Supremes Sing Cable's Praises

The Supreme Court ruled Monday that cable companies are not required to share their broadband access loops with independent ISPs. And the sworn enemies of the cable companies -- the RBOCs -- are cheering the decision as a sign that telecom deregulation is coming soon.

The Court's 6-3 decision in the case of The National Cable & Telecommunications Association v. Brand X Internet Services agrees with a 2002 Federal Communications Commission (FCC) ruling that cable broadband is an “information service,” not a “telecommunication service,” and as such not subject to the same infrastructure-sharing regulations as the phone companies.

“The court specifically said DSL and cable modems look a lot alike, and there were arguments made in the case saying its wrong if you don’t regulate them in the same way, but... the court said the FCC does not have to regulate DSL and cable modem the same way, period,” says Washington D.C.-based attorney Dana Frix. Frix was present at the Supreme Court during oral arguments at the end of March.

In 2003, a 9th Circuit court in Washington state took issue with the FCC’s determination and ruled cable broadband a telecom service. The FCC, with the Department of Justice, appealed and the case was accepted by the Supreme Court.

The FCC has reasoned that because the cable companies built their network infrastructures using only investor equity, while the phone companies had help from the federal government, they are entitled to a different regulatory approach. Attorneys for the cable industry used the same argument in front of the Supreme Court.

“Our networks were not built under the same assumptions as the PSTN was, and should not have the same regulatory regime,” National Cable & Telecommunications Association (NCTA) spokesman Brian Dietz told Light Reading on Monday.

The Supreme Court's decision means it is business as usual for the cable industry, but for the FCC the decision is a strong vote of confidence.

“This decision provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers," said FCC Chairman Kevin Martin, in a prepared statement. “We can now move forward quickly to finalize regulations that will spur the deployment of broadband services for all Americans.” [Ed. note: We've heard that before.]

The decision reverses an earlier assumption in legal circles that the decision of a court trumps any ruling by a regulatory agency, and makes a strong statement that the FCC is best positioned to regulate the industry, says attorney Dana Frix.

Justice Thomas wrote for the majority in the opinion: “The Commission is in a far better position to address these questions than we are. Nothing in the Communications Act or the Administrative Procedure Act makes unlawful the Commission’s use of its expert policy judgment to resolve these difficult questions.”

Frix believes the court was also making a direct comment on the original intentions of the Telecommunications Act of 1996.

“The Supreme Court has said... the ’96 Telecom Act is in itself ambiguous and designed to have the FCC fill in the interstices,” Frix says. “This is a case about how much deference this agency will be given by the courts.”

SBC Communications Inc. (NYSE: SBC) released a statement applauding the decision – a position that seems counterintuitive at first glance. But, as SBC spokesman Michael Balmoris explains, the FCC’s original intention in NCTA v. Brand X was to free both telecom and cable broadband providers from the Title II regulations that require infrastructure sharing with ISPs and others.

Balmoris says the FCC decided to anchor its case on the cable industry and wait for the blessing of the courts before proceeding with the deregulation of telecom broadband.

"The Commission's decision appears to be a first step in an effort to reshape the way the Commission regulates information service providers; that may be why it has tentatively concluded that DSL service provided by facilities-based telephone companies should also be classified solely as an information service," notes Justice Thomas, in the Court's majority opinion.

— Mark Sullivan, Reporter, Light Reading