ANN ARBOR—A University of Michigan professor has weighed
in on what has been called ”the biggest issue in the whole
technology communications realm” with a study refuting
cable companies’ claims that they will suffer if forced to
allow competing Internet service providers to use their
lines.

”My analysis shows emphatically that cable companies
actually will do better under such an arrangement,” says
Jeffrey MacKie-Mason, a professor in the Department of
Economics, the School of Information and the School of
Public Policy. His study, ”Investment in Cable Broadband
Infrastructure: Open Access is Not an Obstacle,” was
sponsored by openNET Coalition, a group of more than 800
local, regional and national Internet service providers,
technology and telecommunications companies dedicated to
promoting competition in high speed Internet cable access.
Full text of the study is available at http://www-
personal.umich.edu/~jmm/papers/broadband.pdf.

The issue has been hotly debated in the past year, as AT&T
has become the nation’s largest cable provider through a
sequence of cable company acquisitions. AT&T’s aim, like
that of the whole industry, is to use cable lines to provide not just TV programs, but a range of services including Internet access at speeds up to 100 times faster than conventional dial-up access service. Although only about a million homes currently have high-speed Internet
connections, some analysts estimate the number will increase to 16 million by the end of 2002, with 80 percent of those connections being made via cable.

But upgrading the lines to provide such services is
expensive. Cable operators argue that they will have no
incentive to make the necessary investment unless they can
be sure their customers will also use them as Internet
service providers. AT&T, for example, would require
customers who subscribe to its high-speed cable modem
service to also subscribe to one of the company’s Internet service providers, Excite@Home or Road Runner. Rival Internet service providers, such as Mindspring and America Online, charge that AT&T is trying to monopolize high-speed Internet connections to homes. They are calling for ”open access”-to other providers.

In his independent research report, MacKie-Mason examined
the effects of open access on cable operators’ incentives to invest in upgrades. His detailed, quantitative analysis of the costs and returns from such investment shows that:
service providers to recoup their investment in cable line
upgrades. Profits from the advanced cable TV, telephone and data transport services will more than reward the
investment.

Under an open access plan for Internet service, cable companies stand to make higher, not lower, profits because
they can charge other Internet service providers for the use of their lines, and because the wider selection of providers will attract more subscribers.

Consumers will benefit from open access, becausecompetition will force Internet service providers to offer higher-quality, lower-priced service. And with more
Internet service providers able to use cable lines, the
variety of services available to consumers will be greater.

”Clearly, cable broadband investment is a winner under open access,” says MacKie-Mason. ”I conservatively estimate that the returns from local telephone service alone are more than sufficient to support the costs of such investment. In addition, cable companies will get revenues from selling data services to Internet service providers. Indeed, if cable companies provide open access to multiple Internet service providers, they will likely do even better than they are doing now, because many more consumers will want to subscribe to cable modem service.”