SARA FISHER

Staff Reporter

L.A.’s cable modem furor is a lot less complicated than it seems and pretty much boils down to this: When a neighborhood becomes wired so that customers can get high-speed Internet access through a cable modem, should the cable company already serving the area have the exclusive right to the business?

L.A. Mayor Richard Riordan believes so, but others say that consumers would pay the price for such a monopoly. With billions of dollars hanging in the balance for cable and Internet service companies, much of the nation is watching Los Angeles as it decides which system to adopt.

The issue jumped to the forefront this month when three chairpersons abruptly resigned during a single week from the city Information Technology Agency just before it recommended a closed-access system. All three supported open access, and resigned either to avoid contradicting Riordan or in protest of his commitment to closed access.

Under the system preferred by the mayor, a cable modem Internet service company would be granted a local monopoly similar to cable television franchises. In L.A., such a system would greatly benefit AT & T; Corp., which recently bought cable provider Tele-Communications Inc. and is moving to acquire MediaOne. The acquisitions could give AT & T; cable access to as many as 336,000 households in the city and more than 900,000 throughout Southern California.

AT & T; already has an ownership stake in high-speed Internet service Excite@home. As a result, AT & T; could bundle its services and keep the revenues.

Not surprisingly, competing high-speed Internet service companies aren’t happy at the prospect of being shut out of what will be an immensely lucrative market just because they don’t own the wires in the ground. A large number of those firms are lobbying in Los Angeles and elsewhere for open access, which would require cable television operators to share their network infrastructure with Internet providers.

The open-access proponents insist they’re not after a free ride, and will pay the cable owners for access to the wires going into homes.

“The open-access advocacy is simply that of non-discrimination,” said John Raposa, associate general counsel for GTE. “This issue is vital both to consumers and the American economy overall, since whoever has control over the access to a medium has control over the medium itself.”

Both sides say their preferred system is in the best interest of consumers.

“Companies like GTE and AOL are using city governments to slow down the rollout of high-speed Internet access in California,” said AT & T; President Lois Hedg-peth. “Reaching acceptable terms and standards with (the other high-speed Internet service providers), plus finding a technology that lets this happen, is a lengthy and protracted approach. We believe it will be difficult to do this quickly.”

Either way, consumers may have to wait a lot longer before their neighborhoods get cable modems. AT & T; executives have threatened to slow down the rollout if they don’t get closed access. The company has already spent about $110 billion to buy cable companies, giving it control over networks that service more than 60 percent of the U.S. cable homes.

Unless the company knows it can recoup its costs through guaranteed Internet customers, it might not make economic sense to invest even more heavily in upgrading the cable infrastructure.

Based on that argument, Riordan has expressed support for closed access, believing it’s the best way to get AT & T; to invest further in the city.

“This is a complex, challenging issue,” Riordan said in a prepared statement. “Local jurisdictions like Los Angeles must take care to be both responsible and pragmatic in order to protect consumers in the rapidly changing world of Internet access.”

The mayor was not available for further comment.

The open-access contingent contends the best way to protect consumers is by providing a choice of Internet providers. They say that the resulting competition will push prices down and quality up, just as it has in the past for dial-up Internet services.

Robert Duggan, the third commissioner to resign from the Information Technology Agency, strongly supports open access as the best way to serve Angelenos. He could not be reached for comment but said during a radio interview last week: “This monopoly power issue is not good to the consumer. The city has a legal and moral obligation to protect them.”

Proponents also claim that AT & T; is dragging its feet by claiming technological problems in the sharing of cable systems. To prove it’s both technically and economically feasible, GTE recently ran a test on its cable television system in Clearwater, Fla. It installed a management device that let up to 20 high-speed competitors access the cable network for the cost of less than $1 per household.

“We proved that it is commercially viable and technically feasible to provide open access,” GTE’s Raposa said. “We’re really not talking about a big deal here.”

The next step in the high-stakes battle comes when the city’s chief legislative analyst makes a recommendation to the City Council within two weeks, before it begins deliberations in July to set policy.

With several council members indicating support for an open-access model, the issue could deepen the ongoing rift between the mayor and the council.

If L.A. eventually opts for open access, it’s likely to be sued by AT & T.; In Portland, Ore., AT & T; filed a lawsuit to overturn an open-access policy adopted by that city, but a federal judge sided with Portland. AT & T; is currently appealing.

“L.A. is a test bed,” AT & T;’s Hedg-peth said. “If (the open-access contingent) is successful in L.A., they say they will do it in the rest of the country.”

On a national level, the Federal Communications Commission has yet to get officially involved because of jurisdictional questions and the lack of a clear opinion by its members. But federal officials are interested because inconsistent policies throughout could throw the telecom industry into upheaval.

“The bottom line is that the emotional stakes are high and the economic stakes unknown,” said Jeannette Noyes, an analyst at International Data Corp. “This issue is going to take quite some time before we reach a resolution.”