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Consumers Are Not Losers in Brand X Decision

Michael Harris
BroadBananas
Michael Harris
6/29/2005

If you listen to the shrieking from the chicken-littles in the mainstream news media, the broadband sky is falling thanks to the U.S. Supreme Court's Brand X decision this week. In a nutshell, the court validated the FCC's classification of cable modem access as an 'information service' rather than a 'telecommunication service.' Under the information service classification, cable operators are not required to open their networks to third-party ISPs. It is a rational policy, as cable operators have built their broadband networks entirely with private capital, rather than public funding. And cable companies do pay plenty for the public resource they do use -- local rights of way -- through franchise fees and other local franchise services. The hysterical refrain following Brand X is that consumers are sure to pay more for broadband, have less choice, and will suffer as cable providers block access to applications. It's all nonsense, of course. A Federal open access requirement would do nothing to lower cable modem service prices, because the resale rates MSOs would charge to independent ISPs would not enable ISPs to under price cable services. Time Warner Cable subscribers, which now have a choice of ISPs, pay a similar monthly fee whether they use Road Runner, Earthlink or AOL. What will drive down cable modem service prices is continued DSL competition. Both SBC and Verizon have slashed their DSL prices, to as low as $14.95 per month in some cases. And MSOs have generally responded by raising cable modem access speeds, providing more value to their subscribers. And the more speed cable offers, the better applications like Vonage and MovieLink will perform. Cable operators can never realistically block these apps, as it will drive their customers to DSL. The only challenge for U.S. consumers is that DSL is not as widely available as cable. In the wake of the Brand X decision, the FCC is likely to extend equal 'information service' classification to DSL, incenting telcos to invest in expanding their footprints. Also, with such a classification, it is possible that DSL-delivered IPTV services would be exempt from local franchise requirements, enabling telcos to ramp up video competition more quickly, another consumer benefit. Where consumer advocacy groups should focus their efforts is on annihilating protectionist legislation sponsored by both MSOs and telcos to prohibit municipalities from creating competitive Wi-Fi networks. If incumbent broadband providers are falling short in meeting the needs of a local community, its citizens should have every right to create an alternative service.

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