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The Price of Speed

[Times art: David Williams]

Should Web surfers have to pay twice for a high-speed Internet connection - once for access to a cable modem service such as Road Runner or GTE WorldWind, and again for an Internet service such as AOL or CompuServe?

By DAVE GUSSOW, Times Technology Editor

© St. Petersburg Times, published July 26, 1999


Sure, America Online has its faults. But you have used it for years, you like its format, it is where you get your e-mail -- it is a comfortable online home.

Except the darn phone connection isn't fast enough. Downloads take forever. What's a surfer to do?

Hey, the cable TV company offers Internet access. It is fast, it doesn't require a phone line and it is cheaper than high-speed alternatives offered by phone companies. There is one big catch: To get the higher-speed cable service and keep AOL, you have to pay twice.

For example, Time Warner charges $40 a month for its Road Runner service in the Tampa Bay area. A subscriber who wants to keep AOL would have to pay another $10 a month under an AOL plan that gives unlimited access if the user has an alternative service provider.

If you are not willing to do that, your options are limited: Drop AOL and start fresh with cable, which provides its own Internet service and speeds 50 to 100 times faster than phone dial-up services, and let everyone know you have a new e-mail address. Or keep plodding along with your current connection.

Those aren't good choices for consumers, argues a coalition that includes consumer advocates, GTE, America Online and small Internet service providers. Consumers should be able to choose one provider and get fast access to the service of their choice without paying twice, they say. And the cable companies shouldn't have a monopoly on this technology.

Not so fast, say the cable companies and AT&T. We are spending billions to upgrade our systems to provide this service and need to make a return on our investment, they say. We are not blocking where people can go on the Internet and, besides, AOL made a business decision to charge users for its content. We shouldn't be penalized for that.

It gets more complicated, and heated sometimes, but that is the gist of the arguments being made as these groups fight over an issue called open access: whether to make cable companies open up their high-speed connections to the Internet for AOL or other Internet service providers. With the Federal Communications Commission taking a hands-off policy on the issue, it has popped up in cities and counties that regulate cable TV franchises.

The movement started in the Northwest. In Portland, Ore., local officials voted to make AT&T open its cable system for Internet competition. A court ruling upheld the decision, though it is being appealed, and the movement has spread. In Florida, the Broward County Commission voted July 13 for open access. Miami-Dade County is considering the issue, and it might surface soon in Pinellas County.

At stake is a high-speed Internet access market that Forrester Research estimates will go from 800,000 users now to 1.5-million or more by year's end, compared with 41.3-million dial-up users getting low-speed access by phone lines. By 2003, Forrester says that 26 percent of existing dial-up users will have converted to high-speed access, also called broadband. By the end of 2003, the Cambridge, Mass., research company predicts there will be more than 27-million broadband subscribers.

But it goes beyond Internet access. AT&T envisions this high-speed line delivering video products such as on-demand movies, digital music channels and local phone service, a market the long-distance company has been fighting to enter for years.

In this debate, each side hurls the word "monopoly" at the other and claims it is the champion of Web-surfing consumers. So who is?

"The real answer is none of them are, which is okay. That's not their job," said Andrew Jay Schwartzman, president and chief executive of the Media Access Project, a group that advocates open access.

The important thing, Schwartzman said, is that someone makes sure that consumer rights are protected in this debate among parties who are "all monopolists."

"It's not just about prices," Schwartzman said. "It's not just about choices and competition, although it is. It's also about free expression. It's about self-governing. It's about creativity. It's about the open architecture of the Internet, which has fueled unprecedented economic growth in this country."

The technical challenge

In a few areas around the United States, including Pinellas County, GTE Corp. has multiple communications personalities. It is not only a local phone company but also a cable TV company (GTE americast) that offers cable modem service (GTE WorldWind) complete with its own Internet service provider (GTE.net).

In the spring, as cable companies kept saying it was not technically possible to allow multiple Internet service providers access to their systems, GTE decided to prove them wrong on its own system.

Using networking equipment available from companies such as Nortel and Cisco, it ran a test with 50 Internet users in the Clearwater area who subscribe to AOL, CompuServe and GTE. It was no problem for the user to click on icons to make the connection and get to their preferred service. It was no problem having subscribers to different ISPs using the system.

The number of subscribers is important on a cable system because it is a network. The more people in a neighborhood who share the line on that network, the slower it gets. The cable companies insist traffic would bog down more quickly if they had to squeeze access to different Internet service providers through the same pipeline.

"One thing municipalities haven't thought about is that you can't simply require cable companies to open networks to multiple end users without some consequences," said Ken McNeely, AT&T's vice president of law and government affairs. "Who manages the space? Is it first come, first served? A lottery? What happens when it becomes so degraded that it's useless to customers?"

Not a problem, GTE says. "The number of ISPs really doesn't matter as much as how many customers you have signing up," said Kenneth Kriz, business development manager for GTE Media Ventures. And the number of subscribers is an issue any system deals with as it grows.

All GTE did was add a piece of equipment, which costs $60,000 to serve 80,000 homes. As systems grow, additional equipment would be needed, but it shouldn't cause a crisis, GTE says.

"You end up with traffic jams because of poor engineering at one level or another," said Al Parisian, director of broadband services for GTE Media Ventures.

Mark Bailey, vice president of Time Warner's Road Runner Online Services in the bay area, concedes it is technically possible to have multiple Internet providers. But he says such a system would create a nightmare to administer and maintain.

GTE's Kriz smiles when he hears such arguments. "It's so simple," he said.

Deregulation and competition

The Telecommunications Act of 1996 was supposed to create competition in the local phone and cable TV markets. But since the law's passage, cable TV rates have risen about 22 percent -- more than four times the rate of inflation. And it is hard to find competition in either market, although parts of Pinellas are the exception, with GTE's americast offering residents an alternative to Time Warner's cable offerings.

"What we have is an unregulated monopoly," said Pat Kemp, executive director of the Florida Consumer Action Network in Tampa. "Unless it's open, we won't see prices drop (for cable Internet access) because there won't be competition."

Not necessarily, AT&T's McNeely says. AT&T has invested more than $100-billion buying two cable systems, TCI and Media One. McNeely says part of that investment is to let AT&T compete with the "incumbent monopolists" to give consumers a choice in local phone service, which can be provided through the cable wire.

He also contends that the moves forced local phone companies to start providing high-speed services such as digital subscriber lines to compete with cable Internet access. That new competition could reduce the price to consumers for DSL.

"Because government has not gotten involved, you're seeing the competitive marketplace evolve," McNeely said.

McNeely wants local communities to wait until a national policy can be decided, as well as give time for the emerging broadband technology to develop and to upgrade and expand the service.

But delaying could cost consumers, Kemp says.

"They'll have such a stranglehold that it will be difficult to then introduce competition into the system," Kemp said, "as it has been for telephone service."

Looking up at the giants

When Time Warner introduced its Road Runner cable modem service in the bay area, Suzi Pilat lost some of her customers at Intelligence Network Online in Clearwater. Hers is one of the dozens of small companies that provide Internet connections by phone lines for people who don't want an AOL or need specialized business services, such as Web hosting.

"Luckily for us, we have geared our whole company toward business from the start," said Pilat, a board member of the Florida Internet Service Providers Association. "A business customer with a T1 (high-speed phone connection) isn't going to dump that and go to cable modem."

But small providers that rely on residential customers and can't offer cable access may have problems, which is why FISPA members -- mostly smaller services that can range from a few hundred customers to thousands of customers -- have been aggressively pushing open access.

Bruce Kasrel, a senior analyst at Forrester, thinks the issue could decide the fate of some of these small ISPs. Those in metropolitan areas could fold if they can't offer cable access to compete. Some in smaller, more rural markets might survive.

Pilat says she approached Time Warner about getting on its Road Runner lines to offer access but never got a response.

The cable companies "want to control the content of your television as well as the content of your PC," said Jim Pennington, president of Auglink Communications in St. Augustine and a FISPA member. "When they have the dual monoply on both appliances in your house, they can control banner ads, they can control sites. they have the ability to do a lot of content filtering."

Not so, says Sandy Colony, vice president of corporate public relations for Road Runner.

"Any Road Runner user has access to any content on the Web," said Colony, adding that bundling the ISP with the service allows it to recoup some of the investment of upgrading the system.

"We've done some research and focus groups," Colony said. "Our customers are happy having one provider. If they have a problem, they know exactly who to call. We haven't seen a problem in bundling our content with our ISP."

And, "as a business decision, they don't want to give that access away."

The small ISPs say, however, that they aren't asking for anything free. Charge them for the access, just as they pay the phone companies for high-speed lines.

Coming soon?

The court ruling in the Portland case may have opened the door for communities to act, but not everyone expects the door to be open long.

Kasrel, the analyst, thinks the court ruling will be overturned.

"You can't have (regulation) town by town," Kasrel said. "That would be nuts." If the ruling stands, he predicts that cable companies would stop expanding and providing cable modem service.

In the meantime, as cable franchises come up for renewal, more communities may look at the issue. In Pinellas County, for example, chief assistant county attorney Jim Bennett says the county was waiting for the court ruling from Oregon. The staff may make a recommendation about the issue soon for a pending cable franchise ordinance.

GTE expects a plan that would open its cable modem service to other providers to be ready by August but could not give a timetable on when such alternative services might be available.

Kasrel expects prices for DSL, which are higher than cable access, to come down in coming months as phone companies market it better and possibly offer package deals with other services.

Phone companies may do that "because they have to," Kasrel said. "If you're going to a market with cable modem and it's $10 to $20 cheaper, and as good if not better (than DSL), I just can't see them winning."


-- Information from Times wires was used in this report.

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