A Practical Navigator for the Internet Economy

Access Indiana and Ameritech, pp. 1-16

In a 13,000 word article we examine successful moves by Ameritech to exchange profit cap for price cap regulation in each state of its five state service area. We take an in depth look at ACCESS INDIANA which we see as a, perhaps unwitting effort, by the Governor to sell the state's future on the information super highway to large corporate interests. Ameritech has been arguing successfully in front of state PUCs that with cable, wireless and IXCs ready to compete on its turf, it needs to be freed from regulatory limits on profits and to have limits on price increases imposed instead. In return it promises to introduce a large range of new digital services and agrees to actually reduce residential rates. What is not made very clear in its filings is that the technology that it is adopting will reduce its costs far more than the residential rate reductions it offers. Consequently it is guaranteed vastly increased profits and the economic muscle to be able to buy out competitors who get in its way. Meanwhile sensing that Internet transport may not be where profits lie, Ameritech is acquiring substantial interest in content. CivicLink is one example. ACCESS INDIANA another. The company put an employee in Indianapolois city hall for a year to find out how Ameritech (with a donation of $1,000,000 in the computer system) could create a system for the electronic dissemination of the public records of the city and county. The result is about to go on line selling the information at a hefty profit to Ameritech and local government. The only problem with CivicLink is that all public information accessible in electronic form is required to be disseminated via the Ameritech system and the prices charged are as much as a ten fold increase over hardcopy costs. The first of the three components of ACCESS INDIANA is a request by the state for companies to bid on providing state government with a system - at no cost to the state - that would do statewide what CivicLink has done in the capital. While defenders of the proposal say that some public information would be provided by the state system at little or no cost, they also admit that they have as yet been unable to come up with any comprehensive definition of what that would be. Meanwhile the list of state data bases that the vendor is expected to put into the system is exhaustive of the full range of state government activity. Also the official state document, that is expected to lead to a contract with the state for this activity, says that the state believes that the vendor will receive enough income to pay for the costs of the system and an adequate rate of return on its investment. It adds that the state also expects to derive substantial income from selling commercially valuable public information. The second of the three components are grants of $900,000 a year that may continue for up to fours years to enable the establishment of community networks. The money comes in thirds from the state Department of Education, the State Library, and an entity called CEC which disburses funds from Ameritech as a part of its Opportunity Indiana settlement that bought Ameritech freedom from profit cap regulation. The goal of the community network program is to enable communities to get local community information content - including that with commercial value - onto the community network and readily available. The program makes plain that the public sector contribution is content delivered to private sector vendors and that, in return for this content, the private sector will build the infrastructure necessary to put the community networks on the air - all of which is fine until one considers the following. 1. Ameritech is already committed to build a $120 million dollar statewide fiber backbone for schools and libraries as a result of the Opportunity Indiana settlement with the state PUC. 2. None of the 900,000 a year may be used by the successful community network applicants to buy hardware or software for the community network to run on. The network is expected to buy service from an existing commercial service provider and mount its content on a service that it does not own. Now the community is free to select an existing service provider located in the community. Fine idea - except that we suspect that the awards will go primarily to communities without existing providers. We think that only communities who have no local service will be willing to hand over their local independence to a foreign facilities owner as well as $12,000 a year in membership fees to a state association beginning with their 3rd year of operation. In return for doing this they will get a 50,000 dollar start up grant. Unfortunately such an arrangement would be one where they sell control of their information future to forces outside their immediate community. If this happens, it will mean that ACCESS Indiana becomes a giant vacuum cleaner sucking money from local communities onto the on ramps of the I-way and funneling it to corporate coffers of Ameritech in Chicago. It would hold the danger of foreclosing each community's ownership of and economic control over its information future by means of a network that - as an alternative to what the Governor wants - could be an engine of local economic development within such a community. The third part of the ACCESS INDIANA program is an RFP for a statewide backbone service to connect local schools, libraries and government offices to the each other and to the Internet. The state wants mutiple organizations to offer backbone services but since it is spending no money on the network, it is unable to guarantee the bidder any usage figures. Organizations are being asked to post a $200,000 performance bond and name flat and very low prices for turnkey connections at 56 kbs and T-1 of state agencies to the state network. The price named is by bandwidth and must be location independent. Since Ameritech has already obligated itself to build virtually this network, it is difficult to imagine any other company willing to take the risk of locking itself into loss leader competition in Indiana for the next 3 to 5 years. At the end of this time the state manadated entry prices expire and Ameritech, having bought market share, will be free to charge any price that it wishes. For these resasons we believe that the actions of Indiana government are not in the interests of the citzens of the state. They will certainly exert a chilling effect on the ability of any new information service providers to set up shop within the state's borders. Finally in a just announced deal with DEC Ameritech is buying up to $40 million dollars worth of DEC's alpha video servers for rapid deployment in midwestern communities in order to drive the demand for content in the local community. Yes, it shouldn't be surprising that the talk in the press release is video on demand and home shopping.

Colorado State Study, pp. 17-22

We republish the first 6 pages of our 80 page Colorado Special Report originally released in mid January. They include the introduction and our interview with Lieutenant Governor Sam Cassidy. It is unlikely that we shall ever publish more than a third of this study in the monthly issues of the COOK Report.

Internet Society Rumblings, p.17

Efforts are underway to increase the number of seats on the ISOC Board and to get the three permanent members (CNRI, EDUCOM, RIPE) to put their seats up for vote. In a short article based on insider comment we attempt to sort out fact from rumor.