NCPA - National Center for Policy Analysis

"Open Access" Subsidizes Competitors

February 2, 2000

AT&T should confront the issue of "open access" to its high-speed cable networks head-on, says Holman W. Jenkins Jr. in the Wall Street Journal. Open access means requiring a network service -- a phone company, electric utility or cable TV operator -- to give competing companies access to its network.

  • AT&T is spending billions to buy cable networks and turn them into two-way systems to deliver voice, video, text and graphics to millions of subscribers.
  • With its digital cable network, AT&T would have first crack at providing advertising, entertainment, shopping and other services tailored to each customer.
  • However, America On-Line -- with 22 million subscribers -- is demanding that AT&T -- with one million high-speed cable customers -- give Internet Service Providers (ISPs) "open access."
  • AOL, which acquired its own digital cable network by buying Time-Warner, will be able to retain its dominant position in Internet access if it can stifle potential competitors, says Holman.

However, AOL and ISPs receive an "immense subsidy" from all local telephone customers because phone service rates are based on the average voice call, which lasts six minutes, while web-surfers can tie-up a local circuit for hours at a time.

Thus AOL wants "open access" to receive a similar subsidy from cable owners, says Jenkins. This is an exact parallel to the birth of utility regulation, says Jenkins, when the early electricity barons invited government into their business to stamp out any possibility of competition.

"Cable delivery of broadband is even less a natural monopoly than electricity," says Holman. "There are too many other technologies vying to hook households to the high-speed grid." AOL and AT&T should have total control of their systems, and "Washington should let their rivalry develop unhindered."

Source: Holman W. Jenkins Jr., "Let's Have A Closed Access Free For All," Wall Street Journal, January 26, 2000.


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