FCC initiates study of high-speed Internet; backbone deregulation also an issue

The Federal Communications Commission in Washington is launching an inquiry to study high-speed Internet service, with particular emphasis on cable delivery. The American regulator is seeking comments on the legal and policy approach to be given to services provided over different platforms, including cable, wireline, wireless, satellite, broadcast and unlicenced spectrum. The FCC also plans to look at providing ISPs with third-party access to cable systems. The announcement coincides with the U.S. regulator’s release of a report which concludes that the competitive Internet backbone market should remain free of telecom regulation. The report, written by the director of Internet policy analysis in the FCC’s office of plans and policy, Michael Kende, explains how existing Internet interconnection agreements – notably peering arrangements – are replacing traditional regulation. "The market outcomes of a competitive Internet backbone market can differ from the network industries characterized by market power that historically warranted interconnection regulations," Kende writes in The Digital Handshake: Connecting Internet Backbones. "In addition, antitrust and competition protections can prevent any anti-competitive consolidation among Internet backbone providers. In sum, this paper argues that any traditional telecommunications regulation of Internet backbone interconnection is made unnecessary by a competitive backbone market." He points out that the FCC has avoided placing the providers of computer services under its common carrier rules. For more than 30 years, it has followed a policy that believes such regulation would discourage innovation and distort the embryonic data marketplace. The growing popularity of the Internet has prompted many non-U.S. carriers to complain that international interconnection arrangements for the exchange of traffic are unfair. The carriers, mostly from the Asia Pacific area, say since traffic flows from outside points to the U.S. are growing, they shouldn’t have to pay for the entire circuit connecting to the American networks. They propose shared costing, similar to that used for voice traffic. One of the most vehement in this argument is the Australian telco Telstra. It estimates 30 per cent of the traffic between the two countries is moving from Australia to the U.S., attributable mostly to American Internet users drawing more heavily on content from the island continent. The explosion in Internet use is a symbiotic development, the paper concludes. "The growth in private Internet backbones has coincided with the introduction of the World Wide Web, which has popularized the Internet for millions of customers. The result is a virtuous cycle that is typical of industries characterized by network externalities," Kende says. "In this case, users, drawn to the Internet by applications such as the World Wide Web, encourage the creation of more Web content, which in turn encourages additional users to log on to the Internet."

FCC initiates study of high-speed Internet; backbone deregulation also an issue

News | October 11, 2000

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