April 2000
Cable, Internet Access and the Commonwealth: Evaluating The Ballot Initiative's Impact on Government and Consumers
By Stuart N. Brotman

A. Government Control Over Private Enterprise

Much of the discussion of the ballot initiative to date has been before federal and state regulatory agencies, courts and within academic institutions and advocacy groups. Clearly, as technology advances, new competition emerges and additional commercial arrangements are made regarding Internet service offerings on cable and telephone networks, the ballot initiative will play out against a continuing backdrop of marketplace developments. These developments suggest a measure to establish permanent government control over an area may result in coming up with a solution that is intrusive, overbroad or not grounded in the real world.

The proposed ballot initiative has been positioned with the positive rhetorical catchphrase "open access," yet ironically, that phrase obscures important policy concerns about government's role in shaping private enterprise in the Commonwealth.

Like Stop & Shop or Star Market, cable is organized as a retail business. It selects the services it believes are most attractive to customers, then packages and prices them to meet customer demand. Some of the services the cable system offers may be "house brands;" (e.g., HBO on Time Warner cable systems) while others are not (e.g., ESPN, Nickelodeon).

Unlike the telephone industry, cable has organized itself solely as a retail operation. Some may argue that cable would make more money offering both retail services and wholesale transport; if the ballot initiative is approved, this economic theory will be cemented into law. All cable systems in the Commonwealth will be required to be in the wholesale business as a condition of offering high-speed Internet services to customers. These customers have a range of methods for accessing the Internet, including competitive offerings offered by telephone companies and by emerging cable competitors such as RCN that offer the possibility of at least three wire-based broadband "pipes" into our homes. Wireless Internet services, including satellite Web delivery, also will expand the range of consumer choice within Massachusetts.

The benign phrase "open access" has larger implications regarding how much control should be vested in government to compel private enterprise to conform to one central business model. If the open access principle were applied to any other line of business in Massachusetts, it is unlikely that many proponents of this principle would step forward to offer comparable support.

For example, imagine a ballot initiative which required Stop & Shop open up its grocery shelves to feature the products of any food vendor who wanted such a display. If Stop & Shop refused, it would not be allowed to display any of its own products. Government would enforce this rule by withholding Stop & Shop's local license (e.g., zoning authority) if it did not obey.

Many people would find this notion contradictory to our American heritage of private enterprise. They also might find it not grounded in the real world, since a person wanting to buy Star Market potato chips could drive to Star Market to do so -- in effect, voting with one's pocketbook about where or what to buy.

Constructing an elaborate government oversight program to ensure that people could buy Star Market potato chips at Stop & Shop would be considered overreaching, inefficient and a questionable use of public expenditures to compel corporate entities to enter into certain types of contracts. It's difficult to understand why the ballot initiative is anything more than a high-tech version of this plan. Moreover, if this principle is applied for one type of business, there will be established precedent for applying it to other businesses where advocates believe it would be better off to mandate "open access."

For example, why shouldn't government require all gas stations to offer pumping facilities for any brand of gasoline that wanted to be there? Imagine how convenient it would be to pull into a Shell station and pump Texaco, Gulf, Getty and other brands as well as Shell. It would minimize having to go down the road to find a Texaco, Gulf or Getty station. Gas stations would either become wholesale as well as retail facilities, or they would not be allowed by government to remain in business.

Government has so many social service activities it must support now with limited resources, such as public safety, sanitation and education. It also has focused competence is such areas. "Open access," whether for cable, grocery stores or gas stations, will put government in another line of business, too -- namely, determining what are the best commercial arrangements for Internet Service Providers. "Open access" adheres to the "one size fits all" mindset -- everything must be available at the same terms or it will not be allowed to be available at all. If we followed this approach over the years, the end result would have created far less choice for consumers. In a society that values diversity of business arrangements in the marketplace, it's difficult to reconcile the principles of "open access" with our cherished freedoms to start businesses, operate them and allow consumers to shop around.

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