So-called broadband access over cable lines, with connection speeds dozens of times faster than today's telephone modems, promises to further propel the economy's rocket fueled technology industry.
Freeing consumers from the frustrating, sluggish performance of traditional phone lines, high-speed cable connections will finally make new computer applications, that include TV-quality video and better audio, possible on the Web.
Steve Case, chairman of AOL, said, "Instead of offering consumers choice, cable is requiring consumers who want a high-speed cable connection to the Internet to buy the Internet service affiliated with a local cable company, even if they have another Internet service they like and want to keep."
But cable companies, such as Cox Communications Inc., want the government to continue its policies allowing them to require subscribers of their new high-speed lines also to pay for their bundled Internet service. The cable industry contends it needs the money it generates from those Internet services to help pay some of its costs of building a new national, digital infrastructure.
The sides were explaining their positions today in testimony to the Senate Commerce Committee. "The mere suggestion from government that such risky investments could be subjected to old-fashioned cost-of-service regulation would have a chilling effect on going-forward investments and would slow down the rollout of these new advanced Internet services," Cox President James Robbins said in prepared remarks.
Robbins said Cox already has spent $4 billion to develop high-speed Internet connections over its cable lines, and the industry expects to spend $10 billion on similar upgrades this year.
On Monday, a coalition of consumer and communications industry groups urged the Senate committee to force cable companies to give subscribers their choice of Internet providers. AOL, with more than 16 million Internet subscribers, was part of that coalition.
"As new broadband technologies emerge to make the online experience faster, richer and more convenient, the cable industry is trying to use its monopoly control of the broadband cable wire to become a gatekeeper on the Internet," the OpenNet Coalition said in a statement.
Critics of the cable industry argue that telephone companies can't require their customers also to use their Internet services.
Solomon Trujillo, president of US West, also complained that local Bell companies are discouraged under federal law from building sprawling, high-speed digital telephone networks that compete with cable lines.
Trujillo wants his company to be allowed to transmit computer data across 197 geographic boundaries established by th government and the industry in 1982 to limit long-distance voice calls. "This constitutes nothing less than a new industrial policy that selectively benefits some segments of society but penalizes other," he said in prepared testimony. "The rules now in place give new market players no incentive to invest in under-served areas, and at the same time prohibit companies like US West from filling the void."
But William Schrader, chief executive officer of PSINet Inc., said it would be a mistake to change the rules affecting how local Bell companies could build these sprawling digital networks. His company provides Internet service for large corporations.
Schrader said Bell companies argument that they could extend high-speed connections into even rural areas if rules were relaxed is just political rhetoric, "This argument makes a good sound bite, and I imagine it is very appealing to senators from rural states," Schrader said. "But as I have learnedÂ… I have to tell you that it makes very little sense."
Schrader noted, for example, that digital subscriber lines, the fastest growing type of high-speed telephone connection, works only if consumers are closer than 18,000 feet from the phone company's central office, which is uncommon in rural areas. "Compromises made in the name of helping rural Americans may never, in fact, deliver DSL services to those same Americans," he said.