11/4/1999
When is a cable not a cable? This is the question working its way through the Ninth
Circuit Court right now, courtesy of AT&T and the good people of Portland, Oregon. When the city of Portland and surrounding Multnomah County passed a regulation requiring AT&T to open its newly acquired cable lines to other internet service providers, such as AOL and GTE, the rumble over high-speed internet access began. In one corner was the City of Portland, weighing in on the side of competition, open access, and consumer choice. In the other corner stood AT&T, championing legal continuity: When AT&T made plans to buy MediaOne, the company was a local monopoly, and AT&T wants it to stay that way. It looked to be a clean fight. And yet, on Monday, one of the three appellate judges, Edward Leavy, threw in a twist: He asked whether there is really any such thing as the cable industry anymore. The answer to Judge Leavy’s simple question has the potential to radically alter the landscape of American media.
AT&T has not invested $100 billion in refashioning itself as a cable giant because it’s
committed to offering its customers high-speed internet access. Rather, AT&T has invested that money to buy back what it really wants: a national monopoly. Indeed, AT&T has been dreaming of regaining its monopoly status ever since the company was broken up into AT&T and the Baby Bells, back in 1984. With cable internet access, AT&T sees its opportunity. In an operation that would have made all the King’s horses and all the King’s men gasp in awe, AT&T is stitching a national monopoly back together out of the fragments of the local cable monopolies. If it can buy up enough cable outlets, it could become the sole provider for high-speed internet access for a sizable chunk of the country.
Cable is attractive to the internet industry because the cable industry has what internet service providers have wanted for years: a way to make money off content. By creating artificial scarcity — we’ll define this channel as basic, that channel as premium, this event is free, that one is pay-per-view — the cable industry has used its monopoly over the wires to derive profits from the content that travels over those wires. So, if you think about it, what AT&T is really buying is not infrastructure but control: By using those same television wires for internet access, they will be able to affect the net content its users can and can’t see (you can bet they will restrict access to Time-Warner’s offerings, for example), bringing pay-per-view economics to the internet.
In this environment, the stakes for the continued monopoly of the cable market couldn’t be higher, which is what makes Judge Leavy’s speculation about the cable industry so radical. Obviously frustrated with the debate, the Judge interjected that, “It strikes me that everybody is trying to dance around the issue of whether we’re talking about a telecommunications service.” His logic seems straightforward enough. If the internet is a telecommunications service, and cable is a way to get internet access, then surely cable is a telecommunications service. Despite the soundness of this logic, however, neither AT&T nor Portland was ready for it, because beneath its simplicity is a much more extreme notion: If the Judge is right, and anyone who provides internet access is a telecommunications company, then the entire legal structure on which the cable industry is based — monopolies and service contracts negotiated city by city — will be destroyed, and cable will be regulated by the FCC on a national level. By declaring that regulations should cover how a medium is used and not merely who owns it, Judge Leavy will be moving the internet to another level of the American media pecking-order. If monopolies really aren’t portable from industry to industry — if owning the wire doesn’t mean owning the customer — then this latest attempt to turn the internet into a walled garden will be turned back.