Cable companies, who have joined the ranks of these corporations with their newly upgraded networks, sign franchise agreements with city or county government agencies to provide cable services to residents. Also, when a cable company changes ownership, a transfer of control agreement must be completed.
Local governments have the authority to condition these contracts because they are responsible for managing the public rights-of-way telecom companies, including cable companies, use to build networks.
Since people want high-bandwidth information services, including Internet access, companies will, naturally, try to supply that demand. Cable companies are uniquely poised to take advantage of the high-bandwidth services market because of their penetration into homes.
According to a report entitled "Internet Over Cable: Defining the Future In Terms of the Past," by the FCC's Office of Plans and Policy, the combined cable networks of one major player reach approximately 40 percent of U.S. households.
Subscription rates are inching up, as cable modems are being slowly deployed in U.S. cities. In North America, there are nearly 600,000 subscribers, said Patti Reali, cable-industry analyst at San Jose-based Dataquest/Gartner Group.
A Changing Game
Technology itself is complicating the regulatory process between government and industry. "In this day and age, you have emerging technologies that didn't exist 15 to 20 years ago when these franchises were put into place," said Jesse Juarros, assistant general manager for the city of Los Angeles' Information Technology Agency (ITA). "Today, you have a different regulatory environment with respect to deregulation, in that you have companies with the ability to offer local and long-distance services. You have at least four technologies capable of delivering broadband services on the data side. So now, you put together a proposal, and you will have a lot of folks interested in deploying their technology into your city."
The telecom industry's latest round of mergers is making local governments play in a different game.
"The mergers have the biggest impact on local governments," said Lawton. "The old days of one-company monopolies are gone. Big companies sell services off left and right to other companies. Local governments need to get the right kind of help so they can understand, in a sophisticated way, the impact of these things on the rates and the services that are going to be offered, or not offered, in their area."
The open-access issue is a new wrinkle that local governments have to consider when negotiating with telecom companies, especially cable companies.
"Across the country, cities are looking at the open-access question," said Lawton. "Some communities believe that multiple ISPs are important; that open access is necessary. In places where there is already competition, this may not be necessary. In other places, where there is a good relationship between the city and the cable company, this may not needed if local officials have confidence in the cable company."
This issue is whether a company such as AT&T, which is both a broadband backbone and an Internet service provider (ISP), should allow other ISPs to connect to its backbone so they can deliver information services. To do this, other ISPs would have to buy the necessary equipment to connect and pay the associated fees to AT&T.
This became a problem after the AT&T/Telecommunications Inc. (TCI) merger of 1998, giving AT&T control of TCI's nationwide cable loops and TCI's affiliated companies.
This problem will not be solved quickly or easily. AT&T is looking to merge with MediaOne, another cable-television company that markets Internet access, adding more cable networks under its control. AT&T hopes this merger will be completed early next year.
Not An Open-And-Shut Case
What started the open-access debate was AT&Ts requirement that customers subscribing to its cable internet services