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For the cable television industry, a forthcoming decision at the Federal Communications Commission is like the Zimbabwean presidential election.

In both situations, the outcome is little in doubt even before the votes have been officially tallied. But beyond that, the implications are tricky to predict.

At issue is the scheduled release Thursday of a decision to cover how high-speed Internet services delivered over cable will be treated for purposes of federal regulation. (That's a Declaratory Ruling and Notice of Proposed Rulemaking, as the event is known in the FCC's jargon-free style.) Most observers agree that the agency has been leaning toward a distinctly low-maintenance stance, but they're not unanimous about how that will work out for big cable companies and for the big phone companies that compete with them for the high-margin business of selling fast Net service to consumers.

Total revenue from high-speed data services provided by four of the largest cable operators more than doubled from 2000 to 2001, amounting to $1.4 billion. And unlike so many telecom-related businesses nowadays, broadband cable Internet doesn't appear to be slowing the pace of its subscriber growth, making the ISP space an even more valuable piece of real estate.

Vegetables

In theory, the FCC could decide that the cable-delivered Internet broadband services offered by

AOL Time Warner

(AOL)

,

Comcast

(CMCSA) - Get Comcast Corporation Class A Report

and

AT&T's

(T) - Get AT&T Inc. Report

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AT&T Broadband are what are known as telecommunications services. Such a decision could result in regulatory requirements such as contribution to a universal service fund and nondiscriminatory access to numerous third parties that want access to the cable operator's high-speed cable network.

But outsiders, tipped off by such obvious clues as FCC Chairman Michael Powell's near-phobic aversion to regulation in most forms, are assuming the FCC will designate broadband cable as a more lightly regulated information service.

So instead of worrying what onerous and costly responsibilities the FCC might end up imposing on cable operators, observers say investors should instead be looking at economic and regulatory issues looming further off in the future. And on those issues the signals are mixed.

Scott Cleland, CEO of the Precursor Group research firm, says tomorrow's likely ruling that Internet over cable is an information service presages further positive news for cable companies and regional Bell operating companies later in 2002. Because Powell has indicated he wants a uniform broadband policy across multiple industries, such a ruling on cable would imply the reclassification of regulated digital subscriber line service as information services in the second half of this year, says Cleland. Taking the position that regulation has stifled DSL investment until now, Cleland said such a decision would be a positive for RBOCs and spur the development of DSL.

Fruits

Because the broadband industry has plenty of room for growth, DSL isn't in a zero-sum game with cable, says Cleland, and increased DSL marketing would be a positive for cable broadband. The importance of Thursday's expected decision, says Cleland, "is making official a very benign regulatory environment toward cable."

Of course, regulation doesn't win the prize as cable investors' biggest concern nowadays. "First and foremost, it's competition from satellite," says Ryon Acey, a cable and telecom analyst at BB&T Capital Markets in Richmond, Va. Acey has hold ratings on the major cable operators he covers, for which his firm hasn't done underwriting.

Beyond the near-term threat from satellite TV companies

EchoStar Communications

(DISH) - Get DISH Network Corporation Class A Report

and DirecTV parent

Hughes Electronics

(GMH)

(neither of which Acey covers), cable operators also face pressure from the less-than-robust economy, says Acey. That will dampen further growth, the analyst says, of digitally delivered video services, which have been a major revenue driver for cable along with high-speed Internet service. "Cable operators have gotten the low-hanging fruit," says Acey.