Cable network sparks debate at PC Forum
By Dick Satran
SCOTTSDALE, Ariz., March 25 (Reuters) - While Microsoft looked for ways to end its antitrust battle in Washington, at this week's PC Forum in Arizona, high-tech heavyweights and futurists were already shifting their view to the next battle over control of the Internet. Participants at the annual gathering of industry stars, and entrepreneurs hoping for celebrity status, witnessed a fight over who will control high-speed access to the Net.
Cable companies are quickly ramping up access to homes -- and offering service that runs 20 times faster than existing Internet services.
Cable modem makes up less than 10 percent of the existing Internet audience now. But at a conference where terms like "neural networks", "wearable computers" and "biometric e-based commerce" fly through the air, there was little doubt that it was the next big thing -- or at least one of the next big things.
In a briefing, chief executive officer Tom Jermoluk of At Home Corp., the leading cable modem company, said service upgrades would be rolled out to up to 15 million new homes per year for the next three to four years. Cable modem, capable of running at 1 million bits per second, and runs over cable television wires, dramatically speeds Internet service that now which typically runs a 56,000, and is carried over telephone wires.
The "broadband" high-speed service looms as a huge threat to existing Internet service providers, or ISPs --- even to online giant America Online Inc, which services 14 million customers, mostly via slower speed wiring.
"Fifty percent of the people who sign up for our service come from America Online," said Jermoluk. "What is the role of the ISP in the future? It is extremely difficult to see that," Robert Rosenberg, of Parsippany, N.J-based INSIGHT Research said in a telephone interview. "Whether my neighborhood ISP will exist in the future is problematic."
Debate erupted at the conference here as "broadbanders" like AT&T, which owns most of AtHome, and traditional Internet services like Mindspring Enterprises Inc. MSPG.O and EarthWeb Inc. EBWX.O sparred over who will control the service.
A key issue is whether the government should force cable companies to open their wires to rivals. "Public policy should not be used to guarantee that an industry goes on forever. Public policy's goal should be to bring new technology to consumers," said AT&T Corp. T.N chief technology officer David Nagel. Nagel argued that his company invested heavily to buy Tele-Communications Inc., the giant cable company that owned most of cable modem company AtHome Corp. ATHM.O, and to upgrade systems and it should not now be required to open its wires to other Internet providers. He said there are numerous competing broadband technologies, including high-speed wireless services and digital telephone service.
But Internet service providers argued that the cable systems should allow others access, as a way of keeping the industry competitive. "The idea that we're getting a free ride from the cable companies is a pile of smelly stuff," said Charles Brewer, chief executive of Mindspring. He argued that companies like his should be allowed access to the cable systems because they could improve service and offer competition to AT&T. "We want to be their best customer, we want to drive traffic their systems, we want to help handle service problems," Brewer said.
Traditionally, cable companies have been heavily regulated because they enjoyed exclusive rights to provide the service within communities. Now, with cable companies investing heavily to upgrade their networks to offer Internet service, they are hoping to avoid a new round of government scrutiny.
The Clinton administration has taken a hands-off approach to most Internet regulation, although the government has pushed forward with the high profile Microsoft case involving Internet software. As if to shift the view forward, the government's top anti-trust regulator, Joel Klein, kicked off the conference by saying that the government is "open to a settlement" of the Microsoft Internet browser case, amid reports that talks were underway.
Klein agreed that industry needs to be encouraged to innovate, and that if successful product takes over a market "some period of monopoly power will be tolerated" so it can cash in. The government will, however, monitor companies that create what he calls "natural monopolies" to see that they are not abusing their positions. "Producers want market power," said Klein, and the drive to get it "spurs innovation and creativity." But the government needs to intervene when a company abuses market power.
On a later panel, William Kennard, chairman of the Federal Communications Commission, said, "Probably the most important decision the FCC ever made was that it was not going to get involved in (regulating) the Internet." Kennard said his agency needs to keep "a healthy dose of humility" in dealing with new cases like the emerging battle over access to broadband. "We need to learn more before we start waltzing in and start proposing solutions," Kennard said.
AtHome's Jermoluk said he was confident that the government will let the cable modem industry build its system without government interference. He dismissed the lobbying efforts of Internet providers, led by America Online in a lobbying group called Open Net, as a publicity campaign, "relying on press releases" to raise doubts about cable modem's future. "The extent to which they can convince people of that threat (of regulatory action), that can cause capital constraints for At Home," said AtHome's Blair Levin. Jermoluk said that upgrades cost $100 to $200 per home and will run into the hundreds of millions of dollars to complete.
REUTERS Rtr 20:03 03-25-99
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