Supreme Court Agrees With FCC on Cable Broadband

The decision ends a case filed in 1999 and twice reviewed by the 9th U.S. Appeals Court, San Francisco. The suit effectively put FCC oversight of cable modem service in limbo. Now the FCC can revisit rules for cable modem and DSL services put on hold during the case.

The agency is likely to produce new rules for both services within 6 months, said telecom lawyers, including Owen Kurtin, a partner at Brown Raysman Millstein Felder & Steiner. The commission opened rulemakings on both types of high-speed Web access in 2002, noted former FCC assoc. gen. counsel Randy May. He predicted the commission will treat DSL as a data service along with cable modems, a view FCC Chmn. Martin signaled today in comments on the high-court ruling.

“We can now move forward quickly to finalize regulations,” Martin said in a prepared statement. The ruling “provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers.” Martin offered no more detail, and an FCC official said the agency would not issue further comments on the topic. Comrs. Adelstein and Abernathy backed the court’s ruling, while Comr. Copps said: “We really have our work cut out for us now.”

Senate Commerce Committee Chmn. Stevens (R-Alaska) and Co-Chmn. Senator Inouye (D-Hawaii), said in a joint statement they'll “review the decision’s impact on the existing public interest obligations.” House Energy and Commerce Committee Chmn. Rep. Barton (R-Texas), who also will review the decision, said FCC classification of cable modem service as an information service was sound.

A variety of telecom firms lauded the high court ruling, made as Bells seek to compete with cable and DBS companies in the pay TV market. Qwest, SBC and Verizon said they hope the ruling will lead to a level regulatory playing field for their services and cable broadband. Nortel and TIA predicted the ruling would spur increased spending on broadband gear.

The Brand X decision may “lead to an increase in spending,” said TIA Vp-External Affairs Grant Seiffert. “We see this as a clear green light, creating certainty in the marketplace, versus creating potholes and speedbumps that we've been dealing with in the past few years.”

Those disappointed by the ruling include EarthLink and media activists. “Today’s Supreme Court ruling is a blow to consumers and competition,” said EarthLink Vp Dave Baker. “Besides keeping prices high, this lack of choice limits the future deployment of innovative voice, video and data services.” United Online also may suffer from the decision, said former FCC staffer Paul Gallant. “It takes the government mandate for ISP access to cable lines off the table,” said the Stanford Washington Research Group analyst. Although not required, cable operators still may strike deals to carry service from ISPs, he said.

Pizza, Dogs and Broadband

The Supreme Court’s majority decision, written by Justice Thomas, slammed the appeals court for failing to defer to the FCC in its Brand X ruling. Thomas contrasted cable modem service with pizza delivery: “A consumer cannot purchase Internet service without also purchasing a connection,” he wrote. In contrast, “one can pick up a pizza rather than having it delivered, and one can own a dog without buying a leash.”

Charter, Cox and Time Warner have said the Telecom Act should be interpreted as letting them provide broadband service that isn’t considered a telecom service. In a March 22 reply brief to the Supreme Court, the firms said “the FCC has reasonably determined [that] cable operators providing cable modem service fall on the ‘information service’ side of the line.'” In oral arguments before the court, respondents said there’s no difference between basic and enhanced service, so cable modems should be regulated as a telecom product (CD March 30 p1).

‘Consolation Prize’

Whether the high court ruling will be good for consumers depends on who’s talking. Advocates of open access to the Internet, including the Center for Digital Democracy, say the decision will put too much control of Internet access in the hands of a few major corporations. Free-market advocates, including the Progress & Freedom Foundation’s Federal Institute for Regulatory Law & Economics Dir. Kyle Dixon, said the decision will encourage further investment in broadband, ultimately lowering prices.

CDD Exec.-Dir. Jeffrey Chester said the ruling threatens freedom of speech. “A cable company that has complete control over its customers’ access to the Internet could censor their ability to speak,” he said, and “block their access to disfavored information services, monitor their online activity, and subtly manipulate the information sources they rely on.”

The ruling may have a silver lining for activists. The decision gives the FCC authority for expanded, or “ancillary,” jurisdiction that it could use to mandate certain requirements in provision of broadband, said Media Access Project CEO Andrew Schwartzman. It’s “something of a consolation prize,” he said. “It is something we will argue aggressively in these coming [FCC] rulemakings.”

Cable companies, whose infrastructure is owned privately, adequately serve the public, NCTA CEO Kyle McSlarrow said. “The public interest that we can achieve is to continue investing” in new services such as broadband, he said. The ruling may “have a positive impact on pricing for consumers.”

Many agree the biggest winners are cable operators. “It really frees the cable companies from any significant regulation from what is emerging as the dominant portion of their service,” said telecom lawyer Kurtin. “It is a powerful leg up on the Bells.”

Local govts. said the court’s decision jeopardizes public safety because information services aren’t subject to law enforcement and 911 requirements. The Alliance of Local Organizations Against Preemption (ALOAP) said the decision hurts consumers, who will be denied the right to choose unaffiliated ISPs. Cable modem’s classification as an information service will “usher in a significant period of market uncertainty,” the group said, so local govts. want to meet soon with industry to ensure that at least at the local level “issues are resolved appropriately.” ALOAP consists of the National Assn. of Telecom Officers & Advisors, National League of Cities, U.S. Conference of Mayors, the National Assn. of Counties and the International Municipal Lawyers Assn.