AOL may put speed bump on the Information Superhighway

By Amy Ridenour
web posted February 1999

Imagine coming home from a busy day at work, settling down in your favorite chair, and turning on some entertainment. Today, that is likely to mean television or the stereo. But soon your options could be very different.

If government doesn't say no, a coming merger between the Internet and cable television will soon give you the best of both worlds: the interactivity and imagination of the Internet combined with the entertainment value and professional standards of television networks.

This means that you won't just watch your favorite game show. You'll play, too, along with other contestants. Soap operas and some other television dramas will be similarly interactive: you'll have the opportunity to control a character yourself, truly getting involved in the direction of the plot.1

In short, home entertainment will change, and change for the better.

The key to making this change possible is increasing Internet capacity and speed. The technology exists to do this now, but a fight between corporations may keep it out of your home.

The fight is between some big names: the long distance giant AT&T and the cable television corporation TCI, which want to combine to offer low-priced, hundreds-of-times faster Internet access by sending Internet signals through TV cable, and the Internet giant America Online (AOL), which wants both the federal government and thousands of local governments to prohibit AT&T/TCI from offering this service unless they give a piece of their cable network to AOL.

It's no exaggeration to say that the outcome of this fight will affect every American, because if AOL is allowed to win, companies like AT&T and scores of others investing in ways to speed up the Internet and improve TV and telephone service will no longer have a profit incentive to do so. Why spend billions to make Internet access faster, or to improve TV and telephone options, they'll figure, if, after they do so, their business competitors will get to use their expensive new networks without having spent the money or taken the risk to build them? So the outcome of this political and legal battle will determine whether Americans continue to surf the world wide web as they do so today, or if web access will speed up tremendous and offer a multitude of new entertainment, educational and telephone service choices, all for a price comparable to what Americans already pay.

AOL is trying several strategies to prevent AT&T/TCI from offering consumers faster Internet access than AOL offers.

First, AOL would like the Federal Communications Commission (FCC) to mandate that AT&T/TCI cannot merge to provide this service unless AT&T/TCI agree to let AOL have access to the AT&T/TCI network.

Essentially, AOL is arguing that the FCC should regulate cable networks as it regulates telephone communications. But the two industries are different, and the FCC has never before had the authority to regulate TV cable. If the FCC is to expand into a broad new area of regulation, it is up to the Congress - not AOL - to tell them to do so. And Congress hasn't done so. Instead, in the last major alteration of telecommunications regulation, the giant 1996 Telecommunications Act, Congress and the President said that they wanted more competition in telecommunications, not less.

The good news is that, although the FCC has yet to rule on AOL's request that it be allowed access to AT&T's high speed networks (despite having contributed not one penny to building them), the FCC does not seem inclined to grant AOL's request. It is a shame, however, that any company should need FCC approval to offer better products to consumers.2

AOL's second, and in some ways more worrisome, tactic is to lobby local governments against the AT&T/TCI merger. Because local governments approved TCI's right to provide local cable TV services, AOL reasons, local governments can prohibit AT&T from merging with TCI to provide Internet and telephone access through those same cables.

It's too early to tell if AOL tactics will succeed with local governments. So far only the city of Portland, Oregon has agreed with AOL's thinking, but most cities have yet to make any decision at all. AOL is lobbying them hard, so it can't be assumed that AOL won't win this fight in many cities. AT&T has responded by filing suit in federal court in Portland, saying that, under the terms of the 1996 Telecommunications Act, they can't be prohibited from using their own cable networks exclusively. But this suit, filed in mid-January, has yet to be heard.

In any city in which AOL does win, the effect will be to deny faster Internet access and improved TV and telephone service to consumers in these cities. Sadly, if many cities agree with AOL, the affect will be national, as fewer companies will be willing to invest in technological improvements. Thus, a decision by a handful of city councils could have a major impact on whether or not Internet speeds and capacity is improved.

In a recent Public Opinion Strategies poll, Americans said that increasing the Internet's speed and efficiency was their number one technology priority.3 It would be ironic indeed if this laudable and popular goal, now within our technological reach, was thwarted by America's largest Internet provider, American Online.

Footnotes:

1 For more information about the impact of improved bandwidth on home entertainment options, see Karen Kaplan, "Year-End Technology Special: Buzzworld for the New Year is Bandwidth," Los Angeles Times, December 28, 1998

2 For more information about AOL efforts to convince the FCC to allow AOL access to AT&T/TCI networks, see Grover Norquist, "Hypocrisy Going High Tech," Washington Times, December 14, 1998

3 James Freeman, "What Washington Must Do to Speed Up the Internet,' USA Today, December 30, 1998

Amy Ridenour is president of The National Center for Public Policy Research. Comments may be sent to ARidenour@nationalcenter.org.




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