BROADBAND TODAY

BROADBAND

TODAY

A STAFF REPORT TO

WILLIAM E. KENNARD, CHAIRMAN

FEDERAL COMMUNICATIONS COMMISSION

ON INDUSTRY MONITORING SESSIONS

CONVENED BY CABLE SERVICES BUREAU

DEBORAH A. LATHEN

BUREAU CHIEF

CABLE SERVICES BUREAU

OCTOBER 1999
BROADBAND TODAY

TABLE OF CONTENTS

FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

I. BROADBAND: THE DEBATE OVER ACCESS . . . . . . . . . . . . . . . . . . . 9

A. The Debate Defined . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

 The Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

 The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

 Arguments For Mandated Open Access . . . . . . . . . . . . . . . . . . . . . . . 11

 Arguments Against Mandated Open Access . . . . . . . . . . . . . . . . . . . 11

B. Roots of the Debate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The First 706 Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The AT&T/TCI Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

AT&T/TCI v. City of Portland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

C. Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Broward County. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

San Francisco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

City of Fairfax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Other Localities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Congressional Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Federal Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

II. TECHNICAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

A. What is Broadband? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

As Defined in the Section 706 Report . . . . . . . . . . . . . . . . . . . . . . . . .17

The Definition of Broadband is Elastic and Does Not Include

 Content. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

B. Cable Broadband. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Changing Architecture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Hybrid Fiber-Optic Coaxial Cable (HFC) . . . . . . . . . . . . . . . . . . . . . .18

Increased Bandwidth, Cleaner Transmission . . . . . . . . . . . . . . . . . . . 18

Not Without Problems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

C. Telephone Company Broadband- Digital Subscriber Lines (xDSL). . 20

D. Wireless Technologies: Fixed Wireless and Satellite . . . . . . . . . . . . . .21
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III. THE BROADBAND INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

A. Generally. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Narrowband Still Dominant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

B. Internet Over Cable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Cable Modem Deployment: Over 1 Million Subscribers . . . . . . . . . .25

 Industry Projections for Cable Modem Deployment and Plant

 Upgrades. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

C. DSL Deployment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Industry Projections and Announcements for DSL. . . . . . . . . . . . . . . 28

D. Wireless Technologies: Fixed Wireless and Satellite . . . . . . . . . . . . . 29

IV. PRELIMINARY FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

A. The Cable Bureau’s Monitoring Sessions. . . . . . . . . . . . . . . . . . . . . . . 31

B. Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

C. Questions Posed to Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

D. Responses and Preliminary Findings. . . . . . . . . . . . . . . . . . . . . . . . . . . 32

1. The broadband industry is nascent . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

2. Cable modem deployment spurs alternative broadband

technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

3. Regulation or the threat of regulation ultimately slows deployment of

broadband. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

4. Market forces will compel cable companies to negotiate access

agreements with unaffiliated ISPs, preventing cable companies from

keeping systems closed and proprietary. . . . . . . . . . . . . . . . . . . . . . . . 34

5. If market forces fail and cable becomes the dominant means of Internet

access, regulation might then be necessary to promote competition. . 35

6. There was no consensus on how to implement “open access” from a

regulatory perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

7. There was no consensus on how to implement “open access” from a

technical perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
BROADBAND TODAY 4

8. Rapid nationwide broadband deployment depends on a national

policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

V. ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

A. Risks of the Commission Continuing Its Policy of Regulatory

Restraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

B. Benefits of the Commission Continuing Its Policy of Regulatory

Restraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

C. Evidence the Commission’s National Broadband Policy is Facilitating

Vigorous Deployment and Competition . . . . . . . . . . . . . . . . . . . . . . . . 46

VI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

ENDNOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

APPENDIX A: Breakdown of Online Universe

APPENDIX B: Residential Broadband Subscribers 1999 – 2007

APPENDIX C: Questions Submitted to Panelists

GLOSSARY
BROADBAND TODAY 5

The Blind Man and the Elephant

It was six wise men of Indostan

To learning much inclined,

Who went to see the Elephant – (though all of them were blind),

That each by observation—might satisfy his mind.

The First approached the Elephant,

And happening to fall

Against his broad and sturdy side—At once began to bawl:

“God bless me! But the Elephant—Is very like a wall!

The Second, feeling of the tusk,

Cried, “Ho! What have we here?

So very round and smooth and sharp – To me ‘tis mighty clear

This wonder of an Elephant – Is very like a spear.

The Third approached the animal,

And happening to take

The squirming trunk within his hands, -- Thus boldly up and spake:

“I see,” quote he, “the Elephant—Is very like a snake!”

The Fourth reached out an eager hand,

And felt about the knee:

"What most the wondrous beast is like

Is very plain," quoth he;

"Tis clear enough the Elephant

Is very like a tree!"

The Fifth who chanced to touch the ear,

Said: “Even the blindest man

Can tell what this resembles most; -- Deny the fact who can,

This marvel of an Elephant – Is very like a fan!”

The Sixth no sooner had begun

About the beast to grope,

Than seizing on the swinging tail –That fell within his scope,

“I see”, said he, “the Elephant – Is very like a rope!

And so these men of Indostan

Disputed loud and long,

Each in his own opinion –Exceeding stiff and strong

Though each was partly in the right –And all were in the wrong!

--John Godfrey Saxe
BROADBAND TODAY 6

FOREWORD

In May and July 1999, at the request of Chairman Kennard, the Cable Services

Bureau, with the participation of the Common Carrier Bureau, the Office of Plans and

Policy, and the Office of Engineering and Technology, convened a series of

Monitoring Sessions on the state of the broadband industry. The goal of these

Sessions was threefold: (1) to establish an ongoing dialogue with the major

stakeholders involved in the provision and delivery of broadband services to American

consumers; (2) to obtain a comprehensive perspective on the status of the residential

broadband industry; and (3) to receive perspectives on the Commission’s regulatory

policy options.

We invited a distinguished and diverse group of experts, including representatives

from Internet service providers (ISPs), online service providers (OSPs), local

exchange carriers (LECs), long distance telephone companies (IXCs), community

organizations, financial analysts, academics and local franchising authorities (LFAs).

We asked these participants to engage in candid, not-for-attribution discussion of the

major issues and challenges facing consumers, the industry, regulators and

policymakers with respect to the deployment of broadband services.

The following Report contains our summary and analyses of those Monitoring

Sessions, in addition to a current survey of the issues, technological developments and

market trends that have become integral to the broadband debate.

We have learned a great deal about the state of the broadband industry as a result of

those sessions. We have discovered that broadband is an awesome, yet largely

inchoate, technology that will bring the Internet and advanced services to millions of

Americans. We have learned that the Commission’s longstanding de-regulatory policy

toward enhanced services, generally, and broadband services, particularly, has

contributed to the Internet’s phenomenal growth. And we have learned that there is yet

much to learn.

We have learned that not even the experts are any more “sighted” at this early stage of

the rapidly evolving broadband industry than the wise men of Indostan referred to at

the beginning of this Report. While it is clear that broadband will play an important

role in the lives of most Americans, it is not clear whether current systems will

maintain their same positions in the broadband industry, or whether new, and as yet

undiscovered systems will dominate the market in the long term. The splintered and

divergent views expressed by the experts in our Monitoring Sessions demonstrate the

difficulty in arriving at these conclusions.

Although this Report endeavors to capture the sense of where things are now, we

recognize that the rapid pace of technological development and a dynamic and

competitive market will require our monitoring efforts to continue. Thus, we anticipate

holding future Monitoring Sessions with other sectors of the broadband industry,
BROADBAND TODAY 7

including e-commerce and Internet companies, to ascertain their views on the relevant

issues.

We acknowledge and appreciate the cooperation and expert assistance of the Directors

and staff of the Office of Plans and Policy, the Office of Engineering and Technology,

and the Chief and staff of the Common Carrier Bureau, without which we would not

have been able to prepare this Report.*

Deborah A. Lathen

Bureau Chief

Cable Services Bureau
BROADBAND TODAY 8

Executive Summary

This Report summarizes the results of two sets of Monitoring Sessions conducted by

the Cable Services Bureau on recent developments, major issues, and the current state

of the broadband industry.

At the outset, the Monitoring Sessions had two principal objectives:

(1) To ascertain a better understanding of the broadband industry since the filing of

the Section 706 Report; and

(2) To answer the question: Should the government require cable companies to

provide access to their plant by unaffiliated Internet and online service providers?

Part I examines the principal issues, parties and arguments in the open access debate.

This part traces the roots of the open access issue as discussed in the FCC’s first

Section 706 Report to Congress, the Commission’s Memorandum and Order on the

AT&T/TCI License Transfer, and the Commission’s “friend of the court” brief in

AT&T v. City of Portland. This part also discusses recent developments in legal,

legislative and regulatory proceedings, particularly actions by municipalities.

Part II outlines the definition of broadband as defined in Section 706 of the

Telecommunications Act of 1996 and provides an in-depth technical discussion of

broadband service and technology.

Part III discusses the broadband industry at large and provides a snapshot of the state

of cable modem, digital subscriber line (DSL), fixed wireless, and satellite

technologies for the provision of Internet services. It also details the schedules and

projections for deployment of these technologies.

Part IV details the preliminary findings reached in the Monitoring Sessions convened

by the Bureau. This part also lists the participants (by category) and summarizes the

questions posed to the participants and their responses.

Part V contains the conclusions reached as a result of the Report, particularly whether

the government, at this time, should mandate that cable operators provide access by

unaffiliated Internet service and on-line service providers to the cable platform.
BROADBAND TODAY 9

I. Broadband: The Debate Over Access

A. The Debate Defined

Broadband refers to technology that will allow users to access the Internet and

Internet-related services at speeds significantly higher than traditional narrowband

modems allow. Currently, many Americans who use the Internet do so at speeds of

less than 56kbps. Broadband technology allows users to access the Internet at speeds

that range from fifty to several hundred times faster. This increased speed will provide

consumers with a range of enhanced services, including streaming video and

telephony services. Analysts predict that broadband technologies will produce

applications that will change the way consumers communicate, shop, educate and

entertain. By year’s end, analysts predict that approximately two million Americans

will have access to broadband technology. By 2008, that number is predicted to reach

78 million. 1

Cable operators have begun to offer broadband services to consumers in various

localities through cable modems. When a consumer signs up for cable modem service,

the cable operator will usually provide Internet access through a wholly or partially

owned or affiliated ISP. For instance, a consumer who signs up for broadband cable

services from AT&T will receive Internet service from Excite@Home. A consumer

who signs up for broadband cable services from Time Warner will receive Internet

service from RoadRunner. When these cable modem subscriber accesses the Internet

through the cable line, the first Web page they will see displayed is Excite@Home or

RoadRunner, unless the subscriber reconfigures his or her Internet access device to go

through a different ISP.

ISPs that are not affiliated with cable operators are attempting to obtain direct access

to cable broadband platforms that would enable consumers to access the Internet

directly through their service, thereby bypassing the services of Excite@Home and

RoadRunner. Currently, there is no national regulation that would force cable

operators to allow this access. Local franchising authorities, who have the power to

grant cable franchises and approve the transfers of cable franchises in their localities,

have begun to require cable companies to “open up” or provide “open access” to their

broadband platforms for competing ISPs as a condition for the approval of franchise

transfers. Thus, as cable company consolidation increases and as cable franchises

come up for renewal, this issue will become more pronounced.

At the same time, cable broadband rollout has spurred the deployment of digital

subscriber lines (DSL), the telephone platform for broadband services. Currently, the

number of DSL subscribers is significantly behind the number of cable broadband

subscribers. The rollout of DSL and other broadband technologies, such as wireless,

satellite, however, is accelerating to close the gap.
BROADBAND TODAY 10

Broadband access is among the most compelling issues in the communications

industry today. Important regulatory and legal decisions affecting how Americans

receive high speed Internet access, voice, video and data services —whether through

cable modem, DSL, wireless, or satellite—can affect the fates of many companies

involved in the development and deployment of broadband services. In addition,

billions of dollars in revenue and investment are at stake. As a growing number of

franchising authorities consider franchise license transfers and legislative proposals to

mandate access to the cable broadband platform for competing ISPs, cable companies,

telephone carriers and Internet service providers will continue to lobby local

governments to regulate or refrain from regulating access to the systems providing

broadband services.

The Issue

It is in this environment that the debate over broadband access is occurring. With

enormous potential revenue streams and unique opportunities at stake, the debate over

broadband access has been characterized by strong lobbying efforts and media

strategies designed to define the debate in terms of “open access” or, for those opposed

to regulation, “forced access.” At the heart of the debate is how competing Internet

service and content companies will utilize the infrastructure of broadband systems.

The debate gives rise to a host of policy issues for federal, state and local

policymakers that revolves around one central question: Would government

intervention and regulation help or hinder the deployment of broadband services for

consumers?

The Parties

Proponents of mandated “open access” include:

• Many, but not all, independent ISPs

• Local telephone companies

• Consumer advocacy groups, including the Media Access Project and

the Consumer Federation of America

• Some local governments, including the City of Portland and Broward

County, Florida

Opponents of mandated “open access” include:

• Some ISPs

• Cable operators and their affiliated ISPs

• Consumer advocacy groups, including NetAction
BROADBAND TODAY 11

Arguments For Mandated Open Access

Supporters of “open access” argue that a closed broadband network threatens

consumer choice and the open nature of the Internet. Specifically, they posit that a

broadband system without a policy of nondiscriminatory access to any ISP that is

willing to invest in the network threatens the open nature of the Internet. They believe

that without access requirements, consumers will be faced with a choice between

broadband services and the freedom of movement and content that characterizes the

Internet. Open access supporters claim that this will lead to less competition, higher

prices, and less innovation.

Among the supporters of “open access” are coalitions of ISPs, led by America Online

(AOL), MindSpring Enterprises (MindSpring) and other ISP companies. ISP

advocates are concerned that the owners of a closed networks will be able to exercise

control over the content and navigational services that the Internet offers. They also

claim that cable broadband is the only feasible option for the delivery of broadband

services at this point in time. Local telephone companies also support an open access

policy. Their arguments are based on regulatory parity, which argues that since the

phone companies are mandated to provide open systems, the cable companies should

be required to as well.

Arguments Against Mandated Open Access

Opponents of mandated open access, led in part by cable interests, argue that any

regulation of the Internet will stifle deployment and competition. Mergers and

acquisitions have resulted in a consolidated cable industry. With the acquisition of

Telecommunications Inc. (TCI), AT&T became the largest U.S. cable operator,

followed by Time-Warner Cable (Time-Warner), MediaOne, Cox Communications

Inc. (Cox), and Cablevision Systems Corporation (Cablevision). As technologies

converge, many of these operators are engaged in efforts to provide services not

traditionally offered by cable. Specifically, these operators are attempting to enter the

local telephone market in order to provide telephony services over their cable systems.

Additionally, many of these operators are upgrading their networks in order to provide

broadband technologies to allow Internet access over cable systems.

These interests are largely opposed to a mandated access requirement. They argue that

the market in which they compete should guide their corporate policy, not government

regulation. One tangent of these arguments relates to the costs that cable operators

have incurred in upgrading their systems. They argue that they should be allowed to

reap the benefits of these investments, and that supporters of an “open access” policy

should not be allowed to share market rewards they have not earned. AT&T has also

claimed that their system is not technologically capable of supporting a large number

of competing Internet service providers.
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B. Roots of the Debate

The First 706 Report

On January 28, 1999 the Commission adopted the first report to Congress on the

deployment of advanced telecommunications capability (Section 706 Report).2 The

Commission based its findings on comments submitted by interested parties, as well as

research conducted by Commission staff.

In the report, the Commission concluded that, at present, the deployment of advanced

services capability in comparison to other technologies appears to be proceeding in a

timely and reasonable manner. The report states that “deployment of broadband, both

backbone and last mile, is occurring on a major scale, for both business and consumer

markets.”3 The Commission’s research demonstrated that “although the consumer

market is in the early stages of development, we see the potential for this market to

accommodate different technologies such as DSL, cable modems, utility fiber to the

home, satellite and terrestrial radio.” 4

Additionally, the report found that while the consumer broadband industry is still in

the development stage, multiple sources of broadband technology are now, or soon

will be available to Americans. Thus, the report finds that there is “no reason to take

action on this issue at this time. [The FCC] will, however, continue to monitor

broadband deployment closely to see whether there are developments that could affect

our goal of encouraging deployment of broadband capabilities pursuant to the

requirements of Section 706.” 5

The AT&T/TCI Merger

In June 1998, AT&T and TCI announced their plan to merge in 1999, whereby TCI

would become a wholly owned subsidiary of AT&T. AT&T/TCI provided @Home, a

service that gives residential cable subscribers high-speed access to the Internet. A

number of parties in the merger proceeding argued that, if approved, “AT&T-TCI

(through @Home) will have a substantial head start in the provision of high-speed

Internet access and could develop an insurmountable position as a monopoly provider

(or duopoly provider together with LECs) of broadband Internet access services to

residential customers.”6

The Commission was not persuaded by this argument. While stating that the issue of

broadband access was not merger specific, the Commission found that, although

AT&T and TCI may be able to deploy these services more quickly than competitors at

the present time, other firms such as telephone, satellite, electric utilities, and wireless

providers were working towards the same goal using different technologies. The

Commission found that the merger might expedite the goal of deployment of high-

 
BROADBAND TODAY 13

speed Internet access services by allowing a quicker rollout of these technologies. The

Commission reiterated the position taken in the Section 706 Report that there was no

need for an “open access” requirement at this time, but the Commission “will monitor

broadband deployment closely.” 7 After carefully weighing the arguments offered by

participants in the merger review process, the Commission concluded that the

proposed merger would not deny broadband subscribers the ability to access the

Internet content and portal of their choice.

AT&T/TCI v. City of Portland

Pursuant to TCI’s cable franchise agreements with the City of Portland and the County

of Multnomah, any changes of TCI’s corporate control would have to be approved by

the City and County. Thus, Portland and Multnomah County began proceedings to

review the franchise transfer applications of AT&T and TCI. As required by law, TCI

had to obtain approval from the FCC in order to transfer its licenses to AT&T. Thus,

the FCC instituted a separate proceeding to determine whether the transfer of the

licenses from TCI to AT&T served the public interest, convenience and necessity.

The Mt. Hood Regulatory Commission (Regulatory Commission), which advised the

City and County on the request for franchise transfer, conducted a series of public

hearings. In the course of those hearings, ISPs not affiliated with @Home claimed

they could not compete with @Home’s higher speed, low cost and widespread

availability. The Regulatory Commission concluded, and recommended to the City

and County, that @Home had no viable competitors in the local market for residential

Internet access services and that AT&T’s cable modem platform was an “essential

facility” that could not exclude competitors without a legitimate business reason.

In December 1998, the City and County adopted the country’s first mandatory access

provision in the wake of the AT&T/TCI merger. AT&T rejected the mandatory access

provision set forth by the City and County ordinance, and in January 1999, the City

and County stated that AT&T’s rejection resulted in a denial of its request for a change

in control in the TCI franchises. AT&T sued the City and County alleging that the

denial of the franchise transfer was unlawful. The principal issue was whether the

City of Portland had the power to require access to the cable modem platform as a

condition of approving TCI’s franchise transfer to AT&T.

On June 3, 1999, the District Court ruled in favor of the City of Oregon and

Multnomah County. AT&T appealed the decision to the Ninth Circuit Court of

Appeals under an expedited appeal schedule. Oral arguments are scheduled for

November 1999.
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C. Recent Developments

In the wake of the Portland decision, local franchising authorities (LFAs) from Florida

to California were confronted with intensive lobbying campaigns from proponents and

opponents of mandated access provisions. To date, four LFAs have voted on

mandated access proposals, with differing results: Portland, Oregon, Broward County,

Florida, San Francisco, California, and Fairfax City, Virginia.

Broward County

On July 13, 1999, the Broward County Board of County Commissioners voted 4 to 3

to adopt a general ordinance requiring cable operators under Broward County’s

jurisdiction to provide unaffiliated ISPs nondiscriminatory access to the cable

companies’ broadband facilities. AT&T has appealed the decision. Cable operator

Comcast Corporation (Comcast) filed suit against Broward County on July 20 in

federal court challenging the authority of the county to impose new regulations.

San Francisco

The San Francisco Board of Supervisors reached a different result. On July 26, the

Board approved the transfer of control of TCI to AT&T without mandating

nondiscriminatory access. The Board did, however, establish a city policy of

supporting nondiscriminatory access to broadband services, and directed the San

Francisco City Attorney, the Department and Telecommunications and Information

Services, and the Telecommunications Commission to take steps to implement that

policy. Among those steps are directives to monitor developments at state and federal

levels, and monitor market developments. The Board requested that the San Francisco

City Attorney, the Department of Telecommunications and Information Services and

the Telecommunications Commission file a report on developments by December 15,

1999. The City also filed a “friend of the court” brief in support of the Portland

ordinance with the United States Court of Appeals for the Ninth Circuit.

City of Fairfax

On September 28, 1999, the Fairfax City Council of Fairfax, Virginia voted 4 to 2 to

require Cox to provide access to its high speed Internet platform to non-affiliated ISPs.

The requirement was a condition of approval of the transfer of the Media General Inc.

franchise to Cox. Cox is discussing the situation with city officials.
BROADBAND TODAY 15

Other Localities

While only four localities have conducted votes on the issue, other localities have seen

an increase in broadband access activity. Numerous localities are conducting studies

and hearings on the issue. On January 26, 1999, the City Council of Los Angeles

adopted a resolution instructing its Information Technology Agency to develop a

policy and implementation plan for open, nondiscriminatory access to cable

architecture by Internet access providers. The Agency recommended that the City of

Los Angeles should not order cable companies to unbundle content from access in the

provision of cable modem services and that the city should not order cable companies

to open their cable modem platforms to unaffiliated ISPs. Additionally, the Agency

recommended that the City continue to monitor the market for broadband access

services in the City over the next three years as the Agency enters into renewal

negotiations with cable operators in order to gauge the necessity of imposing an open

access provision in transfers or cable television franchises.

A public workshop on the issue also was held in September in Dade County, Florida.

Additionally, proponents of mandated access have started petition drives to place

mandated broadband access initiatives on the ballot in Colorado and Massachusetts.

Congressional Action

Thus far, Congress has not acted on the broadband issue. There are, however, several

bills pending in the U.S. House of Representatives and in the U.S. Senate which

address the cable access question. To date, no action has been taken in the relevant

committees on these legislative proposals.

Federal Policy

Pursuant to the requirements of Section 706 of the Telecommunications Act of 19968

(1996 Act), the FCC has studied the deployment of broadband services and methods to

promote the expeditious rollout of advanced services. Based on these studies, the

Commission has adopted a policy of vigilant restraint, refraining from mandating

“open access” at this time, while closely monitoring for anticompetitive developments

that may require intervention. Additionally, the Commission is also actively promoting

the development of many broadband competitors - - including wireless, satellite, cable,

and telephone providers - - by limiting regulatory burdens, by making more spectrum

available, and by making spectrum use more flexible. Competition from multiple

broadband providers is seen as the best way to prevent a monopoly by one provider.
BROADBAND TODAY 16

II. TECHNICAL BACKGROUND

Over the last two years, the term “broadband” has leapt from the pages of obscure

technical journals into popular American lexicon. The rapid pace of technological

achievement and the convergence of discrete industries have moved broadband to the

top of consumer and regulatory agendas.

As more Americans access the Internet, they all want the same thing -- more

information at faster speeds. The access providers need broader bandwidth capacity to

meet this seemingly simple and basic demand and to provide multimedia applications

involving two-way data, voice and video.

The increasing demand for broadband services has been fostered by the explosive

growth of the Internet,9 which has risen from 10 million users in 1995, to an estimated

150 million worldwide users in 1999. Indeed, this growing medium offers unlimited

possibilities and multimedia applications to a worldwide network of online users.10

As such, the Internet is much more than a network of networks; it links people,

communities, and nations together in ways previously unimagined. The potential to

provide education, health care, employment, and training information, in addition to

entertainment and data transmission, establishes the Internet as one of the principal

media for societal transformation. Perhaps most significantly, the Internet has

produced the booming economic model we have come to call e-commerce, which last

year alone generated more than $300 billion in revenue.

Transmitting data, voice and video services at high speeds has become both a business

and regulatory mandate, spurring an immense level of investment.

As will be described more fully below, cable operators, telephone companies, fixed

wireless operators, and satellite providers, among others, have deployed, or are

planning to deploy, a wide array of advanced services in response to, and in

anticipation of, increasing consumer demand.

A. What is “Broadband?”

The 1996 Act itself does not define the term “broadband.” Instead, the 1996 Act refers

to “broadband” as one of the characteristics of “advanced telecommunications

capability.” “Advance telecommunications capability” is defined as "high-speed,

switched, broadband telecommunications capability that enables users to originate

and receive high-quality voice, data, graphics, and video telecommunications using

any technology."11 The term "advanced telecommunications capability" is defined

without regard to any specific transmission media or technology. 12
BROADBAND TODAY 17

Section 706 of the 1996 Act instructs the Commission to:

regularly ... initiate a notice of inquiry ...[to] determine whether

advanced telecommunications capability is being deployed to all

Americans in a reasonable and timely fashion. If the Commission's

determination is negative, it shall take immediate action to accelerate

deployment of such capability by removing barriers to infrastructure

investment and by promoting competition in the telecommunications

market.

13

As Defined in the Section 706 Report

In response to the congressional mandate, the Commission initiated its first inquiry on

the state of deployment of advanced telecommunications capability, and earlier this

year filed with Congress the Section 706 Report on the Commission’s findings. In the

Section 706 Report, the Commission defines “broadband” as:

the capability of supporting, in both the provider-to-consumer

(downstream) and the consumer-to-provider (upstream) directions, a

speed (in technical terms, "bandwidth") in excess of 200 kilobits per

second (kbps) in the last mile. 14 This rate is approximately four times

faster than the Internet access received through a standard phone line

at 56 kbps.

15

The Commission chose 200 kbps because “it is enough to provide the most popular

forms of broadband -- to change web pages as fast as one can flip through the pages of

a book and to transmit full-motion video.” 16 Included in the definition are facilities

that “have been upgraded or otherwise altered in ways that make them capable of

broadband speeds. Thus, a non-broadband line, like a standard telephone line, that has

been conditioned so that it is capable of more than 200 kbps would constitute

broadband.” 17

The Definition of Broadband is Elastic and Does Not Include Content

The Section 706 Report also provides that: “broadband service does not include

content [itself], but consists only of making available a communications path on which

content may be transmitted and received.”18

The Commission recognized that as technologies evolve, the concept of broadband

also would evolve. Thus, the Section 706 Report provides the starting point for an

elastic definition of “broadband.”
BROADBAND TODAY 18

We may consider today's "broadband" to be narrowband when

tomorrow's technologies are deployed and consumer demand for

higher bandwidth appears on a large scale. 19

B. Cable Broadband20

Changing Architecture

Cable industry architecture is in the middle of a transformation from closed cable

systems that feature one-way delivery of analog television signals to two-way,

interactive broadband systems, involving a hybrid of traditional coaxial and modern

fiber optic technologies. These new networks enable the cable industry to deliver a

wide range of services, including digital television, Internet access, and telephony.

Historically, cable networks were constructed to provide only traditional video

programming services that required only one-way transmission of signals. Until

recently, the traditional one-way cable system provided approximately 50 channels of

analog video. The network was a full coaxial system designed with a centralized

“headend”21 and lines called “trunks” leading from the headend to nodes placed in the

residential neighborhoods. Distribution lines emanated from these nodes which carried

the signals through the residential neighborhood. A coaxial wire called a “drop” line

then carried the service from the distribution line to the customer’s television set. The

distribution and drop lines represent the cable industry's "last mile" of plant into the

consumer's home. A traditional 350 MHz coaxial cable systems included many

amplifiers to boost the signal along the way to subscribers’ homes.

Hybrid Fiber-Optic Coaxial Cable (HFC)

Today, full coaxial systems are being replaced with hybrid systems consisting of fiberoptic and coaxial lines. These cable networks are also referred to as hybrid fibercoaxial or “HFC.” The HFC architecture replaces the previous coaxial trunk with a

fiber-optic “trunk.” The fiber terminates at the node, where the signal is then carried

over an upgraded high bandwidth coaxial cable to the customer premises. HFC

networks require fewer amplifiers and offer improved reliability, increased capacity,

and clearer signal transmission, all of which facilitate two-way transmission.

Increased Bandwidth, Cleaner Transmission

The replacement of coaxial cable with fiber-optic cable increases the system’s capacity

and reduces noise, providing cleaner transmission paths that are necessary for two-way

interactivity, telephony, and other new services. The use of HFC enables cable

operators to deliver applications at very high data rates.
BROADBAND TODAY 19

These new networks allow a cable operator to offer more than 100 analog video

channels, hundreds of digital video channels, as well as provide capacity for Internet

access, telephony and other services. With respect to Internet access, upgraded cable

systems can carry data up to several 100 times faster than transmission using dial-up

modems over ordinary telephone lines, and 100 times faster than ISDN (integrated

services digital network) telephone lines. Because a cable network is a shared

medium, these speeds vary depending on the number of actual subscribers using the

Internet connection at the same time. As an example, Table 1 compares the transfer

rate for downloading a 10 Megabyte file. A 10 Megabyte file is approximately the

equivalent of a 10 to 20 minute movie clip. HFC cable architecture can transmit both

upstream and downstream packets of information. Cable companies thus can operate

as "pipeline" or "conduit" services, or become full-service providers combining both

Internet access and other value-added services.

TABLE 1: TRANSFER RATE FOR A 10-MEGABYTE FILE

Modem Speed/ Type Transfer Time

14.4-Kbps* Telephone Modem 1.5 hours

28.8-Kbps Telephone Modem 46 minutes

56-Kbps Telephone Modem 24 minutes

128-Kbps ISDN Modem 10 minutes

1.54-Mbps T-1 Connection 52 seconds

4-Mbps Cable Modem 20 seconds

10-Mbps Cable Modem 8 seconds

 *kbps (kilobits per second) & Mbps (Megabits per second)

 Source: http://www.cablemodems.com/whatis.html

Not Without Problems

Despite the expanded capacity, technical problems for providing advanced services

over cable HFC networks remain. Return path transmission interference results from

noise generated at the connection points between the trunk-distribution line connection

and the distribution line-drop connections. In addition, a cable network is a shared

medium, wherein subscribers in a particular area share capacity. As a result, data

transmissions are potentially more vulnerable to interference and degradation caused

by the actions of any individual subscriber's equipment. Further, as previously

mentioned, transmission speeds degrade as more subscribers are online.
BROADBAND TODAY 20

C. Telephone Company Broadband-- Digital Subscriber Lines (xDSL)22

Digital Subscriber Line (DSL)—sometimes referred to as xDSL because of the variety

of DSL technologies and implementations—is the telecommunications carriers’

version of broadband access. DSL is quickly emerging as an economic solution to

provide high speed Internet access to end users—both residential and small to

midsized businesses. With DSL, the average analog connection of 56.6 kbps can be

upgraded to 1.5 Mbps or higher.23

DSL technology upgrades the performance of the standard twisted pair (the copper

line connecting most homes and businesses) to carry high capacity data transmission.

The technology expands the amount of frequency used over the copper line, whereby

the line’s higher frequencies are used to transmit the data and the lower frequencies

are free to transmit voice or fax transmissions.24 Thus, DSL is able to function on a

line simultaneously with standard voice and fax services and avoids the installation of

a new separate line. Because the technology works over the existing telephone plant,

DSL is significantly less expensive to deploy on a broad scale than other approaches,

such as new fiber or cable construction. 25

In addition, the cost structure of DSL enables providers to serve both residential and

business customers economically.26 Since phone lines are nearly ubiquitous in the

United States, DSL providers are not limited to one market segment (e.g. business or

residential) as are some other broadband access providers.27

Despite the promise of DSL to deliver broadband access to businesses and consumers,

there are several technical issues with regard to the widespread implementation of

DSL. 28 One of the primary inhibitors is signal attenuation, also known as the distance

limitation. Attenuation describes the dissipation of signal strength as it travels over

the copper line. DSL utilizes a higher frequency that is more susceptible to attenuation

than ordinary voice transmission. 29 Consequently, the various DSL technologies

detailed below have distance limitations ranging from 4,000 to 18,000 feet from the

telephone company’s central office.30 “These limitations may ease as technologies

improve, but as a practical matter, DSL is currently limited to locations within a threemile maximum loop from the central office.”31

Although there are several versions of DSL service, there are two general categories,

symmetrical and asymmetrical (see Table 2). Symmetrical versions offer the same

data rates upstream and downstream and are best suited for business applications such

as video-conferencing.32 Asymmetrical versions offer different data rates upstream

and downstream and are ideal for residential users who receive a lot of data but do not

originate or send much (e.g. Internet surfers).33 One such version is called asymmetric

digital subscriber line (ADSL). As ADSL does not interfere with the basic voice

service, the user can simultaneously browse the Internet or watch a movie while

talking on the telephone.34 According to some reports, ADSL provides a competitive

advantage over cable modem Internet access in the following areas:35
BROADBAND TODAY 21

• Simultaneous fast Internet and voice/fax capabilities over a single telephone line.

• Data security over a dedicated point-to-point line (from customer to local exchange

carrier (LEC), which is not available over a shared medium such as HFC or cable

modems.

• Dedicated bandwidth that guarantees performance regardless of the number of

users on the network. In the case of cable modems, where the bandwidth is shared,

the actual performance deteriorates as the number of users on the network

increases.

TABLE 2: DSL TECHNOLOGIES

Acronym Full Name

 Maximum Data Rate

Downstream Upstream

Max. Distance

from Central

Office to EndUser (feet)*

HDSL High-data-rate DSL 1.5 Mbps 1.5 Mbps 12,000

SDSL Symmetric DSL 768 kbps 768 kbps 10,000

VDSL Very-high-data-rate

DSL

51.8 Mbps 2.3 Mbps 4,000

RADSL Rate-adaptive DSL 8 Mbps 1 Mbps 18,000

ADSL Asymmetric DSL 1.5-8 Mbps 640 kbps 18,000

G.Lite DSL Lite 1.5 Mbps 384 kbps 22-25,000

 Sources: Lehman Brothers; Ferris Baker Watts Research; Company reports.

* For each DSL variant there are slower speed versions that allow greater distances between central

office and end-user.

D. Wireless Technologies: Fixed Wireless and Satellite

In the near to medium term, there will be various companies offering local broadband

access using a variety of wireless technologies: fixed wireless and satellite. As with

cable and telephone (collectively wireline) companies, fixed wireless providers are

using their existing microwave networks to transmit high speed Internet services.

Unlike their wireline competitors, fixed wireless providers enjoy a few competitive

advantages. Because they avoid the high costs and delays associated with laying fiber

or upgrading cable networks, fixed wireless companies can enter the market quickly

and deliver broadband services at relatively low costs.36 However, this technology

also presents a number of deployment challenges, most notably, the line-of-sight

requirements between the transmitter and receiving antenna.37 The presence of

obstacles, such as foliage, buildings, and even heavy rain, can hinder reception. 38
BROADBAND TODAY 22

In addition, broadband service via satellite has been projected for the early part of the

millennium.39 With their unlimited coverage area, satellite systems will offer

broadband access to virtually any part of the United States and may be the best method

for serving remote regions and locations where telecommunications infrastructures are

of low quality or non-existent.40 There are several satellite providers that are

constructing systems and plan to start offering two-way broadband satellite services41

by 2001.42 Despite the promise of these broadband satellite systems, there are hurdles

to deployment, including time to market and technological complexity. Commercial

availability of satellite systems is at least two to three years away and, as a result,

satellites might lose potential customers to competing broadband providers who

currently offer high speed Internet access (e.g. cable and DSL). In addition, the use of

two-way satellite services for the mass consumer market presents novel engineering

and technology issues that still need to be resolved.43 Once operational, however,

these satellite systems could directly compete against cable modem service, DSL, and

fixed wireless in the residential broadband industry.
BROADBAND TODAY 23

III. THE BROADBAND INDUSTRY

A. Generally

As Internet usage continues its dramatic rise, the demand for broadband services

grows. The market demand to bring high-speed data, video and voice to residential

and business customers is reflected in increased levels of investment and faster

deployment schedules for various technologies.

Narrowband Still Dominant

With the heightened focus on broadband technologies, the current state of narrowband

access often gets overlooked. Due to the ubiquity of the switched telephone network

system, the vast majority of residential consumers continue to access the Internet

through analog modems. In January 1999, 65% of Internet users were still using

analog dial-up modems with an average speed of access of 33 kbps.44 It is projected

that dial-up will remain the principal means of accessing the Internet for the near term.

See Chart 1 at Appendix A.

B. Internet Over Cable45

As indicated in the Commission’s Annual Assessment of the Status of Competition in

Markets for the Delivery of Video Programming, access to the Internet over cable

generally has become easier in the past two years. Most cable operators do not require

video subscription as a condition of subscription for Internet-based services.

The most popular way to get online through cable infrastructure is through the use of a

personal computer and a cable modem.46 To deliver data services over the cable

network, cable operators using a two-way broadband architecture typically allocate

one television channel for downstream traffic and one channel for upstream traffic.

Cable operators using a one-way broadband network typically allocate one television

channel for downstream, while the upstream path is provided over a telephone line. At

the cable headend, a cable modem termination system (CMTS) communicates through

the allotted channels with cable modems located in subscriber homes to create a virtual

local area network (LAN)47 connection.

However, to provide Internet access over cable, operators must do more than just

install cable modems at the customer premises and CMTSs at the headend. They have

chosen to build an entire end-to-end Internet Protocol (IP) networking infrastructure in

each community. 48 This includes Internet backbone connectivity, routers, servers, and

network management tools, as well as security and billing systems. Essentially, cable

operators have constructed sophisticated, community-wide end-to-end "intranets."49
BROADBAND TODAY 24

Connecting to the Internet over cable infrastructure can offer significant advantages in

terms of speed-of-connection as compared with transmission over traditional dial-up

telephone access and other technologies. Broadband networks maintain higher

capacities than standard telephone lines, and thus allow for faster data-transmission

speeds. But since a network connection is only as fast as its slowest link, the benefit of

high-speed cable connection is lost for content hosted on a Web server that is

connected to the Internet though a 56-Kbps line. The solution is to bring popular

content closer to the subscriber. This is done by "caching" or storing copies of popular

content on local servers, installed usually at regional distribution centers or hubs.50

Thus, when cable modem subscribers access certain websites, their requests will be

routed to the local server instead of through the public Internet.

In addition to advantages of speed, Internet over cable also offers end users a

connection that is “always on,” as compared with the more widely-used dial-up

services.51 Furthermore, most Internet over cable providers offer proprietary content.

These ISPs are also known as online service providers or OSPs.

Virtually all of the major cable operators offer broadband access in some areas, and

they are steadily expanding service areas to meet demand.52 Currently, however,

service is not available in all markets. Notably, cable broadband access will continue

to become more widely available as cable system infrastructures are upgraded. In

markets where cable broadband is available, the industry is hopeful that the eventual

standardization of cable modems will increase subscription levels. To that end, an

industry consortium called CableLabs has adopted hardware and software interface

standards called Data Over Cable Service Interface Specification System (DOCSIS) to

support the delivery of data services over the cable infrastructure.53 This standard

should contribute to lower-cost modems, less complex and time consuming installation

procedures, and potentially, self-installation by subscribers.54 As DOCSIS compliant

modems become available at retail outlets, sales of cable modems should dramatically

increase.

The cable operators are also partnering with a number of cable ISPs that provide

comprehensive networking and systems integration services to support broadband

access. For example, Excite@Home and RoadRunner offer their own high-speed data

backbone and regional data centers with local caching equipment. Other companies,

such as High Speed Access Corporation (HSA) and ISP Channel, are offering basic

turnkey Internet packages specifically designed for small cable system operators.
BROADBAND TODAY 25

Cable Modem Deployment: Over 1 Million Subscribers

Following are notable measurements of the current cable modem market:

• As of August 1, 1999, cable modem service was available to 32 million homes.

This was equal to 30 % of all cable homes passed in the U.S. and Canada.55

• The penetration rates for cable modem service averages 3.5 %, as cable operators

in North America finished the second quarter of 1999 with 1,052,000 cable modem

subscribers (see Table 3). 56

• More than 90 % of these subscribers are on two-way cable systems, while 10 %

are on one-way systems.57

• This is a dramatic increase from 1998, where 15 million homes were passed, and

there were approximately 300,000 cable modem service subscribers.58

• North American cable companies are currently adding more than 2,500 cable

modem subscribers per day. 59

• At that growth-rate, total subscriber count could surpass 1.5 million by the end of

1999.

• The two leading providers of Internet over cable are Excite@Home and

RoadRunner. Both are OSPs, offering proprietary content as well as access to the

Internet.60

• As of August 1, 1999, the Excite@Home subscriber count was estimated at

670,000.61 RoadRunner’s subscriber count was estimated to be 350,000.62

• A number of new cable ISPs, such as HSA, Prolog, and ISP Channel, have

partnered with cable operators to offer their versions of high speed Internet

access.63

• High-speed Internet access deployment also has extended to rural and small

communities, where the costs of deployment and operation are high.64 To

successfully deploy broadband in such areas, cable operators serving these

communities have established partnerships with businesses offering various

Internet services.65
BROADBAND TODAY 26

 TABLE 3: CABLE MODEM CUSTOMER RANKINGS JUNE 30, 1999

Cable Operator Cable Modem

Subscribers

Time Warner Cable 186,000

Media One 140,000

Cox Communications 112,000

Comcast 95,000

AT&T 83,000

Shaw Communications (Canada) 120,000

Rogers Cablesystems (Canada) 100,500

Other 215,000

TOTAL 1,052,000

Source: Kinetic Strategies, Company Reports

Industry Projections for Cable Modem Deployment and Plant Upgrades

• Cable modem deployment is expected to dramatically increase in the coming

years. The projections for residential cable modem subscribers range from 4 to 6

million by 2002, and over 11 million by 2005.66

• The development of the DOCSIS standards for high-speed data delivery over cable

will directly accelerate cable modem deployment, because DOCSIS compliant

modems will increase the success of retail distribution channels, as well as

simplify the installation process.67

• Cable operators have adopted an aggressive schedule to upgrade their networks to

provide broadband services.68

• Under the current schedules, by year-end 1999, the largest cable operators (AT&T,

Time Warner, Cablevision, Cox, Comcast) collectively will have upgraded

systems that cover 46.7 million (65%) of the 72.4 million homes passed.69 By

year-end 2000, these companies will have upgraded systems that cover at least 61

million (80%) households.

• According to Excite@Home, in order to provide broadband services, the cable

industry will need to spend $15 billion to upgrade their systems to reach roughly

one half of homes-passed in the United States and $31 billion to upgrade their

systems to reach all homes passed.70
BROADBAND TODAY 27

C. DSL Deployment

Various telecommunications providers, from incumbent local exchange carriers

(ILECs) to competitive local exchange carriers (CLECs), recently have adopted

aggressive deployment schedules for DSL. There were approximately 160,000 DSL

lines in service at the end of the second quarter 1999.71 This represents a 300%

increase since the fourth quarter 1998 and a 100% increase since the first quarter

1999.72

The ILECs’ aggressive deployment of DSL can be attributed in large part to the

deployment of cable modem service. Although the ILECs have possessed DSL

technology since the late 1980s, they did not offer the service, for concern that it

would negatively impact their other lines of businesses. 73 The deployment of cable

modem service, however, spurred the ILECs to offer DSL or risk losing potential

subscribers to cable. In various communities where cable modem service becomes

available, the ILECs would soon deploy DSL service that was comparable in price and

performance to the cable modem offering. 74 Thus, prior to cable modem deployment,

the ILECs had little incentive to deploy DSL and the consumer had no choice for highspeed Internet access.

At present, cable modem service has a considerable lead over DSL in terms of total

number of subscribers in the residential market. We anticipate DSL will close this

lead, with the adoption of new technologies and standards that will improve the

performance of DSL. By 2007, the subscriber levels for DSL should be nearly

comparable to cable.75 See Chart 2 at Appendix B.

In addition to the ILECs, a new type of CLECs has begun to focus on the high-speed

Internet market. Covad Communications Company (Covad), Rhythms

NetConnections Inc. (Rhythms NetConnections), and NorthPoint Communications

Inc. (Northpoint) all have raised billions of dollars in their initial public offerings.

These companies intend to target DSL services to small and mid-sized businesses, as

well as to residential customers.76

The adoption of DSL-lite (or G.lite) should further accelerate the pace of broadband

deployment in the residential market, because it increases the coverage area of DSL 77

beyond 18,000 feet from the central office and allows more homes to receive high

speed Internet access over their existing copper lines. In addition, G.lite can be

installed (plug-and-play) by the customer.78 This plug-and-play feature is an

important competitive factor, because it allows for off-the-shelf retail availability and

modem pre-installation in PCs, two goals the cable industry hopes to achieve with its

DOCSIS cable modem standard.79 The plug-and-play feature also lowers labor costs,

since it reduces the time technicians spend installing the service at the home or

business.
BROADBAND TODAY 28

Industry Projections & Announcements for DSL

• Actual number of DSL subscribers grew to 159,150 by the end of second quarter

1999, more than tripling since the fourth quarter 1998 and more than doubling

since the first quarter 1999.80

• Analysts predict that over 30 million telephone lines will be qualified to support

DSL services by the end of 1999.81 (See Table 3).

• Bell Atlantic plans to double the availability of its DSL product to 17 million

telephone lines by year-end 1999.82

• SBC Communications Inc. (SBC) expects to reach 250,000 DSL subscribers and to

increase DSL availability to over 10 million homes by year-end 1999.83

• US West expects to reach 100,000 DSL subscribers by year-end 1999.84

• GTE announced a new discounted DSL pricing structure, offering its own ISP

(GTE.net) for $49.95/ month. 85

• US West lowers its price on selected DSL offerings to $37.90/ month. This special

DSL offering will soon be available in more than 40 cities across US West’s

region. 86

• ILECs have entered co-marketing and co-branding agreements with established

Internet access companies such as AOL, MindSpring and EarthLink.

• Bell Atlantic and SBC have agreed to provide volume-discounted DSL transport

service to AOL in order to tap its 19 million-customer base and brand name.87

• BellSouth recently reached a similar agreement with MindSpring, which has a 1.2

million customer base.88 EarthLink has agreements with GTE and Sprint to offer

DSL services nationwide.89 MindSpring and EarthLink have announced plans to

merge. The combined entity will have a subscriber base over 3 million. 90

• NorthPoint, a wholesale provider of broadband, last-mile DSL connections, states

that it has collocation space to serve 30 million residential lines and 4 million

business lines.

• Rhythms NetConnections has partnered with VillageNet Inc., a community

oriented Internet Service Provider, to currently offer DSL services to New York

and Los Angeles and, by year-end 1999, plans to offer these services nationwide.91
BROADBAND TODAY 29

• Covad is creating a broad network footprint and plans to deploy DSL services in

51 major markets, which will cover 28 million homes and small businesses by the

end of 1999.92

TABLE 3: PERCENTAGE OF ILEC NETWORKS THAT ARE DSL-READY

 Qualified Lines (mil)

RBOCs 1998 1999

Ameritech n/a n/a

Bell Atlantic 2.0 7.0

Bell South 2.0 4.0

SBC 3.3 10.0

US West 3.6 5.2

GTE 5.0 6.0

Total: 15.9 32.2

 Source: Donaldson Lufkin & Jenrette--Wireline Communications (June 1999)

D. Wireless Technologies: Fixed Wireless & Satellite

Within a few years, there will be several fixed wireless companies that will be offering

broadband access.93 At present, Teligent, Inc. (Teligent) and WinStar

Communications, Inc. (WinStar) offer a variety of broadband services to small and

medium-sized businesses in several metropolitan markets. Both companies have plans

to further rollout their services to several new markets throughout the U.S. and have

negotiated service contracts with numerous Real Estate Investment Trusts (REITs) to

serve large apartment and commercial complexes.94

In the upcoming months, there are several new fixed wireless systems offering

broadband access through either Local Multipoint Distribution Service (LMDS) or

Multichannel Multipoint Distribution Services (MMDS) technologies. Nextlink

Communications (Nextlink) is the largest holder of LMDS spectrum in North

America, with licenses covering 95% of the population in the top 30 markets in the

United States.95 Nextlink intends to use its wireless capabilities to extend the reach of

the company’s local fiber optic networks to soon offer an array of broadband

services.96 In addition, MMDS systems are being reconfigured to provide two-way

high-speed Internet services. Previously, MMDS companies provided one-way video

services. As market conditions have changed and the demand for data services has

increased, the Commission changed its rules last year to allow MMDS companies to

offer two-way broadband services.97 In recent months, MCIWorldCom and Sprint

Communications Company, L.P. (Sprint) have taken advantage of this rule change and

have spent collectively over $1 billion to purchase several MMDS systems and plan to
BROADBAND TODAY 30

use these systems to offer broadband services directly to business and residential

customers.98 MMDS systems complement these long-distance carriers’ (IXC)

networks, for they provide the last-mile connection to businesses and residences.

Once the networks of MMDS and IXCs become fully integrated, the IXCs will have

greater control of the end-to-end transmission and will be able to provide broadband

services to subscribers more efficiently.

Two satellite systems with great potential for delivering local broadband access are

Spaceway and Teledesic. Spaceway utilizes 16 satellites to provide “bandwidth-ondemand”— the ability to transit and receive voice, video, and data at any time from

any place — at speeds up to 6 Mbps.99 The Spaceway system is expected to cost $4.3

billion to build and launch and should be operational in 2002.100 Teledesic plans to

utilize 288 satellites in low earth orbit (LEO) to provide two-way digital

transmission—voice, video, and data — at a low cost, regardless of location. 101 Its

system will provide 24-hour seamless coverage to over 90% of the planet’s surface

and nearly 100% of the Earth’s population. 102 The company expects to start service by

2002-2003.103
BROADBAND TODAY 31

IV. PRELIMINARY FINDINGS

A. The Cable Services Bureau’s Monitoring Sessions

At the request of the Chairman, the Cable Services Bureau convened a series of

Monitoring Sessions in May and July to study the state of the broadband industry and

to identify any potential market failures. The purpose of these meetings was to:

• Ascertain a better understanding of the broadband industry since the submission of

the Section 706 Report to Congress.

• Answer the question: “Should the government require cable companies to provide

access to their cable plant by unaffiliated on-line service providers and Internet

service providers?”

This seemingly simple question raised several complex policy, legal, and economic

issues. In order to address these issues, the Commission staff met with a diverse group

of representatives from cable, telecommunications, Internet industries, public interest

groups, investment analysts and academics. The Monitoring Sessions held thus far

were devoted to policy and investment. The Bureau anticipates convening future

Monitoring Sessions on the topics of e-commerce, technology, and other relevant

issues.

B. Participants

Meeting participants were chosen based on their interest, expertise, or experience in

the range of issues related to broadband deployment and technology. By category,

these participants included the following:

Multiple System Operators

(MSOs)104

Local Franchising Authorities

(LFAs)105

Local Exchange Carriers (LECs)106

Competitive LECs (CLECs)107

Inter-Exchange Carriers (IXCs)108

Internet Service Providers (ISPs)109

On-line Service Providers (OSPs)110

Industry Trade Groups111

Public Interest Groups112

Educational Institutions, Think

Tanks, Research Organizations,

Academics

Investment Analysts113
BROADBAND TODAY 32

 C. Questions Posed to Panelists

The Bureau staff submitted to our panelists a number of written questions

concerning the current and future state of the broadband industry. The actual

questions submitted to the panelists are reproduced in Appendix C. The questions

were designed to facilitate discussion with the panelists on key policy and

economic issues pertaining to the broadband industry. Panelists were encouraged

to discuss their perspectives on current conditions in the broadband industry, and

express an opinion on whether regulation was warranted by these conditions.

Factors such as future market developments, technological advances, and

ancillary benefits and harms were also offered for consideration. Additionally,

panelists were encouraged to discuss the potential benefits and harms that

regulation may present.

D. Responses and Preliminary Findings

In this part of the Report, we summarize the positions of the panelists and set

forth our very preliminary findings that flow from these positions. We do not

attempt to give an exhaustive recitation of the views of the panelists. Rather, we

are attempting to convey the major positions articulated by the panelists and distill

preliminary findings that can further inform the Commission’s policies on

broadband.

1. The broadband industry is nascent.

As detailed in Part III of this Report, there are approximately 40 million

residential Internet subscribers in North America, approximately one million of

whom subscribe to broadband Internet services. It is important to remember that

residential broadband Internet subscribers constitute less than 3% of the total

Internet subscribers in North America. Although the Bureau expresses no view

on whether the residential broadband market is a separate market from the

residential narrowband market, a comparison of the numbers between the two is

instructive to appreciate the relatively small scale of residential broadband

deployment. Even the most optimistic estimates predict that narrowband will still

be the dominant subscribed form of Internet access by 2005. One analyst

predicted that by 2005, cable will have 34% (23 million subscribers) of the

Internet access market, with DSL at 15% (10 million subscribers), and dial-up

narrowband at 51%, or 35.7 million households.

There was wide agreement that cable has an early lead in deployment of

broadband services. Of the total number of residential broadband subscribers

today, nearly 90% subscribe to cable modem service. There were, however,

divergent views on whether cable would continue to dominate the residential
BROADBAND TODAY 33

broadband industry, as well as which technologies would be serious competitors

in that market.

Broadband industry will thrive in absence of regulation

Most analysts stated that competition, while still in its infancy, exists in the

broadband industry and is likely to increase in the absence of government

intervention. One analyst predicted that by 2005, there would be approximately

23 million cable broadband subscribers, 10 million DSL subscribers, and 1

million satellite broadband subscribers. Analysts also forecasted that DSL

penetration could rise to 20% of high-speed data users by 2005 and to 40% by

2006.

Most participants believed that continual monitoring of the market is appropriate

and necessary to determine the effect of the Commission’s current policy of

regulatory restraint on other markets such as e-commerce and e-content.

2. Cable modem deployment spurs alternative broadband technologies.

There was little disagreement among the panelists that cable investment

inherently spurs investment in DSL and vice versa. Some participants noted that

in the very near term, consumer choices in residential broadband likely would be

limited to either DSL or cable modems. Most agreed that there would not be

multiple pipes into the home within the next two to five years. Rather, cable and

DSL platforms were expected to dominate, with satellites providing an

alternative. Given the high levels of investment in non-cable, two-way broadband

technologies such as DSL, satellite, MMDS, and electric utilities, there was wide

agreement that robust competition in the broadband industry in the long run is

likely.

3. Regulation or the threat of regulation ultimately slows deployment of

broadband.

Cable interests argued that they have made an enormous investment in the cable

plant and have taken on extraordinary amount of risk to create a facilities-based

competitor to the local phone market. This investment and risk, according to the

cable interests, should not be jeopardized by saddling cable with government

regulation. Cable interests also argued that the threat of regulation jeopardizes the

incentives to make investments in alternative broadband technologies.

The investment analysts were in wide agreement that market competition is

developing in the absence of government intervention. They further agreed that

the Commission’s current policy of monitoring and restraint facilitates

development of a fertile marketplace. The absence of regulation, according to an
BROADBAND TODAY 34

analyst and an industry scholar, has been one of the principal factors contributing

to the growth of cable modem deployment in the United States. The investment

analysts also agreed that consumers would best be served if the broadband

industry segments continue to pursue market-based solutions that will speed the

deployment of broadband.

In this same vein, there was near unanimous agreement among the cable and

investment panelists that government regulation of the terms and conditions of

third-party access to cable systems would cast a cloud over investment in both

cable and telephony applications.114 According to these panelists, the cable

industry's ability to provide high-speed data services and telephony already is

factored into cable company valuations. Government-mandated access, as one

cable ISP official noted, “puts a shotgun slug through two inches of Excel

spreadsheets that [cable companies] use to generate their rate-of-return

calculations.”115 Although warning against the prospect of slowed deployment of

advanced services resulting from mandated access, some of the analysts found

that current commitments for broadband and the momentum of AT&T’s

deployment might limit the negative impact of any “open access” regulation.

The cable operators warned that even “light touch” regulation would be a

substantial distraction to investment in cable and the rollout of services. The

complexities of the Commission's rule making and tariffing processes also would

have the same affect. Additionally, the cable operators stated that a slow-down or

halt in cable telephony investment could result from government intervention into

“open access.”

One participant noted that not only does the threat of regulation affect cable

modem deployment, but any disincentives that apply to cable are also applicable

to telephone company DSL. Analysts pointed out that mandating “open access”

to broadband platforms could have an extremely detrimental effect not only on

cable stock valuations, but on other industries as well. If investment in cable

systems slows, stock prices could fall and affect build-out capital. This in turn

could slow the rollout of DSL by ILECs, as the urgency to beat cable to the

consumer marketplace would diminish. There likely would be a ripple effect.

Such a slow down, according to the analysts, could dramatically slow the

development of Internet advertising, e-commerce, and content.

4. Market forces will compel cable companies to negotiate access

agreements with unaffiliated ISPs, preventing cable companies from

keeping systems closed and proprietary.

There was virtually unanimous support for the proposition that closed proprietary

systems generally fail and do not adequately serve the needs of consumers. The

panelists’ opinions diverged over whether market forces, if left to their own
BROADBAND TODAY 35

devices, will create an open and fluid model or whether government intervention

is the only way to achieve this model.

The investment analysts were extremely confident that ISPs like AOL would

almost certainly strike a deal with AT&T and other cable operators. These

panelists posited that AOL’s over 18 million subscriber base gives AOL and the

cable operators a mutual interest in allying to increase cable’s market penetration,

protect their video and phone businesses, and eliminate competition.

Notwithstanding the existence of the exclusive ISP arrangement AT&T has with

Excite@Home, the analysts believed that AT&T and AOL were in the process of

negotiating a carriage arrangement. The analysts were less confident, however, of

the prospects of AT&T striking a deal with other unaffiliated ISPs in the near

term. The prospect of imminent government mandated access, according to the

analysts, would skew these negotiations.

5. If market forces fail and cable becomes the dominant means of Internet

access, regulation might then be necessary to promote competition.

Some of our panelists warned that the principal harm of government restraint

would be the development of a closed proprietary system that is the only viable

broadband platform to the Internet. Such a system would restrict the ability of

consumers to access the Internet through the ISP of their choice and stifle

innovation brought about by small and independent ISPs. According to some

LECs, ISPs, and public interest groups, cable companies could become Internet

gatekeepers with the power to determine which ISPs consumers could use and

what content they could access. These panelists took the view that a “leopard does

not change its spots.”116 Cable is a monopoly and will extend its monopolistic

behavior into the residential broadband industry, they contended. The

Commission’s failure to stop the formation of a broadband monopoly, according

to these panelists, will render subsequent remedial action useless.

According to this view, cable operators would be able to limit consumers’ choice

to their affiliated ISPs, thereby freezing out unaffiliated ISPs. Although the larger

independent ISPs like AOL and MindSpring may survive, some “open access”

advocates warned that the development of a closed proprietary system would limit

the innovation that smaller, unaffiliated ISPs can offer consumers. Panelists

representing smaller ISPs warned that the government’s failure to mandate “open

access” will lead to the demise of thousands of smaller ISPs who will not have the

bargaining power of the larger independent ISPs.

One investment analyst also warned that cable’s current broadband model will

have much broader implications on the development of e-commerce and content

sites. By controlling the last-mile and vertically integrating its Internet access and

content, cable operators have the ability to discriminate against unaffiliated e-
BROADBAND TODAY 36

commerce and content providers. This analyst further argued that cable will have

the incentive to discriminate against these unaffiliated providers, considering the

potential revenue from e-commerce and advertising related to e-content.

Panelists also argued that government inaction might enable cable operators to

prevent Internet video services from developing. These participants stated that

cable operators will be able to use their gatekeeper function to restrict Internet

video streaming over cable broadband networks. Specifically, LEC and local

government interests argued that cable operators will be able to control content on

the cable system network by restricting Internet video streaming.

6. There was no consensus on how to implement "open access" from a

regulatory perspective.

“Why doesn’t the Commission adopt a broadband regulatory model

comparable to existing models in the Communications Act?”

ISPs and some public interest groups posited that “open access” requires cable

operators to grant unaffiliated ISPs non-discriminatory access to their cable plant.

This would mean imposing an “open access” requirement similar to the common

carrier regime under Title II of the Communications Act. These groups argued

that broadband service over cable lines is essentially common carriage, and

moving bits between an ISP and a consumer is essentially a transmission service.

Some of these same interests suggested that “open access” also can be defined by

reference to the cable communications provisions of Title VI of the

Communications Act, which are designed to protect against the potential abuses

of cable operators selling programming. These interests stated that Title VI-type

regulation (also referred to as “regulation light”) would provide unaffiliated ISPs

the same access to the cable system as ISPs affiliated with the cable system. It

was suggested that the Commission could simply apply its leased access rules117

or its program access, just as it would in the context of a vertically integrated

company who owns both the facilities and the programming carried on the

system. One of the advantages cited by these proponents is that tier buy-through

restrictions would prevent cable operators from requiring that a subscriber

purchase its affiliated Internet access service as a condition of subscribing to cable

video service. “Regulation light,” according to its advocates, would also avoid

the full-blown burdens of Title II-type regulation.

One Internet backbone provider suggested that if the Commission does not choose

to apply Title II or Title VI-type definition of “open access,” it should consider

applying a public interest analysis to define the terms of “open access.” This

means that the Commission would rely on its ancillary powers under section 4(i)

of the Communications Act to perform “any and all acts, make such rules and
BROADBAND TODAY 37

regulations, and issue such orders, not inconsistent with [the Act], as may be

necessary in the execution of its functions.”118 Advocates of this position,

however, did not provide any substantive description of how these “open access”

rules would look or operate.

Other “open access” advocates offered what they believe to be a less complex

definition of “open access.” One academician suggested that the Commission

simply impose a basic unbundling requirement, which would permit consumers to

purchase only the services they desired, such as high-speed Internet access, video

programming, or telephony -- separately or in combination. Under such an “open

access” regime, cable companies would be free to establish a price for access and

charge the same price to all ISPs.

“Why doesn’t the Commission level the playing field for

telecommunications service providers and cable operators?”

At least one LEC panelist, an academic, and some public interest groups

supported an “open access” regulatory scheme across facilities. Under such an

approach, the Commission would impose the same regulatory obligations upon

cable operators as those imposed on ILECs. On the other hand, if the

Commission refrains from imposing access requirements on cable operators, these

panelists argued that the Commission should relieve incumbent LECs of their

access requirements.119 If broadband cable regulation does occur, these panelists

argued for non-discriminatory access and arms length dealing for backbone

traffic. The panelists expressed concern that a vertically integrated transport and

content provider could lead to higher backbone prices.

“Why doesn’t the Commission just follow

the Canadian regulatory model for ‘open access’?”

A technology forecasting group acknowledged that the term “open access” is

elusive because the industry is still evolving, but suggested, among other things,

that the Commission examine the Canadian experience with “open access” for

guidance in enacting a regulatory scheme. In 1996, the Canadian RadioTelevision and Telecommunications Commission (“CRTC”) required incumbent

cable operators to provide non-discriminatory access to the cable platform by

unaffiliated ISPs.120

“The cable platform is already an ‘open’ system”

Some cable operators argued that cable systems are, in fact, already open, and

there is no need for imposing further requirements. This view posited that cable

Internet subscribers can reach any Internet site or portal over the cable platform,

and are free to select the ISP of their choice by simply “clicking-through.”121
BROADBAND TODAY 38

“Open access” means providing access to unaffiliated ISPs on mutually

acceptable terms, determined by arms-length negotiation. This view of “open

access,” however, did not enjoy support much beyond the cable interests in

attendance.

Unanswered Questions

“Open access” is one of the most well-worn terms in the growing broadband

access debate. Private interest groups recently have emerged advocating for and

against “open access.”122 Four LFAs recently mandated that cable companies

provide non-discriminatory access to unaffiliated ISPs as a condition of approving

franchise transfers.123 Legislation on the subject has been introduced in State

legislatures and the U.S. Congress.124 Yet, despite a flurry of national and grass

roots activity concerning “open access,” our panelists -- a collection of some of

the nation’s leading business, government, and public interest advocates on this

issue -- were not able to agree upon a single workable definition of the term, 125

much less recommend an appropriate regulatory classification and enforcement

mechanism. This fact speaks volumes about the difficulties and appropriateness

of establishing a regulatory regime at this early stage in broadband’s history.

To date, many questions concerning the specifics of implementing a broadband

access requirement remain unanswered. None of the enacted local legislation

requiring access has set forth a defined system of interconnection or guidelines for

pricing. 126 And most of the enacted or proposed legislation simply mandates that

the terms, rates, and conditions of “open access” shall be the same as those the

cable operator provides to itself or affiliated ISPs. This “nondiscrimination”

standard offers little guidance when a cable operator does not itself offer Internet

access service or is not affiliated with an ISP.

Further, even as to cable operators providing Internet access service through an

affiliated ISP, a “nondiscrimination” standard leaves many implementation

questions unanswered. For example, as cable operators have pointed out,

affiliation agreements between cable companies and ISPs have involved the cable

operator taking an equity stake in (and revenue split with) the affiliated ISP.

Whether these arrangements can and should be used as the basis for a carriage

arrangement with unaffiliated ISPs is difficult, at best. Significantly,

implementation of the “nondiscrimination” standard for interconnection and

access to ILECs’ telephone networks under Title II of the Communications Act

necessitated the creation of separate, complex sets of accounting and nonaccounting rules to govern pricing arrangements between ILECs and CLECs.127

Finally, the panelists were vague or declined to offer to explain how imposing a

broadband access requirement would be consistent with the de-regulatory goals of

the 1996 Act.
BROADBAND TODAY 39

7. There was no consensus on how to implement "open access" from a

technical perspective.

There seemed to be wide agreement among the panelists that “open access”

means a common infrastructure that is competitively neutral. Some consider this

to mean choice and competition at every level of Internet access: the backbone

level, the ISP level, and the content level. In other words, choice in broadband

should be the same as in narrowband.

What was particularly confounding for our participants was the question of where

“open access” should occur. One industry analyst said that “open access” is

decoupling transport from the rest of the Internet, so that cable does not become

the “choke” point. Local government representatives proposed that a local

peering arrangement 128 should be made throughout a local high-speed meeting

point.

One participant argued that it is the protocol of the Internet that is important, and

that the Commission should maintain a protocol independent of the network over

which it runs, though no standard was offered.

Aside from the technical obstacle of implementation, some of the analysts noted

that one of the greatest logistical obstacles to the deployment of distribution

systems is the shortage of engineers and the limited infrastructure necessary to

physically create and deploy these systems. It was clear that at the time of the

Monitoring Sessions, none of the participants had a definitive idea as to how to

account for the critical logistical requirements for wide-scale cable broadband

deployment.

8. Rapid nationwide broadband deployment depends on a national policy.

There seemed to be wide agreement among our panelists that consumers would be

poorly served by a fractured broadband landscape wherein each locality devises

its own set of cable Internet access regulations. All of the financial analysts

expressed concern over the prospect of hundreds of LFAs regulating broadband

access. The analysts also were concerned that the nascent broadband industry

could be negatively impacted if the Portland decision is upheld. The concern is

that cable companies would move away from or substantially slow cable modem

deployment and focus on telephony, thereby thwarting the public policy objective

of rapid deployment of advanced technologies to all Americans. Some of these

analysts also feared that LFAs do not have the expertise to develop workable

“open access” requirements.

The local government representatives tacitly acknowledged that they did not have

the resources or expertise in some cases to develop a comprehensive regulatory
BROADBAND TODAY 40

scheme for broadband access. (And privately, some local and state authorities

expressed reluctance to devise such regulatory schemes.) Some local

representatives expressed a strong desire to see the federal government take the

lead on this issue, by providing formal guidance to states and localities, while

permitting them to maintain an enforcement role.
BROADBAND TODAY 41

V. ANALYSIS

The rapid pace of change and the dynamic developments in broadband

communications present great opportunities for both American consumers and the

communications industry. Consumers stand to benefit from improvements in

technology, which will lead to the provision of greater, faster, and more efficient

services—all at affordable costs. Companies providing broadband services and

technology stand to benefit from an expanding market, which will lead to

increased revenues and a greater number of products and services.

In order for these benefits and opportunities to be realized, however, there must

be a competitive marketplace. Government can promote a competitive market by

encouraging innovation, investment, and infrastructure buildout. In so doing,

government insures that innovative and cost-efficient services will be provided to

consumers by a diversity of entities—or multiple pipes to the home.

The Commission’s public interest mandate requires it to forbear from regulation

and allow market forces to flourish, but to intervene in the event of market failure.

In reaching this balance, the Cable Services Bureau’s staff recommends that the

Commission forbear from imposing regulation and continue to resist the urge to

regulate prematurely. This is not to say, however, that the Commission should be

passive in the face of anti-competitive behavior. At present, the appropriate

balance can be struck by monitoring the market and resisting the urge to fix a

system that does not appear to be broken and shows early signs of healthy growth

and competition.

A. Risks of the Commission Continuing Its Policy of Regulatory Restraint

To be sure, there are potential risks associated with a continued policy of

regulatory restraint and monitoring. We acknowledge that some of the principal

risks include the threat of a cable monopoly of broadband, the creation of

irreversibly closed cable systems, and inconsistent local regulation.

Threat of Cable Monopoly of Broadband

As mentioned earlier, one of the principal harms cited by “open access” advocates

is that the Commission’s failure to act now will give cable monopoly control over

Internet access. Some “open access” proponents predict that cable will be the

leading and perhaps only viable platform for broadband access to the home. In a

recent White Paper submitted to the FCC, the openNet Coalition described the

potential for cable operators like AT&T to develop a monopoly on broadband

access to the Internet. “AT&T’s early advantage in broadband would be
BROADBAND TODAY 42

entrenched and expanded [if the government continued its policy of monitoring] –

end result Ma Web reigns.”129

In this same vein, some of the panelists warned that AT&T will be in a position to

totally dominate cable, Internet access, and Internet content, thus gaining the

ability to set standards for the entire industry. Others expressed concern that as

infrastructures are built, architectures will be constructed so that it will not be

possible to take remedial action at a later time.

The Bureau recognizes that these risks are serious and can potentially undermine

the open nature of the Internet. At this point, however, the Bureau is not

persuaded that consumers are at risk of cable establishing a bottleneck monopoly

in broadband services in the absence of immediate regulatory action. There have

been no developments since the release of the Section 706 Report earlier this year

to alter the Commission’s conclusion that no monopoly exists. Moreover, the

monopoly argument wrongly assumes that cable is the only viable broadband pipe

available in the near term to provide Internet access to the home. As deployment

of DSL, satellite, and wireless advances, in large part spurred by rapid cable

modem deployment, consumers will have alternative platforms to use for highspeed data access, telephony, and video services.130 We have already seen

evidence that these alternative technologies are attracting new subscribers at an

exponential rate, and that prices for these new services are falling. As stated in

the Section 706 Report:

By the standards of traditional residential communications, there are, or

likely will soon be, a large number of actual participants and potential

entrants in this market. Anti-competitive coordination among competitors

is difficult in such markets.

131

We believe for now that the emergence of alternative broadband providers, with

their competitive service offerings, features, and prices, mitigates the risk that

cable will become the gatekeeper to the Internet.

We also believe that customer demand for choice ultimately will compel cable

operators to open their systems to unaffiliated ISPs. If a cable operator opts for a

closed, proprietary system in which consumers have no choice of ISPs or have to

purchase unwanted services as a condition of subscribership, these companies will

risk losing subscribers in favor of more open systems.132 These operators also

would be susceptible to regulation intended to eliminate monopolistic and anticompetitive practices. We believe that market forces and our ongoing monitoring

efforts will persuade cable companies to keep their networks open, even in the

absence of regulation.
BROADBAND TODAY 43

Moreover, the import of the 1996 Act and the Commission’s long-standing policy

of non-regulation of the Internet express a strong preference for market-based

solutions, not governmentally imposed solutions. Even if there could be some

“short-term improvements in retail competition [by the government mandating

access], it may also undermine incentives for developing new methods to

circumvent the influence of incumbents over distribution.”133 Despite the risks in

the balance, our findings support a continued policy of regulatory restraint to

facilitate the rapid deployment of multiple broadband technologies, including

cable, DSL, wireless and satellite. Unless and until anti-competitive behavior

surfaces, it is preferable to allow market forces to propel cable operators and

independent ISPs toward an “open access” system. Market-based solutions

devised by the parties will likely provide a better framework for consumers.

Threat of Creation of Irreversibly Closed Systems

One of the more troubling prospects brought to our attention is of cable operators

designing their networks in a way that irreversibly restricts the ability of

unaffiliated ISPs to access the cable plant in a meaningful way. 134 This is a

charge that the Commission should take seriously. If cable networks are designed

in such a way, the Bureau acknowledges that it may be difficult, from an

engineering and economic standpoint, to re-engineer the networks in a way that

grants meaningful access to unaffiliated ISPs. We are encouraged, however, that

the general consensus among our panelists was that the cable architecture is not

irreversibly closed. The Commission’s Office of Engineering & Technology is

actively monitoring the marketplace to determine if the cable network architecture

remains open. If signs develop that cable is pursuing a closed, proprietary

network design, the Commission should take immediate and aggressive steps to

prevent this result.

Although most cable companies have not provided unaffiliated ISPs with direct

access to their networks, we have seen no credible evidence that cable network

architecture precludes future modifications to allow such access. The availability

of a technology option to require cable companies to provide “open access” in the

future, if these companies gain excessive market power and fail to negotiate with

unaffiliated ISPs, allows the government to stay its regulatory hand unless such

anticompetitive conditions develop.

Threat of Inconsistent Local Regulation

Finally, we address the claim by local governmental interests that the Commission

should give broad guidance to localities on how best to encourage the

development of open network architecture. Indeed, we have witnessed LFA

activity in this area.135 Inconsistent local regulation potentially can disrupt the

Commission’s national broadband policy and keep broadband technologies out of
BROADBAND TODAY 44

the hands of many Americans. While some LFAs have opted for mandated

access, we have been encouraged by the decisions in Los Angeles and San

Francisco, for example, where those governments have decided to pursue a policy

of monitoring and restraint.136 We believe these local governments have followed

the guidance provided by this Commission in its Section 706 Report and the

recent AT&T-TCI Order.

137

The Bureau recommends that the Commission continue to engage in active

dialogue with local regulators across the country to make sure that localities and

the federal government work together to support a national broadband policy. 138

Local government representatives have participated in these Monitoring Sessions,

and we fully expect their continued participation in the Commission’s upcoming

Section 706 proceeding. Numerous LFAs share the Commission’s goal of a

national broadband policy. As the Commission’s staff and localities continue to

work together toward maintaining a national broadband policy, the Bureau is

hopeful that we can avert the uncertainty generated by disparate broadband

policies in which not all Americans will share in the benefits of broadband.

B. Benefits Of The Commission Continuing Its Policy of Regulatory

 Restraint

The findings from our Monitoring Sessions highlight the rapid pace of change in

the nascent broadband industry and the difficulty of placing broadband services

under any existing regulatory framework. The Commission is well aware that

“application of existing regulatory categories is difficult, if not impossible to

many forms of Internet-enabled communications.”139 Until the Commission has a

better view of how broadband technology will be deployed and used by

consumers, the Bureau recommends continuing the Commission’s policy of

regulatory restraint and monitoring. The notion of applying prophylactic “open

access” measures – whether they be in the form of Title II, Title VI, or more

simple unbundling regulations -- before fuller development of the broadband

industry would be unsound public policy that could have the unintended effect of

impeding the rapid development of this industry. The market is the only force, at

this stage, that is sufficiently dynamic and informed to create a competitive

broadband marketplace. We believe that market forces, coupled with ongoing

Commission monitoring of the marketplace, are the best hope for creating an open

network architecture and discouraging the formation of a closed proprietary

architecture.140

Even if a regulatory scheme could be devised at this early stage, such a scheme

would likely be very complex and burdensome. The Commission’s experience

from implementation and enforcement of the Title II “non-discriminatory”

interconnection and access requirements teaches us that a complex regulatory and

tariffing scheme would likely accompany broadband access requirements. For
BROADBAND TODAY 45

instance, the seemingly simple dictate in section 251(c)(2) of the Communications

Act, which requires ILECs to provide network interconnection and access by

telecommunications carriers at any “technically feasible point” on “rates terms

and conditions that are just, reasonable, and non-discriminatory,” has been the

subject of complex and lengthy rulemakings and litigation. This experience has

been borne out in Canada, where in 1996, the Canadian Radio-Television and

Telecommunications Commission required incumbent cable operators to provide

non-discriminatory access to unaffiliated ISPs. It took three years for the CRTC

to adopt rules requiring incumbent cable operators to file tariffs and establish

conditions for interconnection and resale by independent ISPs. Even with this

mandate, trials used to determine rate schedules have not started, and are not

expected to be completed until next year. This type of regulatory delay, and its

resulting uncertainty, threatens to slow down the nascent broadband industry and

would be inimical to the intent of the 1996 Act.

Perhaps most significant, our monitoring efforts have not revealed any

monopolistic practices by cable operators that presumably would be the predicate

for any type of “open access” requirement. Admittedly, we are in the early stages

of the broadband revolution, and although cable has an early lead, its telephone,

satellite, and wireless competitors are rushing to close the gap. Against this

backdrop, it would be premature for the Commission to establish a national “open

access” requirement.

The 1996 Act was enacted to “promote competition and reduce regulation in order

to secure lower prices and higher quality services for American

telecommunications consumers and encourage the rapid deployment of new

telecommunications technologies.”141 The Commission’s charge is to find ways

to encourage market-based solutions and to avoid direct intervention in

competitive and well functioning markets. From the evidence before us and from

our independent research, it appears that the prospect of mandated access could

have a negative effect on continued investment in broadband technologies and

deployment.

Mandated access also could reduce the financial incentives and the build-out

capital for cable companies to make the large investments necessary to upgrade

their systems. Under such a scenario, AT&T, for example, might opt to focus on

deploying telephony services at the expense of deploying Internet broadband

services.142 While we are not persuaded necessarily that cable operators would

halt their nationwide broadband deployment in the face of a mandated access

requirement, there is a significant and credible risk that rapid deployment of these

services to all Americans would be greatly compromised. Thus, faced with no

evidence of anti-competitive and monopolistic practices, the Commission should

continue to pursue its policy of not regulating cable Internet access.
BROADBAND TODAY 46

C. Evidence The Commission’s National Broadband Policy Is Facilitating

 Vigorous Deployment And Competition

The data cited in Part III of this Report indicate that broadband deployment in this

country is growing and will likely grow exponentially in the years to come. The

rapid deployment of this technology to consumers will depend in large measure,

however, on the level of investor interest and regulatory incentives provided to

industry by local and federal governments. One of our most significant

preliminary findings is that the Commission’s policy of restraint on broadband

regulation has helped to create a fertile environment for growth.

The early deployment statistics and anecdotal evidence suggest that in areas

where cable modems are deployed, the deployment of DSL follows closely.

Sometimes DSL deployment spurs cable modem deployment, but it is fairly clear

that the rate of deployment of one technology influences the rate of the other. As

cable and DSL are deployed in the same markets, we also have observed

aggressive price competition. In various markets, DSL prices have been lowered

to be competitive with cable modem service.

Moreover, it appears that the lack of an “open access” requirement for cabledelivered broadband services has pushed independent ISPs to enter into

agreements with non-cable broadband services providers and thereby has

accelerated the pace of deployment. Specifically, there is encouraging evidence

that independent ISPs are entering into agreements with LECs, CLECs, and

satellite providers to deliver high-speed Internet access. And in the not-so-distant

future, the Bureau expects that cable operators and unaffiliated ISPs will

successfully negotiate carriage arrangements. Such arrangements are in the best

interest of business and the consumers they serve.
BROADBAND TODAY 47

VI. CONCLUSION

The Commission’s mandate under the 1996 Act is to ensure that advanced

telecommunications capability is deployed to all Americans on a “reasonable and

timely basis.” As part of that mandate, and at the Chairman’s direction, the Cable

Services Bureau has vigilantly monitored the broadband industry to collect

information as to how this industry is developing. A finding of market-based

harm, however, would be a necessary predicate for regulatory action. In the

absence of such a finding, the Bureau cannot recommend that the Commission

take regulatory action of any kind at this time.

Far from finding harm, the Bureau’s monitoring efforts have revealed a nascent

residential broadband market containing a number of existing and potential

competitors. Cable, telephone, wireless, and satellite companies are rushing to

provide broadband services to the home. As a result of this competition,

consumers will have a wide selection of broadband features, capabilities, and

pricing from which to choose. It is questionable that this multiplicity of choices

would exist if the government were to intervene at this early stage of the race.

Perhaps most importantly, government has provided the numerous incentives to

broadband companies to invest in and deploy their technologies. By forbearing

from imposing “open access” regulations on cable operators, the Commission has

fostered an environment that encourages investment not only in cable, but also in

the alternative broadband technologies, such as wireless, satellite, and DSL.

The Commission should be mindful of the concerns and dangers cited by the

advocates of mandated access. It should be prepared to act swiftly if the evidence

of harm actually materializes. The Bureau believes that the Commission should

continue to monitor developments in the broadband industry, resist the pressure to

regulate this new and innovative industry, and consider regulation only if

competitive harms arise.
BROADBAND TODAY 48

ENDNOTES

 

*

 The following staff of the Cable Services Bureau contributed to the research, drafting

and production of this Report: Tasha Browning, Sunil Daluvoy, Donnie Fowler, Jay

Heimbach, Adonis Hoffman, William Johnson, Anne Levine, John Norton, Clint Odom,

Mike Perko, Michelle Russo, Quyen Truong, and John Wong.

1

See John Schwartz, How Much Room in the Fat Pipe?, The Washington Post, at H01

(Sept. 19, 1999).

2

Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All

Americans in a Reasonable and Timely Fashion, and Possible Steps To Accelerate Such

Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, CC Docket

No. 98-146, Report, 14 FCC Rcd. 2398 (1999) (Section 706 Report).

3

Id. at 2415 ¶ 36.

4

Id. at 2423-24 ¶ 48.

5

Id. at 2449 ¶ 101.

6

Applications for Consent to the Transfer of Control of Licenses and Section 214

Authorizations from Tele-Communications, Inc. to AT&T Corp., CS Docket No. 98-178,

Memorandum and Order, 14 FCC Rcd. 3160, 3198 ¶ 75 (1999).

7

Id. at 3207 ¶ 96.

8

 Telecommunications Act of 1996, Pub.L.No. 104-104, 110 Stat. 56 (1996) (1996 Act).

9

The Internet is a worldwide system of public and private computer networks that allows

for the exchange of information--voice, video, data--through a universal language

(protocol) called TCP/IP. To access the Internet, the customer generally needs a

computing device and a subscription to either an ISP or an OSP. The computing device

translates the information from TCP/IP into a format that is recognizable (e.g. text,

image, sound). The ISP or OSP provides the physical connection to the Internet, as well

as Internet-related services (e.g., Web-hosting, e-mail and proprietary content).

10 See Chairman William Kennard, Connecting the Globe: A Regulator’s Guide to

Building a Global Information Community (1999), available at

<http://www.fcc.gov/connectglobe/sec9.html>.

11 1996 Act, § 706 (c)(1), 47 U.S.C 157 note.

12 Id.
BROADBAND TODAY 49

 

13 Id.

14 Section 706 Report, 14 FCC Rcd. at 2406 ¶ 20. We believe that Congress intended

broadband to be faster than Integrated Services Digital Network (ISDN) service, which

operates at a data rate of 128 kilobits per second (kbps) and was widely available at the

time the 1996 Act was enacted.

15 Id.

16 Id.

17 Id. at 2406 ¶ 20 (citing Comments of Cincinnati Bell Tel. Co. at 7).

18 Id. at 2407 ¶ 23 (citing Comments of e-spire Communications, Inc. at 4; Comments of

Information Technology Association of America at 2 n.3).

19 Id. at 2407-08 ¶ 25.

20 The information in this section is drawn primarily from Barbara Esbin, Internet Over

Cable: Defining the Future in Terms of the Past, OPP Working No. 30, at 75-79 (Aug.

1998) (Esbin White Paper) (citing National Cable Television Association (NCTA),

Telecommunications and Advanced Services Provided by the Cable Television Industry at

3-26 (April 1996); and NCTA, The Cable Television Handbook , Section 3 (January

1997)).

21 The headend is the technological center of the system, where many programming

operations and functions are processed, such as the reception of satellite delivered

programming and broadcast signals. It includes facilities for descrambling incoming

signals from satellite and broadcast programming networks, assigning them channel

numbers, and processing them for retransmission over cable lines. The headend also

contains electronic equipment for inserting advertising at the local level, encrypting

signals for security purposes, and playing or producing public access/local origination

programming.

22 DSL comes in numerous varieties but fall into two general categories: symmetrical

(SDSL) and asymmetrical (ADSL). ADSL is the most common form of DSL for the

residential market.

23 Jonathan Atkin, Ferris, Baker Watts, Inc., Bring on The Bandwidth . . ., at 45 (July

1999) (FBW Report).

24 Salomon Smith Barney Telecommunications Services, xDSL Breaking the Loop, at 11

(April 1999) (Salomon Report).

25 FBW Report at 45.

26 Id.
BROADBAND TODAY 50

 

27 Id.

28 Salomon Report at 15. Some of these implementation issues include: load coils; crosstalk; signal attenuation; digital loop carriers; and bridge taps.

29 Id.

30 FBW Report at 54.

31 Id.

32 Salomon Report at 5

33 Id.

34 Id.

35 PriceWaterhouseCoopers, Technology Forecast: 1999 (10th ed.), at 88 (1999); Salomon

Report at 18.

36 FBW Report at 63; Salomon Report at 20.

37 See FBW Report at 63. Fixed wireless providers must also address the challenge

reaching full production status on equipment that is necessary for large-scale commercial

deployment.

38 Id.

39See Section 706 Report at Appendix A.

40 Salomon Report at 22.

41 The transmissions for these broadband satellite systems would be sent and received

using two-way antennas. In other words, both the downstream and upstream

transmissions are provided through the satellites. Although DirecPC currently offers

high-speed Internet access, it is a one-way system that utilizes the satellites for

downstream transmissions and the existing telephone lines for upstream transmissions.

42 See 706 Report at Appendix A; ING Baring Furman Selz LLC, The Satellite

Communications Industry, at 140-41 (May 1999) (ING Barings Report). The following

list identifies several global broadband satellite projects (and their start of service date):

Astrolink (2001); CyberStar (2000); Skybridge (end 2001); Spaceway (2002-3);

Teledesic (2003).

43 Some of the technology and engineering concerns include the following: developing

affordable customer premises equipment; addressing signal attenuation during inclimate
BROADBAND TODAY 51

 

weather; in the case of low earth orbiting (LEO) systems, launching into space several

dozen satellites.

44 PWC Report at 54 (1999).

45 Information in this section is drawn primarily from Fifth Annual Assessment of the

Status of Competition in the Market for the Delivery of Video Programming, CS Docket

No. 98-102, Report, 13 FCC Rcd 24284, 24313-24321 ¶¶ 52-59 (1998) (“1998

Competition Report”), and <http://www.cabledatacomnews.com/cmic/cmic1.html>

46 See generally <http://www.cabledatacomnews.com/cmic/cmic1.html> A “cable

modem” is the equipment that converts data transmissions from the cable headend for use

in the subscriber's premises. In the home, a cable modem connects the cable television

coaxial wiring to the user's personal computer. Despite its name, a cable “modem” is, in

fact, not a MOdulator-DEMOdulator (MO-DEM) at all. Instead, most cable modems are

simply “external devices that connect to a personal computer (PC) through a standard

10Base-T Ethernet card and twisted-pair wiring.” These Ethernet connections enable a

subscriber’s computer to become part of the cable operator’s virtual local area network

(LAN).

47

 See <http://cabledatacomnews.com> A LAN is a computer network limited to an

immediate area. An Ethernet is a very common method of networking computers in a

LAN. An Ethernet will handle about 10,000,000 bps and can be used with almost any

kind of computer.

48 Many operational issues exist including capacity management, traffic engineering,

fault detection and clearance, failure recovery, provisioning, customer servicing, network

administration, traffic policy management, etc. These areas are new and complex in a

shared media, public high-speed data communications network. See

<http://www.matisse.net/files/glossary.html>

49 An Intranet is a private network inside a company or organization that uses the same

kinds of software that you would find on the public Internet, but that is only for internal

use. As the Internet has become more popular, many of the tools used on the Internet are

being used in private networks. For example, many companies have Web servers that are

available only to employees. See <http://www.matisse.net/files/glossary.html>

50 Owned and operated by the ISPs, a regional distribution center or hub usually connects

several cable headends to the public Internet.

51 Dial-up services require the user to place a telephone call connection to the ISP/OSP

each time access to the Internet is desired.

52 See 1998 Competition Report, 13 FCC Rcd. at 24416-17, App. B, Tbl. B-9.

53 CableLabs is a membership organization consisting of cable system operators in North

and South America. <http://www.cablelabs.org/start_here/index.html> In 1998, the
BROADBAND TODAY 52

 

International Telecommunications Union (ITU) approved the Data Over Cable Service

Interface Specification System (DOCSIS) developed by CableLabs, as an international

standard for the transmission of data over cable. CableLabs® International

Telecommunications Union Approves DOCSIS Modem Standard, (news release) (March

19, 1998). The ITU standard sets forth definitions for high-speed, two-way data

transmissions over cable.

54 Currently, cable modems are available in some retail outlets, but these modems may

not be technically compliant with DOCSIS standards, and may not be interoperable with

modems that will appear after DOCSIS certification.

55 Cable Modem Subscriber Count Tops 1 Million, Cable Datacom News (Aug. 1999),

available at <http://www.cabledatanews.com/cmic>

56 Id.

57 Id. Traditional cable networks are one-ways systems wherein the video signals travel

in one direction: from the cable headend to the subscriber’s home or business. In the

context of cable modem service, one-way systems utilize the cable wires for downstream

transmissions and existing telephone wires for upstream transmissions

58 1998 Cable Competition Report, 13 FCC Rcd. at 24316 ¶ 55.

59 See <http://www.cabledatanews.com/cmic>

60 See <http://www.cabledatacomnews.com/aug99/aug99-1html> AT&T (formerly TCI),

Cox Communications, and Comcast are the major cable partners in Excite@Home.

Time-Warner Cable and MediaOne Group are the major cable partners in RoadRunner.

61 Id. Approximately 275,000 of Excite@Home subscribers are in Canada, bringing its

U.S. total to 395,000.

62 Id.

63 <http://www.cabledatacomnews.com/cmic/cmic7.html>

64 Imposing Common Carrier-Style Regulation on Cable Would Impede Deployment of

Cable’s High Speed Internet Service To Rural and Small Communities, NCTA ex parte

filing (May 1999). See High Speed Access Corp. homepage,

<www.hsacorp.net/pages/pnrl/mnr.html>; ISP Channel homepage,

<www.ispchannel.com/press/01jul99.html>. In rural and small communities where

computer penetration is generally lower than the national average, the high fixed costs

related to establishing high speed networks are spread over a smaller customer base.

65 Imposing Common Carrier-Style Regulation on Cable Would Impede Deployment of

Cable’s High Speed Internet Service To Rural and Small Communities, NCTA ex parte
BROADBAND TODAY 53

 

filing (May 1999). The following list provides few examples of cable systems offering

broadband and/or high speed Internet access to rural and small markets:

• In North Dakota, Cable Services Inc. has recently partnered with ISP Channel to

offer residential and business broadband services to Jamestown and Valley City.

• Midcoast Cable, in partnership with High Speed Access (HSA) Corp., is offering

one-way high speed Internet service in its El Campo and Edna, Texas systems,

which pass approximately 5,700 homes.

• TCA Cable TV, through its subsidiary TCA Communications, Inc., has launched

broadband service in Bryan/ College Station, Tyler and Amarillo, Texas.

• Sjoberg’s Cablevision Inc., has partnered with ISP Channel to offer high-speed

cable modem service over a two-way hybrid fiber/coax network to its community

in Thief River Falls, Minnesota, which has a population of approximately 8,200.

• Lakes Cable in Spirit Lake, Iowa has deployed the InterTECH IDS system to

bring high-speed cable modem service to its cable system serving approximately

4,000 customers.

66 Lehman Brothers, ADSL v. Cable Modems: And the Winner Is . . ., at 6 (June 1999)

(Lehman Report). Even conservative estimates indicate that cable should have over 4

million broadband subscribers by 2002. Based on the current subscriber total of 1 million,

cable broadband market should experience an annual growth rate of over 100 % for the

next 3 years.

67 FBW Report at 78.

68 AT&T stated that plant upgrades to support broadband should reach nearly 60% of

homes passed by the end of 1999 and 90% of homes passed by the end of 2000.

Similarly, MediaOne has stated that its plant upgrades will reach 70% by the end of 1999

and over 90% by the end of 2000.

69 Lehman Report at 17.

70 See <www.home.net/source>

71 DSL figures available at

<http://www.telechoice.com/content/pressreleases/08171999.asp>.

72 Id.

73 The deployment of DSL could have an adverse impact on the telephone companies’ T1

business. T1 is a form of high-speed access that was sold primarily to business

customers. With a price range of $300 to $3000 per month, the T1 business generated

high profit margins for the telephone companies. Since the price point of DSL was

lower, ranging from $50 to $1000 per month (depending on the type of DSL), the

deployment of DSL service would undercut the T1 business. See Banc of America

Securities, Equity Division, Wireline Telecom Services, at 3 (April 1999). (BofA Report).
BROADBAND TODAY 54

 

74 DSL offerings have followed cable modem service in the following areas: Denver, San

Diego, Phoenix, Los Angeles, and Salt Lake City.

75 Lehman Report at 6. According to Lehman Brothers estimates, cable will capture 14.5

million subscribers and DSL will capture 10.5 million subscribers by end of year 2007.

76 BofA Report at 15, 25; Salomon Report at 26. For example, by year-end 1999, Covad

plans to have its DSL service available nationwide to 26 million homes and 2.6 million

businesses.

77 Bear Stearns Report; Cable Industry Outlook , at 67, 71-78 (1999) (BSR); Donaldson,

Lufkin & Jenrette, Cable Report, at 19 (Spring 1999) (DLJ Cable Report). DSL

technology is distant sensitive, meaning that the signal degrades after travelling certain

distances—normally 18,000 feet from the central office. G.lite does not degrade as fast

as DSL when travelling lengths of up to 18,000 feet. Having less degradation of the

signal, G.lite effectively increases the telephone company’s coverage area for DSL.

78 BSR at 67. G.lite does not require installation of a voice/data splitter at the

subscriber’s home or business.

79 DLJ Cable Report at 19.

80 DSL Deployment Surges Well Beyond Projections; Grows 5 Times Faster Than Cable

in 6-Month Period, at <www.telechoice.com/content/pressrelease/08171999.asp>

81 DLJ Wireline Report at 23.

82 Bill Menezes, Lucent Says Solution Will Accelerate DSL Further, Multichannel News--

Broadband Week (Aug. 2, 1999).

83 BSR at 77; Communications Daily, July 21, 1999 (citing SBC 2Q Earnings Report;

SBC is signing up 1,500 new subscribers per week in California alone); Lehman Report

at 6.

84 BSR at 77. At the end of the first quarter 1999, US West had 30,000 DSL subscribers,

of which 85% were residential subscribers. DSL Access Race—May 1999, available at

<http://www.telemagazine.com/issues/199905/tci/dsl.html>

85 Id. GTE’s discounted pricing structure is 20% lower than its then existing lowest priced

DSL service. This discounted DSL pricing is also comparable with cable modem pricing.

86 US West’s News Release, US West New ‘MegaBit Select’. . . (July 7, 1999).

87 DLJ Wireline Report at 23.

88 Id.
BROADBAND TODAY 55

 

89 EarthLink Taps GTE Internetworking For National DSL Network Services, available at

<http://www.xdsl.com/newsrelease/xdsl/4698.asp?mode=welcome>

90 News Release, EarthLink and MindSpring Announce Strategic Merger, available at

<http://www.mindspring.net/aboutms/press-releases/1999/0923.html>

91 Villagenet Inc. Enters National DSL Market, available at

<http://www.xdsl.com/newsrelease/xdsl/4750.asp?mode=welcome>

92 Covad Introduces New Services to Help Power the Next-generation Internet, available

at <http://www.xdsl.com/newsrelease/xdsl/4703.asp?mode=welcome>

93 These fixed wireless providers have licenses operate at specific parts (or bands) of the

spectrum. The following list details the various types of fixed wireless companies and

their bands of operation: Multichannel Multipoint Distribution System (2.1-2.7 GHz);

Local Multipoint Distribution Service (28-31 GHz); Teligent (24 GHz); and Winstar (38

GHz).

94 See,e.g., Salomon Report at 21; Winstar To Provide Boston Properties With Advanced

Broadband Telecommunications Services, July 8, 1999, available at

<www.winstar.com/PressRelease/78_boston_properties.htm>; <www.teligent.com>.

According to some industry estimates, ILECs are failing to meet the data needs of

750,000 multi-dwelling units in the United States—needs that could be quickly and

inexpensively addressed with broadband wireless services. , The 3G Force, Red Herring

No. 69 at 88 (Aug. 1999).

95 Nextlink’s Website at <www.nextlink.com/ra/info/rainfo.html>.

96 Id.; Salomon Report at 21.

97 Previously, the Commission only licensed MMDS systems to provide one-way video

services. In the fall of 1998, the Commission changed its licensing rules and permitted

MMDS systems to offer two-way services, such as broadband access.

98 Hoexeter’s CLECtive Notes, Issue #16, Goldman Sachs (July 1999). Following its

purchase of WBS America in July, Sprint now has access to almost 30 million

households nationwide. Sprint plans to offer its broadband product called ION

(Integrated Online Network) over its MMDS systems. As of the writing of this Report,

MCI WorldCom and Sprint announced their intention to merge. Press Release, MCI

WworldCom and Sprint Create Pre-eminent Global Communications Company for 21st

Century (Oct. 5, 1999), available at <http://www.wcom.com/cgibin/pr/display.pl?cr/19991005>. The combined entity plans to offer a unique nationwide

broadband access alternative to both cable and traditional telephony through a

combination of DSL facilities and fixed wireless access using the combined company’s

nationwide MMDS spectrum.
BROADBAND TODAY 56

 

99 ING Barings Report at 145.

100 Id.

101 Id.

102 Id.

103 Id. at 143.

104 Cable operators are considered MSOs if they own and/or operate more than one cable

system. MSOs are rapidly upgrading their hybrid-fiber coaxial cable networks to provide

for two-way broadband services. Once upgraded, MSOs will be able to offer their

subscribers an array of communication services, including digital video, telephony, and

high-speed Internet. Examples include AT&T/TCI, Comcast, Cox, Cablevision, and

Time-Warner Cable.

105 Cable companies are regulated both by the federal government and LFAs. LFAs’

authority includes jurisdiction over certain types of cable rates, rights-of-way, and

franchise transfers. When a cable system is sold, its cable franchise must be transferred

to the new owner. The LFA approves the franchise transfer. As part of the transfer

process, some LFAs recently have decided to impose certain requirements on cable

operators’ provision of broadband services.

106 Telecommunications companies that provide local telephony or voice services qualify

as LECs. There are several variations of LECs. ILECs are the established local

telephony providers in a given market. In most cases, GTE or the former Bell Operating

Companies (Bell Atlantic, SBC, US West, BellSouth or Ameritech) are the ILECs, and

they are subject to a host of regulatory requirements that include interconnection,

unbundling, and resale obligations. Through a technology called Digital Subscriber

Lines (DSL), ILECs are offering high-speed access through their existing telephone

network.

107 CLECs are new entrants to the local telephony market and compete against the ILECs

for customers. CLECs focusing on providing data services are called DLECs. These

companies are also utilizing DSL technology to provide high-speed Internet access to

customers.

108 Telecommunications companies that provide long distance telephony and data services

are called IXCs. Many of these companies provide Internet backbone services that route

Internet traffic among Internet service providers and other backbone providers.

Examples include MCIWorldCom, Sprint, Qwest, and AT&T.

109 ISPs generally offer businesses and consumers access to the Internet and other related

services such as, e-mail, Web-site building and hosting. ISP offerings typically include

dial-up analog, ISDN, dedicated and frame-relay based Internet connections. Although

most ISPs currently offer only narrowband connections to the Internet, ISPs are
BROADBAND TODAY 57

 

partnering with various ILECs and DLECs to offer broadband connections. Examples

include Earthlink, MindSpring, and Flashcom.

110 OSPs provide the same functions as ISPs, but they also bundle those services with

original and proprietary content. Like ISPs, OSPs have an interest in gaining access to as

many broadband facilities as possible in order to offer new multimedia rich content and

applications over the Internet. Examples include AOL, CompuServ Inc., Netcom, and

Microsoft Network.

111 Trade groups represent the viewpoint of their members in a particular industry. There

are several trade groups that focus on Internet access issues, specifically cable broadband

access. For example, the Association of On-Line Professionals and the openNet

Coalition favor government action to compel access to the cable broadband networks.

Commercial Internet Exchange and the NCTA oppose government mandating access to

cable broadband networks.

112 Public interest groups generally advocate on behalf of cable, telecommunications, and

Internet consumers. Examples include Consumer Federation of America, Media Access

Project and the Center for Media Education.

113 These organizations and individuals conduct academic research, studies, and programs

on public policy issues.

114 According to Wall Street analyst reports, cable company stock prices have

downturned in recent weeks due, in part, to investor uncertainty created by the “open

access” activity in local franchising areas. See Communications Daily at 1 (Aug. 4,

1999).

115 Randy Barrett, Karen J. Bannan, & Louis Trager, Inter@ctive Week Online (Aug 2,

1999).

117 Internet service provider Internet Ventures, Inc. (IVI) has petitioned the Commission

to issue a declaratory ruling confirming that ISPs are entitled to leased cable access under

section 612 of the Communications Act. See Public Notice, Petition Seeking Declaratory

Ruling That Internet Service Providers Are Entitled to Commercial Leased Access to

Cable Facilities under Section 612 of the Communications Act of 1934, as Amended,

DA 99-1104 (June 8, 1999). IVI proposes to offer its subscribers the ability to download

video programming from the Internet, as well as the ability to retrieve data such as Web

pages and e-mail.

118 See Section 4(i) of the Communications Act, 47 U.S.C. § 154.

119 In its recent Unbundled Network Elements (UNE) Order, the Commission declined,

except in limited circumstances, to require incumbent LECs to unbundle the facilities

used to provide high-speed Internet access and other data services, specifically, packet

switches and digital subscriber line access multiplexers (DSLAMs). Given the nascent
BROADBAND TODAY 58

 

nature of this market and the desire of the Commission to do nothing to discourage the

rapid deployment of advanced services, the Commission declined to impose an obligation

on incumbents to provide unbundled access to packet switching or DSLAMs at this time.

The Commission further noted that competing carriers are aggressively deploying such

equipment in order to serve this emerging market sector. Press release available at

<http://www.fcc.gov/Bureaus/Common_Carrier/News_Releases/1999/nrcc9066.html>.

120 See Regulation Under the Telecommunications Act of Cable Carriers’ Access

Services, Telecom Decision CRTC 99-8, File No. 8697-C12-02/98 (July 6, 1999)

(requiring incumbent cable carriers to file proposed tariffs for high speed access services

with supporting cost information).

121 Excite At Home Shares Decline 11% on Report, Wall Street J., at B6 (Aug. 10, 1999)

(“AT&T maintains that it is committed to open access, and stressed that users can reach

any Internet-service provider by clicking through Excite At Home’s home page.”).

122 For example, the openNET Coalition is a group of ISP and LEC interests “dedicated

to promoting the rights of consumers to obtain affordable, high-speed access to the

Internet from the provider of their choice.” <http://www.opennetcoalition.org/who/>.

Hands Off The Internet is a coalition of Internet users “united in the belief that the

Internet’s phenomenal growth stems from the ability of entrepreneurs to expand customer

choices without worrying about government regulation.”

<http://www.handsofftheinternet.com/mission.asp>.

123 See Part I.C. of this Report.

124 See, e.g., Mich. Sen. Bill No. 667, 90th Leg. (June 17, 1999) (“Each wireline

broadband internet access transport provider who is, or is an affiliate of, an internet

service provider shall provide any other requesting internet service provider access to its

broadband internet access transport services, unbundled from the provision of content, on

rates, terms, and conditions that are at least as favorable as those on which it provides the

access to itself, to its affiliate, or to any other person. . . . The access required . . . shall be

provided at any technically feasible point selected by the requesting internet service

provider.”); but see Minn. Senate File No. 1647, 81st Legis. Sess. (March 24, 1999)

(“Every municipality shall refrain from exercising or attempting to exercise regulatory

authority over the Internet . . . or high speed data and Internet access services offered to

subscribers over a cable communications system”). H.R. 2637, 106th Cong., 1st Sess.

(July 29, 1998) (proposing to mandate non-discriminatory access by cable network by

unaffiliated ISPs, including interconnection, on same terms and conditions as affiliated

ISPs).

125 In fairness to the parties advocating “open access,” there does now appear to be a

clearer meaning of the term. According to the openNet Coalition, “open access” refers to

“the ability of consumers to choose the Internet service provider of their choice . . .

Enabling consumers and their chosen Internet service providers to reach each other

requires that Internet service providers not chosen by the cable company have the ability
BROADBAND TODAY 59

 

to purchase, on a nondiscriminatory basis, the use of ‘last mile’ communications facilities

to reach consumers who are requesting their service.” openNet White Paper at 23.

126 Federal legislation is pending in the House of Representatives that would address this

issue. See H.R. 2637, 106th Cong. (1999).

127 See, e.g., Implementation of the Telecommunications Act of 1996; Accounting

Safeguards Under the Telecommunications Act of 1996, CC Docket No. 96-150, Report

and Order, 12 FCC Rcd. 2993 (1996) (and subsequent history); Implementation of the

Non-Accounting Safeguards of Sections 271 and 272 of the Communications Act of 1934,

as amended, CC Docket No. 96-149, First Report and Order and Further Notice of

Proposed Rulemaking, 11 FCC Rcd. 21905 (1996) (and subsequent history).

128 A peering arrangement describes the situation where firms exchange data traffic

without charging one another (bill-and-keep). A local peering arrangement is when the

exchange occurs at a site close to the end-users. This proximity essentially improves the

performance and speeds of the Internet connection, as data traffic travels less distance.

129 Frequently Asked Questions About AT&T’s Acquisition of MediaOne, Open Access,

and the Public Interest, CS Docket No. 99-251, at 24 (Sept. 17, 1999)

<http://www.opennetcoalition.org/news/937594756.shtml>.

130 Corey Grice, The Next Wave in Fast Net Access, CNET News.com (July 28, 1999)

(“The development of new high-speed conduits for Internet access may mute Internet

service providers’ call for access to cable wires, one of the main broadband technologies

available today. Federal regulators, ultimately responsible for refereeing the open-access

battle, are pushing to see as many broadband options as possible to enter the market.”).

131 See Section 706 Report, 14 FCC Rcd. at 2423-24 ¶ 48.

132 David B. Kopel, Access to the Internet: Regulation or Markets?, Heartland Institute

Policy Study No. 92, at 12-14 (Sept. 24, 1999). “The clear lesson of the past 20 years is

that companies with leading products stay in the lead only if they continue to produce

superior products. There is no realistic danger that cable companies will dominate the

broadband industry, unless the companies consistently deliver better value to the

consumer than does the competition.” <http://www.heartland.org/studies/kopelsum.htm>.

133 See Section 706 Report, 14 FCC Rcd. at 2469 (separate statement of Commissioner

Michael K. Powell).

134 Letter dated July 29, 1999, from Jeffrey Chester et al. to Chairman William Kennard

at 1 (“the cable broadband networks can be intentionally manipulated to provide wide

bandwidth to the user for commercially affiliated content, but significantly less

bandwidth for generic and cable-unaffiliated Internet traffic.”).

135 See Part I. C. of this Report.
BROADBAND TODAY 60

 

136 We note also that San Francisco and Los Angeles would be bound by any

pronouncement by the U.S. Court of Appeals for the Ninth Circuit, and that the pendency

of the Portland appeal has some influence on these cities decision to refrain from

mandating an access requirement. Other municipalities outside of the Ninth Circuit’s

jurisdiction may also be awaiting guidance on the legality of “open access” before they

adopt any such measures.

137 14 FCC Rcd. 3160 (1999).

138 See Chairman William Kennard, Address at the National Association of

Telecommunications Officers and Advisors 19th Annual Conference (Sept.17, 1999).

139 Esbin White Paper at 112. See also Jason Oxman, The FCC and the Unregulation of

the Internet, OPP White Paper No. 31, at 25 (July 1999) (“The Commission should not,

and has not, respond to the advent of innovative category-challenging services by

squeezing them into existing regulatory categories.”).

140 AT&T Chairman C. Michael Armstrong stated that, "We believe our cable customers

should be able to access any portals and content they want to reach, [b]ut it should be

done on the basis of a sound commercial relationship, not through regulation" of the

Internet or communications industry at large. Leslie Cauley, AT&T to Shun Exclusive

Pacts for Cable TV, The Wall Street J., at B8 (June 15, 1999).

141 See 1996 Act, Preamble.

142 As a CLEC, AT&T would be required to provide interconnection for competing

providers of telephony services under section 652(a) of Title II, but would not be required

to provide competitors with access to AT&T’s network in the same way as ILECs under

section 652(b). See 47 U.S.C. 652(a) & (b). The regulatory burden on AT&T’s

provision of telephony services thus would be substantially less than a cable “open

access” requirement on its provision of broadband services.
APPENDIX A:

Breakdown of Online Universe
0

10

20

30

40

50

60

70

80

90

100

1999 2000 2001 2002 2003 2004 2005

Percentage of Online Users

Dail-Up Cable DSL

Breakdown of Online Universe

1999E--2005E

Source: Donaldson, Lufkin & Jenerette Estimates, IDC
APPENDIX B:

Residential Broadband Subscribers

1999 - 2007
Chart 2 

0

2000

4000

6000

8000

10000

12000

14000

16000

1999 2000 2001 2002 2003 2004 2005 2006 2007

Residential Broadband Subscribers, 1999-2007

(Cable & DSL Growth Estimates)

source: Lehman Brothers 

DSL Cable

Subscribers (thousands)
APPENDIX C:

QUESTIONS SUBMITTED TO PANELISTS

THE MAY MEETINGS

1. Have market conditions changed to the extent the Commission should reconsider its

earlier finding in the Section 706 proceeding? If so, how have conditions changed,

and why do these changes warrant reconsideration of the Commission’s earlier

finding?

2. Should the government play a role in providing access to cable Internet

facilities or services by ISPs and OSPs that are not affiliated with the cable

provider, or should government allow market forces to determine the level of

access that is offered?

3. If you believe the government should play a role in this arena:

a. Define the scope of access you believe is appropriate and explain why.

b. Describe the type of regulatory scheme that would be necessary to achieve

the goals of government action.

c. What should be the goals of government action?

d. Define the public interest objectives advanced by government action.

How would consumers benefit from government action?

e. Identify the risks to the public of government inaction.

f. Identify the risks to the public if the envisioned benefits of government

action do not materialize.

4. If you do not advocate government intervention with respect to cable Internet service:

a. Identify the risks to the public of government intervention.

b. What public interest objective will be advanced by government inaction?

How would consumers benefit from government inaction?

c. Identify the risks to the public if the envisioned benefits of government

inaction do not materialize.

d. If you believe government action at this time is not appropriate but may be

warranted in the future, indicate what developments or conditions would trigger

the need for government intervention.
5. Would government action provide incentives or disincentives for the deployment of

alternative broadband technologies that reach the “last mile?”

6. Should the vitality of the ISP/OSP industry have any bearing on the question of

whether government action is necessary or appropriate?

7. What is your vision for consumer choice with respect to broadband services? How

would that vision be furthered by any government action or inaction you advocate?

Would all consumers have a multiplicity of choices?

8. What is “open access?”

THE JULY MEETING

1. Are the high cable stock valuations seen in recent mergers of cable systems justified?

2. Do your investment decisions depend on the cable company’s prospects for

deployment of telephone services and deployment of broadband access bundled with

an affiliated ISP’s services?

3. Is there a business case for cable companies to open their systems voluntarily and

partner with an unaffiliated ISP’s services?

4. What impact do high cable stock valuations have on incentives to invest in cable

overbuilds?

5. Do you agree or disagree with the Commission’s policy position that the broadband

market is nascent, that there is a “no-opoly,” and thus government should refrain

from regulation at this time?

6. With respect to the broadband competitive marketplace, some argue that, without

“open access,” AT&T will become a gatekeeper and therefore will not be a

competitive market. How do you see the competitive marketplace with open access:

mandated by state and local governments, (b) mandated by Congress or the

Commission, or (c) not mandated at all?
BROADBAND GLOSSARY

A

Access: The service provided by local exchange carriers or alternate access providers, that enables a

user to enter a circuit and connect with an interexchange carrier.

Access Channels: Channels set aside by a cable operator for use by third parties, including the public,

educational institutions, local governments, and commercial interests unaffiliated with the operator (see

also PEG and LEASED ACCESS).

(ACD) Automatic Call Distributor: A device that is able to distribute incoming calls to a certain

group of terminals.

(A/D) Analog to Digital Converter: A device that constantly converts varying analog signals to digital

signals.

(ADI) Area of Dominant Influence: A television market as delineated by the Arbitron Company.

Addressable: Capable of being activated or accessed remotely by signals sent from a cable system’s

headend (addressable usually refers to descramblers and other set-top boxes).

(ADSL) Asymmetrical Digital Subscriber Line: A modem technology that provides greater

bandwidth from ordinary telephone lines. Asymmetrical is able to provide faster one way speed

connectivity between the central office and the customer premises.

Aerial Plant: Cable that is suspended above ground on telephone or utility poles.

(AIN) Advanced Intelligent Network: A network architecture that allows major foreign and US

telecommunications companies to direct telephone calls based on activating points to the database used

in Signaling System 7 (SS7).

Amplifier: A device that boosts the strength of electronic signals.

Analog: A mechanism or method in which data is represented by continuous variable physical quantities

and that uses nondiscrete variations in frequency, amplitude or location to carry sounds, signals,

mathematical data or other information.
(ANI) Automatic Number Identification: A function by which the directory number of a calling unit

is automatically obtained.

(ARPA) Advanced Research Project Agency: An agency of the U.S. Department of Defense that

funded the ARPANet as a research network.

Aspect Ratio: The ratio of a television screen’s width to its height (4:3 for NTSC, 16:9 for HDTV).

(AT) Access Tandem: A switching system that provides an interexchange carrier with access to more

than one end office.

(ATM) Asynchronous Transfer Mode: A high-speed multiplexing and switching technique that uses

fixed size of cells to support several types of traffic such as voice, data and video.

(ATV) Advanced Television: A series of digital television technologies that are designed to improve

the current commercial-quality television system.

B

Basic Cable: Primary level or levels of cable service offered for subscription. Basic cable offerings may

include retransmitted broadcast signals as well as local and access programming. In addition, regional

and national cable network programming may be provided. Basic service offerings at the system level

may be offered as more than one tier.

Bipolar Signal: A signal that can take on two polarities, of which neither is zero.

Box: Electronic equipment used to process television signals in a consumer’s home, usually housed in a

“box” that sits atop a TV set or VCR. See also CONVERTER and DESCRAMBLER.

(BPS) Bits Per Second: Transmission rate for digital information expressed as the number of bits

(zeroes or ones) sent or received per second.

Broadband Communications System: A network such as a cable system capable of delivering

multiple high capacity services simultaneously.

(BS) Base Station: A fixed land station in the land mobile service that relays signals to and from

mobile voice and data terminals or handsets.

(BSS) Business Support System: A system that supports and manages information of various

telecommunication functions such as billing, data warehousing, customer care, network management and

account receivables.
(BW) Bandwidth: A measure of the capacity of a channel of communications in the broadcast

spectrum. A range of frequencies or the amount of spectrum used to transmit pictures, sound, and data

(In the United States, the Federal Communications Commission has assigned broadcast television

channels a bandwidth of 6 megahertz).

Bundling: Combining goods and/or services into a single package, often for a discounted price.

C

Cablecasting: The use of cable systems by federal, state, and local officials to disseminate information

and television programming to their constituents.

Cable Modem: A communication device connected to a personal computer which offers customers

access to the Internet over a cable system at speeds 50-100 times faster than a telephone connection.

Cable Ready: Label for consumer electronic devices, such as television sets and VCRs, that are

designed to allow direct connection to a cable television network.

Cable System: A localized communications network that distributes television, Internet, and telephone

services by means of coaxial cables and/or fiber optics.

(CABS) Carrier Access Billing System: A software application also known as Integrated Access

Billing System (IABS), that enables local exchange carriers (LECs) to measure minutes of use on access

and thereby be able to bill LECs for it.

(CAP) Competitive Access Provider: Companies that provide connections to long distance

providers while bypassing local telephone companies.

(CARS) Community Antenna Relay Service: Microwave facilities used to relay television, FM

radio, and other signals from a cable television headend to a reception site for distribution over cable.

Cash Flow: A measure often used in the cable industry to assess a company’s financial performance.

Generally, cash flow is a company’s earnings before non-cash expenses, such as depreciation and

amortization, are taken into account.

(CATV) Community Antenna TV: Also known as Cable TV, it uses several TV units connected by

cable to a common antenna to serve a community.

(CBR) Continuous Bit Rate: A transmission rate that is uniform.
(CCIS) Common Channel Interoffice Signaling: The basis for intelligent networks, it routes

information to and from specialized databases stored in the network carriers' computers and uses a

separate data line to route interoffice signals, thereby providing a faster call set-up.

(CCITT) Consultative Committee International Telephony and Telegraphy:

Presently known as the International Telecommunications Union (ITU), the ITU sets and develops

standards for telecommunications.

(CDMA) Code Division Multiple Access: A digital cellular communications technology used as a

multiplexing and multiple access technique in which multiple calls are individually coded for transmission

over one channel simultaneously.

(CDPD) Cellular Digital Packet Data: Developed by IBM as a way to transmit short wireless data

messages, such as credit card verification, over cellular providers' analog network.

(CDR) Call Detail Record: A system feature that tracks details about calls, such as type, time,

duration, originator and destination. CDRs can be used for network monitoring, accounting and billing

purposes.

(CELP) Code Excited Linear Prediction: An analog to digital speech coding method that provides

near toll quality audio by utilizing smaller samples that are processed faster.

Central Office: A telecommunications facility (generally serving 10,000 telephone lines) where local

calls are switched.

(CENTREX) Central Exchange: This is an exchange system run from the central office that routes

and switches calls for commercial and non-profit organizations, while providing them with comparable

services provided by private branch exchanges.

(CG) Character Generator: Device that electronically displays letters and numbers on the television

screen.

Channel Capacity: Maximum number of television channels that a cable system can carry

simultaneously.

(CLASS) Custom Local Area Signaling Services: A number translation service available within a

Local Access and Transport Area (LATA).

(CLEC) Competitive Local Exchange Carrier: A company that has been allowed to offer local

telephone service, in competition with the regional Bell companies.

(CMIP) Common Management Information Protocol: The protocol used in order to manage

remote systems through an application process that interchanges information and commands.
(Coax)Coaxial Cable: A transmission line 1/4 to 1 inch thick with an inner wire to conduct signals and

an outer aluminum coating to act as a ground. The two metal layers are separated by insulation and may

be wrapped in a protective plastic sheathing.

(CODEC) Coder/Decoder: A device that converts digital codes to analog and vice versa.

Collocation: Placing a competitor’s communications equipment in one’s own facilities to allow efficient

interconnection of different networks.

Committed Information Rate: The bandwidth committed by the carrier for the port connection that is

assigned to a permanent virtual circuit in a frame relay network.

Common Carrier: A communications provider, such as a telephone company, which offers its services

to all members of the public for a set fee (tariff). Common carriers are regulated by federal and state

agencies and exercise no control over the content of the messages they carry.

Compression: A technique for reducing the number of bits that make up a digital television signal and

reducing the amount of bandwidth required to carry it. By reducing the bandwidth necessary to carry

compressed digital signals, cable companies and others can greatly increase the number of channels they

offer to consumers.

Compulsory License: Statutory license (section 111 of the Copyright Act) which allows cable and

MMDS operators to retransmit, for a prescribed fee, programming broadcast by television stations (see

also SHVA).

Converter: Device which increases the number of channels that a TV set can receive by converting the

large number of signals carried on a cable or satellite system to a single channel tuned by the TV set,

e.g., channel 3 or 4.

(CPE) Customer Premise Equipment: The equipment at the customer's premises that connects with

a carrier's communication network, such as terminals and inside wiring.

(CRIS) Customer Record Information System: A system that is used to maintain customers' usage

records for billing purposes by many local exchange carriers (LECs).

(CSMA/CD) Carrier Sense Multiple Access with Collision Detection: A protocol by which all

nodes attached to the network contend for access and listen if another PC is transmitting. If not, it starts

to transmit or it waits to retransmit if it detects another station’s jam signal.

(CSR) Customer Service Record: A detailed printout of a subscriber's monthly equipment and

service charges billed by the local telephone company and uses corresponding USOC codes.
D

(DBS) Direct Broadcast Satellite: A TV broadcast service from a small satellite dish antenna that

offers similar services, like that of cable TV, and which transmits highly compressed digital signals.

(DCS) Digital Crossconnect System: A high-speed data channel switch that in response to dialing

instructions independent of the data traveling through, switches transmission paths.

(DDD) Direct Distance Dialing: A switched service that allows for whomever originates a call to

directly place long-distance calls without assistance.

(DDS) Digital Data Service: A synchronized digital service that interconnects digital transmission

centers.

(DE) Discard Eligibility: An indicator in a frame relay that identifies which frames can be discarded in

case of network congestion.

Descrambler: Electronic circuit that restores a scrambled video signal to its original form. Television

signals, especially those transmitted by satellite, are often scrambled to protect against theft and other

unauthorized use.

Dialing Parity: The ability to reach a residential or business phone by dialing the same number of digits

no matter which company’s network is used.

(DID) Direct Inward Dialing: A feature that allows calls to the ten-digit DID telephone number to

reach that specific extension without human interference.

Digital: An intelligence-carrying signal consisting of a stream of bits of zeros and ones for sound, video,

computer data or other information.

Digital Cable: Cable services, programming, and equipment that use digital, not analog, formats (see

DTV and HDTV).

Dish: A parabolic antenna used to receive satellite transmissions at home. The older “C band” dishes

measure 7-12 feet in diameter, while the newer “Ku band” dishes used to receive high-powered DBS

services can be as small as 18 inches in diameter.

Distant Signal: Television signal from another city that is imported and carried locally by a cable

television system.

(DLC) Digital Loop Carrier: The supplies and equipment that are used for digital multiplexing of

telephone circuits. This would include the lines.
(DLCI) Data Link Connection Indicator: The number sequence that identifies public data networks.

(DMA) Designated Market Area: A television market as delineated by the A.C. Nielsen Company.

(DMT) Discrete Multitone Technology: A technology that uses digital signals to transmit multiple

signals over the present pair of copper wiring.

(DN) Directory Number: A 10-digit number assigned by the local telephone provider. Generally

referred to as an individual’s telephone number.

(DOCSIS) Data Over Cable Service Interface Specification: The leading standard for cable

modems.

(DOD) Department of Defense: The United States federal agency overseeing the military.

Downstream: Flow of signals from a cable system’s headend through its distribution network to a

customer.

(DQPSK) Differential Quadra Phase Shift Keying: A phase modulation technique used in modems

to code relative changes of a carrier signal phase in the transmitted waveform.

Drop Cable: The final stretch of coaxial cable that connects a customer’s home to the cable system.

(DS-O) Digital Signal Level 0: A classification of digital circuits with a rate of transmission rate of 64

kb/s.

(DS-1) Digital Signal Level 1: The rate of transmission of a DS-1 (or T -1) is of 1 .544 Mb/s and 24

channels are associated with it.

(DS-3) Digital Signal Level 3: The rate of transmission of a DS-3 (or T -3) is of 44.736 Mb/s and is

associated with 672 channels.

(DSC) Digital Selective Calling: A synchronous system that is used to set up contact by radio with a

station or group of stations.

(DSP) Digital Signal Processors: A special programmable device used for digital signal processing

by providing ultra-fast instruction sequences.

(DSU) Data Service Unit: An apparatus used to link data terminal equipment to the carrier's digital

services, such as T -1.

DTH (Direct-To-Home): All satellite service providers, including C-band and Ku band (DBS).
(DTMF) Dual Tone Multi-Frequency: A type of double-frequency audio signals that are generated

by a push-button device like those on a touch-tone telephone.

DTV (Digital TV): Television signals transmitted and received in digital format (discontinuous zeroes

and ones; compare with ANALOG). Digital TV has several formats and varying degrees of resolution,

from 480 lines per screen progressively scanned to 1080 lines interlaced. DTV includes HDTV, but not

all DTV is HDTV since the bandwidth required for HDTV can be broken down to accommodate

several DTV signals of lesser resolution.

Dual Cable: Two wires or coaxial cables operating side-by-side to provide extra channel capacity and

interactivity.

(DWDM) Dense Wavelength Division Multiplexing: A technique by which multiple light signals

(generally using four or more signals) of different wavelengths, are simultaneously transmitted in the same

direction over a single optical fiber.

E

Earth Station: A large dish used for sending and receiving signals from a communications satellite. A

one-way, receive-only earth station is known as TVRO.

(EB) Electronic Bonding: The ability to forge an interface between the operations support systems of

the local and long distance service providers, thereby enabling the seamless exchange of information

concerning network needs and customer orders.

(EDI) Electronic Data Interchange: An electronic messaging system for the trading and

interchanging of information.

(ES) Earth Station: A satellite communications center, including the antenna, receiver and electronics

necessary in receiving satellite transmitted signals.

(ESS) Electronic Switching System: It is a switching system for the telephone network that is based

on time-division multiplexing of digitized analog signals.

Ethernet: The Institute of Electrical and Electronic Engineers' (IEEE) widely used access method for

the local area network (LAN) protocol.

Exclusivity: Contractual right to be the sole exhibitor of a television program in a particular area at a

specified time.
Extranet: The part of a company or an organization internal computer network which outside users and

which uses the public Internet as its transmission system, but requires passwords to gain access.

F

(FCC) The Federal Communications Commission: Established by the Communications Act of

1934, the FCC is the federal agency in charge of overseeing interstate telecommunications, as well as all

the communications services originating and terminating in the United States.

(FDDI) Fiber Distributed Data Interface: An ANSI define standard by which computers can

communicate at 1 00 million bits per second over fiber-optic token ring network.

(FDDI-LAN) Fiber Distributed Data Interface- LAN: An American National Standards Institute

(ANSI) and ISO defined standard for high-speed (100 MBPS) local area network (LAN)

communications using fiber-optic cable as the transmission medium.

(FDMA) Frequency Division Multiple Access: A multiplexing and multiple access technique for

sharing of a spectrum band where each user is assigned a single transmission channel.

(FEC) Forward Error Correction: A data transmission technique that is able to correct for bad data

transmitted on the receiving end by using the correction bits and a predetermined algorithm sequence.

Feeder Line: Intermediate distribution line (fiber or coaxial cable) that connects a trunk from the

headend to the drop cables serving individual homes.

Fiber Optics: Thin transparent fibers of glass or plastic that are enclosed by material of a lower index

of refraction and in which Light-Emitting Diodes (LED)s send light through the fiber to a detector that

turns the light into an electrical signal.

Firewire: An interface based on the IEEE–1394 standard which allows OpenCableTM set-top boxes to

be connected to digital television sets without signal degradation.

Forbearance: A regulatory body’s decision not to exercise its authority over a given market or

company, usually because there is competition.

(FPS) Fast Packet Switching: A packet-oriented switching technique that uses short and fixed length

packets to increase the throughput.

(FR) Frame Relay: A packet access protocol primarily used to interconnect distant LANs and routers

together, to Internet access via T -1.
Franchise: Contractual agreement between a cable operator and a governmental entity that defines the

rights and responsibilities of each in the construction and operation of a cable system within a specified

geographic area.

Franchising Authority: Governmental body (city, county, or state) responsible for awarding and

overseeing local cable franchises.

(FTP) File Transfer Protocol: Widely used prior to 1995, it is a protocol that enables the user to log

onto computers at other sites and transfer or retrieve files. These files were retrieved/transferred in text

format.

G

(GEO) Geostationary Earth Orbit: A satellite orbit for communications satellites 22,300 miles above

the earth and whose speed is the same as the earth's rotation, so thereby appearing stationary.

(GS) Gateway Server: A station on the local area network that has devices necessary to provide

system interoperability between one or more network users.

(GSM) Global Standard for Mobile Telecommunications: A TDMA standard set by the European

Union for all European countries and increasingly used throughout the world, for two-way digital cellular

systems. It operates in the 1.8 to 1.9 GHz band in North America.

H

H.323: An ITU standard for videoconferencing over packet-switched network which is widely

supported for Internet telephony.

Hardware: Equipment involved in the production, storage, distribution, and reception of electronic

signals, such as computers, amplifiers, cameras, and VCRs.

(HDSL) High Data Rate DSL: A digital subscriber line technology that allows for upstream data

transmission at T -1 of fractional T -1 speeds and quality over copper wires.

Headend: Facility that originates and distributes cable service in a given geographic area. Depending on

the size of the area it serves, a cable system may be comprised of more than one headend.

(HDTV) High Definition Television: Digital television which offers twice the resolution, wider

screens, better sound, and better color than the NTSC format. “True” HDTV involves a 16:9 aspect

ratio and at least 720 lines per screen.
(HFC) Hybrid Fiber/Coax: A network architecture developed by the cable industry which uses a

blend of fiber and coaxial cable to bring consumers interactivity, greater channel capacity, increased

signal strength, and improved

reliability.

Home Shopping: Cable and broadcast television programming which allows customers to view and

order merchandise at home.

Homes Passed: Households with the ability receive cable service and which may opt to subscribe.

(HQ) Headquarters: A center of administration or operations.

I

(ILEC) Incumbent Local Exchange Carrier: A term used to refer to a Bell Operating Company.

Independent: An individually owned and operated cable television system (compare with MSO).

(I-NET) Institutional Network: A private, dedicated network built and/or operated by a cable TV

system for local schools, businesses, or government.

Interactive: Two-way communications allowing a person to both send and receive information

(compare with passive or receive-only systems, such as broadcast television).

Interconnection: The linking of two or more telecommunications networks, such as a cable system to

a local exchange company or a long distance carrier.

Interlaced: A scanning format for televisions which blends two separate images, alternatively scanned

on odd and even numbered lines, into one frame (compare with PROGRESSIVE scanning).

Internet: A global data network supporting research, engineering, commercial, information, and

educational services.

Intranet: An in-house company network Web site that serves the employees of the enterprise and

which offers similar features and services as the Internet.

(IP) Internet Protocol: An International Standards Organization (ISO) standard that implements the

network layer 3 of an open system interconnection (OSI) model that contains a network address and is

utilized in directing a message to a different network.
(IS) Information Service: The department in a company which oversees the computers, networking

and data management. This term has been updated to IT (Information Technology).

(ISDN) Integrated Services Digital Network: A standard and integrated digital network that allows

users to simultaneously send voice, data and video over multiple multiplexed communications channels

from a common network interface.

(ISN) Internet Service Node: An interconnection point in the Internet network to other specific

entities.

(ISP) Internet Service Provider: A service provider that has its own network (or leases) to which

end-users dial into to connect to the Internet.

(ITSP) Internet Telephony Service Provider: A company that provides users with telephony service

via the Internet through standard telephone wires.

(ITU) International Telecommunications Union: An international organization within which

governments and private sectors set communications standards.

IXC (Interexchange Carrier): A long distance telephone company linking separate local exchanges.

K

(Kft) Kilofeet: A thousand feet.

(Km) Kilometer: A thousand meters, or 0.62 miles.

L

(LAN) Local Area Network: A data communications network that links together computers and

peripherals to serve users within a confined area.

Leased Access: Commercial channels made available by a cable operator to third parties for a fee, as

required by the Cable Acts of 1984 and 1992.

(LATA) Local Access Transport Area: The area in which Regional Bell Operating Companies were

allowed to provide local telephone and exchange access services as a result of the divestiture of AT&T

in 1984.
Layer-1: In networking, the fist phase of the communications protocol of the open system

interconnection (OSI) model, also referred to as the physical layer, which provides the transmission of

bits over the network medium.

Layer 2: The second layer of the open system interconnection (OSI) model that contains the physical

address of a client or server station, also called the data link layer.

Layer 3: The third layer of the open system interconnection (OSI) model, which contains the logical

address of a client or server station.

Layer 4: Also known as the transport layer, it is the layer of the open system interconnection (OSI)

model which provides end-to-end management of the communications session.

Layer 5: The fifth layer of the open system interconnection (OSI) model that initiates and manages the

communications session.

(LCD) Liquid Crystal Display: An electro-optical display technology that uses rod-shape molecules

that flow like liquid and bend light.

(LDAP) Lightweight Directory Application Protocol: A protocol that is implemented in querying

directory databases.

(LEC) Local Exchange Carrier: Any authorized carrier that has been given permission by the state

PUC to provide local voice-level telecommunications services within a predetermined area

(LEOS) Low Earth Orbit Satellite: Satellites that orbit the earth at lower altitudes.

(LID) Line Information Database: These databases contain all valid telephone and calling card

numbers, and when a user places a calling card call, these databases can provide validation.

(LMDS) Local Multipoint Distribution Service: A wireless cable system that enables greater

upstream bandwidth than most other wireless services from a fixed station for entertainment video and

CLEC services.

(LNP) Local Number Portability: A feature that allows customers to maintain their present telephone

numbers when they change carriers for incoming calls.

(LO) Local Origination Programming: Material developed by an individual cable television system

specifically for the community it serves.

Local Loop: The wire that connects a home or business to a telephone company’s central office.
Local-To-Local: The retransmission by DBS of local TV signals back into their local broadcast

markets.

Long Distance: A call in the public switched telephone network that goes beyond the local calling

area.

Loop: A pair of wires that connects the central office to the telephone set. The telephone set is the

location of the telephone.

M

(MAE) Metro Area Exchange: Major access points in a network in the Internet.

(MAN) Metropolitan Area Network: A communications network that covers a large portion of a

city or a large campus through which two or more LANs interconnect.

(MDF) Main Distribution Frame: A unit that connects between outside plant cables and internal

lines or line equipment in the central office (CO).

(MDS) Multipoint Distribution Service: A pay-TV broadcast delivery service through microwave

frequencies from a fixed station to multiple small dish antennas.

(MF) Multi-Frequency: A frequency composed of two or more frequencies.

Miles of Plant: Number of cable plant miles laid or strung by a cable system; the cable miles in place.

(MM) Millimeter: A unit of measure for one thousandth of a meter.

MMDS (Multi-Channel/Multi-Point Distribution System): A wireless cable service using

microwaves to transmit multiple television signals to customers.

MODEM (Modulator–Demodulator): An electronic device that allows users to connect computers

and other equipment in their homes, schools, or businesses to a network for the purpose of sending

and/or receiving data.

(MPEG) Moving Picture Experts Group: An international group that sets standards for compressing

video images.

(MPLS) Multiprotocol Label Switching: A technical description for layer 3 switching using labels of

fixed-Length to quicken the pace in traffic paths.
(MSO) Multiple System Operator: A major cable TV organization that has franchises in multiple

locations.

(MUX) Multiplexer: A device that combines many input devices into one compiled signal to be

carried over one telephone line.

Must Carry: A policy, developed by the FCC in the 1960s and codified by Congress in 1992,

requiring cable systems to carry the analog signal of a local television station if that broadcaster so

chooses (see also RETRANSMISSION CONSENT). The Supreme Court voted 5-4 in 1997 to

uphold must carry for analog broadcast television signals.

N

(NAP) Network Access Point: Also known as the Internet Exchanges (IXS), it is a point where major

Internet service providers come together and interconnect with each other.

Narrowcasting: Delivery of programming that addresses a specific need or highly focused audience.

Near Video On Demand: The practice of offering the same programming on different channels at

different times so that customers do not have to wait long for a desired show to begin.

(NEL) Network Element Layer: The layer of an integrated digital network whose function and

capabilities include the information necessary for billing and collection, for routing or transmission of a

telecommunications service.

Network Non-Duplication Rules: FCC rules prohibiting a cable operator from importing a network’s

broadcast signals from a distant television market when they are available simultaneously from a local

network affiliate.

(NIC) Network Interface Card: An interface card that interconnects all the adapters in a computer to

provide access to the network.

Node: A connection point in a cable system (often where a fiber enters a neighborhood and connects to

coaxial cables serving 200-1000 individual homes).

Noise: Static and other distortions to an electronic signal which degrade the quality of television

pictures and sound received by the consumer.

(NPA) Numbering Plan Area: The first three digits of a North American telephone number, often an

“area code”, in which the first digit cannot be a 1 or a 0 and that the remaining numbers can be 2

through 9.
(NPAC) Number Portability Administration Center: A national database that keeps track of all

ported number at the national and regional levels.

(NSP) Network Service Provide: An Internet provider that offers high-speed backbone services.

(NTSC) National Television System Committee: Responsible for the specifications administered by

the FCC for commercial broadcasting.

Number Portability: The right of telephone customers to keep their existing phone numbers if they

change locations or service providers.

O

Off The Air: Refers to the reception of broadcast television signals with a local antenna (either roof-top

or set-top) instead of through a cable or satellite dish.

OpenCable: An initiative of the cable industry (through CableLabs) to develop and label a new

generation of interoperable digital boxes available through retail stores that will provide subscribers with

video, data, and interactive services.

Operating Income: Generally defined as a company’s income before interest payments and taxes.

Optical Amplifier: A device that receives an optical signal and amplifies it and retransmits it as an

optical signal to the system.

(OSI) Open System Interconnection: A logical structure developed by the International Standards

Organization to enable devices from multiple vendors to communicate with any other OSI-compliant

system.

OSP (On-Line Service Provider): An interactive computer service such as Road Runner, @Home,

or AOL which provides subscribers with proprietary information as well as access to the Internet

(compare with ISP).

(OSS) Operations Support Systems: A system that processes telecommunications information which

supports various management functions like network management, inventory control, maintenance,

trouble ticket reporting, surveillance and service provisioning.
P

Packet: A group of bits switched as a unit block of data used for transmission in a packet-switched

network.

Pay Cable: A network or service available for an added monthly fee. Also called premium. Some

services, call mini-pay, are marketed at an average monthly rate below that of full-priced premium.

Pay Cable Unit: Each premium service to which a household subscribes is counted as one unit.

Pay-Per-View: Pay service that enables a subscriber to order and view events or movies on an

individual basis.

(PBX) Private Branch Exchange: A private telephone system switch that interconnects telephone

extensions to each other, as well as to the outside telephone network.

(PCM) Pulse Code Modulation: The sampling of a signal and each sample is then digitized so as to

have it transmitted over a medium.

(PCN) Personal Communications Network: A kind of wireless communications system that

transmits through low-power antennas and uses lightweight and inexpensive handsets.

(PCS) Personal Communications Service: A wireless service concept that allow users to

communicate with the combination of terminal and personal mobility. The allocation of spectrum in the

1800-1900 MHz band is called the PCS band.

PEG (Public, Educational, and Governmental): See ACCESS CHANNELS.

Penetration: The number of homes actually served by cable in a given area, expressed as a percentage

of homes passed (e.g. cable penetration in November 1998 was 67.4 percent nationwide).

(PIC) Primary Inter-Exchange Carrier: The carrier for interstate and international calling that can be

accessed without being required to dial extra digits. Calls get automatically routed to the customer's

“PIC”.

Point of Presence: A site where telecommunications companies (such as cellular and long distance

providers) physically interconnect their systems with other networks (such as local telephone companies

or cable companies).

Pole Attachment: The place where, for a fee, cable systems attach their wires to telephone or utility

poles.
(POP) Point of Presence: The location at which a line from a long distance carrier (IXC) connects into

a local telephone carrier's switching network facility.

(POTS) Plain Old Telephone Service: The basic telephone lines connecting most residential and

small business users to the public telephone network.

(PPP) Point-to Point Protocol: A data link protocol that is popular for Internet access and for carrying

higher level protocols, while supporting both asynchronous and synchronous lines.

Premium Services: Individual channels such as HBO and SHOWTIME which are available to cable

customers for a monthly subscription fee.

Progressive: A scanning format used by computer monitors and some television sets where each

picture frame is presented sequentially and is scanned continuously from the top left of the screen down

to the bottom right corner (compare with INTERLACED).

(PRI) Primary Rate Interface: An interface standard for integrated services digital network providing

a total of 1.544 MBPS.

(PSC) Public Service Commission: Also known as the Public Utilities Commission (PUC), a state

regulatory body that oversees public utility service providers.

(PSN) Packet Switching Node: A node in a packet-switching network, supporting the formatting,

transmitting and routing packets.

(PSTN) Public Switched Telecom Network: The common domestic telecommunications network

that is access by private branch exchange trunks, telephones, and Centrex systems.

(PTM) Packet Transfer Mode: A technique of packet switching and transmission that enables more

effective sharing of network resources by various users.

(PUC) Public Utility Commission: A state regulatory body that is responsible for establishing and

implementing public policy and regulating intrastate utilities.

(PVC) Permanent Virtual Connection: A point-to-point virtual connection scheduled ahead of time

for a long-term connection between data terminal equipment.

R
(RADSL) Rate Adaptive DSL: A modem technology (DSL) that maximizes the digital speed of

copper lines and adjusts speeds in reference to signal quality.

(RBOC) Regional Bell Operating Company: The regional holding companies that resulted from the

divestiture of A T& T. The previous 22 bell telephone companies were combined into 7 regional

companies in 1984.

Regional Hubs: Fiber optic rings that link several adjacent or regional headends, thus improving

reliability, lowering costs, and expanding cable’s offerings to include Internet access and telephone

service.

Retransmission Consent: A policy enacted by Congress in 1992 requiring cable operators to secure

the consent of local television stations before retransmitting their signals. Instead of retransmission

consent, broadcasters may choose MUST CARRY.

(RF) Radio Frequency: The range on the electromagnetic frequencies with radio transmission.

(RJ-11 Jack) Registered Jack -11: The type of phone jack that local telephone companies wire for

most residential homes and which can only hold one line.

Router: A device that forwards data packets of a specific protocol type from one logical network to

another logical network, based on routing tables and routing protocols.

(RSVP) Resource Reservation Protocol: A network protocol that signals a router to reserve a

resource along the data path for real-time transmission.

(RT) RingbackTone: Also known as an audible ringing tone, it is the signal that the calling party hears

during the ringing interval as an audio tone interrupted at a slow repetition rate.

(RTP) Real Time Protocol: An Internet protocol for the transmission of voice and video.

S

Satellite: Communications device usually located in geostationary orbit, which receives transmissions

from earth and retransmits them to different parts of the globe.

(SBC) SBC Communications Inc: A regional telecommunications company made up of Southwestern

Bell, Pacific Bell, Nevada Bell and Cellular One.

(SCE) Service Creation Environment: Software for inputting comprehensive and elaborate

enhanced service specifications.
(SCP) Service Control Point: Software that enables carriers' computers to offer enhanced services by

handling 800 numbers, collect and third-party billing calls, as well as calling cards, while involving the

customer with data interaction.

Scrambling: An electronic security technique used to render a TV signal unviewable unless it is

processed and restored by an authorized decoder or descrambler.

Set Top Box: see BOX, CONVERTER, and DESCRAMBLER.

Share: The percent of television households tuned to a particular program or category of programming.

SHVA (Satellite Home Viewer Act): Federal law (section 119 of the Copyright Act) which gives

direct-to-home satellite distributors such as DBS a compulsory license for the retransmission of

broadcast television programming. The SHVA will expire on December 31, 1999, unless extended by

Congress.

Signaling: The transmission of electrical signals that contain switching information between stations,

user's premises, offices and various central offices.

(SLIP) Serial Line Internet Protocol: A protocol that enables a computer to utilize Internet Protocol

via high-speed modem and a telephone line.

SMATV (Satellite Master Antenna Television): Small-scale, private cable system using a central

rooftop antenna to serve the TV sets in an apartment building, hotel, or multiple dwelling unit.

(SMDS) Switched Multimegabit Data Service: A fast packet-switching service offered by local

telephone companies to provide cross-premises communications services between LANs.

(SMS) Service Management System: A system that coordinates all of the national 800 telephone

numbers for all the US telephone companies through service control points (SCP).

(SONET) Synchronous Optical Network: An American National Standards Institute (ANSI)

standard for high speed, fiber optical transmission on the network.

Spot Revenue: Revenue from advertising placed on a cable system by a local or national advertiser.

(SS7) Signaling System #7: An addressing protocol for setting up calls and providing a faster

processing of a call by operating out of band, for transaction services such as caller ID, automatic recall

and call forwarding.

(SSP) Service Switching Point: Software capable of sending triggering signals to service control

points and queering these databases for information to process telephone calls.
(STP) Shielded Twisted Pair: A two-wire twisted metallic transmission line that is protected by a

sheath of conductive material.

(STPs) Signal Transfer Points: Packet switches that routes signals over paths completely separate

from the voice paths.

(STS) Synchronous Transport Signal: The signal rate carried over a Synchronous Optical Network

(SONET).

Subscriber: This term is used interchangeably with household.

Switch: A mechanical or electronic device for making, breaking, or changing the direction flow of

electrical or optical signals from one side to the other.

Syndicated Exclusivity (SYNDEX): Federal requirement that cable systems black out syndicated

programming from distant signals (out-of-town television stations) for which a local broadcaster has

exclusive contractual rights. For example, cable operators cannot import “I Love Lucy” as part of a

distant TV signal if a local broadcaster has purchased the syndication rights for that program in its

market. (The FCC eliminated this requirement in 1980 and subsequently reimposed it in 1990.)

System: Facility that provides cable service in a given geographic area, comprised of one or more

headends.

T

T-I: Two pairs of copper wire that can carry 24 DS-O signals at a rate of 1.544 MBPS.

(TA) Terminal Adapter: An external device, which connects computers to an ISDN line.

TANDEM: A special ILEC switch which interconnects local ILEC switches directly serving providing

dial tone to users with IXC or CLEC switches and/or networks.

(TCP/IP) Transmission Control Protocol/Internet Protocol: A communications protocol developed

by the Department of Defense to inter-network dissimilar systems and operates at layers 3 and 4

(network and transport, respectively) of the OSI model.

(TDM) Time Division Multiplexing: A digital multiplexing method to merge signals from two or

more channels, such as telephones, computers, and video, into a common channel for transmission over

telephone lines.

(TELCO) Public Telephone Company: A company that provides telecommunication services.
Teleradiology: A system that enables the viewing and processing of images within a hospital's nuclear

medicine departments or remote image viewing from home computers or remote sites.

(TELNET) Virtual Terminal Protocol: An Internet service that allows a user to create an interactive

session with a computer on a different network as if they were actually on that system.

Tier: A package of television channels offered to customers for a single price. Most cable systems have

more than one tier, e.g., a basic package including local broadcast stations, and one or more expanded

tiers featuring popular cable program networks. In addition, cable operators offer premium subscription

services, such as HBO and SHOWTIME, and pay-per-view events such as movies, boxing matches,

and concerts.

(TMN) Telecommunications Management Network: A network using a set of international

standards that interconnects and interfaces with a telecommunications network in order to interchange

information in order to control and maintain the telecommunications network.

Translator: Relay system that picks up distant television signals, converts the signals to another channel

to avoid interference, and retransmits them into areas the original television station could not reach.

Transponder: The part of a satellite that receives and retransmits a signal.

Transport: The transfer access service to and from a point of presence (POP) serving wire center and

a customer's serving wire center or end office (EO).

Trunk: A communications network that can be used to connect circuits between switches or to

interconnect switches themselves to form a network.

Trunking: Transporting signals from one central point in a cable system (such as a headend) to another

site without serving customers directly. Trunking can be accomplished by using fiber optics, coaxial

cable, or microwave, although fiber is now the norm for the cable industry.

(TV) Television: An electronic system of transmitting transient images and sound by means of

electronic signals transmitted through wires and optical fibers.

Twisted Pair: The wire traditionally used by telephone companies to connect customers to their central

offices. It consists of two or more strands of color-coded copper wire bound together in a protective

sheath.

Two-Way: See INTERACTIVE.

(TWTA) Traveling Wave Tube Amplifiers: The main microwave repeaters or transmitters on a

satellite.
U

(UDP) User Datagram Protocol: A host-to-host protocol, which allows an application program on

one computer to send a datagram to an application on another computer via packet-switched

communications network.

Unbundling: Requiring local exchange companies to separate the various components of their

telephone service into independently available and separately priced features, such as the local loop,

switching, operator assistance, and billing.

Underground Installation: Installing coaxial and fiber cable underground as opposed to hanging it

from poles (compare with AERIAL PLANT).

(UNE) Unbundled Network Elements: Parts and components of a system that are sold separately,

including local loops, OSS, local and tandem switches, as well as network interface devices.

Universal Service: A fund to which interstate carrier must contribute in order to provide access to the

advanced interexchange telecommunications services to those people living in rural areas and where it

world otherwise not be cost-efficient to invest.

Unserved Area: See WHITE AREA.

Upstream: Flow of information from a customer back up through a cable system to the headend.

V

(VCR) Video Cassette Recorder: A recording and playback machine that takes signals from a

television camera via a television receiver and records them on magnetic tapes.

Video On Demand: The ability to provide television programming to customers upon request (see also

NEAR VIDEO ON DEMAND).

(VOD) Voice Operated Device: A device that is operated by a system with speech recognition.

(VPI/VCI) Virtual Path Identifier Virtual Channel Identifier: The combination of the address of a

virtual circuit and of a virtual path, thereby identifying a connection on an ATM network.

(VPN) Virtual Private Network: A private switched network that allows sites that are connected with

one another to contact each other without dialing all eleven digits.
(VRU) Voice Response Unit: A device that is capable to form a spoken message from an assortment

of stored words.

(VSAT) Very Small Aperture Terminal: A small earth station for satellite transmission and which is

made up of one master earth station and several two-way satellite terminals. Commonly used by

multinational firms in the transmission of fax, voice, and data throughout a widespread area.

W

(WAN) Wide Area Network: A network that connects two or more LANs in multiple cities via

telephone lines.

(WDN) Wavelength Division Multiplexing: A technology that utilizes the transmission of multiple

light signals simultaneously through the same optical fiber, while preserving the integrity of each individual

signal.

White Area: An area unserved by a local, over-the-air broadcast signal (outside its grade B contour).

(WLL) Wireless Local Loop: A system that uses radio waves, as a substitute for copper in making

telephone connections from your home or office to the public switched telephone network (PSTN).

(WWW) World Wide Web: A basic way of communication through the Internet for world-wide

hypertext linking of multimedia documents.