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

EXECUTIVE SUMMARY

· Cable access to the Internet is a complicated area. It has long-range implications for government and for residential customers in the Commonwealth, both in terms of potential benefits and potential risks. Within advocacy forums such as courts and city councils, it has been easy for proponents of the ballot initiative to portray the measure as "all gain, no pain."
· Regardless of where people come out on the issue, there can be no disagreement on the fundamental nature of our electoral process. As with all other ballot initiatives, the Commonwealth will best be served if voters are able to evaluate a complete, critical analysis of information provided from a variety of perspectives. Reasoned choices based on a vigorous discussion and analysis of competing viewpoints is our best guarantee that the "public interest" will be served.

Government Control Over Private Enterprise

· 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. (See pages 3-5)

Government Costs of Commercial Dispute Resolution

· The ballot initiative is not self-enforcing; to the contrary, it will increase the role of the Commonwealth cities and towns in regulating commercial operations of cable television systems. By its nature, the ballot initiative cannot produce anything but "crazy quilt" results because regulatory decisions are bound to vary from community to community, as they do in other areas of local control such as education and property taxation.
· Virtually every local community in Massachusetts will have to increase the budgets of their cable franchising authorities through direct taxation of residents, including the nearly one-third of each community's population that, on average, refuses to connect a household to cable television service of any kind. Alternatively, instead of passing on the regulatory costs to taxpayers, cities and towns could choose to reallocate their budgets internally to account for any shortfalls that may arise. In other words, budgets for other city services would be used to subsidize regulation of cable Internet Service Providers, a public policy choice that few voters might opt for if they were confronted with the price tag for implementing the ballot initiative. (See pages 5-8)

Government Competition to Attract High-Tech Business

· The reality of "Taxachusetts" has not been with us for a decade, yet the perception remains, demonstrating that a negative image conveyed to the business community can have long-term implications for the Commonwealth's sense of prosperity and the livelihood of its citizens. The ballot initiative has the possibility of becoming the "Taxachusetts" label for our Internet economy, a signal that the Commonwealth is willing to experiment with regulatory schemes that compel Internet businesses to follow a business model that government develops and enforces. (See pages 8-11)

Privacy Concerns

· Massachusetts consumers may be forced to accept lower levels of online privacy protection for cable Internet services if the ballot initiative is approved. Under the ballot initiative's mandate, any Internet Service Provider that wanted to gain access to the cable operator's network would pay a flat fee based on government-required wholesale prices. Thus, the cable operator would retain its historical retail relationship only with online customers who decided to buy the cable operator's own brand of Internet service. The legal mandate of the federal Cable Act would follow this group of subscribers exclusively, giving them a secure basis for online privacy protection. But for the dozens of other Internet services that the cable operator might be compelled to carry, those customers apparently would not be covered by the same high level of privacy protection backed by federal law. In effect, these customers would have to be on guard when buying these outside ISPs since none of them would be required by law to provide any privacy protection for online users. (See pages 11-15)

"Slamming" and "Cramming"

· Given the absence of federal resources and a potential shortfall in state resources, the practice of Internet service slamming among cable customers represents a fertile territory for fraud. The current structure of the market minimizes the possibility of Internet slamming because the cable operator is allowed to enter into network leasing arrangements only with those companies it deems reputable. In contrast, one clear effect of approving the ballot initiative would be to take away such commercial freedom that protects consumers. In its place, the ballot initiative would compel Massachusetts cable operators to allow any and all ISPs onto its network, regardless of whether that company is involved in fraudulent practices. Each of the leasing ISPs would generate its own bill and would have the ability to cram a number of services (e.g., fax, voicemail, e-mail forwarding) onto a single bill, with only the sharp eye of the consumer serving as a filter for potential fraud. And as with slamming itself, even if such fraud is detected, it only marks the start of a potentially long and frustrating process to force the offender to cease and desist. Multiple efforts may be necessary since cramming, like slamming, can occur a number of times. (See pages 16-20)

Internet Access for People with Disabilities

· By its nature, the ballot initiative's approval will mark a step backward in promoting Internet access for people with disabilities. Since any ISP will be permitted to lease cable network facilities at government-compelled rates, there is bound to be a variation among the services each offers to people with disabilities. In this environment, it will be up to each individual to discover these features or the lack thereof, and move on to another one if the provider is not accommodating his or her personal needs. This process of discovering, changing, then discovering again can be frustrating and painful for people with disabilities. (See pages 20-24)

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