FCC STUDYING POSSIBLE NEXT STEPS AFTER CABLE MODEM RULING

The regulatory classification is important because it potentially opens cable operators to common carrier regulation and open-access requirements on high-speed Internet products. That would mean cable would have to open its facilities to competitors. The cable industry contends that its networks were built with private capital and therefore, shouldn’t be subject to the same common carrier regulations put upon phone networks built with ratepayer money. NCTA Senior Vp-Law & Regulatory Policy Dan Brenner said the association would urge the FCC to seek Supreme Court review: “We believe that if and when the Ninth Circuit’s decision is given a full substantive review by the Supreme Court, it will be reversed.” The question is whether the 9th Circuit should have given deference to the expert agency.

Powell quoted a dissenting member of the 3-judge panel as saying at the time that the decision “effectively stops a vitally important policy debate in its tracks.” Powell said the decision would also prolong uncertainty because it remains unclear whether cable broadband service will get additional regulatory constraints. Powell said he was disappointed because the Commission had “carefully developed” its policy over the past several years and the policy itself was designed to “advance broadband deployment for all Americans.” Comr. Copps, who had opposed the Commission’s classification, said the court’s decision was good for consumers and Internet entrepreneurs: “I look forward to the start of a fresh dialogue on broadband service at the FCC.”

The National Assn. of Telecom Officers & Advisors said it was disappointed at the court’s refusal to rehear the case. Exec. Dir. Libby Beaty said the Assn. was “assessing our options and considering what next steps we might take.” She said the court hadn’t addressed local govt. issues on their merits.

Consumer groups and ISP Brand X had brought the case Brand X v. FCC. They said the decision would help consumers by letting them choose among Internet service providers (ISPs) over cable systems, as with dial-up. “Those alternatives mean consumers will get more choices and potentially a whole new array of customized Internet features and lower prices for Internet connectivity,” said Gene Kimmelman, advocacy dir.-Consumers Union. He said he feared the FCC “will attempt to drag out this legal dispute even longer, to the benefit of cable monopolies.”

Mark Cooper, dir.-research for the Consumer Federation of America said the FCC should accept the court’s finding, which promises nondiscriminatory access regardless of the facilities used. “It is time for the FCC to obey the law and restore the vibrant environment for innovation and freedom of consumer choice on broadband that made the narrowband Internet such a dynamic engine of creativity and expression,” Cooper said.

ISP Earthlink also supported the challenge to the FCC. “Cable modem users deserve choice in high-speed Internet providers,” said Dave Baker, EarthLink vp-law & public policy. He said the ruling is “another step towards finally affording them that choice.” Media Access Project Pres. Andrew Schwartzman said cable open access is “now the law of the land” and if Powell “really supports the President’s goal of broadband deployment by 2007, he should take the same position he has taken on the recent D.C. Circuit case on telephone competition. That means avoiding needless delay by attempting to appeal to the Supreme Court. The FCC has now lost on this issue 3 times in a row. It should accept this result and implement cable open access as fast as it can.”

The FCC, NATOA and others had asked the court for an en banc, or full court, rehearing of the case. The FCC would likely consult with the Solicitor Gen. before seeking Supreme Court review. The agency could bring the case on its own, but it’s customary for the Solicitor Gen. to take the action on the agency’s behalf.

Legg Mason analyst Blair Levin noted the decision will take effect in 7 days unless the FCC or cable industry persuades the court to stay its decision during appeal, and the govt. and cable have 90 days to decide whether to take the case to the Supreme Court. Complicating matters, Levin said, is whether the Solicitor Gen. will appeal because DoJ’s criminal div. and the FBI are concerned over the implications of the FCC’s decision on its wiretapping authority. “We believe that even if the court’s decision goes into effect, there will not be immediate application of any common-carrier rules to the cable broadband services while the Supreme Court review decision is being made. More likely, a company seeking, for example, access to the cable network would file an enforcement action at the FCC, which would then defer acting until it undertook some proceeding to decide how and whether to apply telecom rules to cable modem service,” the analysts said.

Legg Mason also said the ruling would have a mixed impact for the Bells. It said the Bells hoped to pair their wins in deregulating broadband facilities (UNEs) with deregulation of their broadband services, and this “puts a big monkey wrench into those works.” The 9th Circuit’s decision, if not overturned by the Supreme Court, will “make it more difficult and time consuming for the Commission to remove some of the regulatory obligations imposed on wireline broadband service,” they said. But the Bells seek regulatory parity with cable competitors, and they may “take some cold comfort in the fact that the cable industry is at risk for greater regulation,” the Legg Mason group said.