TABLE OF CONTENTS
Summary............................................................................................................................... ii
I. Introduction........................................................................................................................ 1
II. Analysis............................................................................................................................ 3
A. Marketplace
issues – The ACA Cable Modem Survey................................. 3
1. ACA
members currently providing cable modem service................. 4
2. ACA
members planning to deploy cable modem service within 12 to 24 months..................................................................................................... 8
3. ACA
members not planning to deploy cable modem service.......... 8
4. The
ACA Cable Modem Survey validates the Commission’s marketplace approach to
broadband deployment................................................... 9
B. Policy
issues - independent cable companies and smaller markets........... 11
1. Policy goals
applicable to cable modem service in smaller markets 11
2. Policy
issues that may arise in larger markets and larger companies do not apply to
smaller markets....................................................................... 12
C. Legal issues – regulatory classification of
cable modem service................ 14
1. Cable modem
service might not fit into any current categories of regulated service..................................................................................................... 14
D. The Commission’s options............................................................................... 17
III.
Conclusion....................................................................................................................... 18
SUMMARY
The
American Cable Association and its members share a vital interest in this
proceeding. ACA members are leading the
industry in providing cable modem service to smaller markets and rural
areas. To do so, ACA members are making
substantial investments in system upgrades and are taking calculated business
risks to launch new services. The
imposition of burdensome mandated open access regulation presents a serious
threat to this progress.
To assist the Commission's inquiry, ACA provides data and analysis to
support the following:
·
Impressive
progress in smaller markets. ACA
has conducted a comprehensive member survey on deployment of cable modem
service. Key highlights of the data
include:
§
ACA members surveyed offer cable modem service in
systems passing nearly 840,000 homes in smaller markets and rural areas. Current expansion plans will double that
number to 1.7 million homes passed within the next 12 to 24 months.
§
ACA members currently serve over 38,000 cable modem
customers.
§
Many ACA members provide cable modem service through
unaffiliated ISPs.
The principal reason for
this progress: The Commission's
regulatory restraint has fostered marketplace solutions in smaller markets.
·
Smaller market
policy goals. For smaller markets,
the relevant policy goals are: (i)
continued rapid deployment of broadband services, and (ii) maintaining a
regulatory environment that encourages investment in companies serving these
markets. As the ACA Cable Modem Survey
data shows, the Commission’s emphasis on marketplace solutions has succeeded in
smaller markets.
·
Open access
concerns do not apply to independent cable.
The policy concerns raised by open access advocates do not apply to
markets served by ACA members because:
§
Unaffiliated ISPs already have access to many ACA
member systems.
§
ACA members are not vertically integrated content
providers and do not present a risk of favoring affiliated content.
SUMMARY (cont.)
·
Cable modem
service may not fit existing regulatory categories. The Commission should resist the results-oriented efforts of
various interests to force cable modem service into an existing regulatory
category.
·
Cable modem
service provided by independent cable companies should remain deregulated. If the Commission does impose mandated
open access regulations on cable modem service, the regulations should include
exemptions for cable companies serving smaller markets.
When it
comes to deployment of cable modem service in smaller markets and rural areas, ACA
members are part of the solution, not part of the problem.
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Inquiry
Concerning High-Speed ) GN Docket No. 00-185
Access to the
Internet Over )
Cable and Other
Facilities )
Comments of the
I.
INTRODUCTION
ACA submits these comments on behalf
of 250 independent cable companies.
Together, ACA members serve about 2.6 million cable subscribers. ACA members range from small, family-run
cable systems to multiple system operators focusing on smaller systems and
smaller markets. About half of ACA
members serve less than 1,000 subscribers.
All ACA members face the challenges of building, operating and upgrading
broadband networks in smaller markets and rural areas.
ACA members share a
vital interest in this proceeding. Through innovative solutions to technical
and business challenges, ACA members are delivering cable modem service to
smaller markets. For ACA, the Notice of
Inquiry ("NOI") raises a critical question: Will ACA members deploying cable modem
service to smaller markets now face the tremendous risk and uncertainty of
burdensome regulations?
As demonstrated by
the painful experience of cable rate regulation for smaller systems, when it
comes to regulating cable, one size does not fit all. In this proceeding, the Commission can help
forestall unintended consequences of any future regulation of the cable modem
platform or cable modem service. By
recognizing the unique circumstances and economic considerations of smaller
market providers, the Commission can ensure that the clamor to regulate does
not drown out the concerns of independent cable and the smaller markets they
serve.
II.
ANALYSIS
A.
Marketplace issues
– The ACA Cable Modem Survey.
The NOI seeks to
develop a factual record regarding the deployment of cable modem service. ACA has previously provided the
Commission with anecdotal reports of ACA members’ progress in deploying
advanced services in smaller markets. For
the inquiry in this docket, ACA wanted to provide the Commission with more
complete information concerning ACA members' success in delivering cable modem
service. To do so, ACA conducted a
comprehensive member survey during November 2000 ("ACA Cable Modem
Survey").
The ACA Cable Modem
Survey included telephone interviews of 108 member companies. In total, the sample included systems
serving more than 1.7 million cable subscribers in 3,400 franchise areas around
the United States. Members answered a
range of questions concerning their current provision of cable modem service,
near-term plans for rolling out or expanding the service, and how regulation of
cable modem service in their markets could affect their businesses.
1.
ACA members currently providing cable modem service.
·
Service information - franchise areas, homes passed and
customers served.
·
Financial considerations - investment required, sources
of capital, reasons for making the required investment, and assumptions
underlying business models.
·
Access to networks by unaffiliated ISPs.
·
Near-term expansion plans.
Results of the ACA
Cable Modem Survey show significant progress by ACA members in deploying cable
modem service in smaller markets.
a.
Service information.
Of the 108 member companies surveyed, 38 currently offer cable
modem service. The systems offering cable modem service pass a total of 839,748
homes. This represents approximately
33% of the total homes passed by ACA members in this group. The companies report a total of 38,647 cable
modem customers served as of October 2000.
To put these
numbers in context, the ACA members in this group serve approximately 2.5% of
the total U.S. cable customers and approximately 2.7% of the
total U.S. cable modem customers.
b.
Financial
considerations.
The ACA Cable Modem
Survey offers helpful insights into financial considerations involved in
upgrading plant and offering cable modem service in smaller markets. The
companies in this group report investing an aggregate $300 million to upgrade
their cable systems and obtain equipment for providing cable modem
service.
The franchise areas
where ACA members offer cable modem service represent 12% of the total number of
franchise areas served by the companies, while the number of homes
passed represents about 31% of the homes passed by the companies. This
suggests the companies are offering the service in their larger franchise areas
first.
The data contains noteworthy exceptions to
this observation. Several ACA members
report offering cable modem service in communities with less than 1,000 homes,
a few in communities with less than 500 homes.
·
The investment was necessary to remain competitive.
·
The investment was necessary to respond to marketplace
demands.
·
Business models showed that the investment would earn a
satisfactory rate of return.
c.
Access to networks by unaffiliated ISPs.
One aspect of the
ACA Cable Modem Survey shows a noteworthy difference in how independent cable
companies provide cable modem service: Many
ACA members provide cable modem service through agreements with unaffiliated
ISPs. ACA members and companies
such as High Speed Access, Internet Alliance, InterTECH and others have
negotiated agreements for unaffiliated ISP access to the cable modem platform
in smaller markets. In contrast to the
activity involving larger companies and larger markets, no ACA member reported
that any transaction with an unaffiliated ISP required litigation, lobbying of
government officials, or mega-mergers.
To the contrary, these agreements arose from business decisions by
independent companies to risk capital, transact, and provide an exciting new
service.
No ACA member
reported denying unaffiliated ISPs access to their cable modem platforms. Many members reported that no ISPs in their
service areas expressed interest in negotiating the terms of access to smaller
market cable systems.
d.
Expansion plans.
With their
expansion plans complete, these ACA members will offer cable modem service to
approximately 65% of the homes passed by the companies. For several ACA members in this group, their
plans include offering the services to 100% of franchise areas served.
Many ACA members in
this group indicated that they would not risk the investment necessary for this
expansion if burdensome regulations were imposed on cable modem service in
their markets.
2.
ACA members planning to deploy cable modem service within 12
to 24 months.
Of 108 companies surveyed, 36 plan to deploy
cable modem service within the next 12 to 24 months. The companies in this group currently provide cable service to a
total of 69,367 cable customers in 167 franchise areas. Within the next 12 to 24 months, these
companies plan to launch cable modem service to systems serving an estimated
54,500 homes passed.
Nearly all ACA
members in this group indicated that they would not risk the investment
necessary for this expansion if burdensome regulations were imposed on cable
modem service in their markets.
3.
ACA members not planning to launch cable modem service.
Reasons given by
these companies for not launching the services include:
·
Cost.
·
Affiliated with a telephone company that offers DSL or
dial up services.
·
Small customer base cannot support the investment.
·
Selling their cable system.
4.
The ACA Cable Modem
Survey validates the Commission's marketplace approach to broadband deployment
in smaller markets.
The ACA Cable Modem
Survey shows robust investment in broadband infrastructure in smaller
markets. Far from languishing on the
wrong side of a digital divide, almost a million customers in these markets
have access to cable modem service today. Current expansion plans will double
the availability of the cable modem service within 24 months. In some cases, these markets are ahead of
broadband deployment in urban centers.
This impressive
success begs one question: With the
higher costs associated with serving lower density markets, what drives this
progress? Commission reports, papers
and speeches offer one consistent answer:
the absence of burdensome regulation spurs investment in broadband
deployment.
ACA
members agree. ACA members surveyed
report developing their business models on the assumption that marketplace
forces would govern their provision of cable modem service. Nearly all ACA members currently providing
cable modem service indicated they would not risk additional capital at this
point if the service were to face burdensome regulations in their markets.
In
summary, the ACA Cable Modem Survey shows that the Commission’s policy of
regulatory restraint and allowing marketplace solutions to develop has worked
extremely well in smaller markets.
We
now turn to policy questions raised in the NOI.
B.
Policy issues -
cable modem service in smaller markets.
1.
Policy goals
applicable to cable modem service in smaller markets.
The NOI seeks comment on the policy goals
that should guide the Commission's inquiry. In smaller markets, two straightforward and often repeated
policy goals apply:
·
The rapid development of advanced services.
·
A regulatory environment that accommodates the unique
burdens and costs of independent cable businesses serving smaller markets.
The Commission's market based approach to
the cable modem platform has facilitated these goals in smaller markets. The ACA Cable Modem Survey shows members are
making substantial progress in deploying cable modem service. Many companies have done so through
negotiated agreements with unaffiliated ISPs.
Little of this progress would have occurred under burdensome regulatory
regimes like those advocated by some local franchise authorities, certain ISPs,
and incumbent telcos.
2.
Policy issues that
may arise in larger markets and larger companies do not apply to smaller
markets.
A
range of policy positions have surfaced during the open access debate.
Principal themes include: fostering
consumer choice, preventing market dominance by cable operators to
the detriment of unaffiliated ISPs, and preventing discrimination against
unaffiliated content. ACA defers to
NCTA and others to debate the merits of these policy positions. That said, the data collected in the ACA
Cable Modem Survey suggests one clear distinction - these policy issues do
not involve independent cable companies and smaller markets. The delivery
of cable modem service by ACA members does not present the perceived threats
underlying these policy positions.
The provision of cable
modem service by ACA members in smaller markets does not impede consumer choice in broadband Internet access.
The efforts of ACA
members are providing hundreds of thousands of consumers the option of
high-speed cable modem service in smaller markets. The number of homes passed by ACA members surveyed should exceed
1.7 million within 24 months. Other facilities-based providers have chosen not
to invest in these markets. In this
way, ACA members deliver a choice of broadband Internet access where none would
otherwise exist. With some exceptions,
most ISPs have shown no interest in serving smaller markets and in negotiating
access to the cable modem platform.
Emerging competition from satellite delivered Internet access should add
to consumer choice in even the smallest markets.
The
provision of cable modem service by ACA members in smaller markets has not
resulted in market dominance to the detriment of unaffiliated ISPs.
ACA
members report providing cable modem service to 38,647 customers in systems
passing 839,748 homes, a penetration level of less than 5%. By no measure does this suggest market
dominance. Moreover, many ACA members
report providing cable modem service through transactions with unaffiliated
ISPs. While the mandated open access
debate rages in larger markets, in smaller markets ACA members and unaffiliated
ISPs work together without the hoopla.
Finally, with the limited exception of ISPs that specialize in partnering
with independent cable companies, ACA members report that unaffiliated ISPs
show no interest in negotiating access to their systems.
The provision of cable
modem service by ACA members in smaller markets presents no risk of
discrimination against unaffiliated content.
In summary, ACA
defers to NCTA and others to address policy issues applicable to larger markets
and larger companies. For the markets
served by ACA members, the fundamental policy goals remain the rapid deployment
of advanced services and a regulatory environment that encourages investment in
smaller market providers. The
Commission’s current policy serves to advance these goals.
C.
Legal issues - regulatory classification of cable modem
service.
ACA anticipates that able advocates from
divergent perspectives will brief extensively the central legal issue in the
open access debate: How is cable modem
service classified under current law?
ACA offers only a few remarks on this question.
1.
Cable modem service might not fit into any current categories
of regulated services.
As recognized by
the NOI, the regulatory characterization of cable modem service has resulted in
sharp divergence in the courts.
Different courts have classified cable modem service as a "cable
service", not a "cable service", part "telecommunications service"
and part "information service", solely “information service”, and most recently, commercial speech
protected by the First Amendment.
A recent analysis
by Professor John Roberts of DePaul University Law School argues that confusion
reigns because current law has not developed a category of regulated service
into which cable modem service fits.
The fierce battle over "cable
access" - whether cable companies should be required to allow competing
Internet service providers direct access to cable modem platforms - raises
serious statutory questions which the 1996 Act simply cannot answer. The issue, though now of great importance,
was not anticipated or dealt with by the drafters.
For ACA, the
regulatory classification of cable modem service is less important than the
consequences of that classification. In
short, if the Commission proceeds to classify the service as one that is
regulated under the Communications Act, and the Commission does not forbear its
regulatory authority, the Commission must carve out broad exceptions for
smaller market cable systems. If not,
the regulations will bring a substantial risk of undercutting the progress of
ACA members in delivering cable modem service in smaller markets. Ample authority exists for creating
exceptions for independent cable companies.
We now turn to the
questions raised in Section III.C. of the NOI.
D.
The Commission's options.
Should the Commission continue its current approach?
For the markets
served by ACA members - yes. The Commission should continue to allow
independent cable businesses and others to develop marketplace solutions to
deploy cable modem service in smaller markets.
As the ACA Cable Modem Survey shows, the Commission's approach has
fostered substantial progress in making high-speed Internet access available to
hundreds of thousands of consumers in smaller markets and rural areas.
Should the Commission initiate a
rulemaking?
For the markets served by ACA
members - no. ACA recognizes that issues related to other
industry and market sectors may drive the ultimate answer to this
question. If the Commission proceeds
with a rulemaking, it should remember that one size does not fit all. It should
include proposals to exempt independent cable companies from regulations aimed
at larger companies and larger markets.
Should the Commission exercise its
forbearance authority?
For the markets
served by ACA members - yes. As shown by the ACA Cable Modem Survey, the
marketplace is working in smaller markets.
As expressed by the Cable Service Bureau, “A finding of market-based
harm . . . would be a necessary predicate for regulatory action.” No
evidence of market-based harm exists in markets served by ACA members. The imposition of burdensome Title II
regulations, local franchise regulation, or other regulations would upend
business models, erode incentives to invest, and stall progress in deployment
of cable modem service.
III.
CONCLUSION
ACA recognizes that much of the debate engendered by the NOI
will focus on large companies and large markets. ACA asks the Commission to resist letting that debate overshadow
the important progress of ACA members in deploying cable modem service in
smaller markets. As shown by the ACA
Cable Modem Survey, the Commission's policy of regulatory restraint is working
well in smaller markets.
If the Commission concludes that concerns with larger
markets and larger companies warrant the imposition of mandated open access
regulations, it should propose broad exemptions from those regulations for
independent cable companies serving smaller markets.
Respectfully
submitted,
AMERICAN CABLE ASSOCIATION By:__________________________
Matthew M. Polka Christopher
C. Cinnamon
President Rhondalyn
D. Primes
American Cable Association Bienstock & Clark
One Parkway Center 307
North Michigan Avenue
Suite 212 Suite
1020
Pittsburgh, Pennsylvania 15220 Chicago,
Illinois
(412) 922-8300 (312)
372-3930
Attorneys for American Cable
Association
December 1, 2000
acacomments_GN00-185
