• by Ross Fadner , October 7, 2003

Media buyers reacted strongly in favor of a federal court ruling that likely will increase competition in the burgeoning broadband marketplace and accelerate penetration of high-speed Internet access. However, the agency executives contacted by MediaDailyNews, remained reserved over what the exact implications of the ruling by the 9th Circuit Court might mean for the future of a broadband advertising marketplace (see related story on a broadband upfront in today's edition of MediaDailyNews).

"More access to new technologies is always a good thing," said Alan Schulman, Senior Vice President-Creative Director at Universal McCann. "The more people access the technology, the more reasonable prices become, the faster the cream will rise to the top."

Schulman noted that the court's ruling, which overturns Federal Communications Commission rules that had restricted access to the broadband lines of cable operators, likely would have a two-fold impact: bringing the cost of broadband access down while allowing for the higher quality service providers, who will do more than just grant access to the technology, to rise to the top.

Schulman said the move likely would fuel a price war among broadband service providers, making broadband access more accessible to a greater percentage of the population. He said it also was likely that independent broadband service providers could spark a new telecommunications marketing war, launching ad campaigns to establish brand recognitions in the rapidly emerging category.

"Access to technology is indivisible to the consumer. Sooner or later the word broadband should disappear altogether; consumer's choices will then be highlighted by brand names," he explained, "Putting premium content where there is need for content, that's the added value, but branding the service is also a further, essential means of adding value to the consumer-as Time Warner has done with Road Runner."

However, another agency new media guru, Tim Hanlon, Vice President and Director of Emerging Contacts at Starcom MediaVest Group, said the long-term implications of the court's ruling remained unclear.

"In some respects, this is a marketing-neutral event," he noted. "The fate of advertising does not hinge on this ruling, which is beginning to seem like a euphemism for increased competition in the broadband market. Of course, over time [the ruling] will be less and less of an issue."

Other analysts suggested that the short-term implications of the ruling could prove problematic for some advertisers.

"I don't want to ignore the reality that in the short-term there could be hiccups to existing business models, causing advertisers to slow down, change the way they look at the market," says Adam Gerber, Senior Vice President of Strategy and Innovation at Starcom MediaVest Group.

"But there should be long-term positives," he added. "Expanding the broadband universe by generating more consumers can only be a good thing for the medium."

Hanlon echoed fellow SMGer Gerber's long-term optimism, but he stressed the importance of site content and value as being more beneficial to advertisers.

"As the content becomes more robust," he said, citing ESPN and Yahoo! for their robust content and noting that as "pricing becomes more affordable, the audience becomes more essential." And advertisers should be gleeful about that notion.

The federal court ruling overturned the FCC's decision to classify high-speed Internet cable service as 'an information service,' a move that had previously marginalized any cable company's would-be competitors in the broadband market.

The three-judge panel of the 9th U.S. Circuit of Appeals in San Francisco ruled that cable-based broadband is also a 'telecommunications service,' which now makes operator's cable lines subject to the same rules requiring them to lease their use to competitors that phone companies were made to adhere to.

Previously, the FCC voted in March 2002 that cable companies should not have to open their lines to competition largely because officials felt this would encourage cable companies to invest more money in high-speed Internet technology. Since, they have spent billions on upgrading their networks.

The real losers in that FCC decision were the phone companies, who were left at a competitive disadvantage vis a vis cable operators, because the rule required phone companies to lease their infrastructure to rivals while cable operators were not.

Independent service providers may have been even harder hit by this decision. Though there are alternatives to high-speed cable access such as DSL, Wi-Fi and satellite, 60% of high-speed users subscribe to their cable company's service, effectively closing off independent ISPs from nearly two thirds of the high-speed market. According to the Consumers Union, three fourths of all independent ISPs have folded in the last five years.