News

Analyst: Cable Will Open Nets to ISPs

10/04/1998 8:00 PM Eastern

Washington -- Media and telecommunications analyst Scott
Cleland is forecasting that cable operators will eventually have to open their high-speed
networks to unaffiliated Internet-service providers, "either voluntarily or by
regulation."

In a Sept. 22 memo to clients, Cleland warned that if cable
operators are forced to open their networks to unaffiliated data providers, they could
lose a key regulatory advantage and see the collapse of the economic model underpinning
the industry's data play.

"The cable industry's data-business model, in
part, rests on the expectation of 'double' data revenues, from the high-speed
pipe and from its Internet-service-provider offerings," Cleland wrote.

Cable operators forced to unbundle their data networks
would not be able to require cable-modem subscribers to purchase service from the
cable-offered ISP first. Instead, subscribers could go right to their ISP of choice --
America Online Inc., for example.

Cleland, managing director of Legg Mason's Precursor
Research, said the debate over access to cable plant is one that investors in cable and in
AOL must watch carefully.

"Investors need to understand this issue, because it
is central to many business models, fundamental to how the residential high-speed-service
market will develop and a key factor in who will win or lose in the marketplace,"
Cleland said.

Cleland indicated that AT&T Corp. is trying to persuade
federal regulators not to condition approval of its merger with Tele-Communications Inc.
on opening TCI's data network to ISP rivals.

"The threat of unbundling is apparently
AT&T's primary concern in securing regulatory approval for their merger,"
Cleland added.

September