—28—

75.

AT&T argues that this competition is not disabled by the cable broadband

architecture, since a customer can always “click-through” to a non-cable ISP. But the ability to

click through provides just a fraction of the services that a competitor ISP might potentially

provide. It would be as if competitor browsers on the Windows platform performed just 30% of

the functions that they performed on other platforms. Further, click-though may be economically

irrational even if it is technically feasible, just as Microsoft’s original “per processor” license

made it nominally possible but extremely unlikely for an OEM to load two operating systems

onto a computer. Thus the question in this matter is not whether a user will take the time to

“download” another ISP connection; there’s no such download possible. The architecture ties the

user to AT&T/MediaOne’s ISP; users cannot cut that knot.

IV.

The Arguments in Favor of Broadband Bundling

A.

A Policy of “Regulatory Restraint”

76.

It is our view that AT&T’s desired design of the architecture of the emerging

broadband cable market could be a significant threat to innovation in this market. We suggest a

presumption that no significant portion of the broadband market be permitted to violate the

“End-to-End” design, unless there is clear evidence that such a change is benign.

77.

So far the FCC has taken a different view. In its initial consideration of this

matter, and in the most recent reports from the Cable Services Bureau, the FCC has taken the

position that it would best facilitate competition in this market by simply doing nothing. In our

view, this profoundly underplays the importance of the FCC’s activism in assuring competition

in the past, and will jeopardize the innovative prospects for broadband Internet service in the

future.

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78.

The Cable Services Bureau most recent report to Chairman William Kennard has

recommend a policy of “regulatory restraint.”15It grounds its recommendations on a number of

“responses and preliminary findings,” and on a straightforward cost benefit analysis of the risks,

and benefits, from “regulatory restraint.” The “responses and preliminary findings” are as

follows:

(1)

The broadband industry is nascent;

(2)

Cable modem deployment spurs alternative broadband
technologies;

(3)

Regulation or the threat of regulation ultimately slows
deployment of broadband

(4)

Market forces will compel cable companies to negotiate
access agreements with unaffiliated ISPs, preventing cable
companies from keeping systems closed and proprietary

(5)

If market forces fail and cable becomes the dominant
means of Internet access, regulation might then be
necessary to promote competition

(6)

There was no consensus on how to implement “open
access” from a regulatory perspective

(7)

There was no consensus on how to implement “open
access” from a technical perspective

(8)

Rapid nationwide broadband deployment depends on a
national policy

79.

In our view, conclusions (1) and (2) are correct. Conclusions (6), (7) and (8) may

be correct, but are irrelevant to this proceeding. Conclusions (3), (4), and (5), the heart of the

policy recommendation, are both wrong and internally inconsistent.

80.

Findings (1) and (2): It is clearly correct that broadband services are just

beginning. The vast majority of Internet users are narrowband users. The content and services

15See Broadband Today, Staff Report To William E. Kennard, Chairman Federal Communications Commission On
Industry Monitoring Sessions Convened By Cable Services Bureau (October 1999).

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that fit best with broadband are just being developed. These services are in part services that

require large bandwidth to function effectively. (Streaming video or audio is an example). More

significantly, they are also services that assume that the user is “always on” the Internet. This

latter fact will, in our view, lead to the most significant change in how the Internet will be used.

There are a host of applications that are just beginning to be envisioned that will depend upon the

Internet constantly monitoring and responding to situations “at home.” Many of these services

are difficult or impossible to implement through modem-based telephone access.

81.

It also appears correct, though we have not studied the matter independently, that

cable broadband service has spurred other broadband providers, in particular DSL. We do

believe the report overstates the significance of existing DSL competition. The current market

share of cable in the residential broadband market is over 80%.1 6This lead is significant, and is

unlikely to change quickly.1 7

82.

Findings 6 and 7: The Bureau maintains that there is neither agreement on how to

implement “open access” nor agreement on what “open access” is. But this part of the report

reads like a poor imitation of a Socratic dialogue. Obviously, if one gathers a collection of bright

lawyers and technologists, each advancing different interests, one can create a cacophony of

views about what “open access” is, just as a good law professor can create a cacophony of views

about what “justice” is, or even what the “FCC” is. But a law professor can not deny that there is

an “FCC” merely because no “agreement” in definition is found. And the Bureau should not

16See Cable Takes the Early Lead, The Industry Standard (October 11, 1999) at 119. For an earlier and higher
estimate, see Randy Barrett, “Cable, phone lines in battle for supremacy, Inter@ctive Week69 (January 25, 1999)

17See, e.g., Forrester Report, From Dial-Up to Broadband, April 1999, at 10.