Federal Communications Commission chairman William Kennard Wednesday rejected a request from state and local regulators to conduct an investigation into the nascent market for high-speed Internet services.
A group of state and local regulators last month asked for the inquiry as a way of resolving the controversy over unregulated high-speed cable online services that require customers to sign up with a cable-owned Internet service provider like Excite At Home.
ISPs like America Online and MindSpring have repeatedly asked local governments, the FCC and Congress to prohibit cable companies from forcing customers to buy packaged offerings.
In all but two cities so far, cable companies like AT&T Corp. and Time Warner Inc. have successfully turned back the lobbying campaign by arguing that any regulation would ruin their ability to make a profit on their new high speed services.
Kennard, in a letter to the FCC's Local and State Government Advisory Committee, repeated his previously stated view that no inquiry was needed because the market for high-speed, or "broadband," Internet access was fragile and likely to be harmed by uncertainty that a formal FCC probe would cause.
"A formal proceeding would chill investment in cable modem service, which in turn would reduce the competitive pressure on local phone companies and others who are currently investing in alternative means of providing consumers with access to broadband," Kennard wrote in the letter, which was released by the FCC.
FCC formal inquiries can begin a regulatory process and sometimes lead to the enactment of new rules.
The letter also repeated Kennard's view that regulating cable Internet service at the local level would create chaos.
"The prospect of thousands of different regulatory authorities independently establishing separate regimes regarding broadband access will frustrate the rapid deployment we should be encouraging," he wrote.
While likely to please the cable industry, Kennard's position further disappointed consumer and public interest groups that have warned of possible abuses by the industry.
"It is antithetical to everything Kennard has stood for to interfere with state and local governments' decisions and to bring all of the abuses of the cable television industry to the Internet," said Andrew Schwartzman, president of nonprofit the law firm Media Access Project.
A federal district court in Portland, Oregon upheld the right of local governments to regulate cable Internet services, but the ruling has been appealed. The FCC is expected to file a brief in the case siding with the cable industry and arguing that only federal authorities can regulate such services.
Copyright 1999 Reuters Limited.
