After a week of celebration, the cable industry and its investment analysts may be facing a serious hangover. The champagne binge after the 3-1 vote by the Federal Communications Commission on March 14 classifying cable modem systems as information services may have been ?premature,? according to numerous veteran staffers at the FCC and at least one GOP Commissioner. Belatedly, some investment analysts and cable executives are rethinking the meaning of the FCC decision and its potential for mandated access to cable broadband for independent Internet service providers.

Cable lawyers and the lobbyists at the National Cable Telecommunications Association had asked the FCC to designate cable modem carriage as an information service and to close the issue without taking any further action. However, the FCC voted instead to begin a Notice of Proposed Rulemaking (NPRM), which could set the stage for both regulation and open access for ISPs.

?The FCC, in racheting the issue up to an NPRM, is lighting a fire under cable's feet to get on with voluntary carriage of other ISPs, which they have promised,? said Scott Cleland, CEO of the Precursor Group, a technology analyst firm in Washington. ?Cable has been slow to deliver on these deals, and with this NPRM, they have been put on notice.?

David Kaut, an analyst with Legg Mason, explained, ?A lot of the analysts were too quick to infer that this [decision] means no regulation of cable Internet services, and they weren't looking at what the FCC actually said.?

In an interview, NCTA president Robert Sachs said the FCC's move to an NPRM was a major signal. ?That the FCC issued an NPRM means it is incumbent on the cable industry to demonstrate that the broadband market is developing competitively,? he said. Sachs conceded that the NCTA's take on the ruling was slightly different a week earlier, when it was calling the FCC decision a clear victory. ?At the time, we hadn't seen the full NPRM yet,? Sachs explained. Now, ?the industry has read the NPRM and taken it seriously,? he added.

The industry certainly should, said several FCC staffers. In a Feb. 6 conference at the Precusor Group's offices, Sachs himself called the pending cable modem classification decision the most important issue affecting cable's future revenue, more important than the cable ownership decisions that were still hovering at the time in Federal Appeals Court. ?And I meant it,? Sachs reiterated. Regulating cable modem under common carrier or cable rules could cripple industry business development and hurt consumers, he said.

That was why cable company lawyers and the NCTA asked the FCC earlier not to issue any NPRM at all but to simply classify cable modem as ?info service? and declare the matter closed. The cable industry lost that battle when the Republican majority of three commissioners issued the NPRM.

However, to the surprise of FCC veterans ? and at least two commissioners ? analysts and cable industry executives downplayed or ignored the agency's move. They weren't alone.

?We were floored? with the initial ebullient reaction to the FCC's vote, said an aide to Commissioner Kevin Martin, ?The media's take was downright wrong.? Headlines blared that the FCC ruling had freed cable from sharing its wires. But Commissioner Kathleen Abernathy had said in her statement, ?I remain concerned that some cable operators may continue to offer consumers only a single brand of ISP service or that cable operators generally may offer only two or three options?. I believe that the Commission should not yet dismiss proposals to impose some kind of access requirement?. I therefore believe that it would be inappropriate for the Commission not even to consider imposing access obligations on cable operators.?

?Abernathy and the other commissioners did more than leave the door open,? said one office counsel at the FCC who would not speak for attribution. ?They're starting the process for an access rule, and if they don't see serious efforts by cable companies to make long-term commitments to ISPs, they won't avoid regulating here.? The counsel added, ?The Commissioners were very troubled by Excite's demise and what it did to consumers.?

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