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FCC opens ITV inquiry

Interactive television is little more than a pilot project today, but regulators are worried that media giants will one day monopolize what could be the next big thing on the little screen.

So, the federal government last week took a tentative step toward rules that could eventually prevent cable and other broadband providers from interfering with rival ITV services.

The FCC launched an inquiry into the need for antidiscrimination restrictions. That inquiry can't directly result in new rules, but it could give the agency necessary public support to begin crafting rules in the next year or two.

Regulators are asking for predictions on the ability and likelihood of cable company interference with rivals' interactive TV services.

The cable industry is opposing even the suggestion of ITV rules, but FCC officials said their review of the America Online-Time Warner merger raised fears that companies controlling both distribution and production of TV content will have an incentive to block services of other content providers.

"We're pleased that the commission has decided to conduct a fact-finding inquiry rather than a rulemaking which presumes a regulatory outcome," said Robert Sachs, president of the National Cable Television Association. "But asking dozens of hypothetical questions about regulating a business which has yet to take form still puts the cart before the horse."

Cable industry officials note that only a few hundred thousand households subscribe to ITV services. The leaders in the business are Microsoft's WebTV, with just over 200,000 users and America Online's AOLTV, which hasn't released subscriber numbers for its infant service.

Originally the FCC considered issuing a "notice of proposed rulemaking," which would have let it establish rules more quickly, but cable industry lobbying and resistance from Republican Commissioner Michael Powell persuaded the panel that ITV was too embryonic to set rules now.

Commissioner Michael Powell, who is expected to be named FCC chairman this week, didn't comment on the inquiry, but commenting on the AOL Time-Warner merger two weeks ago, he said ITV issues "are not trivial, and clearly warrant fuller examination."

Consumer advocacy groups and leading programmers such as Walt Disney Co. had lobbied for the rulemaking, in addition to ITV restrictions imposed on AOL Time Warner by the FTC. Those restrictions forbid the company from interfering with interactive triggers or content provided by non-affiliated programmers and Internet services.

"To our children a dumb one-way TV will seem like a completely useless device," said Disney lobbyist Preston Padden.

The FCC inquiry sets in motion what perhaps was the cable industry's biggest worry regarding the AOL-Time Warner merger-that merger conditions, particularly for ITV and open access for Internet service providers, will become regulatory models all cable companies eventually will have to follow.

Comments on the ITV inquiry are due March 19; replies April 20.

Besides asking for comment on the need for any restrictions, the agency also wants opinions on whether cable or other programming distributors such as direct broadcast satellite will have an advantage delivering ITV, and if the agency has authority to impose ITV restrictions.

Defining ITV is another problem for the FCC, which is mulling which of the myriad ITV services under development should fall under the prospective rules. They include electronic program guides, alternative camera angles, graphics and statistics that wrap around video images, interactive marketing, chat rooms and e-mail.

  • Regulators are also unclear how other cable industry rules affect ITV. For instance:

  • Should the rules apply only to regulated cable franchises or should companies facing enough local competition be exempt from most cable rules falling under ITV restrictions?
  • Would antidiscrimination protections apply only to local broadcast stations with must-carry rights or to cable networks that must negotiate their carriage terms?
  • Should bandwidth constraints permit cable systems to deny ITV carriage if the alternative is to bump some networks off their lineup entirely?

FCC Chairman William Kennard, who resigned from the commission Friday to make way for President Bush's designee, said the inquiry is necessary because cable one day will be an important platform for ITV. "The commission would do well to get ahead of the curve," he said. "I am concerned that a vertically integrated ITV service provider might have the incentive and ability to discriminate."

Commissioner Gloria Tristani complained that the FCC was pursuing only an inquiry, meaning final rules can't be established without a second round of comments and replies. Republican Commissioner Harold Furchtgott-Roth, on the other hand, said even this preliminary step goes too far. "It is much too premature for the commission to address the topic," he said. "By the mere adoption of this item, the commission communicates to the public that something has gone awry in the marketplace..This simply is not the case."