Court ruling points way to broadband regulation

A U.S. appeals court rejects the FCC's request to rehear a case, in a decision that could prompt local governments to start regulating the cable industry.

A U.S. appeals court has rejected the Federal Communications Commission's request to rehear a case, in a move that could prompt local governments to regulate the cable industry.

In essence, the court said that cable networks' broadband services have an element of telecommunications services in them. The rejection could pave the way for municipalities to force cable companies to share their broadband Internet lines with third parties.

The 9th U.S. Circuit Court of Appeals on Thursday stuck to its decision in October 2003 that the FCC incorrectly defined cable networks as information services instead of telecommunications services. The distinction is critical because local governments can force telecommunications services to share their broadband access lines, while information services are free from government intervention.

The cable industry has argued, with support from the FCC, that its lines are private and build on an estimated $75 billion to $84 billion of its own funding to modernize its network. Because of this investment, cable companies can now offer hundreds of channels, high-speed Internet access, phone service, video on demand and high-definition programming.

The FCC has long defined cable networks, such as those of Comcast, Time Warner Cable and Cox Communications, as information services. At the same time, it has defined the Baby Bell phone companies, such as Verizon Communications, SBC Communications, BellSouth and Qwest Communications, under the telecommunications heading. The Bells are required by federal law to allow third parties to lease their copper lines to offer phone or Internet services.

Thursday's ruling strikes a severe blow to FCC Chairman Michael Powell's longstanding position that regulating broadband would stymie growth. Given the 9th Circuit's rejection, Powell faces two tough choices: appeal to the U.S. Supreme Court or drop the case altogether. Approaching the Supreme Court would mean seeking counsel from the U.S. Department of Justice, which has supported changing cable into a telecommunications status in order to extend its wiretapping jurisdiction into cable phone lines.

Powell did not say whether he plans to pursue a Supreme Court appeal, according to a statement on the FCC's Web site. The FCC has 90 days to file an appeal to the Supreme Court.

"I am disappointed that the court declined to address the merits of the commission's policy that was carefully developed over the past several years," Chairman Powell said in a statement. "This decision...prolongs uncertainty to the detriment of consumers. That is why we will study our options and explore how to continue to advance broadband deployment for all Americans."

The National Cable & Telecommunications Association, a cable industry lobbying group, was more clear in its position for Powell's next step.

"While we are disappointed with the 9th Circuit ruling, we will urge the FCC to seek U.S. Supreme Court review," Dan Brenner, the NCTA's head of law and regulatory policy, said in a statement. "We believe that if and when the 9th Circuit's decision is given a full substantive review by the Supreme Court, it will be reversed."

While Powell has long protected the cable industry from local regulations, not all of the FCC's commissioners share his belief.

"This is a good day for consumers and Internet entrepreneurs," FCC Commissioner Michael Copps said in a statement. "I look forward to the start of a fresh dialogue on broadband service at the FCC."

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