Cable Firms Don't Have to Share Networks, Court Rules
Tuesday, June 28, 2005
The Supreme Court upheld cable companies' right to restrict rival Internet service providers from their networks, prompting telephone companies yesterday to argue that they should be relieved of a similar regulatory obligation.
Phone companies are required to share their lines with Internet providers, an outgrowth of an era when such rules were deemed necessary to foster competition. But the phone companies argue that the rules put them at a disadvantage compared with the largely unregulated cable industry.
The high court's 6 to 3 ruling affirmed the Federal Communications Commission's authority to decide which services it needs to regulate.
Sources familiar with FCC discussions said the agency is likely to consider whether to ease the regulatory burden on phone companies in the coming months, a move supported by new FCC Chairman Kevin J. Martin. The sources spoke on the condition of anonymity because the agency has not yet decided to formally take up the issue.
Companies such as EarthLink Inc. and Brand X Internet Services -- the Santa Monica, Calif.-based company that brought the original suit against the FCC -- do not own their own networks and depend on network operators to provide the connection to their customers. They argued that the FCC was misclassifying cable service as a data service, making it exempt from rules that apply to telecommunication providers, and the U.S. Court of Appeals for the 9th Circuit agreed.
The Supreme Court overturned that ruling. Writing for the majority, Justice Clarence Thomas said the FCC originally regulated Internet service over phone lines as a telecommunications service because that is the way people primarily accessed the Internet, by dialing their provider over the phone companies' lines. By contrast, cable-modem service grew up in different market conditions, with plenty of competitors offering high-speed access, he wrote.
Justice Antonin Scalia, writing for the dissenting justices, said cable-modem service includes a telecommunications component and therefore should be regulated. "When all is said and done, after all the regulatory cant has been translated, and the smoke of regulatory expertise has blown away, it remains perfectly clear that someone who sells cable-modem service is 'offering' telecommunications," Scalia wrote.
In their response to the case, the regional telephone giants yesterday made their pitch for changes that could extend the National Cable & Telecommunications Association v. Brand X Internet Services decision to their benefit.
The "FCC and Congress should act promptly to finish the job. The Commission should update its rules to ensure that all broadband services, including those offered by Verizon and other telephone companies, are not subject to old policies," Thomas J. Tauke, executive vice president of public affairs and policy for Verizon Communications Inc., said in a statement.
In that vein, phone companies already successfully argued that new fiber-optic networks should not have to be shared with rival network operators that do not own their own lines.
Phone companies such as Verizon and SBC Communications Inc., which are planning to offer Internet-based television service, also are hoping to win exemption from local franchise agreements that cable companies must obtain.
Giving the network owners such great control over what rides over their networks could set technology on a dangerous course, opponents of the court's decision said.
"If [the phone companies] are successful, Brand X will stand as the trigger that reverses a century of communications policy and undermines the bedrock principle of democratic media, which is nondiscriminatory access for all," said Ben Scott, policy director of Free Press, a nonpartisan media policy group.
A key concern is that phone and cable companies could potentially use their power over the network to act as gatekeepers of the Internet, discriminating and limiting consumers' access to certain services so that some Web sites and online services are favored. Opponents of yesterday's ruling said they would push the FCC and Capitol Hill to codify rules ensuring the "network neutrality" on the Internet.
"The ballgame becomes now how each of the two industries that controls a wire can determine what content, what access, at what speed consumers and technologists can offer and retrieve services over those networks," said Gene Kimmelman, senior director of Consumers Union.
Newer services such as Internet-based telephone service, for example, could suffer if cable companies are able to degrade the quality of Internet service or deny service altogether, he said.
An industry controlled by two big players cannot be trusted to police itself without clear rules, said Jason D. Oxman, senior vice president of legal affairs of Comptel/ALTS, the industry association that represents competitive telephone carriers and Internet service providers. "Network neutrality without regulation to back it up is an empty promise."
Cable companies, however, denied they have any incentive to control what their customers can access on the Internet.
"There is no problem today -- the customer can go anywhere they want on the Web," said Kyle E. McSlarrow, president and chief executive of the National Cable & Telecommunications Association.