itself as an Internet company, offering Real Player video at http://www.freespeech.org. Now John Schwartz, FSTV's president, worries that his content will be blocked from traveling through cable companies' Internet pipes.

"I think the nightmare scenario is that this develops like cable TV," Schwartz says. "I don't think regulating and fostering competition are incompatible. You certainly don't want the public to lose the way they did in the cable-TV arena."

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For a good time, log on to http://www.handsofftheinternet.org. What you'll find is the cable industry's propaganda, offered up with a heavy dollop of lefty-libertarian cant of the sort you might overhear in Davis Square, at the Diesel Café. It opens with this: "A war is being raged over the Internet and how you as a consumer will access it. The battle lines are drawn and you have to decide which side you're on. The side that limits or the side that innovates. Tell the government to get its hands off the Internet!" The site even features a clenched-fist salute, a gesture AT&T chairman C. Michael Armstrong (fiscal 1998 compensation: $6.8 million) no doubt indulges in often while railing against The Man.

Of course, AOL and its fellow Internet providers are hardly sitting out the propaganda war. Their group, awkwardly called the openNET Coalition (http://www.opennetcoalition.org), isn't quite so blatant in its disingenuousness, aside from the subliminal message behind its name. Who, after all, is for a closed Internet? But there's a big difference between its rhetoric and the cable industry's: though openNET's message is just as over the top and self-serving, it has the advantage of being true. "Cable operators . . . are seeking to change the Internet into a corporate `Intranet' by controlling almost all facets of it from the local transmission network to the ISP service, the portal, and even the Internet backbone," the openNET Coalition warns. "The consequences of these restrictions on competition include higher prices, less consumer choice, stifled innovation, and constraints on the free flow of information and electronic commerce."

Indeed, the cable industry's arguments are nothing short of ridiculous. Cable lines, after all, were laid with the approval of local governments, and represent a monopoly in its purest, rawest form. Although a few communities have more than one cable company, the choice facing the vast majority of consumers is between the cable company and rabbit ears. Now, AT&T and other cable companies seek to extend that monopoly to the Internet.

Think, for a moment, about the difference between the two kinds of pipelines people use in order to connect to the Net. If you use a modem, your sole interaction with the phone company -- if any -- is to install a second line. You buy your Internet access from any provider you like, whether it be giant AOL or a local company such as Software Tool & Die, in Brookline, or Shore.Net, in Lynn. Your Internet provider, in turn, pays the phone company for the use of its lines. That's because federal regulators treat phone lines as a "common carrier," required to sell service to all comers on a non-discriminatory basis.

With cable, on the other hand, you have one choice for an Internet service provider: your cable company or its designated subcontractor, such as Roadrunner or Excite@Home. The cable company, in other words, is attempting to leverage its government-granted monopoly over one business (high-speed wires) to shut competitors out of another business (Internet access). AT&T has said it is willing to negotiate deals with other Internet providers (it's already cut a deal with MindSpring), but that's a long way from open access.

Federal Communications Commission chairman William Kennard has refused to say no to the cable companies' monopolistic ambitions, arguing that it would be perverse to start imposing regulations when broadband is still in its infancy. Yet a recent report by the University of California's E-commerce Project found that this hands-off approach represents a dramatic, and dangerous, departure from past FCC policy. For 30 years, the report notes, the FCC has aggressively regulated phone-line-based telecommunications networks to ensure open standards and open access, thus fostering competition and innovation. "Having misread its own history, the FCC now risks misinterpreting Hippocrates: `First, do no harm' is not quite the same as `First, do nothing,' and in this particular case, doing nothing is doing harm," the report says.

With the FCC aiding and abetting the cable monopolists, the only hope for consumers is that other broadband options will become available. The most promising is known as digital subscriber line, or DSL, a high-speed service available over ordinary phone lines. Hands Off the Internet actually cites DSL as evidence that the cable industry is in a fierce competitive battle, quoting from a recent report by International Data Corporation that DSL will likely overtake cable modems by 2003, becoming "the consumer broadband access service of choice." Peter Lewis, the New York Times' technology reporter, recently tested both cable and DSL broadband, and pronounced DSL to be superior. (The cable industry also notes -- and rightly so -- that phone companies put DSL on the back burner for years, preferring to sell more-expensive T1 and ISDN service. What's pushing the spread of DSL more than anything is competition from cable broadband. So score one for the cable companies.)

But wait. Cable is here now. DSL is just beginning to be rolled out, and it has significant drawbacks, especially a technical limitation that requires any hook-up to be within three miles of a central switching station. Other technologies, such as broadband-by-cellular and broadband-by-satellite, are at least several years off in terms of being practical and affordable.

It would be nice to see the cable industry's broadband dreams done in by their own obsolescence, and perhaps that's exactly what will happen. But it would set a dangerous precedent to let the cable industry piss all over the Internet today just because cable might one day fade away. For one thing, the closed model preferred by AT&T might be applied to other technologies on the theory that what's fair for one medium is fair for all. For another, theories about DSL's eventual triumph aside, cable is likely to be with us for some time to come.

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Fifteen years ago, Harvard Law School professor Charles Nesson was getting ready to go to court against W.R. Grace & Company and Beatrice Foods Company, the multinational giants accused of polluting well water and thereby inflicting leukemia and other illnesses on a neighborhood in Woburn, Massachusetts -- the case made famous in Jonathan Harr's bestseller A Civil Action. Today Nesson is the director of Harvard Law's Berkman Center for Internet and Society -- and is representing Cambridge, Somerville, Quincy, and North Andover in their case against AT&T. Among the lawyers helping him is another veteran of the Woburn case, Kevin Conway. (Jan Schlichtmann, the lead attorney best known for being played by John Travolta in the movie version of A Civil Action, is not taking part.)

When officials of the four communities demanded that AT&T provide open Internet access as a condition of receiving MediaOne's cable license, the company appealed to state regulators. Theirs is one of a number of similar cases around the country. Currently a case is pending in federal court pertaining to Portland, Oregon. If the cable companies prevail, there will be nothing local officials can do to govern cable Internet service, even though it was those local governments that granted cable licenses in the first place, and even though local officials have the authority to regulate cable companies on other aspects of their service.

Hands Off the Internet's Chris Wolf says it makes no sense to allow local officials such power. He cites FCC chairman Kennard's call for nationwide uniformity, and claims that local governments are seeking to extend their authority well beyond what's stipulated in the Telecommunications Act of 1996.

Charlie Nesson, though, is outraged -- so outraged that he and Conway are representing the four communities pro bono. "It's a real example of control being taken away from local communities without due process," he says.

More important, though, is the principle that Nesson believes is involved. Indeed, Nesson is no advocate for AOL, and he sees the Massachusetts ballot question as a distraction. Rather, his argument is the same as that advanced by the University of California report: that open standards are what have driven the growth of the Internet, and it's the cable industry's effort to abrogate those standards in the name of profit -- even more than the fight over open access -- that threatens future innovation.

"The issue, from our point of view," says Nesson, "has to do with the architecture of the Internet" -- that is, the ability of anyone, even the loneliest pamphleteer, to jack in to the Net at no cost other than what he pays his Internet provider, without worrying that a giant corporation will block his message.

Thus has Nesson got at the subversive heart of what makes the Internet such a revolutionary development. Corporations have been trying to tame the Net ever since it emerged from its academic and military roots in the early 1990s. In part they've succeeded: most Internet traffic today is generated by the same corporate media that dominate television, movies, magazines, and newspapers. But as long as the architecture of the Internet remains open, independent and alternative voices will continue to be heard as well.

The cable companies would make that open architecture a thing of the past. Activists could fight back through DSL and other non-cable broadband technologies, but what is to stop the phone companies from lobbying Congress to give them the same monopolistic advantages enjoyed by the cable industry?

Ultimately, then, AT&T wants "hands off" so that it can make the Internet safe for itself and for other cable companies. You don't have to be a toady for AOL to understand what a disaster that would be.

Dan Kennedy can be reached at dkennedy[a]phx.com.