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WASHINGTON -- The nation's high court this week gave the latest hard knock to key rules in the highly regulated telecommunications industry. Now the question is whether the century-old competition scheme will topple completely, or settle back into a new structure.
Proponents of "open access" suffered a major setback on Monday in the so-called Brand X case, when the U.S. Supreme Court decided (.pdf) that the cable industry doesn't have to let competitive ISPs onto its wires.
The fight moves next to Congress and the Federal Communications Commission, where telephone companies are expected to seek similar exemptions from line-sharing rules.
"The telcos will respond by scurrying over to the FCC and to the Congress and demanding their own exemption from open-access regulations," said Ben Scott, policy director of public-interest group Free Press. "If they're successful, I think that means that Brand X will stand as the trigger that reversed a century of communications policy and undermines the bedrock principle of democratic media, which is nondiscriminatory access for all."
The fight focuses on arcane legal issues, but holds serious consequences for consumer broadband prices and quality of service. Cable operators have resisted the concept of open access for years, arguing that it would unfairly saddle the industry with new regulations and create potential technical problems. Critics argued that the industry simply doesn't want to face competition from new broadband ISPs riding its wires.
The case decided Monday pitted the National Cable & Telecommunications Association and the FCC against internet service provider Brand X internet of Santa Monica, California.
Brand X -- supported by the wider ISP community and consumer groups -- had asked the Supreme Court to affirm an October 2003 decision by the 9th U.S. Circuit Court of Appeals. The lower court favored Brand X when it found that cable-modem service is partly a "telecommunications" service and therefore should be subject to the same line-sharing rules that govern broadband DSL services run by telephone companies.
In 2002, the FCC had classified cable-modem service as an "information" service not subject to traditional telephone rules that would require leasing lines to competitors.
In a majority opinion written by Justice Clarence Thomas, the Court ruled that "the Commission is in a far better position to address these questions than we are."
Consumer groups said the ruling will simply open a new front in Congress as it prepares to rewrite the 1996 Telecommunications Act.
Gigi Sohn, president of Public Knowledge, said the decision means Congress "should act to ensure that communications, content and applications are allowed to pass freely over the internet's broadband pipes ... because 'net neutrality' is a worthy goal that not only will promote free speech and creativity on the internet, but also will benefit those who provide broadband connectivity by making that connectivity more valuable."
Forces in Congress are already preparing a massive overhaul to the 1996 Telecommunications Act, with the Brand X decision giving proponents of deregulation another talking point.
Rep. Joe Barton (R-Texas), chairman of the House Energy and Commerce Committee, lauded the decision on Monday, raising issues that "demonstrate why Congress needs to modernize the Communications Act. Congress needs to remove the ambiguity regarding what broadband services are and how they should be regulated."
Meanwhile, Senate Commerce Committee chairman Ted Stevens (R-Alaska) and co-chairman Dan Inouye (D-Hawaii) said they will review the decision's impact on a litany of public-interest obligations "as well as its implication on the proper regulatory treatment for DSL services."
Congress could yet step in on the side of open-access proponents. But the decision has also emboldened telephone companies in their quest to get out of their own obligations to provide access to third-party ISPs.
On Monday, Verizon Executive Vice President Tom Tauke called on the FCC and Congress to "act promptly to finish the job" by "giving telcos the same deregulatory treatment enjoyed by cable operators."
The cable industry, which has supported "regulatory parity" between cable and telco firms, said on Monday that it wouldn't lobby against any such effort -- whether in Congress or the FCC. "It doesn't matter what the forum is," said Kyle McSlarrow, NCTA President and CEO. "We're not going to oppose it."
The NCTA, which had feared it might have to work through myriad technical and legal issues if forced to provide access to third-party ISPs, breathed a sigh of relief on Monday.
McSlarrow, who called the decision "a victory for consumers" that "keeps this innovative service on the right deregulatory path," said it will also help cable operators innovate. He said top cable-modem downstream speeds of 160 megabits per second are possible in the next few years (compared with up to 5 Mbps today). "That's on the drawing board," he said. "This allows us to keep upgrading the speeds."
Furthermore, he argued that broadband competition is already robust, noting that wireless and satellite companies now offer broadband products in addition to cable companies and telcos. "This is 2005," he said. "You're not even dealing with a duopoly anymore."
FCC chairman Kevin Martin agreed that the decision added "much-needed regulatory clarity and a framework for broadband that can be applied to all providers." He said the FCC can now "move forward quickly to finalize regulations that will spur the deployment of broadband services for all Americans."
But consumer groups remain convinced that the decision will result in fewer broadband providers.
"Consumers remain at substantial risk of paying loaded, inflated prices" for cable-modem service, said Gene Kimmelman, director of the Washington, D.C., office of Consumers Union. He said the decision means cable operators will maintain their "choke hold" on broadband services.
Broadband Fight Heads to Congress
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