IP: FCC expected to dereg. Cable Net service

[David Farber <dave () farber net>]

> Date: Mon, 14 Jan 2002 18:11:21 -0500
> To: farber () cis upenn edu
> From: Jeff Chester <jeff () democraticmedia org>
>
> Cable Expects Favorable Data Order
>
> By TED HEARN and LINDA HAUGSTED
> Multichannel News
> 1/14/2002
>
>    Cable lobbyists are all but certain that the Federal Communications
> Commission is no more than a month or two away from handing the industry a
> victory over proponents of mandatory access to cable's high-speed Internet
> platform.
>
> But the win could lead to legal challenges and numerous skirmishes with local
> regulators.
>
> Over the past few years, the cable industry has vigorously campaigned against
> government-imposed access, and that effort is apparently close to paying off
> with an FCC ruling that would keep cable-modem service unregulated.
>
> According to various sources, the FCC is planning to conclude that after
> studying the issue formally since September 2000, data-over-cable is an
> information service rather than a cable service or a telecommunications
> service. Under FCC policies adopted since the 1960s, information service
> providers are not regulated.
>
> Several cable-industry sources and others who track the issue said recent
> conversations with FCC staff indicate that a consensus had emerged on
> classifying data-over-cable as an information service.
>
> An FCC spokeswoman declined to comment. Aides to commissioners Kathleen
> Abernathy, Michael Copps and Kevin Martin last week said they had not seen
> any Cable Services Bureau recommendation on cable-modem classification.
>
> The cable industry lobbied for Internet access to be classified as a cable
> service, a move that would bar any government entity from imposing terms.
> Cable's fallback position was a classification as an information-service
> provider.
>
> In no circumstance did cable want to be labeled as a
> telecommunications-service provider and shoulder the open-access requirements
> imposed on local phone companies.
>
> Officially, the National Cable & Telecommunications Association wasn't
> prepared to declare victory.
>
> "It would be premature to comment on an FCC decision that has yet to happen,"
> said NCTA spokesman Marc Osgoode Smith.
>
> Andrew Jay Schwartzman, president of the Media Access Project — a
> public-interest law firm that advocates open access to cable systems — said
> he believed the FCC would adopt the information-service classification.
>
> "The glimmerings that we get are consistent with that. Conversations with
> staff and so forth certainly have suggested that," Schwartzman said.
>
> The classification decision is the FCC's first move. At about the same time
> as it plans to announce its classification decision, the commission is
> expected to release a notice of proposed rulemaking seeking public comment on
> the regulatory implications of declaring data-over-cable to be an information
> service.
>
> Several sources said the FCC's decision to classify data-over-cable as an
> information service would not sound the official death knell for the
> open-access debate. That won't occur until the FCC wraps up the planned
> rulemaking.
>
> But cable-industry lawyers said it was unlikely the FCC would classify
> cable-modem offerings as an information service, and then give serious
> thought to imposing open-access requirements on information-service providers
> for the first time.
>
> If the FCC planned to make such a move, the lawyers said, the agency could
> have skipped the new rulemaking by classifying data-over-cable as a
> telecommunications service in the first instance.
>
> LOCAL BATTLES LOOM
> Far from insulating cable from hostile government action, the FCC's decision
> to call cable an information service could spark a new tug of war between
> cable operators that offer high-speed Internet access and cities that issue
> local cable franchises.
>
> AT&T Broadband and other cable operators are concerned that because some of
> their franchise agreements permit the offering of cable services, but not
> information services, they might be required to obtain a new or a second
> franchise.
>
> Local regulators said an FCC move to define high-speed data as an information
> service would cause a flurry of franchise activity. Most local contracts are
> written to allow governments to regulate cable operators' use of local
> rights-of-way.
>
> "For some time, cable will have no legal authority to operate [in the public
> rights-of-way]. Cable will have to be prepared to deal with that," said Bill
> Marticorena, an attorney with Ruttan & Tucker and adviser to several southern
> California cities.
>
> Companies can't use rights-of-way without some form of local approval. To do
> so would represent an illegal gift of public resources for which elected and
> appointed officials could be sued, Marticorena explained.
>
> Franchise fees are another concern. Cable operators aren't sure whether local
> governments may impose a franchise fee on information services provided by a
> cable operator. And if they oppose such levies, they don't know whether a 5
> percent cap on gross revenues would apply to revenue derived from cable-modem
> service.
>
> Cable-industry lawyers are reviewing the recently extended Internet Tax
> Freedom Act to determine whether that law prohibits the collection of
> franchise fees on information-service revenues.
>
> Under a deal cable struck with local governments in 1998, when the law was
> first passed, cable-modem franchise fees were exempt from the moratorium on
> Internet taxation.
>
> Refunds could also complicate matters. Assuming local governments may not
> collect franchise fees on information services, some cable operators might be
> inclined to seek refunds from local governments to recover previous
> franchise-fee payments on Internet-access revenue.
>
> "That money's been paid and spent. A request for a refund is a pill that will
> not go down easily," Marticorena said. "Cities will be very, very reluctant
> to give anything back. If they want communities to get aggressive, this will
> do it."
>
> Nick Miller, a Washington attorney who has represented dozens of cities at
> the FCC, said the agencies could avoid setting up a clash between cable
> operators and cities by classifying cable's Internet-access product as both a
> cable service and an information service. Miller recently met with FCC
> officials to advocate that position.
>
> "If the FCC reads the comments of the local governments carefully, I think
> the local governments would be content to have the commission declare these
> are information services, provided they didn't preclude the simultaneous
> treatment of them as cable services," Miller said.
>
> THANKS TO POWELL
> Those issues aside, the FCC's move to segregate cable from a forced-access
> regime would represent a clear victory that some said was largely
> attributable to the deregulatory philosophy of FCC chairman Michael Powell.
>
> "Cable dodged a bullet when [President] Bush was elected and Powell became
> chairman. [Powell] is not going to regulate cable on his watch," said
> Precursor Group telecom and media analyst Scott Cleland.
>
> By classifying data-over-cable as an unregulated information service, the FCC
> is effectively requiring unaffiliated Internet-service providers to negotiate
> private carriage deals with cable MSOs.
>
> EarthLink Inc., the 4.8-million subscriber Atlanta-based ISP, had urged the
> FCC to classify cable Internet as a telecommunications service, which would
> have cable operators sharing their high-speed-data lines at regulated rates.
>
> "The conduit has to be open, said EarthLink vice president of law and public
> policy David Baker. "There has never been any question of that on the
> telecommunications side. Some folks at the FCC are bending over backwards to
> avoid calling cable transport a telecommunications service."
>
> EarthLink, which has about 500,000 broadband subscribers, reaches some
> cable-modem subscribers under a carriage deal it reached with Time Warner
> Cable in 2000. That deal was struck as Time Warner Inc. was planning to merge
> with America Online Inc.
>
> Consumer advocates also called on the FCC to open cable's broadband pipe to
> multiple ISPs to provide consumers with a range of options aside from an
> MSO-affiliated ISP. Multiple ISPs, they added, would allow consumers to
> switch providers were there a service interruption to the cable system's
> affiliated ISP.
>
> "If [the FCC] goes this route, it appears to be a clear effort to find some
> unregulated space to protect cable's monopoly Internet service. It's just
> outrageous for the commission to perpetuate that abuse of consumers by
> artificially placing this service in an unregulated box," said Gene
> Kimmelman, Washington office co-director of Consumers Union.
>
> EXPECT LAWSUITS
> FCC action favoring cable is certain to spark litigation. Although Baker
> declined to say whether EarthLink would sue, Schwartzman indicated his group
> was ready for a court battle.
>
> "I have no doubt that any decision the commission makes will wind up in
> court. Clearly, this is not the end of it," he said.
>
> Cable-industry lawyers predicted that MSOs would not legally challenge the
> FCC's decision to classify data-over-cable as an information service. They
> also indicated the FCC would postpone a decision on cable-modem
> classification until after the Supreme Court handed down its decision in the
> pending pole-attachment case.
>
> Under a lower court decision, cable operators that provide Internet access
> are not entitled to pay FCC-mandated rates to attach their wires to utility
> poles and conduits. The lower court said regulated rates covered cable
> services and telecommunications services, but not information services.
>
> In theory, if the FCC rules that data-over-cable is an information service
> and the Supreme Court then affirms the lower court's decision, cable
> operators offering Internet access would have to negotiate pole fees with
> utilities in 32 states where the FCC has jurisdiction.
>
> The cable industry believes the FCC could reverse a Supreme Court setback by
> classifying data-over-cable as a cable service, thus maintaining
> pole-attachment rate protections for cable's Internet providers.
>
> But in the past, FCC officials have said that the agency was not planning to
> time its decision on the status of cable-modem service to the release of the
> Supreme Court's ruling in the pole case.
>
>
>
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