Alerts and Updates
Supreme Court Upholds FCC Internet Access Policy
July 8, 2005
Among the decisions adopted by the Supreme Court last week is one with far-reaching implications for use of the Internet because the decision supports the Federal Communications Commission's (FCC's) policy that cable modem service is not a form of common carrier service and, hence, not subject to common carrier obligations such as non-discriminatory pricing. In the case, National Cable & Telecommunications Association v. Brand X Internet Services, the Court overturned a Ninth Circuit decision that had struck down an FCC policy exempting cable systems from common carrier regulation for Internet access. The FCC policy provided that cable modem service was not a "telecommunications service" under Title II of the Communications Act, but rather a form of "information service." Since cable modem service is not a telecommunications service, cable companies are not subject to common carrier obligations under Title II regarding those cable modem services. One of those common carrier obligations is the duty to serve prospective customers on a non-discriminatory basis.
Internet service providers (ISPs) had argued that mandatory access to cable modem service was essential if consumers were to be able to secure Internet access free of monopoly pricing and other anti-competitive practices. The Supreme Court disagreed with the ISPs' arguments, lending support to those who have argued that the best means of fostering high speed Internet access is via the free market. According to free-market proponents, the best way of stimulating investment in broadband access is by eliminating the regulatory burdens and uncertainties associated with common carrier status.
The Brand X case turned on the issue of whether the FCC's interpretation of the Communications Act was permissible within the meaning of controlling Supreme Court precedent. The Court held that since there was an ambiguity in the Communications Act, and since the FCC's interpretation of the Act was reasonable, the FCC's decision was entitled to deference and should have been upheld.
Significance
The decision is significant not only for telecommunications and Internet policy, but also for administrative law.
The decision represents Supreme Court endorsement for a view that the FCC has long espoused, namely that the integration of a capability for manipulating and storing information (e.g., Internet service) with basic telecommunications converts the entire offering into a non-common carrier information service, at least when the integrated service is provided by an entity other than a wireline telephone company. The FCC has long distinguished between two types of transmission services: i) basic telecommunications (the transmission of communications without change in form or content) and ii) information or "enhanced" services that offer the subscriber the capability to acquire, manipulate and process information delivered via telecommunications. Building on this distinction, the FCC had also held that the integration of an information service with telecommunications, when offered by entities that do not own their own transmission facilities, turns the entire offering into an information service.
Further, the decision makes it likely that, in the name of regulatory parity (i.e., equivalent regulatory treatment between and among providers of the same service), the Commission will follow through with an earlier proposal to relax the regulatory treatment afforded the next best alternative to cable modem service, namely digital subscriber lines (DSL) offered by telcos. Also open at the FCC are other rulemakings looking to establish national policy in respect to Internet access, including the scope of residual authority the FCC may have over providers such as cable systems.
The decision also increases the importance of competitive alternatives to cable modem and DSL service. Since both cable systems and telcos are in the Internet access business themselves, ISPs (who buy Internet connectivity from the telcos and the cable companies in order to resell that Internet access to their customers) will increasingly seek out alternatives in order to maximize choice in the access marketplace. These alternatives include wireless facilities (such as WiMax); broadband-over-power line facilities being tested by electric utilities; and Internet access via satellite.
The decision may make it more difficult for certain broadband providers, e.g., electric utilities, to secure the statutory benefits afforded providers of "telecommunications services." These statutory benefits include access to public and private rights-of-way, such as streets, and joint use of utility facilities.
Lastly, the decision is also significant from an administrative law perspective. One of the key issues the Supreme Court considered was whether an earlier Ninth Circuit decision trumped the FCC's contrary policy choice. The prior Ninth Circuit decision had held that cable modem service was a "telecommunications service" within the meaning of the Communications Act and was therefore subject to common carrier regulation. The FCC disagreed with the Ninth Circuit when it later held that cable modem service was an information service. The Supreme Court ruled that the earlier Ninth Circuit decision did not prevent the FCC from reaching a contrary result since it is for the expert agencies to clarify ambiguity in their statutes unless the courts have already resolved the question. Here, the Supreme Court held that the Ninth Circuit had not spoken conclusively on the precise question at issue. According to the Supreme Court, this left the ambiguity in the statute unresolved, and the expert agency (here the FCC) was not precluded from exercising its discretion to clarify the ambiguity.
The Brand X decision represents a signal decision for the FCC and telecommunications policy generally. It could add momentum to ongoing efforts for reform of the nation's telecommunications law.
For Further Information
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