How should cable modem service be classified (and regulated?)

[Declan McCullagh <declan () well com>]

---

Subject: CEI's C:Spin - Classifying Cable Modem Service
Date: Thu, 23 Oct 2003 13:58:26 -0400
Message-ID: <34E9D04BDDD3DB41BD4CA41945557C27D8EB28 () saturn dc cei org>
From: "Richard Morrison" <rmorrison () cei org>


CEI C:\Spin



This issue:  A Decisional Divide – Classifying Cable Modem Service



By <http://cei.org/dyn/view_bio.cfm/217>Braden Cox

Technology Counsel, Project on Technology and Innovation

<http://www.cei.org/>Competitive Enterprise Institute

October 23, 2003



Sometimes a judicial outcome can be summed up by the aphorism "hard cases 
make bad law.”  At other times, perhaps, it is bad law that makes hard 
cases.  Then there is the recent decision by the U.S. Court of Appeals for 
the 9th Circuit, Brand X Internet Services v. FCC, an example of an easy 
case making bad policy.



The 
<http://www.ca9.uscourts.gov/ca9/newopinions.nsf/58AF00C2122345DD88256DB7005BFAA3/$file/0270518.pdf>9th<http://www.ca9.uscourts.gov/ca9/newopinions.nsf/58AF00C2122345DD88256DB7005BFAA3/$file/0270518.pdf> 
Circuit ruling issued earlier this month took some people by surprise.  A 
three-judge panel ruled against the FCC’s decision to classify Internet 
service provided by cable companies as an “information service.”  Instead, 
the court found that cable modem service is a “telecommunications service,” 
a more highly regulated category that forces cable Internet service 
providers to allow competitors access to their lines.  Bell companies are 
similarly subject to requirements that mandate competitor access to their 
copper plants.



Easy Case



Simply put, the Court ruled that cable modem service is a form of 
telecommunications service to be consistent with its ruling in a prior 
case.  The 
<http://www.ce9.uscourts.gov/web/newopinions.nsf/0/7d3b1b3a05b2e14588256927007a7444?OpenDocument>previous 
case involved a suit against the city of Portland, Oregon, whereby the city 
had placed forced access conditions on the sale of a cable franchise.  The 
court held that cable modem service had telecommunications service 
components.  As such, the city of Portland could not regulate the cable 
modem services – only the FCC had the legal authority to do so.



Courts often defer to the FCC’s interpretation of the Telecommunications 
Act of 1996.  As a general rule, a court that is reviewing an agency’s 
interpretation of a statute it administers employs what is known as a 
“<http://www2.law.cornell.edu/cgi-bin/foliocgi.exe/admincases/query=%5bgroup+467us837!3A%5d!28%5blevel+case+citation!3A%5d!7C%5blevel+case+elements!3A%5d!29/doc/%7bt2%7d/hit_headings/words=4/pageitems=%7bbody%7d?>Chevron 
two-step” analysis.  First, the court looks to the intent of Congress.  If 
the intent is clear, the court rules accordingly.  However, if the statute 
is silent or ambiguous, the court then asks whether the agency’s 
interpretation is reasonable.



Courts defer to reasonable FCC interpretations – the rationale being that 
the FCC, as an agency created by Congress, has the specific authority and 
expertise to administer the communications laws.  But when the court issued 
the City of Portland decision in 2000, the FCC had not yet decided how to 
classify cable modem services.  Thus, there was no agency action that 
required deference and the court was free to decide the matter from 
scratch.  And the 9th Circuit correctly stated in its opinion that an 
agency should not be able to set aside a federal court’s interpretation of 
a statute – that is a job for Congress to resolve.



Bad Policy



There is danger in having an FCC that lags behind the times.  If the FCC 
doesn’t act, the judiciary will.  The Ninth Circuit decision raises a 
fundamental policy question of whether judicial review or agency rulings 
are a more appropriate way for government to regulate industry and, as 
Judge O’Scannlain stated in his concurrence, affect an “admittedly 
complicated and highly technical area of telecommunications 
law.”  Government regulations are not very good at accommodating new 
technologies in ways that benefit consumers to begin with, but when even 
the advantage of their predictability is removed, complying with the rules 
while providing the service customers desire most becomes next to impossible.



Consumers would not benefit from having cable Internet services bogged down 
with the same regulatory morass that affects the telecommunications 
industry.  Requiring open access of a growing cable modem service industry 
would destroy the capital investment incentives needed to bring more 
broadband services to the home.  Thus, on remand the FCC should deregulate 
DSL, not regulate cable.



Congress should view this case as yet another indication that it needs to 
revisit the 1996 Telecommunications Act and craft a new set of regulations 
fit for the 21st Century.



C:\SPIN is produced by the Competitive Enterprise Institute




_______________________________________________
Politech mailing list
Archived at http://www.politechbot.com/
Moderated by Declan McCullagh (http://www.mccullagh.org/)