ADVOCATES BEMOAN LACK OF REGULATION FOR INTERNET-OVER-CABLE

Internet-over-cable service essentially is unregulated, although questions about its status are pending before FCC. FCC is considering whether Internet provided by cable should be considered cable service, telecom service, information service or perhaps some other animal altogether. Consumer advocates said modem customers with access to multiple ISPs wouldn’t experience such problem. For example, Earthlink offers competition to incumbents AOL and Road Runner in more than 20 AOL-Time Warner service areas. AT&T, meanwhile, was furiously moving its customers from @Home to new high-speed network. @Home’s problems also touched off more debate over competition between cable modem service and DSL offered by major phone companies. DSL is regulated, point that has infuriated telco officials who continually plead for regulatory parity with cable.

Media Access Project’s Andrew Schwartzman called situation “unquestionably a short-term debacle” and chastised FCC for allowing cable Internet service to “needlessly remain in a regulatory vacuum caused by the FCC’s inexcusable and intentional delay on deciding the issues.” He called on FCC to take action on pending Notice of Inquiry to decide how to define service. In absence of ruling, no agency -- neither FCC nor FTC -- has regulatory authority, Schwartzman said. David Butler of Consumers Union said situation revived open access debate and question of whether ISPs should be allowed on cable’s network, notion that cable companies resist, in part because their network was financed privately. Both Butler and Schwartzman said govt. should step in because shutdown was not simply termination of service for Internet surfers but critical breakdown for many people who depended on high-speed Internet services -- including e-mail and Web pages -- for their small businesses.

Several DSL providers seized on customers’ fears about uncertainty of cable modem service and offered special promotions to @Home customers for DSL service. Covad Communications, for one, was allowing @Home customers to move to DSL free, with no up-front costs and access to dial-up service while they waited for new DSL line to be installed. DirecTV Broadband extended special offer of 2 months free DSL service to cable modem customers and was waiving its activation fee. SBC, while not extending special offer, said it was prepared to provide any cable modem customers who had been disenfranchised by shutdown. SBC spokeswoman said @Home was “perfect example” of why regulatory parity was needed between cable modem and DSL service. “To say we're not surprised is an understatement,” she said. “This puts consumers and users in a horrible situation. This is why it makes no sense to have a monopoly provider be unregulated.” NCTA spokesman said such argument didn’t hold water because phone companies on one hand were asking Congress to free them from regulations, while at same time, arguing cable should be regulated. Besides, if there were more regulations, cable industry wouldn’t have been able to raise $52 billion in private capital to upgrade system and provide cable modem service in first place, spokesman said: “Of course it’s a matter of concern when the system is interrupted, even for a short time and for a relatively small number of people, but over time the cable modem has shown itself to be a superior and more efficient product.”

AT&T, meanwhile, was working to move its cable modem customers to new system. “We're appealing to our customers to stick with us,” said Susan Marshall, senior vp-advanced broadband services. It was unclear how many customers were cancelling service for lack of confidence, and Consumers Union’s Butler said his group had received only anecdotal reports of customers switching to DSL. AT&T said service interruptions and general surrounding uncertainty undoubtedly would have negative impact on its 4th quarter bottom line. As of Mon. morning, AT&T had moved 330,000 cable Internet customers in Oregon, Washington state and Dallas area to new network. AT&T customers in San Francisco and Illinois were scheduled to be moved late Mon. or Tues., bringing total added to new network to 657,000. Company hoped to move rest of customers in next few days, with those in Denver and Salt Lake City to be added on Wed., those in Hartford, Pittsburgh, Rocky Mountain region and Sacramento to be added Thurs., and those in Mich. Fri., AT&T said. AT&T owns 23% stake in Excite@Home and has bid $307 million for most of its assets - - bid investors call too low. AT&T spokeswoman at corporate hq in N.J. didn’t return phone call on status of AT&T’s bid.

Charter Communications didn’t establish new deal with @Home but had been preparing for such situation for relatively few customers who were on @Home system. Charter shifted 90% of those 145,000 customers to its own network. Comcast and Cox Communications had signed deals with @Home to allow their subscribers to continue to receive service for 3 months, but both companies were shifting customers to alternate networks.