Cable Internet Companies Under FCC Regulation

Posts: 492

Supreme Court asks why cable broadband lacks regulation
By Grant Gross

U.S. Supreme Court justices on Tuesday questioned why the U.S. Federal Communications Commission (FCC) would classify cable modem broadband as unregulated, while it regulates DSL (digital subscriber line) and other services offered by large telecommunications carriers.

In the Brand X vs. FCC case, a group of Internet service providers has opposed the FCC's attempts to classify cable modem service as an unregulated information service, effectively shutting out independent ISPs from riding on cable broadband networks and selling their services to cable modem users.

During oral arguments, Supreme Court justices questioned how cable modem service providers can argue that broadband access and Internet functionality are an inseparable service when the FCC has required large incumbent telecom carriers to sell access to their broadband networks to competing Internet service providers (ISPs).

Thomas Hungar, deputy solicitor general at the U.S. Department of Justice, told justices that the FCC had the authority to separate cable modem service from traditional telecommunication service.

In recent years, the FCC has moved away from classifying DSL as a telecommunication service, he noted. Incumbent local telecom carriers have traditionally faced regulation, including requirements they share access to their networks with competing carriers, because the four large incumbents inherited large parts of their networks after the breakup of the government-sanctioned AT&T Corp. monopoly in 1984.

In February 2003, the FCC voted to phase out rules requiring the large incumbent telecoms, often called regional Bells, to share residential DSL lines at discounted rates with competing ISPs.

On one side of the Brand X case is a group of ISPs, including Earthlink Inc. and Brand X Internet LLC, arguing that U.S. broadband customers would have more choices of providers, and that competition could drive down prices, if the Supreme Court rejects the FCC's attempt to classify cable modem broadband as an unregulated information service.

Supporters of the FCC action, including the cable industry, say broadband adoption in the U.S., hailed by President George Bush and other politicians as an engine of economic growth, would slow if cable providers were forced to share their networks with competing ISPs.

Both sides' arguments depend heavily on arcane definitions of telecommunication and information services buried in FCC regulations and U.S. telecom laws.

During arguments Tuesday, Justice Antonin Scalia compared the cable industry's argument in the case to an automobile parts vendor who requires customers to purchase car windshields when they want to buy windshield wipers. Justice Stephen Breyer compared cable modem service to voice mail, which offers similar functionality to e-mail but is associated with a highly regulated telecommunication service.

"I keep thinking of my answering machine and it doesn't seem that much different," Breyer said.

The FCC in March 2002 ruled that cable modem service was an information service not subject to the same regulation as telecom services. The FCC suggested then that less regulation would foster the growth of broadband, and by extension, the Internet. In October 2003, the 9th Circuit Court of Appeals overturned the FCC decision.

The FCC mistakenly separated information services from telecommunication services, when cable modem service is a combination of both, argued Thomas Goldstein, lawyer for Brand X and the other ISPs involved in the case. The FCC allowed cable modem providers to avoid regulations by not offering a separate, stand-alone broadband service, he said.

"Congress could not have intended carriers to deregulate themselves simply by adding some (Internet) service," Goldstein said.

But Paul Cappuccio, a lawyer representing the National Cable and Telecommunications Association, told justices it was impossible to separate the Internet functionality from the broadband functionality in cable modem service. The cable companies tied together "two ingredients that come together to make a separate product," he said.

Cappuccio argued that the FCC looked at how cable modems work in practice and saw an unregulated Internet-related service. But definitions in U.S. law suggest carriers can offer both information and telecommunications services at the same time, and the two don't have to be exclusive, Goldstein countered.

Breyer questioned if the court should overrule the FCC and attempt to draw its own lines. "I don't know how broadband services will be offered 20 years from now," he said. "There could be wireless. People could be broadcasting using their teeth. Why not leave it to the FCC?"

The Supreme Court on Tuesday also heard oral arguments in another technology-related case. The entertainment industry argued it should have the right to sue the makers of the Grokster and Morpheus peer-to-peer software for their users' copyright violations.

The court is expected to rule on both cases in about three months.
3/31/2005 10:29 AM