March 19, 2001 3:30 PM PST

FCC weighs interactive TV rules

WASHINGTON--Consumer groups are pushing federal regulators to write rules for interactive television, but the companies that will deliver that service argue that it's hard to regulate an industry that barely exists.

The Federal Communications Commission on Monday collected comments from a variety of parties on its inquiry into applying regulations to interactive television (ITV). The inquiry resulted from the AOL-Time Warner merger, when concerns arose that the company might use its cable pipes to control what interactive services could reach consumers.

However, despite years of promises that couch potatoes could remote-click their way through a sea of Internet content right on their TV screens, an ITV industry doesn't really exist yet. The question facing regulators, then, is whether they must act now to ensure that any future industry is open, or whether even the threat of regulations will prevent any industry from flourishing.

The ITV market, or what there is of it, has taken a hit recently. Liberate Technologies, whose business plan is based on providing set-top boxes capable of delivering ITV services, was downgraded last month by Deutsche Banc Alex Brown because of delays in interactive TV. Meanwhile, Microsoft ran into problems with the launch of its UltimateTV interactive service in late January after partner Thomson Multimedia failed to deliver its set-top boxes on time. The software giant says the service is available now.

But a consortium of consumer groups told the FCC that it must "move expeditiously to begin a rulemaking establishing open access for providers of enhancements on all platforms, whether cable, DBS, DTV, or new technologies yet unknown." The Consumers Union, Consumer Federation of America, and the Center for Media Education (CME) in a filing written by the Media Access Project argued that ITV would combine television with the Internet and become a major delivery application within the next five years.

Regulators must act pre-emptively to ensure open access, the groups argued. "Without safeguards, ITV is likely to become a digital mirror image of the current closed multichannel cable model," said CME Executive Director Jeffrey Chester.

Echoing the arguments made against AOL Time Warner, the consumer groups argued that cable companies and others would become "gatekeepers," only permitting ITV services of their choosing and creating "walled gardens" of interactive services that could keep out independent producers.

"One of the great triumphs of the Internet," said CME Policy Associate Andy Goldman, "has been to create an unprecedented forum" for the public, something that could be threatened by cable gatekeepers.

"There is plenty of harm in using crystal ball gazing as a basis for proposing to regulate" new services, argued the National Cable Telecommunications Association (NCTA) in its own filing with the FCC.

"Cable companies and many others are in only the initial stages of developing--let alone deploying--a variety of services that might come under the umbrella term 'Interactive Television,'" the NCTA said. In fact, even the threat of regulations "could actually discourage investment in ITV services."

NCTA quoted a report from the FCC's Cable Services Bureau that explained its decision not to impose upon the nascent cable modem industry's open access requirements. The bureau found that "a significant and credible risk that rapid deployment of those services to all Americans would be greatly compromised" because it "could reduce the financial incentives and the build-out capital for cable companies."

The NCTA suggested that any rules imposed on ITV could violate cable operators' First Amendment rights. Exercising that right, the NCTA also had a succinct take regulating an industry it repeatedly pointed out "for the most part doesn't exist."

"This," said the NCTA filing, "is a peculiar--and misguided--proceeding."

 

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