In July of 2002, United Online, the nation's third-largest Internet service provider, launched a new high-speed service it hoped would appeal to customers ready to abandon their slower dial-up connections.
The California-based company was able to offer its new service because of a deal it had negotiated with cable industry giant Comcast Corp. There was just one hitch: The deal left little room for United to compete with Comcast on price.
Commissioner Michael J. Copps has criticized FCC cable policies.
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"From a pure appeal standpoint, our price was really no better than other offerings out there, including the other offering from Comcast," said United Online chief executive Mark Goldston.
More than a year later, United Online has not been able to expand its broadband service beyond Indianapolis and Nashville -- the markets where it first launched. The company won't release high-speed subscriber numbers, but according to Goldston the total is an "infinitesimal" percentage of its current subscriber base of 5.2 million.
United Online's struggles to turn its deal with Comcast into a viable business comes as a federal court decision has renewed a debate over the obligations of cable companies to open their networks to rivals. The San Francisco-based 9th Circuit Court of Appeals effectively overturned a Federal Communications Commission policy that allowed cable companies to set their own rates and even exclude rivals from their high-speed "broadband" lines.
The FCC spared the cable industry from regulatory restrictions in hopes it would spur companies to invest in new broadband networks. Indeed, the industry, with 14 million subscribers, is now the nation's leading provider of high-speed Internet access, outpacing telephone companies, which are required to share their lines with competitors.
When cable companies have opened their lines to competitors, the results have been mixed.
The companies that have fared best tend to be those, like Earthlink Inc., that have negotiated deals with Time Warner Cable, which was required by federal regulators to open its network to rival Internet providers as a condition of its parent company's merger with America Online in 2001.
"We make money, they make money and the customer gets a good deal at a good price," said David N. Baker, Earthlink's vice president of law and public policy.
Earthlink also has negotiated a deal with Comcast. Baker declined to discuss the terms and conditions of the individual deals. However, he noted that Comcast has limited Earthlink to distribution in two cities -- Seattle and Boston. In contrast, Time Warner has made Earthlink available to subscribers in all 39 of its major markets.
