The Jeff Pulver Blog: Supreme Court to Hear Brand X Cable Modem Case this Morning:

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March 29, 2005

Supreme Court to Hear Brand X Cable Modem Case this Morning:

This morning the Supreme Court will hear oral argument in Brand X Case and consider the regulatory classification of cable modem service. If the Supreme Court gets beyond the procedural issues, and in fact deals with the substance of the case (the regulatory classification of cable modem service and, by analogy, other broadband delivery platforms), the conclusions in this case could dramatically affect the course of the Internet and communications policy and competition, including some incidental effects on the US VoIP industry.

Although the Brand X decision affects ISPs most directly, the Supreme Court's opinion might have some incidental effect on whether, and to what extent, unaffiliated Internet service providers are entitled to use the cable companies' networks to reach their subscribers. The Ninth Circuit had upheld a District Court decision reversing an FCC Order that had concluded that cable modem service was an "information service". Under the rejected FCC rule, cable modem service would not have been subject to telecom regulation, and therefore limited obligations would have been imposed on cable operators to make the cable plant available to competitive Internet access providers. The Ninth Circuit rejected the FCC's conclusions. The Ninth Circuit essentially acknowledged a "layered" regulatory model: the cable modem service includes both a regulated telecom transmission service upon which the unregulated Internet information service rides. The underlying telecom service would be subject to telecom regulation, while the information service riding the telecom transmission would not. Under this conception of cable modem service, it would seem that the current state of the law should be that unaffiliated ISPs should have access to end-users via cable modem. The reality, to date, however, seems to be that independent ISPs still don't have much access to cable customers except to the extent that the ISPs have negotiated access or the FCC or FTC have, otherwise, compelled access pursuant to merger agreements such as the conditions set forth in the AOL-Time Warner deal.

An initial question, however, in the case under review is whether, regardless of the merits of the dispute, the lower court should have given greater deference to the views of the FCC. If the Court only reaches this threshold question, the Supreme Court might simply send the case back to the Ninth Circuit for reconsideration under a more deferential standard of review. That would postpone judicial resolution of the regulatory classification of cable modem service and its ripple effect on other flavors of Internet access.

I believe that the Supreme Court decision is likely to trigger heavy activity at the FCC beginning the Summer of 2005. The FCC has been waiting (and waiting) for final resolution of the Brand X decision before it tackles the regulatory classification of all varieties of high-speed Internet access services. Once the Supreme Court releases an Opinion (most likely June '05), the Commission will attempt (again) to categorize and reconcile conflicting approaches to Internet access across multiple platforms. Most obviously, the FCC will attempt to develop a unified regime governing Internet access for cable modem service and for Bell-provided DSL and other broadband pipes.

In the United States, the Bell companies are still regulated as common carriers in their provision of DSL service and are required to offer their transmission capacity to unaffiliated Internet service providers. If the cable companies are determined, by a final ruling of the Supreme Court, that their cable modem services are not subject to telecom "fair access" regulations, then the Bells will have a much stronger "parity" argument that their facilities also should not be subject to competitive access when offering broadband Internet access services.

Thus, this decision will likely affect the course the FCC takes in several pending proceedings regarding the regulatory treatment of Internet access services provided by the Bell companies, most recently raised in BellSouth and Qwest petition for forbearance from Computer II obligations and the deregulation of DSL and other broadband services. The FCC has also been holding in abeyance a couple other broadband proceedings pending a Supreme Court decision in the Brand X case.

Some have argued that the Brand X decision will not affect the ability of consumers and ASPs to reach one another and maximize the capabilities of the network and their Internet experience. They may be right, but I have some fears about the slippery slope and what remains once all common carrier regulation of last-mile transmission facilities is stripped away. The FCC used Title II to compel Madison River to allow consumers to reach Vonage. If the underlying transmission service is not subject to Title II because it is not a telecom service, what legal hook is there to ensure that the consumer can reach alternate ASPs like Vonage or even FWD.

From the perspective of an unaffiliated VoIP provider, I believe it will be most important for the FCC to keep in mind the "Net Freedom" principles that both FCC Chairman Powell and FCC Commissioner Copps had been touting over the past year. If and when the FCC strips away some of the current safeguards ensuring competitive access to end-user customers who can only be accessed through a Bell company or cable last-mile bottlenecks, I think there had better be firm rules in place that would ensure consumers continued fair access to the Internet. If the Supreme Court determines that the cable companies do not have to provide access to competitive ISPs, we will see whether the regulators truly believe in net neutrality or whether they were just giving it lip service and using the concepts of "consumer empowerment" and "net freedom" in order to promote an unregulated free-for-all.

Posted by jeff on March 29, 2005 06:12 AM | Permalink

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Jeff, now that the June Supreme Court decision has come down, what do you think will be the final "classification" of Internet Service Providers by the FCC?

Do you think ISPs will remain classified as mere "information services" or do you think that they will be reclassified as "common carriers" and why?

Posted by: John at September 15, 2005 01:04 PM

Verizon provides local dial tone to the 92201 area code. In fact, Verizon is the ONLY company that does, so we're screwed again under these monopolizing companies that offer nothing but over priced substandard sevice

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maybe someone can provide an answer here. only recently have i heard that there has been a new fcc regulation re: telecommunication companies here in ca. as i understand it, only the big three telecom companies, sbc, att, mci can provide home residence service--no other telcoms can provide the dial tone as per march 11, 2005. from what i've gleaned so far this is true. are the other telcoms fighting to overcome this recent fcc decision and if so, what may be the outcome? if there is an overturn, when should that be and when will the consumer know of it? Thank you.

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March 29, 2005

Supreme Court to Hear Brand X Cable Modem Case this Morning:

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