Convergence -- the much-hyped melding of entertainment, telecommunications, and the Internet -- isn't coming to the cable-television industry. It's already arrived.
As the titans of cable gather in Chicago for their annual meeting, rapid consolidation is bringing greater resources to bolster the industry's infrastructure so companies can provide digital and more interactive television along with super-fast Internet access that an increasing number of consumers crave.
By year end, more than 1 million customers will be logging onto the Internet over cable. That's still only a tiny portion of the online market, but many times the number getting high-speed access from telephone companies or other providers.
The mergers, not all of which have been approved yet by regulators, have shaken up the corporate pecking order from last year's show.
Long-distance giant AT&T is poised to become the largest operator in the country after completing its US$48 billion acquisition of Tele-Communications Inc. and announcing a $58 billion deal to purchase MediaOne Group.
Former Microsoft mogul Paul Allen has also been empire building, announcing last month he would purchase Falcon Communications for $3.6 billion to jump to the No. 4 slot in the US market.
An early proponent of using cable wires to deliver high-speed Internet access, Allen will sing the convergence hymn when he appears Tuesday along with the chief executives of two of the companies that are still bigger than his Charter Communications: Gerald Levin of Time Warner and Brian Roberts of Comcast.
And they will be speaking to an eager audience. With stock prices and valuations up across the board in 1999, many in the industry are in a celebratory mood.
In the regulatory arena, Federal Communications Commission authority over cable rates expired in March, and the industry has so far prevailed in its two most critical Washington battles by preventing new regulation of cable Internet service and avoiding the forced carriage of broadcasters' new digital-television transmissions.
Decker Anstrom, president of the National Cable Television Association since 1994, said despite the recent success, the industry remains highly focused on lobbying efforts in Washington.
After Congress passed laws regulating cable rates and cracking down on the industry in the 1980s, cable executives "see Washington is as important as their banker -- the impact of regulation hits on the bottom line," Anstrom said.
Efforts to avoid regulation of cable Internet services received a setback 4 June when a federal judge in Portland, Oregon, ruled that the local government there had the authority to force a cable operator to share its Internet pipes with competitors.
Unlike heavily regulated telephone companies providing Internet access, cable companies have chosen to require consumers linking to the Net over cable wires to buy that access along with Internet services like email and Web-page hosting for a single price.
Internet service providers led by America Online complain they are shut out by the practice, since few consumers will pay twice for Internet service. The companies want a ban on exclusive deals, especially when the Internet service is provided by a cable-owned company like AtHome or RoadRunner.
"Open access is necessary because people want the right to choose their ISP," said Greg Simon, a former White House aide who is lobbying on behalf of the Internet companies. "There's no technological reason not to, and there's no economic reason. It's just the cable companies wanting to get one more monopoly."
Anstrom conceded that the recent court decision in Portland was "unsettling," but said there are few signs of support either among localities or in Congress and the FCC to regulate cable Internet service. "We're confident the decision will be overturned," he said.
Washington analyst Scott Cleland said the battle over cable Internet will be "by far the biggest challenge" facing the industry on the regulatory front.
Cleland, who predicts cable Internet will ultimately be opened to competition in a few years, argued that the court's decision shifts the political dynamic by breaking through the logjam in Washington.
"Now cable has a grassroots and consumer problem whereas before this it was pretty much stalemated at the FCC and in Congress," Cleland said.
Copyright© 1999 Reuters Limited.
