Broadband Internet Access:

1. Broadband Internet Access: The Market Solution Vs. Government Intervention

2. “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

3. 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

4. Broadband Technologies • DSL • Cable • ATM • Satellite • Wireless • Fixed Wireless • Fiber David Rice, Kennedy School of Government, Harvard University

5. Broadband Penetration David Rice, Kennedy School of Government, Harvard University

6. Broadband Distribution by Technology David Rice, Kennedy School of Government, Harvard University

7. The Last Mile The Last Mile David Rice, Kennedy School of Government, Harvard University

8. 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

9. 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

10. 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

11. 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

12. 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

13. ‘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

14. ‘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

15. Open Access Fights Around the U.S. David Rice, Kennedy School of Government, Harvard University

16. Political Stakes are High IT Industry Contributions (in millions) * January1st through July 31st only David Rice, Kennedy School of Government, Harvard University

17. 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

18. 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

19. 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)

20. 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

21. 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

22. 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