Cable-Access Roads Lead to FCCs Lathen

Deborah Lathen, chief of the Cable Services Bureau at the Federal Communications
Commission, is playing a central role as the agency develops its policies on cable
Internet access. Despite some heavy criticism, the FCC has resolved to let the marketplace
rule the actions of cable operators, she said. In an edited interview with
News Washington bureau chief Ted Hearn, Lathen said her bureau intends to forward
digital must-carry recommendations to the five commissioners by Dec. 31.

MCN: Did you think you'd be at the center of so many
high-profile controversies when you took the job more than a year ago?

DL: Nope, I didn't. In fact, I remember commissioner
[Harold] Furchtgott-Roth telling me that basically, the biggest thing I was going to have
to face was digital must-carry. Of course, we've seen a lot of things besides digital

MCN: What's been the biggest surprise?

DL: I would have never predicted the AT&T
[Corp.] mergers. You know, I didn't predict the first one, and I certainly wouldn't have
predicted the second one, so the AT&T-TCI [Tele-Communications Inc.] merger, and then
the proposed AT&T-MediaOne [Group Inc.] merger. And of course, that gave much more
significance to the ownership rules, much more significance, when we were dealing with
them all in the merger context.

MCN: I guess for you, topic No. 1 -- and probably
Nos. 2, 3, 4 and 5, as well -- has to be open access, which the cable industry calls
forced access. Why is the FCC refusing to intervene in this area?

DL: Well, I will restate what we've been saying for
about a year now, and that is because we believe this is a nascent market, and it just
does not make any sense at this point in time to try to introduce regulation to a
brand-new marketplace.

When we're looking at basically 1 million cable-modem
subscribers and around 250,000 or so DSL [digital subscriber line] subscribers out of a
universe of 30 million or more Internet users we don't think this is the
appropriate time to intervene with regulations based upon a 65-year-old regulatory scheme.

MCN: Didn't you also say that part of the problem is
definitional -- that people who are advocating open access haven't been consistent or
uniform in what they mean?

DL: Well, yeah, I mean, we've gotten different
answers for open access. We've gotten from regulation like program access, to full Title
II unbundling, to any variation in between full Title II unbundling. No one's come up with
a consistent definition of open access, or let alone been able to tell us what type of
regulatory scheme you'd be looking at.

MCN: Why is the FCC even bothering to monitor a
service such as broadband Internet access over cable -- a service that chairman William
Kennard has called nascent? It would seem by definition not to need any monitoring at all.

DL: I don't think that's accurate, because we are
looking at the marketplace, and the reason why you want to monitor is because we want to
make certain that gatekeepers are not arising, and we want to make certain that an
irreversibly closed system doesn't get built. So it's very important for us I think not
only as an obligation, but I think it's our responsibility to do so.

MCN: The FCC released a broadband-access report a
couple of weeks ago. What did you find?

DL: We invited a whole universe of people and
organizations to come and talk to us. We had ISPs [Internet-service providers], we had
OSPs [online-service providers], we had consumer-advocate groups, we had the RBOCs
[regional Bell operating companies], we had CLECs [competitive local-exchange carriers],
we had investment bankers. I mean we had a whole arsenal of people come in, talk to us and
tell us about the market.

We did our [broadband] 706 report [in February], and we
wanted to see if there had been any changes in the marketplace since the time we conducted
our 706 report. And what the report found was that the market is a nascent marketplace,
that no one could come up with a cogent definition of what open access meant, and that the
majority of investors we spoke to said imposing regulation at this time would actually
serve as a disincentive for investments.

So basically, what we found from conducting these
monitoring sessions is that our policy really for now is the right policy. And we
recognize, [as] many people told us, that there were risks involved. We recognize the
risk, and we have taken actions through monitoring. Our monitoring helps us to make
certain that we're mitigating against those risks.

MCN: Critics of your report said it did not consider
the point that failure to intervene now had its own serious risk. Their point is that
cable's Internet-access strategy could clobber so many ISPs that FCC action in the future
would be too late. What's your reaction to that kind of criticism and argument?

DL: We considered all viewpoints, and this is not a
task one undertakes very easily. It's very difficult, but we had to make some difficult
decisions. We believe in the marketplace, and we believe that the marketplace is going to
sort this out.

MCN: Because people are not clear what they mean by
open access, does this mean the FCC wouldn't be sure what to do if it decided to

DL: There are many factors, OK? This is a new baby,
and you're trying to figure out how it's going to grow and what it's going to be. So I
can't just tell you that this is the only factor we're looking at.

We're also looking at structural issues. As I said, we're
making certain, [and the Office of Engineering and Technology] has been looking to make
certain, that irreversibly [closed] systems aren't being built. So that's just one of the

MCN: Has the FCC given any thought to what its
reaction is going to be if the city of Portland, Ore., prevails in its case against
AT&T? Have you assigned staff to review the FCC's options if Portland wins and imposes
open access on AT&T, or thought about what that implies for the FCC's hands-off

DL: Well, of course, the General Counsel's office
and the Office of Policy and Planning -- we all sit down and we discuss these scenarios,
but it would be premature for us to come up with any conclusions, since Portland hasn't

MCN: A lot of the articles coming out of the
Portland oral argument said the court had to decide whether AT&T was offering a cable
service or a telecommunications service. What did you think of that focus?

DL: We were very pleased with it because we felt
that this was really important information that the court needed. The parties stipulated
that this was a Title VI cable service. And we felt that it was important for the court to
know that the Federal Communications Commission, which has the jurisdiction to decide
that, hasn't decided it -- that it could be a telecom service or an information service.

The most important thing was that we wanted the court to
know that just because the parties stipulated it, that didn't mean it was necessarily so.
So we were pleased that the court read and listened to our brief.

MCN: Many people focus on the relevant product
market in this debate. Does the FCC consider high-speed access a separate product market?

DL: We haven't made that determination.

MCN: Didn't you imply in your monitoring report that
there was one product market because you said cable had about 3 percent of the entire
Internet-access universe, which meant that it was small player?

DL: The commission really hasn't made that
determination yet. I could tell you my personal opinion, but I won't.

MCN: Are you encouraging cable companies to sign
deals with third-party ISPs?

DL: The chairman has always favored marketplace
solutions. And we always encourage the parties to get together and to try to come up with
marketplace solutions, because we believe they know their businesses better than we do.
And we also believe agreements that they reach are more likely to be kept, because they'll
come up with terms that are agreeable to them. So the answer to your question is yes, of
course, we encourage marketplace solutions.

MCN: Since your answer is yes, how is that
consistent with letting the marketplace work? Do these people really need the FCC to tell
them to do this?

DL: Well, we're not telling them what to do. We are
not involved in any negotiations or discussions telling the parties what to do. We're just
basically asking them to go and to get together and talk, so yeah, it's not at all

MCN: Have you seen a what I would call a template
letter between AT&T and MindSpring Enterprises Inc. that lays out some kind of
open-access regime after AT&T's exclusivity agreement with Excite@Home Corp. expires
in 2002?

DL: I have not seen the template letter from
AT&T and MindSpring. I would love to see one, but I haven't seen one.

MCN: What's the agency's posture going forward --
more monitoring?

DL: We're doing the 706 report so we'll be
gathering information again.

And we're certainly looking at what monitoring sessions we
should continue with.

MCN: Internet Ventures Inc. has a petition pending
seeking the authority to use cable commercial leased-access rules to provide broadband
Internet access. That's been kicking around since June. When can we expect a decision?

DL: I think pretty soon. We're working on it. I
can't give you a definite date, but we'll be getting it done pretty soon.

MCN: Why is it taking so long for the agency to act
on this one?

DL: I don't think that's taking long for us to act
on it. It's an issue that we're considering among many, many other things that you know
we've been busy with these past couple of months.

MCN: I've heard that you were going to postpone
action on this petition until after the Portland case came down.

DL: That's not true.

MCN: Critics of the FCC's new cable horizontal and
attribution rules said they were shaped to help AT&T get its merger with MediaOne
through the FCC. And they pointed to the rule insulating limited partnerships in which one
of the partners shows no material involvement in programming selection. Were these rules
crafted to help ease AT&T's merger issues?

DL: No, no. The purpose of the rules was to strike a
balance, and the balance was to allow the companies to compete in this new area --
advanced services -- and yet at the same time to not allow them to unduly influence
programming in their traditional areas. And it was a difficult balance to strike, but it's
one that we believe we struck.

MCN: By a lot of people's math, AT&T is way
above the 30 percent cap you imposed. Does it even matter, with the statute declared
unconstitutional and with your rules stayed, in terms of their merger?

DL: The rules state that they do have to come into
compliance. I think we changed it from 60 days to 180 days within the court's mandate that
they have to come into compliance. It's on public notice already that we have asked
AT&T to tell us how they would be in compliance with the horizontal and attribution
rules. So that is one of the things that we are reviewing in the merger, and that's on the
public record.

MCN: What is the agency's time frame for acting on
the AT&T-MediaOne merger?

DL: I can't tell you that now because we're still in
discussions about that, and we're getting lots and lots of comments and things in. And I'm
not in a position to tell you what that deadline's going to be yet.

MCN: Can you say when the cable bureau will make a
recommendation to the commissioners?

DL: Not at this point in time, I can't. I am not
able to do that now.

MCN: Let's talk about digital must-carry. What's the
current time frame for a decision on that issue?

DL: I can't speak as to when the commission would
decide it, but our target for the bureau was to have something in December and
December is not over. We're still going to keep working toward our target, and we'll just
keep trying to get as close as we possibly can to the December target.

MCN: You have some tough calls to make here. What
has been the most difficult aspect of dealing with the digital must-carry debate?

DL: It may be that the parties are just so dug in on
their sides. It's such a standoff between the two of them. That may be it. And otherwise,
I just approach them like I do all of the other proceedings that we have to handle. I know
it's not a very good answer, but they're intractable in their positions.

MCN: So there's going to be litigation, right?

DL: You know that there's going to be litigation. So
we're always very careful about our record and how we do it. But you know there's going to
be litigation involved because they're really just so dug in. The good news that we've
seen is the retransmission-consent agreements that have been negotiated with the major

MCN: The cable industry argued in favor of letting
the marketplace work here, and other commission officials have said that to the extent the
marketplace is working, there's less reason for the agency to get involved. Are you
waiting to see what happens in this retransmission-consent round to find out how
comprehensive a digital must-carry rule might have to be?

DL: No, I wouldn't say that we're waiting. We're
watching it, but we're not holding back on doing anything. We're watching it to see what's
developing and where it's going. We continually assess what's going on in terms of
retransmission consent.

MCN: President Clinton just signed new
satellite-competition legislation. Are you looking forward to implementing this law and to
the potential of promoting satellite competition to cable?

DL: Sure. We said to Congress last year that we were
looking then to bring local into local, and to make DBS [direct-broadcast satellite] a
viable competitor to cable, so we're happy to see this coming about. The time frames are
pretty tight, but we'll make it happen.

MCN: Do you have adequate staffing and the resources
to handle this job?

DL: You never have adequate staffing, but we always
manage to pull a rabbit out of our hat.