shirky.com Clay Shirky's Writings About the Internet
Economics and Culture, Media and Community, Open Source
ATT and Cable Internet Access
11/4/1999

When is a cable not a cable? This is the question working its way through the Ninth 
Circuit Court right now, courtesy of AT&T and the good people of Portland, Oregon. When 
the city of Portland and surrounding Multnomah County passed a regulation requiring AT&T 
to open its newly acquired cable lines to other internet service providers, such as AOL 
and GTE, the rumble over high-speed internet access began. In one corner was the City of 
Portland, weighing in on the side of competition, open access, and consumer choice. In 
the other corner stood AT&T, championing legal continuity: When AT&T made plans to buy 
MediaOne, the company was a local monopoly, and AT&T wants it to stay that way. It looked 
to be a clean fight. And yet, on Monday, one of the three appellate judges, Edward Leavy, 
threw in a twist: He asked whether there is really any such thing as the cable industry 
anymore. The answer to Judge Leavy's simple question has the potential to radically alter 
the landscape of American media.  

AT&T has not invested $100 billion in refashioning itself as a cable giant because it's 
committed to offering its customers high-speed internet access. Rather, AT&T has invested 
that money to buy back what it really wants: a national monopoly. Indeed, AT&T has been 
dreaming of regaining its monopoly status ever since the company was broken up into AT&T 
and the Baby Bells, back in 1984. With cable internet access, AT&T sees its opportunity. 
In an operation that would have made all the King's horses and all the King's men gasp in 
awe, AT&T is stitching a national monopoly back together out of the fragments of the local 
cable monopolies. If it can buy up enough cable outlets, it could become the sole provider 
for high-speed internet access for a sizable chunk of the country.

Cable is attractive to the internet industry because the cable industry has what internet 
service providers have wanted for years: a way to make money off content. By creating 
artificial scarcity -- we'll define this channel as basic, that channel as premium, this 
event is free, that one is pay-per-view -- the cable industry has used its monopoly over 
the wires to derive profits from the content that travels over those wires. So, if you 
think about it, what AT&T is really buying is not infrastructure but control: By using 
those same television wires for internet access, they will be able to affect the net 
content its users can and can't see (you can bet they will restrict access to Time-
Warner's offerings, for example), bringing pay-per-view economics to the internet.

In this environment, the stakes for the continued monopoly of the cable market couldn't 
be higher, which is what makes Judge Leavy's speculation about the cable industry so 
radical. Obviously frustrated with the debate, the Judge interjected that, "It strikes 
me that everybody is trying to dance around the issue of whether we're talking about a 
telecommunications service." His logic seems straightforward enough. If the internet is 
a telecommunications service, and cable is a way to get internet access, then surely 
cable is a telecommunications service. Despite the soundness of this logic, however, 
neither AT&T nor Portland was ready for it, because beneath its simplicity is a much more 
extreme notion: If the Judge is right, and anyone who provides internet access is a 
telecommunications company, then the entire legal structure on which the cable industry 
is based -- monopolies and service contracts negotiated city by city -- will be 
destroyed, and cable will be regulated by the FCC on a national level. By declaring that 
regulations should cover how a medium is used and not merely who owns it, Judge Leavy 
will be moving the internet to another level of the American media pecking-order. If 
monopolies really aren't portable from industry to industry -- if owning the wire doesn't 
mean owning the customer -- then this latest attempt to turn the internet into a walled 
garden will be turned back.


Write clay@shirky.com with questions or comments.

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shirky.com Clay Shirky's Writings About the Internet
Economics and Culture, Media and Community, Open Source