All the q about net neutrality.1. Who is in favor of net neutralit.pdf
King County ERP 1999 Finalrep
1. A Report to the Budget and Fiscal Management Committee
Metropolitan King County Council
Applying a Policy of Non-Discriminatory Access
To High-Speed Internet Access Over Cable
in King County, Washington
Conclusions and Recommendations of
the Expert Review Panel
Created by Ordinance No. 13409
and Supporting Materials
William Andersen
Ron Johnson
Sharon Nelson
Roger Noll
Martin Rood
Ralph Sims
Jeffrey Sterling
Rick White
Ernie Ting, Facilitator
October 1999
2. ORGANIZATION OF THE REPORT
PART I - Conclusions and Recommendations
of the Expert Review Panel
Created by Ordinance No. 13409
PART II - Technical Appendix to the Panel's
Conclusions and Recommendations
PART III - Facilitator's Background Discussion
PART IV - Agreed-Upon Statement of Facts
of AT&T and the Pacific Northwest
Open Access Coalition Regarding
Current Market Conditions
PART V - Separate Statements of Panel Members
3. A Report to the Budget and Fiscal Management Committee
Metropolitan King County Council
Applying a Policy of Non-Discriminatory Access
To High-Speed Internet Access Over Cable
in King County, Washington
PART I
Conclusions and Recommendations of
the Expert Review Panel
Created by Ordinance No. 13409
William Andersen
Ron Johnson
Sharon Nelson
Roger Noll
Martin Rood
Ralph Sims
Jeffrey Sterling
Rick White
Ernie Ting, Facilitator
October 1999
4.
5. KKIINNGG CCOOUUNNTTYY EEXXPPEERRTT RREEVVIIEEWW PPAANNEELL
October 28, 1999
Metropolitan King County Council
King County Courthouse
516 Third Avenue, 12th
Floor
Seattle, Washington 98104-3272
Honorable Members of the Council:
In accordance with the provisions of Council Ordinance 13409 and Council
Motion 10716, we are pleased to submit to you our conclusions and recommendations
regarding non-discriminatory access to the Internet over AT&T’s high-speed cable
modem platform in King County.
Respectfully,
Sharon L. Nelson, Co-Chair Rick White, Co-Chair
William R. Andersen Ronald A. Johnson
Roger G. Noll Martin S. Rood
Ralph Sims Jeffrey Sterling
6.
7. Panel’s Conclusions and Recommendations 1
CONCLUSIONS AND RECOMMENDATIONS
OF THE EXPERT REVIEW PANEL
This statement contains the Expert Review Panel's conclusions and
recommendations on how a broad policy of "non-discriminatory access" for AT&T's new
Excite@Home service can be best carried out to support vigorous competition and
consumer choice for Internet services in unincorporated King County. Employing new
cable modem technology, the Excite@Home service will soon allow residents to send
data to and from the Internet at very high speed over AT&T's cable television lines. In
establishing this Panel, the Metropolitan King County Council raised the concern that
AT&T will dominate the market for high-speed access to the Internet and may use that
power to restrict the choice of other Internet services as well. In Ordinance 13409, the
Council specifically charged the Expert Review Panel with "addressing any
anticompetitive implications of rolling out bundled high speed cable modem Internet
services including legal, technical, and economic considerations as well as subscriber
privacy issues."
The Panel has examined the potential problem and weighed various solutions to
recommend to the Council. After considering information on a wide range of issues, the
Panel has concluded the following:
1. The Panel agrees that the Council should continue to encourage a vigorously
competitive market for Internet services, and be concerned with market power
which interferes with consumer choice.1
If AT&T is successful at marketing its
cable modem service and its ability to carry information at high speed between King
County homes and the Internet is not seriously challenged by other companies, the
troublesome market conditions that the Council has noted may arise.
However, at this time AT&T is not yet offering cable modem service in
unincorporated King County. The company is working to complete the upgrade of its
cable network and has agreed not to deploy the service until the Council’s review
process is complete. As required by AT&T's franchise agreement, that upgrade is
scheduled to be complete throughout the county by March of 2000. Without an
actual offering of cable modem service, the Panel finds that there is uncertainty about
whether AT&T will possess unacceptable power in the marketplace for high-speed
Internet access.
1
The term "market power" is explained in Point #3.
8. Panel’s Conclusions and Recommendations2
2. The Panel agrees that certain principles of non-discrimination are appropriate as a
foundation for a pro-competitive policy. In that regard, the Panel recommends
that the Council immediately ensure that AT&T fulfills its commitment to treat all
Internet traffic that it carries as part of its cable modem service equally. By
“equally”, we mean that:
• AT&T will not block or limit access to information at any site on the Internet,
including the sites of competitors to AT&T or Excite@Home.
• AT&T will not make it more difficult or more cumbersome to transmit
information efficiently to or from sites that are not affiliated with AT&T or
Excite@Home.
• AT&T will provide fast access to local sources of information via “local
peering” -- that is, direct connections between AT&T’s local cable network
and local sources that avoid the congestion of unnecessarily sending
information through distant regional or national facilities.
• Any consumer can easily connect to any Internet services or online content of
his or her choice without viewing any AT&T or Excite@Home sponsored
information by “clicking” on an “icon” – that is, the symbol which represents
the consumer’s preferred service – which appears on his or her computer
desktop.
The technical specifications for equal treatment of all Internet traffic are provided in
the Technical Appendix to these conclusions and recommendations – Part II of this
report.
3. The Panel agrees that the following considerations should lead the Council to
consider further action beyond the non-discrimination principles in Point #2:
• Any failure by AT&T to continue to comply with the requirements for equal
treatment of all Internet traffic as described above
• Market conditions in which consumers have shown that they value cable
modem access highly, but in which viable alternatives to AT&T's service for
high-speed Internet access have not emerged -- that is, in which AT&T has
"market power"
• Any other situation in which substantial consumer dissatisfaction arises and
which may manifest itself as complaints about AT&T’s cable modem service.
• Any decision by AT&T to agree to and implement a more expansive version
of so-called “open access” as part of its cable franchises elsewhere in the
United States, or to enter into agreements with unaffiliated Internet service or
content providers.
9. Panel’s Conclusions and Recommendations 3
4. In response to the Council’s question of whether it is technically and economically
feasible to implement non-discriminatory access, the Panel generally does agree:
• Each of the three different approaches which have been proposed for non-
discriminatory access is technically feasible. These approaches are local
peering, unbundling of the Excite@Home service into a separate transport
offering, and so-called leased capacity.
• Local peering, as endorsed by the Panel in Point #2 and as it is being
implemented by AT&T, is also economically feasible.
• While unbundling of the Excite@Home service can be accomplished at a
definable cost to AT&T, the viability of the separate transport service -- after
that cost has been passed on to competitors who wish to use it -- is uncertain.
• The economic feasibility of providing leased capacity, where competing
providers of Internet services are offered a portion of the overall capacity of
AT&T’s cable modem system, was not resolved in testimony provided to the
Panel.
5. However, there is a degree of uncertainty about the significance of AT&T's
bundling of high-speed connections with other Internet services in its
Excite@Home offering, and of the harm to competitive markets and consumer
choice that might result. This follows from the uncertainty about whether AT&T
will possess unacceptable power in the marketplace for high-speed Internet access.
[See the sidebar on the next page which explains when “bundling” may become anti-
competitive “tying“.]
In this regard, members of the Panel have weighed the advantages and disadvantages
of different courses of action for the Council to take under these current
circumstances. The Panel has identified two alternative courses for further action:
• Wait for actual conditions to emerge. The Council could carefully monitor
the market for the problematic circumstances noted in Point #3 above. Should
any of those circumstances emerge after AT&T begins to offer cable modem
service, the Council would proceed to consider additional measures as
described in supporting sections of the report.
• Take steps now to prepare for the likelihood of market power. Alternatively,
the Council could monitor the market, but stand ready to impose a
requirement that AT&T "untie" its cable modem package unless a competitive
market emerges within the next year or the company voluntarily offers
consumers the option of combining its high-speed connections with the
Internet services of other companies.
10. Panel’s Conclusions and Recommendations4
THE DIFFERENCE BETWEEN “BUNDLING” AND “TYING”
The Panel agrees that the question of whether AT&T has power over the market
for high-speed Internet access is important to resolving the controversial issues
of "bundling" and “tying”. The term “bundling” refers to marketing two
products in a package, such as hamburgers and French fries. The service that
AT&T is currently planning to offer, Excite@Home, combines a high-speed
connection for passing data between homes and the Internet with other services
such as electronic mail, Web hosting and use of information data bases -- that
is, other services are bundled with the high-speed capability. AT&T does not
sell the high-speed connection to consumers separately at this time.
The term "tying" refers to a particular situation where consumers are forced to
buy a second product if they want the first product -- because a firm is the
exclusive (or nearly so) provider of that first product. This tying arrangement
can force consumers to buy the firm’s second product even if competitive (and
possibly superior) alternatives to it are available. For example, the old Bell
System once required that consumers of telephone service buy Bell System
telephones as well – even though other kinds of handsets were available.
If AT&T becomes one of several different providers of high-speed connections to
King County residents, its bundling of other services with the high-speed
capability need not be a problem. In fact, it may be desirable. Consumers who
like the convenience of the Excite@Home bundle with the electronic mail, Web
and information features that AT&T has selected can purchase it, while those
who like the mail, Web or information services of other companies can shop for
their high-speed connections elsewhere. Those alternative providers of high-
speed connections may also sell a bundle of services.
Even if AT&T were to be the dominant provider of high-speed connections in
unincorporated King County, bundling would not necessarily be undesirable or
a problem. The company could allow consumers the option of buying the
Excite@Home bundle of services or combining an AT&T high-speed connection
with the email, Web services and information of any other companies. In this
case, AT&T's possible market power over high-speed connections would not
limit consumer choice for other Internet services.
(continued on next page)
11. Panel’s Conclusions and Recommendations 5
However, if AT&T does gain market power over high-speed connections and
only offers the bundled Excite@Home service, the prospects for vigorous
competition and consumer choice in King County could be seriously threatened.
In this circumstance, a refusal to offer an unbundled option for high-speed
connections would be an example of anti-competitive tying, where consumers
are forced to buy a second product or service because of a firm's control over
the market for the first.
6. Members of the Panel differ in their views as to which of the two courses for
further action in Point #5 would best serve the Council’s interest in encouraging a
competitive market and consumer choice. Among the core reasons for this
divergence are:
• Different views on the ease or difficulty of correcting any market power
problem at a later time. Some members believe it will be possible to readily
correct any problem after actual market conditions emerge, while others
believe that the delay and increasing political challenge of initiating action
later will harm consumers and the cost to consumers of switching service
providers will entrench AT&T in the market.
• Different expectations about the extent to which AT&T will face competition
in the near term in unincorporated King County. Some members believe that
there is a high likelihood that AT&T will have substantial and enduring
market power, while others believe more strongly that competing technologies
will soon reach even outlying areas and consider the prospect of AT&T
market power uncertain at this time.
• Different assessments of the difficulty and magnitude of the costs of
implementing a County requirement that AT&T offer an unbundled version of
its Excite@Home service. Some members believe that a local requirement for
unbundling would involve a lengthy process with considerable administrative
and litigation costs for the County, while others believe that it is possible to
craft a timely and simplified method of enforcement if the Council begins to
consider the process of implementation now.
7. The course of action which entails waiting for actual conditions to emerge is
favored by four Panel members (Sharon Nelson, Roger Noll, Martin Rood and
Rick White). Under this alternative, the Council would carefully monitor for the
circumstances highlighted in Point #3 and consider additional measures – including
the possibility of a requirement for AT&T to untie the sale of its high-speed
connections from its sale of other Internet services -- should any of them arise.
12. Panel’s Conclusions and Recommendations6
These members believe this alternative would have several advantages:
• It would recognize that we are at an early stage of the market's
development, and allow the potential of various competing technologies for
high-speed connections to emerge. A competitive market for high-speed
connections would resolve concerns about the potential for market power
and tying of services much more simply than a regulatory solution.
• It would allow AT&T and potential competitors to make decisions on
deployment, marketing and business alliances based solely on the most
effective and efficient way to develop the market for high-speed
connections, and would preserve incentives for AT&T to invest further in
this capability. It would not distort the incentives of the marketplace in a
way that would discourage the deployment of new technologies.
• It would allow the Council to benefit from observing the actual
development of market conditions before making any decision on the need
for further intervention and spending of scarce fiscal resources on what may
be a controversial local regulation.
• It would allow the Council to first observe the outcome of litigation
between AT&T and other jurisdictions and the mounting pressure on the
Federal Communications Commission to establish national rules before
undertaking the task of making and enforcing rules -- as well as engaging in
a costly and lengthy adversarial battle with AT&T over jurisdiction or the
justification for intervention.
The second course of action -- taking steps now to prepare for the likelihood of
market power -- is favored by four Panel members (Bill Andersen, Ron Johnson,
Ralph Sims and Jeffrey Sterling). These members of the Panel believe that despite
the uncertainty, it is probable that AT&T will have market power in unincorporated
King County -- that is, there will be significant consumer demand for high-speed
access to the Internet and that substitutes will not be generally available in the near
term. In addition, the consequences of inaction could be to allow AT&T to become
entrenched and -- with ample resources and monopoly rents to protect -- difficult to
dislodge without protracted legislative proceedings and time-consuming litigation.
After the fact measures would provide only a partial remedy after much damage may
have been done to consumers and businesses in King County.
These members believe that the Council should pursue whatever steps it can easily
take now and in the future to protect consumer choice from the effects of such power,
and should unequivocally commit to a course of action protecting King County
consumers and businesses. They strongly recommend that the Council:
13. Panel’s Conclusions and Recommendations 7
• Continue the conditional approval of the AT&T/TCI transfer while entering
into immediate negotiations with AT&T seeking agreement about how an
equal access policy can be implemented. Such a policy would include the
components of the non-discrimination policy noted in Point #2 and, in
addition, would include an undertaking by AT&T to make the option
available to its subscribers to buy high-speed connections without other
AT&T or Excite@Home services, or alternatively to allow competing
service providers the option of buying the high-speed connections and
offering them to their customers. In this way, subscribers would have a
choice of Internet service providers.
• Absent a negotiated agreement, be prepared to impose by September 1,
2000 a suitable remedy for any market power that has emerged (as shown
by a lack of significant high-speed competition by June 1, 2000, for
example) or for any shortfall in AT&T’s commitment to implement and
sustain high-quality local peering.
• To minimize enforcement costs for the County, clearly state that it is not
preempting any separate private right of action otherwise available to any
person who is injured as a result of a violation of the non-discriminatory
access policy.
//
14. Panel’s Conclusions and Recommendations8
Table Illustrating How Differing Assumptions Drive Different Views
on Further Action that the Council Should Take
On this Question: Panel Members Favoring
Taking Steps Now to
Prepare Tend to Conclude:
Panel Members Favoring
Waiting for Actual Market
Conditions Tend to
Conclude:
How likely is it that
AT&T will wield
market power?
Very likely -- AT&T’s
service will have high value
to consumers and there will
not be viable alternatives in
unincorporated King
County in the near term.
Uncertain – Competing
technologies will continue
to develop and grow
rapidly; AT&T may
voluntarily untie high-speed
connection from other
services.
What are the
consequences of not
intervening early?
If market power in fact
emerges, AT&T will be
entrenched with a large
share of the market which
will damage the competitive
market. Consumers will not
be inclined to switch service
providers later. Dislodging
AT&T will be a difficult
and time-consuming
political challenge.
Any unfair AT&T market
share can be readily
reversed by adopting
corrective steps later.
Consumers will be willing
to switch to other service
providers at that time. In
the meantime, intervention
which might discourage
others from deploying
services to compete with
AT&T will be avoided.
How difficult and
costly would it be to
implement a County
requirement for
unbundling?
Timely and simplified
methods of enforcement can
be developed if the County
begins to consider those
issues now.
Local requirement for
unbundling would involve a
lengthy process with
considerable administrative
and litigation costs.
15. A Report to the Budget and Fiscal Management Committee
Metropolitan King County Council
Applying a Policy of Non-Discriminatory Access
To High-Speed Internet Access Over Cable
in King County, Washington
PART II
Technical Appendix
to the Panel’s Conclusions
and Recommendations
October 1999
16.
17. Technical Appendix 1
TECHNICAL APPENDIX
TO THE PANEL’S CONCLUSIONS
AND RECOMMENDATIONS
Non-Discriminatory Treatment of Traffic
and Open Unbiased Access to Any
Internet Resources and/or Services
As overall requirements, and in order to achieve non-discriminatory treatment of Internet
traffic and provide open, unbiased and usable choice of, and access to and/or from any
Internet-based resources and/or services, AT&T must now and for the life of the
franchise agreement both:
• Sustain high-quality and minimal-packet-loss, minimal-latency, high-speed,
high-performance, and extremely reliable local peering and traffic exchange
facilities as specified below; and
• Establish and sustain an effective mechanism to locally peer and exchange
traffic locally, without settlements, with all qualified institutions and/or
qualified Internet Service Providers (ISP's) and/or qualified Online Service
Providers (OSP's) and/or other qualified Internet content or service providers
who seek and are willing to meet, peer and exchange traffic locally with
AT&T in and via the agreed-upon local exchange point or points (to which the
institutions/providers furnish their own connectivity, and at which the
institutions/providers provide their own compatible interface).
Here the definition of, and criteria for, "qualified" is having the technical capability
including the requisite router(s) capable of maintaining stable BGP-4 peering and
successors, a 24 hour a day seven day a week Network Operations Center (NOC),
willingness to exchange and maintain current contact information (including
administrative, technical and operational contacts), providing at least a standard 100
million bit per second connection and interface from their router(s), and willingness to
sign an industry standard settlement-free bilateral peering agreement (BLPA).
AT&T in its Memorandum of October 18, 1999 proposes and commits to a configuration
and approach which with minor modification will meet these requirements.
A. Local Peering and Exchange.
In general, Internet packets and/or intranet or Internet traffic to and/or from subscribers to
non-AT&T partners must be provided with performance and priority within, and into and
18. 2 Technical Appendix
out of the local AT&T Internet-over-cable system which is both: no worse than
equivalent to that provided throughout the local AT&T system to AT&T and/or AT&T
partners, and which is maintained at no worse than the performance levels provided by
AT&T's initial design for local peering as sketched in their October 18, 1999
Memorandum to the Expert Review Panel (attached). Not withstanding the foregoing,
the performance and priority standards set forth in the preceding sentence would not be
applicable with respect to telephony services using the AT&T cable network
infrastructure.
A.1. Location of Peering and Local Exchange Point(s) -
At least one local High Performance Peering and Local Exchange Point (HPPLEP) must
be established and sustained at a logical regional network exchange point where Internet
service provides and others normally exchange traffic for a section of the country, to
enable institutions, ISP's, OSP's, employers, schools and others who wish to provide
content or other services to consumers within the AT&T cable system and who are
willing and qualified to peer and exchange traffic with AT&T locally, to be able to do so
with the minimal packet loss or flow delays, and with packet loss and packet delay no
greater than AT&T provides to itself or to its partners for similar types of traffic. An
attachment point for this facility for AT&T and for those wishing to peer with AT&T
must be at the major regional carrier-hotel location at which the largest number of local
ISP's and institutional commodity Internet backbone connections exist. In the case of
King County and as agreed by AT&T, that location is the Westin Building in Seattle.
A.2. Loss and Delay-Free Interconnection between AT&T and HPPLEP -
As per AT&T's proposal, AT&T must implement and sustain a connection between its
Internet-over-cable facilities and the High Performance Peering and Local Exchange
Point (HPPLEP) with a 150 million bit per second link by January 1, 2000 and with an
OC-48 link by July 1, 2000.
Over time AT&T must manage and possibly upgrade that link to sustain that level of
performance throughout the life of the agreement. If the link becomes a bottleneck as a
result of factors within AT&T’s reasonable control, AT&T must take whatever steps are
necessary so that the link performs at a level consistent with the total performance of the
AT&T Internet-over-cable system. It is presumed that link performance will be
acceptable if there is no more than 0.2% packet loss or more than 15ms round trip latency
between the high performance peering and local exchange point (HPPLEP) and AT&T's
local Internet-over-cable cable modem termination system (CMTS) or equivalent or
successor technology.
A.3. Peering and Local Exchange Fabric Performance -
19. Technical Appendix 3
AT&T must implement its October 18, 1999 commitments for the specific router and link
configuration proposed with the additional requirement that by July 1, 2000 the two 100
million bit per second connections from the Cisco router to the two peering points which
AT&T has selected (i.e. 'SNNAP' & 'SIX') must be upgraded to two gigabit Ethernet
connections. AT&T must maintain, and if necessary, upgrade that configuration to
ensure that its performance does not significantly deteriorate and become a bottleneck or
provide throughput worse than AT&T provides to itself or its partners. One test for
adequate performance across this peering fabric will be that within the AT&T portions of
the configuration AT&T provides no worse than two tenths of one percent packet loss.
Loss levels exceeding that amount will be evidence of the emergence of a bottleneck
unless they result from factors outside of AT&T’s reasonable control or are consistent
with loss levels experienced within the total performance of AT&T’s Internet-over-cable
service.
B. IP addressing policies -
AT&T and its partners and vendors must upon a subscriber’s request enable subscribers
to have up to four DHCP-assigned Internet addresses.
C. Acceptable Use Policies (AUP) -
AT&T may not implement any AUP on non-AT&T or AT&T partner traffic, or on
individual subscribers that varies from the least-restrictive AUP policy that applies to
AT&T or AT&T’s partners or vendors, and in no case shall AT&T apply any restrictions
based on content or supplier except as required by law or as a temporary response to
ongoing Denial of Service attacks or similar events that seriously compromise network
operations.
D. Content Restriction or Filtering -
AT&T may not implement any content filtering on non-AT&T or non-AT&T partner or
on subscriber traffic except as required by law or as a temporary response to ongoing
Denial of Service attacks or similar events which seriously compromise network
operations.
//
23. A Report to the Budget and Fiscal Management Committee
Metropolitan King County Council
Applying a Policy of Non-Discriminatory Access
To High-Speed Internet Access Over Cable
in King County, Washington
PART III
Facilitator’s Background Discussion
Ernie Ting
October 1999
24.
25. Facilitator’s Background Discussion i
FACILITATOR’S BACKGROUND DISCUSSION
Table of Contents
Page
Preface ii
Section 1 – Historical Context 2
Section 2 -- The Markets and Services of Internet Access 7
Section 3 – The Central Question of Pro-Competitive Bundling Versus 17
Anticompetitive Tying
Section 4 – Monitoring the Availability of Competing Services in 21
Unincorporated King County
Section 5 – Discussion of Technical Issues 25
GLOSSARY 31
APPENDICES 33
Panel Members
Witness List for August 17, 1999 Public Hearing
Witness List for August 31, 1999 Panel Meeting
List of Commenters at October 18, 1999 Public Hearing
List of Parties Submitting Written Comments from October 14-19, 1999
List of Parties Submitting Written Comments from October 25-26, 1999
26. ii Facilitator’s Background Discussion
Preface
This background discussion covers several select subjects. While my objective
has been to make this document a helpful complement to the statement of the Expert
Review Panel’s conclusions and recommendations (Part I of this assembled report), it is
important to note that the Panel has not adopted this material as its own. Although I have
attempted to provide a balanced picture which is broadly consistent with the Panel’s
conclusions, each member of the Panel will undoubtedly find some areas in which they
would differ in tone or substance with the characterizations here.
Having said that, I wish to acknowledge the contributions of language for selected
passages in this report by Prof. Roger Noll and Dr. Ron Johnson. As the choice of how
to use those offerings was mine, the overall result remains my own responsibility.
Ernie Ting
Facilitator to the Expert Review Panel
27. Facilitator’s Background Discussion 1
FACILITATOR’S BACKGROUND DISCUSSION
Section 1 – Historical Context
The County’s Development of a Non-Discriminatory Access Policy
Part I of this report summarizes the conclusions and recommendations of the
"Expert Review Panel" established by the Metropolitan King County Council to look
more closely at various complex and contentious issues surrounding the offering of
Internet access over local cable systems. These are issues which surfaced during the
Council's recent consideration of the merger of AT&T Corporation (AT&T) and Tele-
Communications, Incorporated (TCI). As part of the AT&T/TCI merger process, AT&T
applied to local governments throughout the United States to transfer control of cable
franchises held by TCI to itself. King County was one of those local jurisdictions.1
During the County’s consideration of the transfer request, concerns were
expressed about the growing success -- and market influence -- of TCI’s new cable-based
technology for providing access to the Internet. Consumer interests and competing
technology firms stated that AT&T's acquisition and expansion of the high-speed Internet
access technology called @Home would pose an anticompetitive threat to the Internet
itself.2
Members of the Council also expressed serious concern about the potential
dominance of the @Home "cable modem" technology as the most ready vehicle for
providing high-speed Internet access into homes in unincorporated sections of King
County -- with imperfect, if any, competitive alternatives. Such concerns centered on
assertions that the @Home service's combination or "bundling" of its high-speed data
transport with apparently unrelated Internet features and content would effectively shut
out competing Internet firms from many cable customers' homes. AT&T's potential
1
Incorporated cities within King County have their own local franchising authority for cable services. As a
result, the County government's franchising jurisdiction is limited to the unincorporated areas of King
County.
2
Technically speaking, AT&T was not acquiring @Home Networks, Inc. -- a separate business entity.
However, TCI held a substantial minority financial interest and a majority voting interest in @Home. With
its acquisition of TCI, AT&T would inherit that majority control. @Home itself subsequently merged with
Excite -- one of the major companies which marketed Internet content and search features through a one-
stop "portal".
28. 2 Facilitator’s Background Discussion
market dominance was also seen as a threat to consumers' access to diverse information
sources.
Many of the critics of AT&T's potential dominance over high-speed Internet
access suggested that the County impose a requirement that the firm provide "open
access" to its cable modem technology to prevent the adverse consequences from
happening. Under such requirements, competing online firms and alternative sources of
information content would be able to hook into cable's high-speed "pipeline" into
consumers' homes -- and curtail AT&T's ability to extend its advantage in transport speed
into an anticompetitive edge in other parts of the Internet marketplace as well.
During meetings of the Council's Budget and Fiscal Management Committee, the
contentious question of open access was raised and discussed by a series of witnesses. In
a proposed ordinance, the County Executive had recommended that the Council
immediately impose open access conditions on the proposed transfer of control. Such
conditions would have included so-called economic unbundling in which high-speed
transmission over cable facilities would be separately sold and priced from other Internet
services.
The various witnesses who appeared before the Committee included technology
experts from @Home and America Online, the largest Internet service provider in the
United States, among others. Such witnesses offered a range of conclusions about the
appropriateness or feasibility of implementing open access requirements -- conclusions
that were often backed up by complex or highly-technical arguments. Although the
investigation by the Committee did appear to establish the technical possibility of
implementing various conceptions of open access, the reasonability of imposing such
conditions from a technical integrity or financial viability standpoint remained subject to
vigorous dispute.
Under federal law, King County had one hundred twenty (120) days to review a
request for transfer of control such as that proposed by AT&T and TCI. Although AT&T
filed its request for a transfer of control on September 16, 1998, the Council did not
formally receive this matter for decision until January 7, 1999. While the Council and
AT&T had agreed to a thirty-day extension to February 16, 1999 of the statutory deadline
for a County decision on the transfer, the time and resources for a thorough review were
not available within that timeframe.
Given the time limitation on pursuing any further investigation of the issues, on
February 16, 1999 the Council enacted Ordinance 13409 which granted a conditional
approval for the transfer of control of the cable franchises from TCI to AT&T. In lieu of
immediate Council action which would have denied AT&T's application for the transfer,
29. Facilitator’s Background Discussion 3
AT&T/TCI and the Council agreed to refer a more detailed examination of the issues to
this Expert Review Panel. After receiving a report of findings and recommendations
from the Panel by October 8, 1999, the Council would return to the matter for final
action.
In passing Ordinance 13409, the Council reaffirmed its policy against
anticompetitive behavior and for competition in telecommunications and cable services.
The Council also endorsed a broad policy of non-discriminatory access to the cable
modem network, stating that such a policy would promote consumer choice and
competition in the provision of Internet services. The task of considering the technical,
economic and legal issues associated with implementing such a policy of non-
discriminatory access then fell to the Expert Review Panel.3
The Expert Review Panel Process
The Expert Review Panel is composed of eight members of the public appointed
by the Council.4
The members represent academia in the fields of economics, antitrust
law and technology, research and development, business entrepreneurship, and the
practice of law and utilities regulation.5
The Council's charge to the Expert Review Panel
in Ordinance 13409 specifically states:
The ERP will issue a report with findings to the council by October 8,
1999 addressing any anticompetitive implications of rolling out bundled
high speed cable modem Internet services including legal, technical, and
economic considerations as well as subscriber privacy issues.6
After some early discussion of how broadly or narrowly to interpret its role in
reviewing the issues, the Panel adopted the following as its "mission statement":
The Panel was created under Ordinance 13409 to produce a report assessing
the competitive consequences of the proposed AT&T/TCI merger. The
County Council has expressed a policy objective of promoting consumer
choice and competition in telecommunications and Internet services. The
3
Although the Panel considered information about the relationship of federal or state policies to local
policy, the Panel was not charged with determining the nature of the County's jurisdiction over cable issues.
4
The appointment of the eight members of the Panel and the hiring of a consultant/facilitator to organize
and manage the Panel process were approved in Motion 10716 adopted by the Council on June 21, 1999.
5
See the Appendices for a list of Panel members.
6
Ordinance No. 13409, Section 6, at page 8, line 21 to page 9, line 2.
30. 4 Facilitator’s Background Discussion
Panel will examine what conditions, if any, on access and unbundling will
best promote the pro-competitive policy of the Council.
The Expert Review Panel will assist the County by:
• Assessing market conditions
• Examining network architectures
• Examining the technical and economic feasibility of different modes
of access
• Reviewing a number of current issues, including privacy concerns.
Also, the Panel will assess whether any given policy will achieve the pro-
competitive objectives of the County.7
While the Panel affirmed that its primary mission was limited to examining issues
arising out of the AT&T/TCI merger, the members recognized that it would be desirable
for any policy recommendations made by the Panel to be broadly applicable to any other
company holding a cable franchise in the County.8
In addition, Council staff as well as
Panel members noted the desirability for the Expert Review Panel to help the Council
anticipate emerging policy issues -- beyond the immediate issue of open access.
After convening for the first time on July 22, 1999, the Panel developed a plan to
solicit information on the issues, deliberate as a group, and develop a report to the Budget
and Fiscal Management Committee and Council. The Panel met almost weekly through
August and into September. During this time, the Panel received oral presentations as
well as extensive written submissions from various interested parties at its regular
meetings.9
The Panel also held a more formal hearing on August 17, 1999 at which
several experts representing AT&T, Excite@Home, and other competitors in the industry
appeared. All told these individuals included technology experts, economists, regulatory
policy experts, and consumer representatives.10
On September 14, 1999, the Panel requested an approximately two-week
extension of time for its deliberations and drafting of a consensus report. Subsequently
7
Mission Statement Adopted by the Expert Review Panel -- 7/27/99
8
At this time, the only other cable operator in the County is Summit Communications, Incorporated. At
the time of the Council's deliberations on the transfer of TCI franchise control to AT&T, Summit held a
franchise covering a small percentage of the households whose cable service was under King County
jurisdiction.
9
The most-visible parties before the Panel were AT&T and the Pacific Northwest Open Access Coalition --
a group including GTE, large Internet service providers including America Online, and the state association
of independent Internet service providers.
10
A list of parties appearing at the August 17, 1999 public hearing also is contained in the Appendices.
31. Facilitator’s Background Discussion 5
the Panel continued its regular meetings into October, weighing different conclusions and
recommendations. After releasing a formal draft describing the Panel’s tentative
conclusions and recommendations on October 14, 1999 for public comment, the Panel
held a second public hearing on October 18, 1999 to solicit oral comments on the draft.
A series of speakers appeared at the hearing, including individual consumers, business
interests, non-profit organizations, and some of the principal interested parties. Written
comments on the draft conclusions and recommendations also were received by the Panel
through October 19, 1999.
After further deliberations, the Panel approved a structure for presenting
additional background materials developed by the Panel facilitator and the parties to the
Council. The combined package of materials was made available once again for public
review and comment on October 25th
and October 26th
. The Panel then considered those
comments and approved a final report, transmitted to the Council on October 28, 1999.
33. Facilitator’s Background Discussion 7
Section 2 – The Markets and Services of Internet Access
Defining Internet Access
To provide a context for understanding the controversy over open access in
Internet-related services, it is worth taking some time to consider the way that different
functions are carried out in the Internet marketplace. Strictly speaking, “the Internet” is
an extensive web of networks which permits literally hundreds of thousands of computer
sites around the world to communicate with each other -- using a standard set of technical
rules of the road, the TCP/IP protocols.1
Sites on the Internet have specific “addresses” –
expressed as a string of numbers such as “207.69.172.80”, or denoted by a domain name
such as “metrokc.gov” – which allow data to be routed to them. [See Figure 1, where
sites on the Internet are depicted with simplified addresses such as “2.4”.] In turn, most
of these computer sites facilitate access to their Internet connections by employees,
subscribers or other affiliated individuals – allowing millions of people to enjoy the
benefits of the information and services that are made available by Internet sites.
Most people therefore do not have their own place on the Internet -- they either
share access to a connection or use some intermediary service that offers a way to
transfer some or all of the information on the Internet to and from their desktops. This
last point is important because the manner of that access is at the center of the current
controversy.
Up to now, the most common ways for people to access the Internet were two –
by communicating over a direct connection to the Internet owned by an employer or
school, or by making a telephone call to an “Internet service provider” (ISP).
Approximately six thousand ISPs around the United States share their connections to the
Internet by allowing individuals to call them and be temporarily connected to the Internet
by using one of a pool of addresses controlled by each provider.2
[In Figure 1, Users A,
B, C, and D share the connection “2.9” assigned to their ISP.] Aside from providing
consumers “a seat at the table” of the Internet, ISPs commonly offer consumers the
capability of sending and receiving electronic mail and news posted for public viewing.
1
The Transmission Control Protocol and the Internet Protocol. See the Glossary for definitions.
2
The precise mechanisms for providing “dial-up” access vary. Our description attempts to simply
characterize some of the more common arrangements.
34. 8 Facilitator’s Background Discussion
1.3
2.9
6.4 1.8
5.52.47.33.2
3.4 9.2
Figure 1: Simplified Illustration of the Web of Networks, Computer Sites
and Users on the Internet
While relatively inexpensive, “dialing up” an ISP over a telephone line provides a
limited capacity for transmitting data back and forth to the Internet. This is so because
conventional telephone lines are designed to carry audio signals – voice. Dial-up services
1.8.1
1.8.2
1.8.3
User A
User C
User B
User D
35. Facilitator’s Background Discussion 9
must therefore translate the massive stream of “0” and “1” digits of computer data into
the equivalent of a series of rapidly-changing audio tones. The speed at which
information can be transferred via this method is limited to less than 56 kilobits
(thousands of zeros or ones) per second.
New technologies are offering at least some consumers the ability to have a
constant connection to the Internet outside of the work or school setting. These
technologies allow consumers to connect their computers to the Internet without having
the data converted into voice-type signals, and permit information to be transferred at
vastly higher speeds – from hundreds of kilobits per second to millions of bits per second.
Chief among these technologies are digital subscriber line (DSL) and cable modem
services, with some high-speed wireless technologies slowly emerging as well.
Digital subscriber line technology transmits signals over telephone lines, but
bypasses the dialing mechanism and voice (or “analog”) portion of the telephone
network. Instead, special equipment is installed at both ends of the telephone line to
permit data to be carried directly to and from computers.3
Cable modems perform a
similar function, adding the ability to transfer computer data over the same coaxial cable
that now carries television programming into homes.
Defining Internet-Related Markets
When consumers typically connect to the Internet by dialing up an ISP, they do
two different things: 1) establish an electrical connection from their personal computers
to a shared computer which in turn is networked with the vast array of linked computers
that is the Internet, and 2) draw on software programs and digitized information that
create the logical world of the World Wide Web, electronic mail, chat rooms and other
valuable applications. These two functions are clearly separated when these tasks are
separately performed by the consumer.
In the emerging world of DSL and cable modems, consumers have connections to
their Internet service provider all the time. In this environment, the transport function
being performed by the DSL or cable modem technology can be invisible. The technical
components of services that are delivered over the Internet – how it is done – no longer
necessarily have any relationship to the way services appear to be structured from a
consumer perspective.
3
Depending on the specific technology and existing conditions, equipment may not always have to be
installed at the consumer end of the telephone line.
36. 10 Facilitator’s Background Discussion
Within the Internet itself, the structure of service providers historically was
divided along lines such as:
• Internet service providers (ISPs)
• Internet backbone providers
• Content and application providers
As noted, ISPs provided access to the Internet for consumers. Content and
application providers developed and offered information or application programs, and
either provided their own linked computer sites or employed ISPs to make that
information accessible on the Internet. Backbone providers constructed and maintained
the equivalent of long-distance networks for Internet data.
However, as Internet businesses have matured, the challenge of developing
Internet-related markets has turned increasingly from technical challenges to marketing
strategy. To simplify services for consumer use and to leverage visible business names
on the Internet into profitable commerce, many industry players have formed partnerships
or other kinds of business alliances across the different technical components of Internet-
related services as well. These alliances allow firms to offer services that appear
seamless as well as exert greater control over the factors influencing the quality of their
offerings.4
From the standpoint of consumer demand therefore, definitions of Internet
markets or market segments are becoming more and more blurred.5
In its own recent
decision on the transfer of control of TCI licenses to AT&T, the FCC employed a five-
category classification of “entities” for its market analysis. The “five types of entities
involved in Internet services” were said to be:
1. End users
2. Access providers
3. Application providers
4. Content providers
4
Although less common, a number of the early Internet services were highly-integrated. America Online
(AOL) not only offered dial-up Internet access, but controlled its own backbone network and aggressively
pursued its own content to offer its subscribers. AOL no longer has its own backbone network.
5
In economic theory, market definitions are not strictly arbitrary, but dependent on the specific
characteristics of demand. The Owen-Rosston paper offered by AT&T, for example, devotes much of its
attention to a critique of Prof. Jerry Hausman’s econometric analysis of whether broadband and
narrowband access are distinct markets. See footnote 23 below. However, the results of any such analysis
may reflect shades of gray.
37. Facilitator’s Background Discussion 11
5. Backbone providers.6
However, since our concern is with the technical as well as market issues of open
or non-discriminatory access, it is more important for us to distinguish the transport
function from other aspects of Internet access, content or backbone services. For our
purposes, we classify the services and products in the Internet market as falling into one
or more of the following three categories:7
1. High-Speed Transport
2. Internet Access
3. Content and Applications
Figure 2 offers a schematic way of considering these three functions. Progressing from
bottom to top like a set of building blocks, Internet access is built upon the pure transport
function and provides the means for consumers to ultimately reach the far-flung content
and applications of the Internet.8
The bottom layer -- pure transport -- is sometimes referred to as a “dumb pipe”
function – where voice, video or data is moved from one point to another without any
enhancements or extra features. What is inserted into one end of the pipe comes out the
other end unchanged. In the context of Excite@Home, the transport function that is of
particular concern is at the end or "last mile" of the network -- where the fiber and coaxial
6
Federal Communications Commission, In the Matter of Applications for Consent to the Transfer of
Licenses and Section 214 Authorizations from Tele-Communications, Inc., Transferor to AT&T Corp.,
Transferee (CS Docket No. 98-178), Memorandum Opinion and Order, FCC 99-24, released February 18,
1999, at para. 64.
On the other hand, the recent report of the Information Technology Agency of Los Angeles
employs the following categories:
1. End users
2. Internet service providers (ISPs)
3. Internet backbone providers (IBPs)
4. Content providers.
City of Los Angeles Information Technology Agency, Broadband Access Report, June 1999, p. 8.
7
Historically, these distinctions have been much more than thought exercises. For decades, national
telecommunications policy was focused on an attempt to confine the local telephone monopolies to pure
transport functions. This “bright line” distinction was the basis for regulatory policy in the FCC “Computer
Inquiries”. A variant of this distinction was incorporated into the 1956 consent decree against the Bell
System as the ban on providing “information services”.
8
This type of schematic is also commonly used to portray different aspects of a computer network as
different “layers”. Progressing from bottom to top, the first layer typically specifies the attributes of the
physical media employed in the network – for example, standard coaxial cable. Higher layers generally
represent more subtle characteristics which build on the specifications below it to completely describe the
essential aspects of a particular network design.
38. 12 Facilitator’s Background Discussion
cable runs from individual subscribers' homes to join up at shared equipment of the cable
system where additional services or content are supplied.
The next layer -- Internet access -- takes raw transport capability and makes it
useful for consumers. It involves a package of functions that give users an identity or
"presence" on the Internet, connect them with remote sites on demand through Web
browsing software, provide them with electronic mailboxes and mailing functions, offer
space to store information on personal Web sites, and provide other basic communication
and navigational aids.
CONTENT AND APPLICATIONS
[e.g., publications, databases, goods for sale, interactive
entertainment]
INTERNET ACCESS
HIGH-SPEED TRANSPORT
Figure 2: Different Categories in the Market for High-Speed Internet Services
Beyond these two layers are the vast amount of specialized content and incredibly
diverse services and applications of the open Internet -- for all intents and purposes,
unbounded. When made accessible for public or commercial use, the vast resources
located on any of the hundreds of thousands of interconnected computers on the Internet
are available to any user -- at least in theory.
The Openness of the Internet
The simple overview we have just provided of the purely technical aspects of the
Internet understates its key role in the exploding electronic marketplace of the past
several years, however. That role has been to provide a whole new set of options for all
kinds of non-commercial content and to alter dramatically the economic equation for new
ventures -- creating new business models, and rewriting marketing, production and
39. Facilitator’s Background Discussion 13
distribution strategies. Central to that role is the open nature of access to content and
applications on the Internet.
In contrast, any computer network may offer many of the same features as an
Internet service provider -- such as electronic mail and a wide range of content including
news, entertainment applications and databases – within a private or “proprietary”
system. Indeed, several of the early commercial services such as Prodigy, Compuserve,
Delphi and America Online were originally based on mostly proprietary offerings.
Access to content from other unaffiliated sources tended to be an adjunct function using
primitive search and retrieval tools. In many ways these early services were seen
primarily as electronic content providers which incidentally integrated local dial-up
access and mail functions. At the time, the business model for these “online service
providers” appeared appropriate to maximize earnings of those firms.
The advent of graphical Web browsers and search engines suddenly made it much
easier to access alternative sources of content on the Internet, however. Quickly,
consumer demand for “true Internet access” which was not limited to proprietary
resources pushed open the design of most online services and brought with it tremendous
opportunities for new content and applications developers.9
Literally by design, the Internet has an open-ended structure and still relies to a
large degree on decentralized management of its network components. It is a mostly
cooperative venture, evolving from its original academic and scientific heritage and
permitting unfettered use within minimal guidelines.10
While this freedom has
encouraged a new and diverse population of information and applications developers, the
downside of this scheme has been a lack of responsibility in any identifiable entity for
ensuring the quality of the total network. Therefore, with the explosion of electronic
commerce on the Internet has come pressure to commercialize – and assert greater
control over -- the way network facilities are developed and managed. This tension
between the open and decentralized virtue of the Internet and the pressure to provide end-
to-end care is one additional aspect of the debate over open access and Excite@Home.
9
Many services for businesses still employ proprietary resources, as the specialized information
requirements and price-value sensitivity for that market differs substantially from that of the residential
consumer market.
10
As is often noted, the very earliest heritage of the Internet was military – the Defense Department
ARPAnet that was developed thirty years ago. Perhaps the most important aspect of the ARPAnet was that
it introduced a scheme for transmitting data successfully over “unreliable” connections – where the
availability of specific pathways to get information from sender to receiver is unknown in advance. This
scheme served the need to have a defense communications network that could continue to operate even if
segments of it had been destroyed in a nuclear attack.
40. 14 Facilitator’s Background Discussion
The Excite@Home Service
The idea for the @Home service was developed in the mid-1990s as a high-
technology partnership of the venture capital firm Kleiner Perkins Caufield and Byers
and cable giant TCI -- shortly thereafter joined by Comcast Corporation and Cox
Communications. It was designed as a hybrid of the last-mile transport and Internet
access functions -- and particularly with its merger with the Excite portal, increasingly
has incorporated the broader content and applications function as well. Both technically
as well as from a marketing standpoint it has been engineered as an integrated service.
Figure 3 is a schematic of the Excite@Home service modelled after our earlier
diagram of the three categories in the market for high-speed Internet services. The
shaded area shows how Excite@Home has created a bundled offering up the chain from
"dumb pipe" through basic Internet access and encompassing a full range of its own
content and applications.11
Access to content and applications produced by unaffiliated
entities is also available, and is depicted in the white areas on the schematic.
EXCITE@HOME
PROPRIETARY CONTENT
AND APPLICATIONS
UNAFFILIATED
CONTENT
AND APPLICATIONS
@HOME INTERNET ACCESS INTERNET ACCESS
HIGH-SPEED TRANSPORT
OVER AT&T/EXCITE@HOME CABLE MODEM SYSTEM
Figure 3: Excite@Home's bundling (shaded area)
The current policy debate is triggered by the concern that cable customers, who
generally have been served by only one firm, can be forced to confront an all-or-nothing
decision -- buy the high-speed transport provided by Excite@Home's cable modem
technology, and automatically get the Internet access functions and proprietary content
11
For these purposes, the term "proprietary" content is meant to include content which Excite@Home
offers on an exclusive or partially-exclusive basis via contractual arrangements with other service or
product providers, as well as any wholly-owned resources.
41. Facilitator’s Background Discussion 15
and applications arranged by Excite@Home as well. Although AT&T and
Excite@Home have indicated that the Internet access software of competing providers
can be used instead of Excite@Home's -- and the content and applications of unaffiliated
sources can be accessed by "clicking through" to Internet links -- the firms have not
offered to disconnect the price of the transport function from that of Internet access or of
Excite@Home's content.
Thus, AT&T cable customers ostensibly pay for all of Excite@Home's service
regardless of whether they use all three functions as provided in the bundled offering. In
addition, it is seen to be technically possible for Excite@Home to block or impair
customer access to other ISPs or unaffiliated sites and content resources on the Internet.12
The latter possibility would allow AT&T to leverage any market power it has in high-
speed transport into market power in Internet access and content by denying access to
those sites, or by charging monopoly prices to operators of those sites to make their
services available to Excite@Home customers.
However, AT&T states that it is committed to abide by provisions of Council
Ordinance 13409 which declare that the company “will not restrict services that can be
provided by providers of online services” and that “customers of @Home service will be
able to access other ISPs or OSPs on the Internet without having [to] view content
provided by @Home, if a customer so chooses.”13
AT&T maintains that its cable modem
12
Consumers Union, the Consumer Federation of America, and the Media Access Project submitted a copy
of various “white papers” authored by Cisco Systems, Inc. – the largest manufacturer of “routers” used to
direct traffic over the Internet – which purport to lay out how cable system operators can use capabilities in
new software to put “absolute control, down to the packet, in your hands.” In Cisco’s “Controlling Your
Network – A Must for Cable Operators” (1999), the discussion continues on page 3 with statements that:
The ability to prioritize and control traffic levels is a distinguishing factor and critical
difference between New World networks employing Internet technologies and “the Internet.”
But beyond that, new, advanced QoS techniques give you the means to maximize revenue
generated through bandwidth capacity by providing the highest quality for your most
valuable services.
In a later section on page 5 entitled “Selectively Limited Access Rates”, the paper states:
Committed access rate (CAR) is an edge-focused QoS mechanism provided by selected
Cisco IOS-based network devices. The controlled-access rate capabilities of CAR allow you
to specify the user access speed of any given packet by allocating the bandwidth it receives,
depending on its IP address, application, precedence, port or even Media Access Control
(MAC) address.
Still later on page 5, the discussion continues:
Further, you could specify that video coming from internal servers receives precedence and
broader bandwidth over video sourced from external servers.
13
Council Ordinance No. 13409, subsection 4(H).
42. 16 Facilitator’s Background Discussion
customers who currently use America Online need only “to double click on the AOL icon
to reach that content”, for example.14
Further, AT&T has asserted that the cost of the high-speed transport provided by
the cable modem network is reduced by its bundling of Excite@Home Internet access
and content. According to testimony provided by both AT&T and Excite@Home
witnesses, the full cost of the transport function is substantially offset by revenues from
advertising and other sales associated with customer traffic passing through the
Excite@Home portal.
14
Written Statement of AT&T Corporation Before the King County Expert Review Panel on Internet
Access, August 12, 1999, pp. 6-7
43. Facilitator’s Background Discussion 17
Section 3 – The Central Question of Pro-Competitive Bundling
Versus Anticompetitive Tying
The Significance of Bundling
As noted in the Panel’s conclusions and recommendations, the act of bundling
different services into a single package offered for sale to consumers is very common in
the general marketplace – in fact, far more common than fully unbundled approaches to
selling many goods and services. For example, groceries are purchased as a bundle of the
physical product itself, transportation from producer to retailer, as well as marketing
functions such as warehousing/processing for individual sale.
The prevalence of bundling in the marketplace can be due to consumer
preferences for one-stop shopping or other ways of simplifying purchasing decisions. It
can also reflect real savings in the cost of producing goods and services. As noted by
economists representing the positions of both the Coalition and AT&T, the general
practice of bundling is often pro-competitive in nature – in cases where consumers have
the choice of bundled or unbundled offerings.15
On the other hand, the offering of a bundled service where alternatives for
consumers are limited or non-existent can reflect the anticompetitive exercise of market
power. The appropriateness of bundling in a particular case depends on whether the
seller wields significant market power over at least one of the bundled items and is using
bundling to unfairly undermine competition in the market for the other items through a
“tying” mechanism.
Potential Economic Harm of Tying on Internet Access
Economists for AT&T and opposing parties such as the Pacific Northwest Open
Access Coalition disagree vehemently on the significance of the bundling arrangement
with respect to AT&T’s offering of Excite@Home.16
As noted, bundling may be seen as
a pro-competitive step, as long as consumers have a choice of alternative transport
15
See Declaration of Jerry A. Hausman, October 28, 1998, at paragraph 13, incorporated as Exhibit 3 of
Comments of the Pacific Northwest Open Access Coalition, August 1999. Also Bruce M. Owen and
Gregory L. Rosston, Cable Modems, Access and Investment Incentives, December 1998, pp. 10-11.
16
The disagreement spans a range from simpler issues – the difference between “exclusive bundling” and
“tying” – to fundamental ones, namely the impact of bundled pricing on consumer welfare. See Hausman
(1999) and Owen-Rosston (1998) cited previously, as well as the testimony of Professor Keith B. Leffler,
“Issue – Is Closed Access Anticompetitive?”, August 17, 1999.
44. 18 Facilitator’s Background Discussion
services -- or have the option of buying either the bundled Excite@Home service or
AT&T’s high-speed transport bundled with other ISPs and content.
However, under certain circumstances, AT&T’s decision to bundle high-speed
transport with Internet access and content could have adverse consequences – creating a
tying arrangement that funnels a larger fraction of the high-speed market into AT&T’s
Internet access and content affiliates, or limiting the number of consumers who are able
to realize the value of high-speed transport. In order to assess whether AT&T is
significantly harming consumers by bundling Excite@Home service, the following two
questions need to be answered:
What are the prospects for other high-speed transport services? One core issue is
the purely technical one of the differences between Excite@Home cable modem transport
and the services available over other media, such as telephone lines or wireless
technology. If other technically-comparable forms of transport become available in the
near future, AT&T will have little or no market power in high-speed transport and will be
unable to leverage its position into significant market power in either the Internet access
market or the content/applications market. In essence, people who prefer Excite@Home
as their ISP, given its operating policies and technical characteristics (including blocking
or disadvantaging other ISPs and content sites) will use the AT&T service, while others
will select alternative means of transport.
Thus, a necessary condition for the AT&T bundling arrangement to have a
significant anticompetitive effect is that others are unable to match its transport
capabilities. Because of the nascent and rapidly developing state of high-speed transport
technologies, the Panel was unable to arrive at a consensus answer to this question about
the likelihood of multiple high-speed services emerging in unincorporated King County.
What is the value that consumers will place on high-speed transport? This is the
second core issue. If competing technologies do not emerge, significant harm will occur
only if consumers perceive enough value from AT&T’s high-speed transport to permit
the company to engage in certain market practices.
In a more extreme scenario where a large proportion of consumers value the
opportunity to obtain high-speed transport and are willing to endure any limits on their
choice of ISP or content, AT&T's business plan would have the potential to create broad
market power for Excite@Home as a dominant ISP and result in substantially less
diversity in content markets.17
17
Under these conditions, other cable companies nationwide might follow the same strategy. In the long
run, this could lead to increased pressure for regulatory or antitrust intervention.
45. Facilitator’s Background Discussion 19
An alternate scenario might involve a smaller number of consumers who have a
very strong preference for high-speed transport over choice in Internet access and
content. If AT&T could identify such a segment of consumers who place a large
premium on transport speed, it could conceivably earn higher profits by focusing its high-
speed business on that more limited market. In that case, the remaining consumers who
place a high value on both high-speed transport and choice of content -- and who are not
willing to sacrifice the latter -- would just go without. Under this scenario, AT&T’s
market power in high-speed transport would translate into a different loss to consumers –
potential value of high speed which is forfeited because the tradeoff is too high.18
In its comments, AT&T has argued that these scenarios do not reflect the
marketplace reality that it faces, stating that its strategy is to deliver maximum value in
order to attract as many consumers as possible away from services such as DSL and to
respond to competition in price and other terms.19
Indeed, in describing these business
incentives, AT&T is projecting the competitive market conditions it will be confronting if
the answer to both of the questions we have posed above turns out to be strongly positive.
The Question of Customer “Lock-In”
Given the uncertainty about competitive alternatives, one of the key assumptions
which underlies the differing conclusions drawn by Panel members about the urgency of
open access is about customer “lock-in”. Simply, a customer lock-in effect would
suggest that the provider who signs up customers for high-speed transport service first
would have an enduring advantage. Companies that enter the market later would have a
difficult time getting consumers to switch, even if the newer entrants had less expensive
or higher quality services.
Perhaps the most likely source of any significant lock-in effect has to do with the
perceived cost and inconvenience for most consumers of switching Internet email
addresses or personal Web addresses. As with switching telephone numbers or
conventional mail addresses, changing personal Internet addresses can be a considerable
adjustment in notifying friends and associates and potentially losing messages or business
which is sent based on obsolete information. Although it has been possible for
18
Prof. Noll suggests that this second scenario is far less likely to generate timely antitrust intervention
because it is likely to produce a high-speed transport market that appears to be structurally competitive.
(AT&T will have a relatively small share of the access market combined with lots of market power over
those who value speed over diversity.)
19
Written Comments of AT&T Corporation on the Draft Executive Summary of the Report of the King
County Expert Review Panel on Internet Access, October 19, 1999 (AT&T October 19, 1999 Comments),
p.1.
46. 20 Facilitator’s Background Discussion
consumers to obtain a “domain name” such as “ronjohnson.com” which can allow email
and Web addresses to be taken from one Internet service provider to another, a higher
level of service with additional cost must generally be maintained. More recently,
however, the development of Web-based email addresses which are not dependent on a
consumer’s Internet service provider has provided one growing solution to the problem of
losing one’s email address when changing access providers.
Clearly, differing assumptions about the extent of a customer lock-in effect and
the willingness of consumers to switch Internet service providers affects the view of
different Panel members about whether any potential market power of AT&T will cause
irrevocable damage to the market. The prospect of lasting damage to a competitive
market due to lock-in causes some Panel members to favor a more aggressive or
preventative strategy. On the other hand, the belief held by some Panel members that
adverse impacts of any AT&T market power are readily reversible favors waiting for
actual market conditions before considering any corrective action.
47. Facilitator’s Background Discussion 21
Section 4 – Monitoring the Availability of Competing Services
in Unincorporated King County
The consensus recommendations of the Expert Review Panel call for the County
to monitor the local market over time for the emergence of competitive alternatives to
AT&T’s cable modem service.20
While some local information on the deployment of
alternative technologies for high-speed transport is readily available, a request by the
Panel for AT&T and the Pacific Northwest Open Access Coalition to develop an agreed-
upon statement about current market conditions in unincorporated King County seems to
indicate that some in-depth research will be required for future monitoring to be helpful
and conclusive.21
Generally speaking, public information on the local availability of high-speed
services is not segregated between incorporated and unincorporated areas of King County
– making it difficult to perform monitoring which is specific to the Council’s particular
community of interest. Where companies are willing to make detailed information on
their current technology deployment available, some basic database analysis could
provide a much more definitive picture for the different geographies of the County.22
In addition, the mere deployment of basic infrastructure to support a particular
service -- such as digital subscriber line -- does not generally indicate the fraction of all
households which can actually avail themselves of the service given individual household
conditions.23
If ground-based wireless technologies are deployed, the extent of effective
radio coverage throughout unincorporated areas will become an issue as well. A modest
but statistically-valid sampling technique might be considered to provide a better picture
20
The monitoring information would be employed for somewhat different purposes under the two
alternative policies adopted by Panel members. For the Panel members who favor taking steps now to
prepare for further intervention, the focus of monitoring would be to see whether alternatives emerge over
the next several months. The other Panel members who favor waiting for actual market conditions to
emerge would have the County monitor on an ongoing basis. AT&T has volunteered to provide semi-
annual reporting of information to address the Panel’s recommended monitoring program.
21
The Panel originally had asked the parties to discuss more general areas of agreement The Panel’s
facilitator determined that an assessment of current market conditions was the mostly likely and useful
contribution that the parties could make to the Panel’s study. The resulting assessment is provided as Part
IV of this report.
22
To reduce the competitive sensitivity of such information, any analysis could be strictly limited to current
deployment information (as opposed to planned deployment) and aggregated where possible.
23
The Pacific Northwest Open Access Coalition and AT&T submitted slides purporting to show,
respectively, the large size or the small size of the gaps in DSL’s coverage of unincorporated King County.
48. 22 Facilitator’s Background Discussion
of actual availability of different services, perhaps tied in with a survey of consumer
interest and purchasing decisions.
Testimony and other information provided to the Panel clearly seem to indicate
that there will be competitive alternatives for high-speed transport in the more urban
locations within King County. See Figure 4 for a table of alternative technologies
available locally or being developed. The number of alternative providers, and their
capabilities, will continue to grow rapidly. At a minimum, digital subscriber line service
will be offered by US West, GTE or competing local telephone companies. In the more
densely populated areas, various kinds of wireless services are likely to progress to higher
transport speeds as well.
Technology Providers Transport Speed Availability? Cost to Deploy
Cable modem AT&T/TCI 128 kbps – 3 mbps County-wide $800-1000*
DSL US West, Covad,
Rhythms
128 kbps – 7 mbps Near-term: western
King County
Later: uncertain
$600-800*
Terrestrial
Wireless – MMDS
American
Telecasting
300 kbps+ Testing N/A
Satellite DirecPC 400 kbps (one-
way, telco return)
County-wide? $400-500*
Third-Generation
Cellular
None Up to 2 mbps Some years away;
coverage area
unknown
N/A
IDSL GoDigital (equip.) 144 kbps County-wide? N/A
ISDN Telephone Cos. 128 kbps+ N/A
Figure 4: Alternative Technologies for High-Speed Transport24
The Panel was split in its view on the prospects that such technologies will serve
the outlying areas of unincorporated King County in the near future, however. Some parts
of unincorporated King County are close to urban locations and are being served by DSL
or wireless services. However, beyond a few miles from existing telephone switch
locations, conventional DSL technology is not currently deployed. The Panel noted the
announcement of xDSL technology that may permit digital subscriber line service to be
24
SOURCES: AT&T, “Communications Options in King County”; Kenneth L. Wilson, “High Speed
Internet Access Alternatives for Remote Locations”, August 26, 1999, p.5; Edmund L. Andrews, “Rush is
On in Europe for Wireless Data Services,” The New York Times, July 27, 1999. Deployment costs are per
subscriber, from Chart 2 of Federal Communications Commission, In the Matter of Inquiry Concerning the
Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely
Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the
Telecommunications Act of 1996 (CC Docket No. 98-146), Report, FCC 99-5, released February 2, 1999.
49. Facilitator’s Background Discussion 23
offered as much as twenty miles from existing telephone switches, but was not able to
draw any consensus conclusion about the likely availability of such service or wireless
alternatives.25
25
The Coalition asserted that operating shortcomings in the technologies for extending DSL coverage make
them unworkable. Statement of Dale Veeneman for GTE, September 7, 1999. On the other hand, in its
recent comments, AT&T argued that the availability of alternative technologies in outlying portions of
unincorporated King County is more a business decision by its competitors -- being willing to invest as it
has – than a technical feasibility question. AT&T October 19, 1999 Comments, p. 2.
During the Panel deliberations there was also discussion of other measures that the Council might be able
to take to promote the development of competitive alternatives for high-speed access in unincorporated
King County. Panel member Roger Noll at one point suggested that the County signal its strong interest in
seeing the unbundling of Internet access and content from high-speed transport over cable – and establish
such open access as a prime criterion in evaluating bids for the cable franchise now held by AT&T when it
expires.
Additional measures that were mentioned might include steps to make it easier for new competitors to
access needed County right-of-way, wireless tower permits, or other public resources to deploy competing
facilities as efficiently as possible.
51. Facilitator’s Background Discussion 25
Section 5 – Discussion of Technical Issues
Feasibility of Different Concepts of “Open Access”
In testimony and written submissions to the Panel, the parties have described at
least three different concepts of open access which could be imposed by the Council. It
has been asserted that each of the concepts is intended to promote competition for
Internet services and enhance consumer choice. The three concepts are:
1. Leased capacity for alternate Internet service providers
2. Unbundled Internet pricing and services
3. Equal or non-discriminatory treatment of all consumers' and providers'
Internet traffic.
We briefly describe each concept in turn, and then discuss the technical and financial
feasibility of implementing such a concept.
Leased Capacity for Alternate ISPs Leased capacity for alternate Internet
service providers is generally viewed as the most ambitious conception of open access. It
is akin to requiring a cable operator to split up the “pipeline” into subscriber homes and
give each competing Internet service provider a share in order to ensure a degree of
competition and choice within the cable modem system itself. However, the Pacific
Northwest Open Access Coalition has stated that their desired concept for access to
AT&T’s cable modem system would not require a fixed allocation of the total
“bandwidth” -- or capacity -- of the cable system.26
Inasmuch as the existing cable modem network was not designed so its capacity
could be shared with multiple providers, a substantial amount of controversy exists over
the extent to which technical modifications to enable it are technically and financially
feasible.27
Technology experts for Excite@Home and GTE, in particular, engaged in an
detailed debate via a series of written submissions to the Panel.28
The thrust of the expert
comments seemed to be that modifications to permit leased capacity arrangements were
26
Pacific Northwest Open Access Coalition, Comments to Final Draft Report from the Expert Review
Panel, October 26, 1999.
27
Excite@Home’s Milo Medin cited a NASA saying that “with enough thrust, anything can fly” to make
the point that, in absolute terms, virtually anything is technically possible – but perhaps not financially
reasonable. Oral Statement at August 17, 1999 Public Hearing.
28
Excite@Home, “Response to GTE’s Clearwater Test and Reaction to GTE’s Technical Paper”, August
26, 1999. GTE Laboratories, Inc., “Statement of L. Alberto Campos in Response to Criticism of GTE
Clearwater Trial Contained in Additional Materials Filed by AT&T August 26, 1999”, September 7, 1999.
52. 26 Facilitator’s Background Discussion
technically feasible. The parties continued to argue over whether a leased capacity
requirement would entail substantial additional expense or delay in cable modem system
deployments, and the extent to which the capacity of the cable system would be impaired
by the sharing among providers.29
Unbundled Internet Pricing and Services One of the most commonly-discussed
conceptions of open access would be a requirement that AT&T unbundle the purchase of
Internet services from the basic transport of data, and offer that transport at a separate
price. The unbundled transport could either be offered to competing ISPs – who could
rebundle it with their own Internet access and content services for sale to consumers – or
directly to consumers as the equivalent of “dialtone” for the Internet.
Some members of the Panel specifically proposed a form of unbundling that
would be available to consumers. In this conception, consumers could buy Internet or IP
dialtone from AT&T without getting Excite@Home’s electronic mail, Web functions or
proprietary content services. In addition, IP dialtone service would give customers access
to any community broadband network without having to go through Excite@Home.
IP dialtone would include specialized addressing and physical transport services
that are needed to send traffic to the Internet. Subscribers to IP dialtone service would
pay for transit to the community broadband network, which would be composed of all
locally-peered sources such as K-20 schools, hospitals, governments, libraries, other local
content providers and locally-peered ISPs. The Panel members advancing the concept of
IP dialtone envision customers being able to use the service to telecommute. Since
schools, government, and presumably many local businesses would be attached to the
community broadband network, it is believed that students and employees could access
those networks for email and backbone transit purposes.
The IP dialtone service would not include access to any of @Home’s resources,
e.g., its backbone network, caching service, email or hosting services. In this design, if
an IP dialtone customer wanted email, web hosting, or access to information outside of
the community broadband network, he or she would need to shop for ISP services from
the providers that were connected to the broadband community network.
Based on testimony and written submissions, the Panel concluded that some type
of unbundling of price and service – either offered to ISPs or consumers – would be
29
The technical issues last raised by Excite@Home appeared to have been addressed by GTE – but the
Panel did not have the benefit of a further response by Excite@Home.
53. Facilitator’s Background Discussion 27
technically feasible.30
In addition, it appeared to most Panel members that price and
service unbundling of the Excite@Home service could be accomplished at some
definable cost to AT&T. However, the viability of any raw transport service as a way to
facilitate high-speed access to competing ISPs – once the unbundling cost had been
passed on to consumers or ISPs who wish to use it –was found to be uncertain.31
Non-Discriminatory Treatment of All Internet Traffic A requirement for equal or
non-discriminatory treatment of all consumers' and providers' Internet traffic is a third
concept of open access. It bars the cable operator or its business partners from biasing
the local Internet-over-cable architecture toward affiliated firms or services, or from
censoring or otherwise closing off access to external Internet resources or services. Non-
discriminatory access is a means for guaranteeing that consumers get unbiased,
unimpeded and uncensored access to the full Internet so they can obtain the most
valuable Internet content or services for their own needs.
It seeks to ensure that:
• Consumers can get unimpeded access to the Internet including whatever ISP,
institutional Internet services, or Internet content they choose
• Consumers can “click through” and directly access an ISP of their choosing
without having to pass through any kind of Excite@Home portal or home page
• The consumer gets such access on the same basis and with the same performance
that the cable operator provides to its own affiliated Internet access service,
content or applications, and
• Local and national ISPs, content providers, schools, employers and others who are
willing to interconnect and exchange Internet traffic locally with the cable
operator will have their services receive the same treatment and performance
capabilities as the cable operator and/or its Internet service and content providers
provide for their own content and services.
30
The specific conception of IP dialtone to consumers was not proposed until after the Panel’s August 17,
1999 hearing with technical and economic witnesses, and therefore was not the subject of discussion in that
earlier testimony.
31
Experts for AT&T and the Coalition offered “back of the envelope” estimates of the cost of unbundling,
while Coalition representatives asserted that its members are prepared to cover the added cost of
implementing unbundling. Presumably at some level the added cost to pay for the unbundling itself might
make the transport-only service prohibitively expensive to consumers. Generally speaking, the specific
estimates of unbundling costs presented to the Panel focused on operational costs and held aside the more
contentious issue of what the administrative and regulatory costs might be of any such requirement.
54. 28 Facilitator’s Background Discussion
The Panel concluded that it is technically and financially feasible to implement
and sustain non-discriminatory or open access in the form of equal treatment of all
consumer's and providers' Internet traffic. AT&T has indicated that it is committed or
willing to commit to many – if not all -- of the conditions that would constitute equal
treatment of all traffic.32
The Specification of High-Performance Local Peering
Part of the conception of open access which entails non-discriminatory treatment
of all Internet traffic is a careful and thorough implementation of high-performance local
peering. As an element of that implementation, AT&T already has an agreement with the
Council to provide certain aspects of local peering – establishment of a “carrier hotel” in
Seattle. After some difficulties in keeping on schedule with the implementation of that
capability, it now appears that AT&T has caught up. As an initial matter, the Panel has
found that AT&T should be held to all of the commitments it has made regarding local
peering.
In response to questions by the Panel, AT&T indicated that it has a four-pronged
strategy to improve the performance of its connections with the rest of the Internet. This
included increasing their capacity at the public interconnection points, increasing the
number of locations at which AT&T offers interconnections, engaging in discussions
with certain ISPs to install multiple private interconnections, and working to locally peer
where possible to reduce traffic on backbone networks.33
In testimony before the Panel, Excite@Home also appeared to acknowledge that
it employs differing policies for "caching", or locally storing, content drawn from its own
affiliated sources versus content drawn from unaffiliated sources. Panel members
expressed a concern that restrictions on unaffiliated traffic or biased access will distort
AT&T's service from open Internet access toward something closer to a proprietary
service which discourages the use competing Internet content services and applications.
In addition, some members asserted that delays in providing high-performance local
peering will impair the development of local Internet resources and lessen the prospects
for locally-based Internet content and service providers, King County based businesses
and other institutions.
32
AT&T's/TCI's franchise agreement with the City of Seattle also encompasses many aspects of the "equal
treatment of traffic" definition of open access.
33
AT&T provided a statement of its policy regarding non-discriminatory peering. Response to the King
County Expert Panel’s Query about Nondiscriminatory Peering: Scaling @Home’s Internet Connectivity
and Peering Policy, August 26, 1999.
55. Facilitator’s Background Discussion 29
Given these concerns, to ensure that high-performance local peering is
implemented properly, criteria have been developed by the Panel to guide the Council
and County staff. These criteria appear in the Technical Appendix to the Panel’s
conclusions and recommendations.
Privacy and Security Issues
The Panel also was asked to address privacy concerns that were raised during the
Council’s deliberations early this year. Primarily these concerns had to do with an
alleged TCI practice of routinely obtaining waivers of customer rights to maintain the
privacy of their personal information under the King County Code. The Panel also
identified a security issue with use of the Excite@Home service, in which computer
hackers could take advantage of the “constant on” nature of the cable modem connections
to the Internet to break into consumers’ desktop computers.34
In its response to questions about protecting King County consumers, the Pacific
Northwest Open Access Coalition suggested that there is evidence that Excite@Home is
making use of information about their subscribers’ use of their service and selling such
information to third parties as well as delivering email marketing pieces based on such
information.35
In AT&T’s response to the Panel, the company indicated that it complies with
federal requirements to protect subscriber information. Among these requirements were:
1) notice to subscribers regarding the nature of any personally identifiable information to
be gathered, and 2) written or electronic consent of subscribers for the disclosure of any
personally identifiable information. AT&T specifically highlighted instances in which it
would use subscriber information to assemble a consolidated bill for consumers who use
Excite@Home and other AT&T services.
The question about what, if any, measures AT&T and Excite@Home are taking to
enhance security of subscriber computers connected to the Internet via cable modem
service was not addressed further by the companies. In turn, the Panel did not pursue the
issue further within the period of its deliberations.
34
Ian Austen, “High-Speed Lines Leave Door Ajar for Hackers,” The New York Times, July 8, 1999. This
security issue is not necessarily limited to cable modem service. Any service which assigns a consumer a
relatively fixed IP address may have an added level of vulnerability.
35
Response of the Pacific Northwest Open Access Coalition to the Questions of Interest to the Expert
Review Panel Members, September 7, 1999, p. 10.
57. Facilitator’s Background Discussion 31
Glossary
Application: In this context, specialized computer software that performs a particular function for a
consumer.
Bandwidth: Originally, the term literally meant the width of a frequency band which was being used to
carry analog communications signals, typically wave patterns, in megahertz (millions of wave cycles per
second). Now the term can be more loosely used to mean any measure of information-carrying capacity.
Bits Per Second (bps): Fundamental measure of speed at which digital data is transmitted.
Broadband: Ability to carry data at high speed. It is sometimes defined as a speed over some specific
minimum, such as 200 kilobits per second or 1.5 megabits per second. A typical application over
broadband-capable networks would be transmitting a stream of graphic images or video. A looser term
might be “high-speed”.
Bundling: In this context, marketing two or more products or services in a standard package with a single
price, such as hamburgers and French fries in a fast-food combination.
Cable Modem Service: A service which carries data from homes to and from the Internet over cable
television lines. Cable modem service employs devices connected at both the consumer’s and cable
company’s end of the line to place computer data into a suitable form for high-speed transmission.
Content: Any form of information created, stored, delivered or used for a valuable purpose by a consumer.
Digital Subscriber Line (DSL): A technology which allows conventional copper telephone lines to carry
large amounts of digital data at high speed. There are a large number of variations of DSL.
Domain: The portion of an Internet address which represents the name of a group or organization which
has authority to operate a computing site and grant access to its associated users to the Internet.
Internet Protocol (IP): The rules which deal with the addressing or routing of packets of data sent over the
Internet.
Internet Access: A bundle of services which includes, at a minimum, a connection to the Internet, and
typically involves email, and access to Web sites and news services.
Internet Service Provider (ISP): An organization, usually a business, that sells a service – Internet access --
that provides an connection to the Internet along with other basic services such as email, or the ability to
maintain a personal Web site or access news sources.
IP Dialtone: A service which would provide a bare minimum set of functions for connecting to a networked
computer. IP dialtone would include specialized addressing and physical transport services that are needed
to send traffic to the Internet.
Leased Capacity: Leased capacity for alternate Internet service providers essentially requires a cable
operator to share the capacity of the “pipeline” into subscriber homes with competing Internet service
providers in order to ensure a degree of competition and choice within the cable modem system itself.
Narrowband: Ability to carry data which is limited to slower speeds. It is a general term in common use,
and usually does not refer to any specific bit rate. Typically it refers to transmission rates which are
equivalent to a telephone voice channel or slower – under 64 kbps.
58. 32 Facilitator’s Background Discussion
Non-Discriminatory Access or Open Access: In this context, generally speaking, conditions under which
the buyer of high-speed transport (which may be the end consumer or an ISP) is given service on terms
which are the same as those given to all other buyers – including the cable company’s own high-speed
transport users.
Packet: A bite-sized chunk of data. Information which is composed of larger amounts of data is often
broken down into small packets before being sent over computer networks. These packets may be of
standard size or vary in size, depending on the technology being employed. The Transmission Control
Protocol TCP is the standard method for composing packets to be sent over the Internet.
Portal: A site on the World Wide Web which offers one-stop convenience -- for searching the Internet for a
particular topic, accessing proprietary content, or using applications programs such as electronic calendars
and mail management functions.
Online Service Provider: A service provider which provides proprietary content, that is, information which
is exclusively available to subscribers, as well as access to the Internet with email, Web access and other
ISP-type services.
Peering: An arrangement which uses a direct connection between two networks to avoid the congestion of
unnecessarily sending information through shared, and often distant regional or national, facilities.
Protocol: A rule setting out the manner in which computers will communicate with each other. When
standardized, protocols allow devices with otherwise incompatible designs to work together. The subject
of a protocol can vary from physical issues such as appropriate voltage to use to how to request capacity on
a network to the format for mail, etc.
Router: An electronic device which transfers data between two networks which use the same protocols, but
may employ different physical media (for example, coaxial cable and copper wire).
Server: A computer which runs software that allows other devices to draw information or use a service
which is housed on the computer.
Transmission Control Protocol (TCP): TCP is the set of technical rules which details how information is
prepared to be sent over the Internet. It also specifies how packets are developed on the sending end of a
transmission and reassembled at the destination.
Transport or Transmission: The carriage of data from one location to another, typically from one computer
to another.
Tying: A particular situation where consumers are forced to buy a second product or service if they want
the first product or service because a firm is the exclusive provider of that first product or service. A tying
arrangement is anticompetitive as it can force consumers to buy a firm’s second product or service even if
superior alternatives are available.
Unbundling: Making a combination of products or services available for sale individually.