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Broadband Internet Access:. The Market Solution Vs. Government Intervention. “The future of the Internet will be shaped more by policy choices than technology choices,” – Steve Case, Chairman and CEO, America Online. What is Broadband?. Narrowband: 56K Dial-up modem Email

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broadband internet access

Broadband Internet Access:

The Market Solution

Vs.

Government Intervention

slide2
“The future of the Internet will be shaped more by policy choices than technology choices,” – Steve Case, Chairman and CEO, America Online

David Rice, Kennedy School of Government, Harvard University

what is broadband
What is Broadband?
  • Narrowband: 56K Dial-up modem
      • Email
      • Web Surfing
      • Download text files
  • Broadband: 100 x Faster
      • Watch movies and listen to music
      • Two-way Audio/Visual communication
      • Large file downloads
      • ‘Always On’

David Rice, Kennedy School of Government, Harvard University

broadband technologies
Broadband Technologies
  • DSL
  • Cable
  • ATM
  • Satellite
  • Wireless
  • Fixed Wireless
  • Fiber

David Rice, Kennedy School of Government, Harvard University

broadband penetration
Broadband Penetration

David Rice, Kennedy School of Government, Harvard University

broadband distribution by technology
Broadband Distribution by Technology

David Rice, Kennedy School of Government, Harvard University

the last mile
The Last Mile

The Last Mile

David Rice, Kennedy School of Government, Harvard University

open access
Open Access
  • Telcos vs. Cable
  • Traditional ISPs use regulated phone lines
  • Cablecos use closed, proprietary networks
  • Issue: Competition for high-speed Internet

users and unbundling of delivery and

content providers

David Rice, Kennedy School of Government, Harvard University

bundling itc services the at t strategy
Bundling ITC Services: The AT&T Strategy
  • AT&T acquires TCI and MediaOne
      • Access to 30 million US cable subscribers
  • Goal: provide one-stop-shopping for

voice, Internet, and video.

David Rice, Kennedy School of Government, Harvard University

controlling the pipe and the content the aol timewarner merger
Controlling the Pipe and the Content: The AOL-TimeWarner Merger
  • AOL: Largest ISP in the world
      • 22 million subscribers in October, 2000
  • TimeWarner: Second-largest media

conglomerate in the world

      • 500,000 cable Internet subscribers in 1999
      • 22% of the current broadband subscribers

David Rice, Kennedy School of Government, Harvard University

ilecs fighting for relevance
ILECs: Fighting for Relevance
  • Incumbent Local Exchange Carriers
  • Marketspace openly competitive as a result

of the 1996 Telecommunications Act

  • Trying to roll-out DSL technology
      • Fraught with technical problems and high-costs

David Rice, Kennedy School of Government, Harvard University

drivers of government intervention in the market
Drivers of Government Intervention in the Market
  • Consumers’ need for “security.”
  • Business’ desire for stability.
  • Losers seeking relief.
  • Winners wanting to cement their lead.
  • The Internet’s role as official channel.

David Rice, Kennedy School of Government, Harvard University

losers beg for government action
‘Losers’ Beg for Government Action
  • Open Net Coalition
      • Funded by small, regional ISPs
      • Founded by AOL (pre-Time Warner)
      • Seeking Congressional or regulatory action to

force cable companies to allow other ISPs access to

their networks

      • Spin: “The Internet will become a Corporate

Intranet”

David Rice, Kennedy School of Government, Harvard University

winners warn against stifling broadband investment
‘Winners’ Warn Against Stifling Broadband Investment
  • Hands Off the Internet
      • Funded by AT&T
      • Represents the cablecos who want to maintain their

dominant position by keeping networks proprietary

      • Spin: “The Free market—it works!”

David Rice, Kennedy School of Government, Harvard University

open access fights around the u s
Open Access Fights Around the U.S.

David Rice, Kennedy School of Government, Harvard University

political stakes are high
Political Stakes are High

IT Industry Contributions (in millions)

* January1st through July 31st only

David Rice, Kennedy School of Government, Harvard University

confluence of regulation
Confluence of Regulation
  • Municipalities have jurisdictional authority over

cable television franchises

  • FCC has jurisdiction of Internet service providers

and traditional telecom providers

  • 1996 Telecommunications Act was perfectly

vague regarding clear jurisdictional authority

  • Court decisions and attempts to force open

access at the municipal level have further

muddied the issue

David Rice, Kennedy School of Government, Harvard University

turning points at t v city of portland
Turning Points:AT&T v. City of Portland
  • Portland, OR requires AT&T Broadband

to open cable networks to competition

  • Decision is overturned by the 9th Circuit

Court of Appeals

  • Regulation of cable Internet networks is

remanded, defacto, to the FCC

David Rice, Kennedy School of Government, Harvard University

turning points
Turning Points:

AOL-TimeWarner Proposed Merger

  • AOL, the most outspoken critic of AT&T’s

merger with TCI and proponent of ‘open access’

to cable networks, abandons the grassroots effort

  • Merger requires FTC approval (12/14/00)
  • Expected to be required to open networks to

competition

  • Recently announced a pilot project to

‘voluntarily’ allow access to ISP Juno,

MindSpring, and Earthlink (Sprint’s ISP)

unanswered questions
Unanswered Questions
  • Should cable companies be required to

open networks to competition?

  • Under what conditions?
      • Price for leasing lines
      • Level of bandwidth
      • Authority to control network traffic
      • Who has jurisdiction
      • How much authority

David Rice, Kennedy School of Government, Harvard University

recommendations
Recommendations
  • Apply anticipated FTC ruling on AOL-

TimeWarner as a model, scaled appropriately, for ‘voluntary’ action by all cable operators

  • Provide jurisdiction over fees, competition,

consumer, and deployment to state-level PUCs

  • Provide the FCC authority over broad policy

issues, guidelines for PUCs, and technical

assistance

David Rice, Kennedy School of Government, Harvard University

to comment or criticize please contact the author
To comment or criticize, please contact the author:

David Rice

Candidate for Masters in Public Administration, 01’

Kennedy School of Government

Harvard University

David_Rice@KSG01.Harvard.Edu

David Rice, Kennedy School of Government, Harvard University