April 14, 1999

Internet Providers' Demands on High-Speed Data Rejected

By JERI CLAUSING

ASHINGTON -- The battle over access to high-speed Internet connections moved Tuesday to the Senate Commerce Committee, whose chairman, John McCain, said he would seek a study on how to make the technology more widely available.

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After nearly three hours of testimony, Senator McCain rejected calls from Stephen M. Case, chief executive of America Online Inc., and others that cable companies be forced to open their networks to competitors for high-speed data, or broadband, services. Instead, Senator McCain said he would file a proposal with bipartisan backing that would require the Commerce Department and the Federal Communications Commission to "analyze the facts and issues on the deployment of broadband technology."

The F.C.C. decided in February not to conduct a formal study but said it would continue to monitor the evolving market for broadband services.

In particular, Senator McCain said, he wants to make sure low-income Americans are not left behind. "Given the huge investments necessary to build these networks," said the Republican from Arizona, "there is growing concern that rural and disadvantaged areas will lag behind the rest of the country."

The hearing focused largely on whether cable companies should have to play by the same rules as phone companies and open up to competitors.

As consumers move their Internet connections from telephone modems to high-speed services offered by cable companies through a single provider, companies like America Online are concerned that their business will disappear.

But James O. Robbins, chief executive of Cox Communications Inc., a cable leader, argued that Government intervention would slow investment by companies like his and only increase the cost of access for customers. "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," he said.

The only real tension came from Senator Fritz Hollings, who alluded to the irony of an industry giant like AOL pleading for help as a potential violation of antitrust laws, then lambasted the head of U.S. West Communications Inc. after he told the committee that artificial boundaries from the 17-year-old breakup of AT&T prohibit Baby Bells like his from building sprawling high-speed digital networks.

"You are still controlling 98 percent of access and you come up here with a straight face and talk about parity?" Hollings said, accusing the Baby Bells of dragging their feet in carrying out the Telecommunications Act.

Solomon D. Trujillo, president U.S. West, responded that the FCC has written cumbersome rules that are delaying the process. And he pointed out that his company has only 20 to 30 percent of the business market because competitors developing high-speed networks have "chosen to go where the money is."

"No one is building in rural areas. No one is building in inner city areas. No one is building in the suburbs," Trujillo said.

But William Schrader, chief executive of PSINet Inc., which provides Internet service for large corporations, said it would be a mistake to change the rules affecting how local Bell companies could build large digital networks.

Schrader said Bell companies tell Congress that they could extend high-speed connections into even rural areas if rules were relaxed.

"This argument makes a good sound bite, and I imagine it is very appealing to senators from rural states," he said. But he added, "I have to tell you that it makes very little sense.''

Schrader noted, for example, that digital subscriber lines, or DSL, the fastest growing type of high-speed telephone connection, work 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.

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Jeri Clausing at jeri@nytimes.com welcomes your comments and suggestions.

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