David Olson holds this truth to be self-evident: One company
should not control the Internet.
The 47-year-old bureaucrat, a modern-day minuteman, has
fired the first shot in what may be the last great technology
war of the 20th century.
"It really is David and Goliath," says Jane Lawton, president
of a national group of telecommunications regulators. "David
brought the issue to the forefront and for a long time was
out there by himself."
Last week, Olson sat in his small downtown office cluttered
with empty Diet Coke cans. His desk was littered with nail
clippings. The first shirt button above his trousers was
undone, a T-shirted belly poking out. And he was wearing
a Star Wars "Darth Maul" tie.
"My wife gave it to me because I'm engaged in a battle
with the Dark Side," he says. "I wear it to constantly recognize
the ruckus I'm raising and the danger I'm in. We're shaking
the largest companies in the world, their scenarios of the
future."
He's not exaggerating.
"Every regulator, every elected official--federal, state
and local--and every stock analyst has their eyes glued
firmly on the Portland case," says Josh Kardon, Sen. Ron
Wyden's chief of staff.
The Internet is more than a vehicle for downloading stock
quotes, porn and airfares. A recent U.S. Department of Commerce
report says the Internet has been the key to American prosperity
in the 1990s. Others see the Net as the great equalizer:
a tool, available to rich and poor alike, that can eliminate
the social, educational and geographic disparities of the
Industrial Age.
As the Internet matures, however, a new digital divide
is emerging between haves and have-nots. It's a speed gap--and
it's about much more than luxury and convenience.
Currently, the vast majority of Portlanders log on to the
Internet via telephone lines and "dial-up" modems. When
it comes to downloading large text files or complex graphics,
dial-up modems can be so slow that some refer to the Web
as the World Wide Wait.
But soon, as faster technology with more "bandwidth" is
rolled out, all that will change. David Olson knows this
from firsthand experience. He and his family had high-speed
Internet at their Washington County home until last month,
when they moved to Portland--where the service isn't yet
available.
The benefits were obvious. For one, his kids could do their
homework faster than their classmates.
"My daughter was doing a report on African elephants,"
Olson explains, "and I helped her search 20 different Web
sites on zoology and conservation with photos and lots of
text, and the whole process took less than 10 minutes. With
dial-up it would have easily taken an hour."
Olson says high-speed Internet enabled him to shop and
work more efficiently at home. He also researched medical
information about his father's cancer. "You can download
the latest research from Johns Hopkins in two seconds instead
of two hours," he says.
Olson believes it's crucial that such speed be available
to all Americans at a fair and affordable price. Otherwise,
he says, the gap between rich and poor will grow wider.
"You will get a real information divide between the yuppies,
who cruise down the broadband highway in their BMW modems
at lightning speed, and everybody else, who is stuck in
the back of a 1935 school bus," he says.
Other regulators and consumer groups share his view. "It's
a very serious concern across the country," says Lawton,
president of the National Association of Telecommunica-tions
Officers and Advisors. "It only exacerbates the digital
divide."
Lawton thinks the government should ensure, as it has for
utilities such as electricity and basic telephone service,
that high-speed Internet is available and affordable to
all Americans. That's the principle behind what is being
called "open access."
Standing in the way, though, is AT&T, which now controls
most of the Internet's fastest highways and on-ramps.
Several technologies and companies are now vying for high-speed
supremacy. But the evidence suggests that one technology--cable
TV--and one company--AT&T--will soon become dominant.
Competitors such as the wireless (or microwave) industry
and the Baby Bell phone companies are expected to offer
their own high-speed services. But they have technical shortcomings.
Wireless signals break down in rainy climates and hilly
landscapes. The Baby Bells' version of high-speed Internet
(known as DSL) is inferior to the cable version because
its geographic reach is limited: Households need to be within
a certain distance of switching stations to receive DSL.
In fact, leading studies predict that coaxial cable will
become the dominant medium in the high-speed Internet market
in just three years. By the year 2002, some analysts
predict, 80 percent of America's homes will connect to high-speed
Internet through cable.
Proof of cable's superiority can be seen in the business
strategy of AT&T, America's oldest and biggest telephone
company.
During the last year, AT&T spent $120 billion acquiring
cable TV companies including TCI, the country's biggest
cable firm. In all, AT&T now owns 60 percent of all
the nation's cable TV lines. In Portland, AT&T has owned
all the cable wires since its 1998 purchase of TCI and Paragon.
AT&T is not making these investments just because of
the profits it hopes to reap from offering ESPN's SportsCenter,
Nick at Nite and other cable TV programming. Rather, it's
betting that cable TV wire will become the best way to deliver
high-speed Internet--as well as TV and phone services.
That's why, in addition to buying cable companies, AT&T
is laying 2,800 miles of new cable an hour.
The country's leading consumer groups worry about one company
playing such a dominant role in high-speed Internet.
Here's the concern: In addition to operating the Internet
highway--the cable wire--AT&T also wants to force customers
to use its on-ramp--the company's Internet Service Provider,
called @Home.
In practical terms, here's how it works: AT&T will
allow other Internet providers, like America Online, to
"ride" its cable line. But AT&T cable customers must
buy @Home if they want high-speed service; if they prefer
another provider, like AOL, they'll have to pay extra. That
leaves customers will two choices: Subscribe to @Home for
$40 per month; or pay the monthly @Home fee and another
$20 per month for the ISP of their choice.
"The reality is, nobody is going to pay twice," says Olson.
"That's idiotic."
That means the smaller on-ramp companies--which are already
a $30 million industry in Portland alone--may shrivel and
die.
AT&T acknowledges that may happen. But the company
argues that it gambled and sunk billions into cable. It
shouldn't have to share its rewards with others, like AOL,
which, with 17 million subscribers, is the world's largest
Internet provider.
"If AT&T spends billions upgrading the system and it
stinks and no one comes to the party, no one is guaranteeing
us a return on investment," says Kevin Mulligan, regional
director of communications for AT&T.
"No one else stepped up to purchase the cable systems which
the ISPs now claim to be vital to their well-being," continues
Mulligan. "One has to question why they didn't have the
foresight or motivation to do that."
Given the clear conflict, one might think that federal
regulators would step in and clarify the rules of the game.
Unfortunately, the feds chose to swallow their whistles.
The Federal Communications Commission and its chairman,
William Kennard, are the nation's top technology watchdogs.
But since AT&T started its aggressive move into cable
TV, Kennard, a Yale-trained lawyer appointed to the post
by President Bill Clinton, has deemed it premature to develop
any national policy on the matter.
In a speech last month in San Francisco, Kennard (who declined
an interview with WW) outlined three reasons for
his "hands-off" policy.
First, Kennard stressed that consumers don't need to worry
about a monopoly because one doesn't exist--yet.
Second, he insisted that the FCC should follow a high-tech
version of the Hippocratic oath in regulating (or not regulating)
the Internet: "First, do no harm."
Finally, Kennard said that he sees DSL, wireless and satellite
technologies giving cable a run for its money.
In the absence of any FCC action or policy, cities and
counties have been left to decide whether they want to confront
the "open access" issue. None did until Portland took on
the matter last September--and then AT&T made the mistake
of underestimating the local officials in Portland.
"They did not understand Oregon's appreciation for maverick
politics, nor the motivations or ambitions of the players
involved," says Kardon, Sen. Wyden's top aide.
AT&T underestimated no one more than Olson, the cable
bureaucrat with sheepskins from Reed College, Lewis &
Clark's Northwestern School of Law and the Royal Academy
of Dramatic Art in London.
Olson is no yokel. He was a former president of the national
cable regulators' group. He was thinking about open access
before most experts.
And AT&T's plans did not sit well with Olson, who has
a maverick political streak as wide as the Columbia Gorge.
Although Olson may look like a "computer geek," says Kardon,
"in reality he's a brilliant charmer whose sole concern
is the public interest."
After studying the issue last fall, Olson slowly concluded
that AT&T's arguments just didn't add up. Portland had
granted TCI a cable TV monopoly because citizens didn't
want their streets constantly torn up by competing companies.
But AT&T wanted its purchase of TCI to give the company
a virtual monopoly in another area--high-speed Internet
access. Problem was, the city had never granted TCI or AT&T
a monopoly in that area.
In October, Olson decided that the free-wheeling, low-cost
ethos of the Internet demanded different rules than cable
TV had. He wrote a tough open-access requirement that said
AT&T had to provide "non-discriminatory access" to its
cable lines for other Internet providers. (In other words,
it had to charge other ISPs the same wholesale rates as
@Home.) He presented it to a citizen advisory panel, the
Mount Hood Cable Regulatory Commission, on Nov. 16, 1998.
Olson had another quality that would serve him well in
the coming battle. A co-founder of Portland's Tygres Heart
Shakespeare Company, Olson had a flair for drama. He understood
the value of framing the debate in populist, anti-monopoly
terms. He spoke in colorful language. He didn't shy away
from the spotlight.
AT&T had flown in its lawyer, Rick Thayer, from Denver.
Thayer told the commission that the company would not accept
any kind of open access requirement whatsoever.
It didn't matter. The commission voted 5-2 to support Olson's
ordinance.
The battle was on.
"It was, indeed, the shot heard 'round the world," says
Olson.
Once the citizen panel voted to support open access, the
conflict in Portland was effectively over. The issue still
had to go to the City Council and Multnomah County Commission
for approval, but it was too late for AT&T's lobbyist,
former Gov. Neil Goldschmidt, to rally even friends like
Mayor Vera Katz. Local politicians weren't going to buck
a citizen panel without compelling reason--and the only
one AT&T offered was the threat of a lawsuit.
With Commissioners Sharron Kelley and Erik Sten leading
the way, county and city governments voted Dec. 17 for open
access. The city tried one last stab at compromise. "We
needed six-figure litigation like a hole in the head," explains
Olson. "We have cops to hire, fires to fight."
In early January, Wyden, an ally of AT&T dating back
to the Telecommunications Act of 1996, brokered a deal.
Under the agreement, Wyden would press Kennard for a commitment
to rule on the open-access issue within a year. AT&T
would get to deploy its high-speed cable Internet in Portland
without open access, and AT&T would withdraw its lawsuit--although
the company and the city would reserve the right to sue
one another after the FCC handed down a policy.
On Jan. 15, Wyden left the Senate floor during impeachment
proceedings to seal the deal in a teleconference with AT&T
General Counsel Jim Cicconi and Sten, who is Olson's boss.
But the call went all wrong. While Cicconi pretended to
negotiate, it was clear that AT&T was backing out. Since
Portland's vote, the company had won victories in several
other cities. "So AT&T decided that their hand was much
stronger," says Kardon.
This time they misread Sten, the whiskerless commissioner
who looks younger than his age of 32. "My guess is that
AT&T and TCI thought they could scare him," says Kardon.
"He's a small guy who looks like a choir boy. But he's got
a temper--and his limits."
"It turned bloody," Kardon continues. "Sten and Cicconi
were yelling, and Ron was getting more and more angry over
the course of 90 minutes."
The deal fell apart, and Wyden walked away from the conference
call uncharacteristically angry. Two weeks later the senator
had a meeting with AT&T lobbyists on an unrelated issue
and took the opportunity to blast them. "He told them he
had never been jerked around like that," says Kardon. "It
was very personal and loud. I've never seen him do that.
Ever."
The lines were firmly drawn. AT&T filed its lawsuit
Jan. 19 in federal court. On June 3, U.S. District Court
Judge Owen Panner ruled for Portland, saying the city did
have the legal right to impose certain conditions on the
cable franchise.
With that court decision, other cities felt emboldened.
News of Portland's victory was passed around like Thomas
Paine's revolutionary pamphlets. Citizen advisory boards
began to see themselves as well-regulating militias.
Later that month, in Los Angeles, a majority of that city's
citizen technology advisors quit in protest over the mayor's
pro-AT&T stance. In Denver, the open-access battle is
headed toward a citizen referendum in November. Things got
even hotter in Florida's Broward County, the site of the
first major vote after Portland's.
In Broward County, AT&T ran hundreds of TV ads and
brought dozens of lobbyists into Fort Lauderdale. "From
a lobbying standpoint, we've never seen anything like AT&T's
level of mobilization before in this industry," says Scott
Cleland, an industry analyst at the Legg Mason Precursor
Group in Washington, D.C., which tracks telecommunications
policy.
Norm Abramowitz, a Broward County commissioner, said AT&T
tried to hire his two best friends to lobby him--and succeeded
in snagging one of them. Still, commissioners voted 4-3
on July 14 to join Portland in requiring open access.
That was nothing compared to the melee in San Francisco,
when the city's Board of Supervisors voted July 26 on open
access.
AT&T dressed people up as chess pieces outside City
Hall to make its point that open access advocates were pawns
for big companies like AOL. AT&T deluged members of
the Board of Supervisors with scripted anti-open-access
calls. And AT&T packed the supervisors' hearing with
so many senior citizens that a fire alarm went off.
According to Supervisor Michael Yaki, more than $2 million
was spent on local TV ads in the two weeks before the vote,
and the "seismic tremor of Gucci-clad lobbyists" was the
most forceful to hit San Francisco since the great earthquake
of 1906.
San Francisco supervisors blinked.
While they passed a resolution of support for open access,
they stopped short of requiring it. Instead, they said they
would wait and see what happens to Portland in the 9th U.S.
Circuit Court of Appeals.
The spotlight is back on Portland. AT&T was slated
to file its appeal in federal court this week. Locally,
the question is this: What happens if Judge Panner's decision
is upheld?
Even if Portland wins in appeals court and the Supreme
Court, its citizens might still lose. AT&T insists it
will not deploy high-speed Internet in Portland if it means
succumbing to open access.
It seems unlikely that AT&T will maintain such stubbornness.
It has 600,000 cable subscribers in the Portland area--the
company's seventh-biggest market cluster. "It's like buying
a coffeehouse and not selling any coffee," says Sten.
But in case the company does carry out its threat, Sten
is preparing a request for proposals to see if any other
companies, particularly public utilities such as Enron or
US West Communications, are interested in building a new
cable system in Portland.
Many others see the tide turning soon, though, toward a
compromise.
"Our suspicion has long been that AT&T will realize
at some point that it's got to do its deal. It can't own
the Internet. Many of us suspect that AOL and AT&T will
do a deal to divide the universe between them, and we'll
be no better off for it," says Kardon. "If it's one or two
companies owning the Internet, it still stinks."
Last week, Wyden and Virginia Sen. John Warner sent a letter
to the FCC's Kennard telling him to get busy developing
a national policy that will ensure an open and competitive
market.
"Without open access," the senators wrote, "consumers will
likely see higher prices and fewer innovative services,
and consumers in certain hard-to-serve areas may see nothing
at all."
In the end, many observers think the debate will hinge
on the details of a deal with AT&T brokered by Kennard.
David Olson vows that Portland will stay in the battle,
crusading for open access. "We'll fight an oligopoly as
much as a monopoly," he says. "It's going to be the dominant
telecommunications issue for the next five years. And it
started here. I've never seen anything like this--a major
telecom issue driven by the provinces."
Should Kennard want any advice, he knows where to turn.
In June, Olson gave him a book that compares the 19th-century
telegraph to the Internet. In it, he inscribed a simple
message to the FCC chairman--one that AT&T would have
been wise to consider. It said: "Next time you have anything
to say about Portland, puh-leez call me first!"
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Willamette Week | originally
published August 11,
1999
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