Will Council let courts, FCC decide net access issue?

With millions of dollars at stake and policymakers in other cities watching closely, the L.A. City Council is still refusing to take a stand on the controversial issue of high-speed Internet access.

Hearings on the issue are set to begin this week, and City Hall insiders expect the council to wait for federal regulators or even the courts to decide whether consumers should have open access to the high-speed Internet provider of their choice.

If the city chooses open access, it would require cable and telephone companies to open their delivery systems to rival providers for a price.

"Earlier this year, there were probably six to nine votes solidly supporting open access," one lobbyist said. "Now I don't think anyone knows."

Most council members were conspicuous in their silence on the issue last week, either refusing to comment or saying through spokespeople that they're still studying the issue.

Earlier this summer, Councilman Alex Padilla, chairman of tile council Information Technology Committee, said L.A. has an opportunity to set the tone nationwide on broadband technology and competition.

But thus far, he has declined to take a position on the issue.

"I'm looking to take a rational, reasonable approach." Padilla said then. "We're looking at taking big steps in the next couple of months, I'm not inclined to wait for the Federal Communications Commission to set a direction."

Over the summer, several developments slowed what had seemed an inevitable move to mandate open access. Several key city policymakers involved in the issue left their positions. Meanwhile, the Information Technology Agency issued a report in June urging the council to step back and leave the broadband market unregulated.

On a national level, the Federal Communications Commission, which had never actively intervened in a local cable Internet dispute, filed a brief in federal court against the city of Portland, Ore., after that city mandated open access. The FCC is asking an appeals court to reverse that decision on the grounds that an open system would slow investment in highspeed Internet infrastructure.

FCC Chairman William Kennard has argued that a "hands-off" regulatory approach that helped the Internet prosper should also apply to broadband services offering Internet access.

In part, Kennard argues that the market is in its infancy. "When I look out in the marketplace and I see only a million cable modem subscribers and about 200,000 (digital line) subscribers, my first reaction is to allow this marketplace to play out for awhile before we step in and start regulating," he said in a Sept. 17 speech.

In fact, the FCC has suggested it's willing to sue any local governments that mandate open access because the Telecommunications Act of 1996 instructs the commission to speed the deployment of "advanced telecommunications capability to all Americans" and "remove barriers to infrastructure investment."

As a result, the FCC has consistently opposed open-access mandates, no matter what type of delivery system is involved.

In Los Angeles and elsewhere, cable companies and long-distance giant AT&T Corp. want a closed system to maximize revenue from the delivery systems they already have in place. Local phone companies, aligned with America Online Inc. and other ISPs, want cities to mandate open access, letting competitors inexpensively lease space on existing cable systems.

Observers predict there will be plenty of political posturing during the upcoming City Council hearings and perhaps some enlightened debate. But in the end, the council will likely walt and hope that the marketplace or the courts sort out the arguments.

The longer the hearings last, the less likely the council will vote for open access.

"(Closed-access advocates like) AT&T must be delighted that there will be at least three hearings (before the council schedules any votes)," one lobbyist said.

Even before the FCC showed it was willing to flex its muscles, the city Information Technology Agency urged the council to take a hands-off approach. At Wednesday's heating, council members will get to question staff members about the report.

The report said cable, telephone, and satellite companies should duke it out to see which type of service can most quickly and cheaply bring high-speed broadband service to consumers.

To date, though, the telephone and satellite options haven't matched the speed of cable or the range of services it offers.

The ITA says "forcing" cable companies to open their networks to rival ISPs would cut cable profits and might encourage them to invest in high-speed infrastructure elsewhere. If that happened, L.A. consumers would suffer.

The report does urge the council to put a "reopener" in any franchise agreement. That way, if one cable company captures two-thirds of the customers for high-speed access in its service area, then the council can require the company to open its lines to competitors.

The open-access side isn't convinced that this approach would protect consumers or taxpayers. "What happens two-and-a-half years from now when the (cable) system is built out?" one insider asked. "If the city reopens the agreement, the cable company will demand compensation for its investment - and it may well get it.

"If the city adopts a wait-and-see approach," the insider said, "the battle is already over."