Broadband competition may face new limitations

An FCC ruling passed this spring may cut down on service options for consumers.

Consumers considering how much broadband service will cost in the future might naturally suspect that competition will lower prices.

Broadband is an attractive business now. Often only two companies compete for customer contracts in most communities. Both the cable and telephone industries have consistently raised prices over the past year. Observers say they earn profit margins of about 40 percent.

Yet a recent decision by the Federal Communications Commission will likely block more companies from entering the fray, consumer advocates say. The FCC decided in March that cable companies were no longer required to share their systems with competing broadband service providers. The agency is currently reassessing its "open-access" rule for local phone companies as well.

The result, consumer advocates say, is that consumers will have fewer choices for broadband service, and will undoubtedly pay more.

"For the first time in the history of this country, the major means of communication and commerce will not be subject to a common-carrier obligation," says Mark Cooper, director of research for the Consumer Federation of America (CFA), a consumer-advocacy group in Washington, D.C. "People need to understand how radical a concept this is."

Even before the March decision, broadband providers EarthLink and Juneau were the only major competitors able to gain marginal access to cable company networks, according to Mr. Cooper. In fact, just 10 providers service 85 percent of broadband customers nationwide. The FCC's decision could shrink that number, experts say.

The limited competition contrasts sharply with the Internet dial-up industry, in which there has never been fewer than 10 competitors offering service for every 100,000 consumers, primarily because of a government-mandated open-access rule, according to the CFA.

Cable industry officials argue that the government does not need to mandate open-access in order for competition to flourish. "Government regulation would only slow the process of bringing choice to networks," says AT&T Broadband spokesperson Sarah Eder.

Cable companies will be able to share their networks better, says Ms. Eder, if they are able to develop unique business relationships with smaller competitors rather than be required to fit them into a government-mandated model.

She points to relationships AT&T recently established with two small broadband providers in New England and Seattle as evidence of increasing competition.

Some cable providers are offering even more choices to consumers. TimeWarner/America Online, for example, now allows people to choose among up to five cable-based services in some areas of the country, according to Marc Smith, spokesperson of the National Cable & Telecommunications Association.

Mr. Smith says the cable companies have earned the right to determine with which companies they wish to share their networks. "We as an industry have invested over $60 billion since 1996," says Smith. "We should be the ones to decide how the network is utilized."