AOL and AT&T Debate Cable Access

(October 5, 1999) George Vradenburg of AOL and Elaine McHale of AT&T debated whether cable companies which provide Internet access should be required to provide access to competing ISPs. FCC Commissioner Harold Furchtgott-Roth also participated in the panel discussion.

The discussion was part of an event titled "The FCC in 2000." It was hosted by the Georgetown University Law Center, the Federal Communications Commission, and the Federal Communications Bar Association.

AOL's Vradenburg argued that Internet access over cable ought to be treated like local phone service. He also repeatedly reminded the audience of AT&T's monopolistic practices that lead to its forced breakup in 1984.

AT&T's McHale argued that AT&T had no monopoly or market power in Internet services. Rather, it was promoting competition. Its cable facilities would be used to provide telephony services in competition with the regional Bell companies, and its deployment of cable Internet access has prompted the Bells to roll out high-speed DSL service.

Furchtgott-Roth argued that it was not the role of the FCC to set policy. "I would urge those, however, seeking a deregulated landscape, to think twice about urging the Commission to jump into the fray. Good intentions don't always lead to good results. That is particularly true in the area of regulation. Markets and technology and the Internet or electronic commerce change far more rapidly than regulators can possibly respond to, even with perfect information."

The event was held in the moot court auditorium of the Georgetown University Law Center, just off of Capitol Hill in Washington DC. The audience included many people from telecommunications and Internet companies, and many lawyers.

George Vradenburg is AOL's SVP for Global and Strategic Policy. He previously was its General Counsel. He stated that "we ought to be fully committed to continue the thirty year policy of the FCC in this country of requiring competition in our local infrastructures as the best way to get consumer adoption and user driven innovation."

He said that the Internet industry, the most "innovative, competitive, dynamic, investment attracting industry in the history of this country," rests on "a monopoly infrastructure."

He elaborated that for thirty years it has been the policy of the FCC to "open up our telecommunications system to competition." This has been evidenced by several policies.

"We distinguished between data service and telecommunications service," said Vradenburg. "We did not subject our data services to the same kind of regulation that we subjected our telecommunications services."

"We allowed foreign devices," said Vradenburg, "to be attached to our telephone system, at a time when our telephone monopoly insisted that attaching the devices would bring that system to a crushing halt."

"We had to break up that telecommunications company in the early '80s."

He also stated that the 1996 Telecommunications Act was passed to force local phone companies to open up their facilities to competitors.

Vradenburg argued that "the fastest route to the broadband rollout of services is to create the kind of competition in broadband that we have had in the narrowband environment, and indeed, force all of that competition that we see at the service level down into the infrastructure. How do you do that? You make the cable infrastructure and the telephone infrastructure compete for service providers."

Vradenburg took issue with FCC actions on this issue. "Surprisingly, the FCC has sort of taken a different tact, and said, notwithstanding thirty years of a sustained conscious policy in this country of assuring competition through our local infrastructure by assuring that it is open cost based interconnection, we have decided that now markets ought to prevail, whatever that may mean, and that in fact that what we ought to do is allow this regulated monopoly, to continue in its current regulated state, but not extend the current interconnection requirements, or non-discrimination requirements associated with video programming into the Internet."

During the question and answer session he also criticized FCC Commissioners for lobbying local cable regulatory authorities on this issue. He added that Furchtgott-Roth had not done so.

Elaine McHale is Public Policy Vice President for AT&T Law and Government Affairs.

She stated that it was the goal of AT&T to "bring competition to the local exchange residential consumer. We have today, in 97% of the country, 97% of the customers lack a choice." During her opening she stated that "we will deploy cable telephony services, as well as high speed Internet access services." In response to a question, she stated that the Internet service was secondary to telephony.

She argued that AOL and the local phone companies opposed the AT&T cable mergers or sought forced access conditions, not to impose competition, but because AT&T would compete with them.

"Not surprisingly, AOL, and the Bell companies, GTE as well, have teamed up to oppose our merger, and to argue that we should have an open access requirement," said McHale. "Now, we know why the Bell companies want to slow down our merger. They obviously want to protect their own positions in the local exchange market."

"And, I think AOL has a similar position. AOL has done wonders to bringing the Internet to consumers. They are today the market in the Internet user market. They hold about a 40% market share. And the cable companies are interested in entering that market to challenge their position."

She continued that cable Internet access will be offered to fewer home users than DSL will be. "Contrary to the claims of AOL and the RBOCs, we do not hold a monopoly position or market power in the provision of Internet services, and much of the rhetoric that we hear from AOL in support of the open access debate, and also from the Bells, is in anticipating a market failure in a market that has not yet developed. And it is not so that this country will regulate in anticipation or in advance of a market failure."

She also argued that it was AT&T's merger with TCI that led the local phone companies to roll out DSL service.

She concluded that "it is unrealistic to assume that imposing a forced access requirement would not slow the deployment of both cable telephony and Internet high-speed access services."

It will surely raise the costs. There is not a one of us who cannot honestly think that it wouldn't engage us in thorny issues, like cost allocation, and pricing decisions, and what is the OSS, and what is the colocation rules. And it is not a simple path, of simply saying offer non-discriminatory access."

	Harold Furchtgott-Roth

Harold Furchtgott-Roth is the FCC Commissioner most committed to deregulation, and most committed to exercising regulatory power only when granted authority to do so by Congressional statute. He frequently dissents from decisions reached by the majority of the Commission.

He argued that the debate largely dealt with competing policies and business plans, and that choosing between these is not the function of the FCC.

"At the FCC, I have kind of a strange view, which is, we don't set policy. The Congress does policy. They write policy into law."

When asked by the panel's moderator, Scott Harris, for his interpretation of local authority to mandate open access, not as a matter of policy, but as a matter of law, he declined to offer a legal interpretation.

He did comment that "we need to resist those who would keep us from deregulating." However, he also stated that the Internet was already being regulated. "We must not deceive ourselves into thinking that the Internet today is entirely without regulation. It is regulated in many ways."

"Practically every aspect of the Internet today is regulated, directly or indirectly." However, he added, "it is less regulated than other media."

Furchtgott-Roth was also asked if the FCC has the authority to address monopolies. He responded that the FCC only has limited authority to do so under the Clayton Act, but it does not exercise that authority. He also commented that the FCC already had plenty to do "without going off and looking for new things to do." As for the FCC's antitrust merger rules, he whispered, "we don't have any such rules."

Vradenburg also seized upon the antitrust merger review authority question to point out that "they haven't articulated the basis" for taking a stand on this issue.