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could the FCC require access providers with significant market power to provide open access, or

face regulation if they don’t. The policy — open access — should be clear, even if cable

companies control how it is implemented in the first instance.

91.

The need for this policy is pressing. The Bureau’s evidence that cable will

negotiate open access contracts is both slight, and beside the point. The Bureau points to

negotiations with America Online, which it suggests is evidence that cable will provide

independent access generally. But the principle of open access, and the value preserved by End-

to-End architecture, is not that the largest and most powerful have the right to access. The

principle of open access, and the design of End-to-End, is that anyonewith a better mousetrap

gets access to the market.

B.

Technological Limitations to Open Access

92.

The Bureau repeats technological arguments about why open access is not

feasible in the context of broadband cable. These arguments are misleading at best.

93.

First, the Bureau repeats cables claim that there is something technologically

impossible about giving ISPs access to the cable lines. Cable, it is claimed, is a “shared

medium,” while DSL is dedicated.

94.

This is a fundamentally misleading argument. The Internet itself is a shared

medium. Its performance, as the report notes, “var[ies] depending on the number of actual

subscribers using the Internet connection at the same time.”2 0The only difference between DSL

and cable is the place where one enters the shared pool. It is true that cable is architected to share

IMAGE lem-les.doc06.gif

19See Broadband Today, Staff Report To William E. Kennard, Chairman Federal Communications Commission On
Industry Monitoring Sessions Convened By Cable Services Bureau 35 (October 1999).

20Id. at 19.

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bandwidth among local users, whereas DSL does not. But whether that difference results in a

difference in performance is simply a function of how many users the cable company decides to

connect, and not upon whether the users it connects have different ISPs. Give a certain profile of

usage, cable broadband can guarantee an effective equivalent of unshared access simply by not

overselling the access they attach at any single node. More to the point, the cable companies can

control usage whether or not they also own the ISPs, merely by limiting the number and size of

network subscriptions. So the shared medium argument does not justify bundling of ISP service

with access to the network.

95.

Second, the Bureau argues that security on a cable node is less effective than on a

DSL connection, since data from other computers passes by all computers on a network node (as

is the case, for example, with an Ethernet network). This argument too is misleading. There is a

difference in the security approaches necessary to implement broadband cable securely, since

users on a particular node are all exposed to the same network traffic. But cable companies are

already developing technologies to eliminate that security risk. There is no reason to believe that

a properly implemented cable system would be any less secure than a comparable DSL system.

And again, there is no reason to believe that cable control over ISPs is necessary to achieve this

goal.

96.

Third, the Bureau makes much of AT&T’s expectations that it would be permitted

to run a closed network. The report sites the colorful mixed metaphor of one analyst, that an

open access requirement “puts a shotgun slug through two inches of Excel spreadsheets that

[cable companies] use to generate their rate-of-return calculations.”2 1The argument is apparently

21Id. at 34.

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a point about economic justice or fairness — that it would be unjust or unfair to change the rules

just now.

97.

If AT&T had these expectations, they were unreasonable. In an age that has

reaped extraordinary benefits from the regulations that deregulated the telephone monopoly, and

that is beginning to reap the benefits from similar regulations deregulating other local

monopolies — for example, electricity — no reasonable business could believe it likely that it

could sustain an old-world regulatory structure that protected monopoly. And if AT&T did build

its models on that assumption, doubtless Excel is quite capable of recalculating the returns on a

different set of assumptions. That, after all, is what an electronic spreadsheet is for.

C.

Incentives to Build Broadband Connections

98.

The Bureau repeats the threat of cable companies, that they won’t invest as

quickly if they are forced to open access. In effect, the argument is that we must grant cable

companies not just a monopoly over the wires, but a right to expand that monopoly into

competitive markets, in order to give them an incentive to implement broadband access. This

argument is simply wrong as a matter of economics. It is possible to grant whatever incentives

are needed by setting the appropriate price for control of the wires themselves. Allowing the

cable companies to gain that incentive by monopolizing a competitive market offers no

guarantee of giving the appropriate incentive, and (as discussed above) poses significant risks to

competition and innovation.

99.

We also suggest that the cable companies protest too much. We have heard many

times the argument that an industry won’t ever develop — or will collapse — if it isn’t given

preferential treatment by the government. Most of those arguments turn out to be illusory. In the

late 1970s, Hollywood argued to Congress that the movie business would not exist in ten years

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