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Before the
EX PARTE COMMENTS Norman D. Thomas, Chair January 29, 1999 TABLE OF CONTENTS
INTRODUCTION "Those cut off from these high-speed networks today will find themselves cut off from the economic opportunities of tomorrow. And more importantly, they will be cut off from the most important network that there is – the network of our national community." FCC Chairman William Kennard The Mt. Hood Cable Regulatory Commission ("MHCRC") is an appointed group of ordinary citizens in the city and eastern suburbs of Portland, Oregon. The MHCRC was established to handle cable franchising and regulatory matters on behalf of six local governments. The MHCRC meets monthly, and has for a number of years been accustomed to toiling in relative obscurity. MHCRC members typically view their task as primarily one of serving the public interest, protecting cable consumers, monitoring franchise compliance, and following as best we can the policies set forth by Congress, the FCC, applicable law, and the provisions of our cable franchises. On the night of November 16, 1998, the MHCRC’s comfortable and customary anonymity ended. On that date, the MHCRC recommended that nondiscriminatory access to AT&T/TCI’s planned high-speed internet cable modem platform be required as a condition of Portland and Multnomah County approving a change in control of TCI’s local cable franchises to AT&T. It is in part the purpose of these ex parte comments to set forth with some particularity the policy and legal factors underlying the MHCRC recommendation. An initial survey of several of the factors influencing the MHCRC would include, the following, among others:
A more detailed survey of these factors is developed in the remainder of these comments. On December 17, 1998, the Multnomah County Board of Commissioners and the Portland City Council upheld the MHCRC recommendation by a nearly unanimous margin. To the best of our knowledge, Portland and Multnomah County thus became the first governmental entities in the nation to impose such a condition in a cable regulatory process. TCI and AT&T on December 29, 1998 failed to submit an unqualified acceptance of the transfer conditions imposed by the City of Portland ("City") and Multnomah County ("County"). The proposed change in control was therefore automatically denied as of that date by operation of the original City ordinance and County resolution. On January 19, 1998, TCI and AT&T filed a Complaint against the City and the County in the United States District Court for the District of Oregon seeking "a declaratory judgment that the condition sought to be imposed by the (City and County) requiring carriage by TCI of unaffiliated providers of online and Internet access services, is unlawful and a violation of AT&T’s and TCI’s civil rights;" and "an award of damages in an amount to be proved at trial; and costs and attorneys fees." These ex parte comments are for the purpose of directly providing updated information to the FCC regarding the MHCRC, City and County deliberations and action on this proposed change in control, and to inform the FCC of the subsequent litigation that has been filed against the City and County by TCI and AT&T. The litigation has been filed despite earnest City and County efforts (facilitated in part by the direct involvement of Oregon’s senior United States Senator) to explore alternatives and compromises short of litigation. These comments are also intended to respectfully urge that the FCC promptly open a regulatory proceeding to assist in clarifying the matters at issue here, so that a nationwide resolution of these important national communications matters can be expedited. Particularly in light of the litigation now facing Portland and Multnomah County (and possibly other local governments as well in the near future), a federal solution led by the FCC is urgently requested. In making its original recommendation to Portland and Multnomah County, the MHCRC consciously sought to carry out what the MHCRC and its staff sincerely understood to be a broad, federally-encouraged policy of providing for competition, deregulation, and an open and accessible marketplace in communications and Internet access. The FCC’s current open docket on the AT&T/TCI transfer presents an ideal opportunity for the FCC to consider the implementation of an open cable access policy at a national level. Whether the FCC chooses to impose such a requirement on the AT&T/TCI transfer request now pending, or whether the FCC chooses instead to open a separate rulemaking to consider the benefits of imposing or allowing an open access requirement industrywide on cable’s planned high speed cable modem platform, the need for prompt and decisive FCC guidance in this area is clearly urgent. II. CHRONOLOGICAL PROCESS OVERVIEW OF MHCRC/PORTLAND/MULTNOMAH CONSIDERATION OF AT&T/TCI REQUEST FOR CHANGE OF CONTROL "The challenge for the regulator, at each step, is to examine the underlying purposes and policy goals behind existing regulatory categories, and to apply them only where those purposes and policy goals make sense. Any regulatory efforts in this arena should begin with an analysis of whether the operator in question exercises undue market power over an essential service or facility necessary to provide an essential service." Barbara Esbin To understand the genesis of the imposition of the "open access" condition imposed by Portland and Multnomah County, it will be necessary to review the history of local franchising authority consideration of the change of control of TCI cable franchises to AT&T here. The process throughout has been governed by the applicable section of Title VI of the Communications Act, and relevant FCC rules. A chronology, highlighting the development and imposition of the cable modem open access condition by Portland and Multnomah County, is as follows:
III. THE PUBLIC INTEREST "In the two-and-a-half years since the 1996 Act passed, I'm concerned that consumers may have seen more changes for the worse in telecommunications than for the better. If there ever were a time for the Commission to ensure that consumers' interests don't take a back seat to the interests of telecom giants, it is now. One powerful tool the FCC has to make that happen is the imposition of meaningful merger conditions" FCC Commissioner Gloria Tristani There is no question but that the main issue resulting in the preliminary denial here of the proposed change in control of TCI cable franchises to AT&T was the disagreement among the parties regarding local authority to impose a nondiscriminatory access condition with respect to AT&T/TCI’s planned high-speed cable modem Internet platform. This issue is unfortunately now the subject of litigation by AT&T and TCI against the City of Portland and Multnomah County----litigation the City and County sought diligently to avoid. The Mt. Hood Cable Regulatory Commission respectfully submits that this is no ordinary cable transfer. Cable transfers in recent years have primarily involved rectifying the boundaries of local cable franchises so that the cable industry can realize economies of scale and competition through a ‘clustering’ strategy. Here, however, the MHCRC was not faced with a routine request for the transfer of one or more cable franchises from one Multiple System Operator ("MSO") to another. Instead, the filing and the previous announcements from the parties described a transfer with national significance: a change in control of one of the largest cable operators in the nation to one of the largest telecommunications companies in the world. The requirement recommended by the MHCRC, providing for open access to the high speed Internet platform planned by AT&T and TCI, was heavily debated here at both the MHCRC level and before the elected bodies of Portland and Multnomah County. Ultimately, the Cable Commission unanimously recommended, and Portland and Multnomah County approved by substantial margins the open access provision (the combined City/County elected official vote was 9-1). Our view is that this is the position that best protects consumers, competition, technological innovation, and an open marketplace in the rapidly growing world of Internet information and commerce. The MHCRC is aware this decision has attracted national and local interest, but the key point in our view is the public interest. The public interest is clearly best served by providing for robust competition and choice in the thriving Internet market, a market which is clearly more important every day (as the FCC itself recognizes) when considered from a business or public policy perspective. "Open access" is especially important because of the critical need to ensure that a maximum variety of choices concerning high-speed access to the Internet be available to users and citizens of any income level or social status. As the FCC is aware, the current narrowband business model for the most part sets forth differential rates for high-speed access, yet such differential rates for speed of access may not be technically necessary on the broadband pipe. Surely the FCC does not seek to encourage an Internet access marketplace where the economically disadvantaged (e.g the poor, public schools, and libraries) are trapped in a low-speed, low-tech "text-only" Internet world, while businesses and the well-off enjoy the high speeds, dense graphics, and multimedia options growing every day on the Internet. The MHCRC and City and County officials and staff here have discussed internally with great concern the implications of an "information-rich" vs. "information-poor" society. MHCRC staff has attempted to actualize the implications of "speed-rich" versus "speed-poor" Internet options by visualizing real-life scenarios, such as the following: imagine a 30-student classroom sharing one computer terminal where one student must wait twenty minutes or longer utilizing a 28 kpbs telephone modem to download a graphically-detailed map of the Thirteen Colonies for a history report. Such a low-speed Internet connection will simply not be able to benefit all students in the limited time available. Yet a higher-speed DSL connection may be economically or technically infeasible for the school, and an alternative high-speed cable connection (if available at all) is reachable through only one platform and one provider which the school must "buy through" to reach its Internet Service Provider of choice. Moreover, the proprietary platforms represented by "@Home" and similar developing cable services may not by any means become available universally and in all markets and franchise areas unless local governments retain and utilize the regulatory tools available under existing franchise agreements and federally-recognized consumer protection authority to ensure that no de facto redlining or discrimination in price and availability occurs. This may well become an increasingly critical issue given the general availability of cable connections in urban areas, and the potentially superior technical "fit" for many households to the robust cable platform as compared with the more limited DSL and other options available on the narrowband telephone platform. The development of a information "haves" and "have-nots", divided by purchasing power, is a social result devoutly to be avoided Yet we fear this result when Internet speed is related to economic capabilities, and this is the unfortunate result which appears to be developing on the telephone wire. The MHCRC hopes that the FCC will not through inaction encourage investment and deployment of a proprietary cable modem platform which will be dominated by a single, incumbent cable carrier. The need for open access on the broadband pipe remains a very significant issue, and the MHCRC earnestly recommends that the FCC approach this issue frontally by either imposing an open access condition on the AT&T/TCI merger, or else immediately moving to open a rulemaking docket on this matter. IV. LEGAL CONSIDERATIONS "Our shared goal of competition is one of the biggest ways in which we are on common ground---over the past year, the enemies of competition and change have learned that they are not going to profit from legalistic disputes about jurisdiction." FCC Chair William Kennard The MHCRC and its staff have been frequently asked about our views regarding the basis for our authority to impose an open access condition at the local level. Since this matter is now in litigation, we are confident that a fuller and more formal statement of our legal views will be forthcoming in the judicial process. However, MHCRC staff and legal counsel have carefully reviewed this matter, and we are comfortable that our actions are lawful as well as in the public interest. A very brief overview of our views regarding local authority as well as the policy and process basis for our action would include the following, among other things:
In the final analysis, the MHCRC did not consider an "open access" requirement to be, in any manner, a constraining level of regulation on a nascent techology. Rather, the thrust of the MHCRC recommendation was toward open markets---not regulation; toward competition---and not monopoly. We continue to feel strongly, on legal as well as policy grounds, that the essential nature of our open access recommendation was one that strongly encouraged the continued growth of an unfettered, unimpeded, vibrant Internet---with many choices available on many platforms---and we would oppose any regulations that demonstrably produce an opposite result. V. FCC ACTION NEEDED. "...the policies of interconnection, equal access, and open architecture have served us well in the wireline context. Indeed, the concepts of connectivity and interoperability and openness are the lifeblood of the Internet. These principles are worth preserving. Some worry that any mention of these principles portends premature and excessive governmental intervention, jeopardizing investment and deterring build-out. Not so." FCC Commissioner Susan Ness There is an urgent need for prompt FCC action to address the implications of the plans of cable MSOs, including ATT/TCI, to offer broadband services using franchised cable TV system facilities. The issues surrounding cable broadband have been raised both in the context of the proposed AT&T/TCI merger, CS Docket 98-178, and in the Commission’s proceedings to implement section 706 of the Telecommunications Act, CC Dockets 98-146 and 98-147). In addition, many local franchising authorities and our local regulatory colleagues around the country have shared their concern with us regarding the likely negative impact on both consumers and the Internet of the cable industry as the bottleneck gatekeeper of broadband internet access . Should the FCC decide to approve the merger of these two companies, the FCC should condition its approval upon the outcome of the proceedings the FCC opens on these issues.. Ultimately, the importance of this issue transcends the business plans of AT&T. The need for the Internet to remain open and competitive is a matter of national policy and should be addressed on a national level. In the absence of FCC action, it is likely that the proprietary cable modem platforms will become the cable industry norm. This can only damage the openness and innovation that has made the Internet the unfettered medium it is today. "It is true that the devil is in the details. And let’s be candid about the fact that we are not always going to agree on every substantive issue. But we can and must agree to work together, to maintain an open dialogue for addressing our differences and resolving them as best we can." FCC Chair William Kennard As the FCC has often recognized, the Internet is a critical information superhighway containing important public interest resources for all citizens (medical, government, education, etc.). The Internet was in fact begun for governmental and public interest---not commercial---purposes. The recent and extraordinarily rapid development of the Internet into a commercial success ("e-commerce"), is to be applauded, and will enhance the Internet’s importance as a gateway enabling consumers to bring competitive goods and services into their homes. However, in the MHCRC’s best judgment, home access to the Internet for most citizens for at least the next few years and beyond will continue to depend on the existing two wires already built to most homes: the telephone wire (narrowband), and the cable wire (broadband). Despite niche availability of wireless or other options yet unknown in some markets, the mass of people (rich and poor) will depend on the two wires already present. And these two wires will continue, in our best judgment, to provide the only realistic mass access to the Internet for most citizens. Under enlightened FCC and federal policies, the MHCRC believes considerable progress has been made in opening up the telephone wire to competition by requiring the monopoly incumbents to provide wholesale access to resellers. This has reduced rates in long distance and data services, encouraged technological innovation, and broadened access for businesses and consumers.. However, the MHCRC would submit that similar progress on the far more robust broadband cable wire has barely begun. Yet, we know that cable’s "fat pipe" is much more suitable in terms of technology, speed, and capacity to carry the ever-more-dense Internet content (particularly multimedia) that is becoming a necessity (by any objective measure) for adequate access to the Internet now and in the immediate future. It is now abundantly evident from our process here that AT&T/TCI intend to do everything possible, including filing litigation, to maintain bottleneck control over the cable customer’s initial entry to the high-speed cable Internet platform. Such control is maintained by requiring each cable customer to enter the high-speed Internet world only through the proprietary platform (e.g. "@Home", "Road Runner") of the incumbent cable operator, before reaching other platforms, ISP’s, and content providers of the consumer’s choice. Without a broad menu of wholesale access through the cable modem, it is not clear to us that the present great variety in narrowband retail access choices (through online providers and ISP’s ) will survive commercially long enough to provide similar economically-disparate or technologically-vibrant competitive choices to future cable modem customers. The MHCRC submits that such an anti-competitive scenario is clearly wrong. It is self-evidently not in the public interest. It appears contrary to every hard-earned lesson of public telecommunications policy this great nation has learned at least since the 1982 AT&T breakup. If the current policy pronouncements of federal law have any real meaning, the MHCRC believes that the FCC, Congress, and franchising authorities should together and immediately be doing everything possible to prepare cable networks for the competive, open cable platform which longstanding national communications policy clearly contemplates, and we should dow so despite whatever statutory or categorical confusion may now exist, . Such an open cable platform will develop more rapidly, consistently, and fairly if the FCC begins to take action to look into this matter by appropriate regulatory means, and if the FCC is careful in the meantime not to unjustly preempt or impair local effort, such as the MHCRC’s, to spur competition through utilizing existing local franchising authority. Finally, the MHCRC hopes that the present sporadic growth in high speed Internet access through narrowband or wireless options in some limited markets, though itself encouraging, is not mistaken by the FCC as reason to excuse the cable industry from a clear public need to open up its broadband platform to competition. In our view, either action is pursued now, or else an overly timid 'wait and see' attitude (whether federal or local), will require all involved levels of government to spend many years in the future trying to 'retrofit' open access onto a monopolistic and proprietary broadband Internet platform: the same platform the cable industry is now rushing to deploy. We urge the FCC not to lose track of the overall competitive "forest" in a rush to applaud the isolated narrowband or wireless "trees" of the moment. If the FCC mistakes current competition among ISPs on the narrowband wire as reason enough to forgo action, the MHCRC submits that the consequence of such inaction may cause vibrant competition and choice to disappear entirely if AT&T and TCI's business plans for Internet access on the broadband pipe prevail. Surely, this is not the result intended by the FCC, nor is it the result intended by the citizens serving on the Mt. Hood Cable Regulatory Commission. We have attempted to follow the lead of our federal jurisdictional partner---the FCC---in recommending what seems to us a simple, common-sense requirement that consumers be assured a variety of choices, prices, and providers for increasingly-critical high-speed access to the Internet. Our reward thus far has been unlooked-for notoriety, litigation, and a dearth of federal guidance. We earnestly request that the FCC move promptly to address this situation. Respectfully submitted, _________________________ Norman D. Thomas, Chair _________________________ David C. Olson, Staff Director MT. HOOD CABLE REGULATORY COMMISSION DECLARATION I, David C. Olson, declare as follows:
I hereby state under penalty of perjury that the foregoing is true and correct. Executed on January 31, 1999 ________________________ David C. Olson EXHIBITS MT. HOOD CABLE REGULATORY COMMISSION
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