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WASHINGTON, Jan 28 (Reuters) - Internet and online service providers suffered a setback on Thursday in their bid to get equal access to high-speed Internet systems offered by cable television operators.

The Federal Communications Commission, in a report to Congress, rejected for now the Internet companies' request to force cable operators to open their high-speed lines to competitors at a fair price.

But FCC members, including Chairman William Kennard, said the agency might revisit the issue in the future.

"This is a serious issue and it's one I believe we should continue to monitor very closely," Kennard said at Thursday's FCC meeting.

Cable operators had argued that forcing them to grant equal access to other service providers, as phone companies are required to do, would have deterred them from spending the billions of dollars needed to upgrade their networks to allow for high-speed Internet connections in the first place.

"The commission's decision today will preserve a stable environment for continued investment and innovation," National Cable Television Association President Decker Anstrom said after the FCC released its decision.

Cable Internet services, with only 300,000 to 500,000 subscribers nationwide, are still in the nascent stage and regulation would premature, Anstrom added.

Cable Internet subscribers pay about $40 a month for a connection to the Internet 25 times faster than ordinary telephone modem Internet connections. The fee also includes Internet services, like e-mail or Web page hosting, from a cable-owned provider such as AtHome Corp. <ATHM.O>

Unlike people connecting to the Internet over phone lines, a cable Internet customer must pay for the cable company's service provider even if the customer would prefer another provider such as America Online <AOL.N> or MindSpring Enterprises Inc. <MSPG.O>

AOL, MindSpring and other independent Internet service providers fear customers of cable net access will be unwilling to, in effect, pay twice to get their services.

In public comments on Thursday, the companies tried to put the best light on the FCC's decision.

"We concur with Chairman Kennard that the 'closed cable' problem is a serious issue," AOL Senior Vice President George Vradenburg said. "We look forward to working toward a swift resolution with the commission and those in Congress who have shown a growing interest in this important issue."

But privately, some industry officials feared that they had lost one of their best opportunities to gain equal access to cable Internet services.

Thursday's report was required by Congress in the 1996 Telecommunications Act to examine the deployment of high-speed Internet services and other advanced telecommunications technologies. Lawmakers ordered the agency to take action if it found such services were not being made available to all Americans in a "reasonable and timely" way.

The issue has also been raised in the FCC's consideration of AT&T Corp.'s <T.N> $48 billion acquisition of cable giant Tele-Communications Inc. <TCOMA.O> But because the problem could occur with any cable operator, the agency is considered less likely to impose openness requirements only on TCI and AT&T as a condition of the merger.

Consumer and public advocacy groups, which have also backed the open access argument, vowed to continue pushing for action by the FCC or Congress.

The groups fear that if cable operators become the dominant providers of high-speed access, they will erode the Internet's free flow of ideas. Already, AtHome is required by its cable owners to prevent its customers from watching more than 10 minutes of television-quality video streamed over the Internet.

Thursday's decision "has no immediate bearing on our request that the FCC initiate a rulemaking," said Andrew Schwartzman, president of the Media Access Project, a nonprofit Washington law firm backing open access. "It's necessary that they come to grips with this soon."

((Aaron Pressman, Washington newsroom, 202-898-8312))


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