Broadband Legal Limbo Lingers

4/04/2004 8:00 PM Eastern

Federal broadband policy took another hit last Wednesday, less than a week after President Bush called for affordable nationwide broadband access by 2007.

The setback came in the 9th U.S. Circuit Court of Appeals, which refused to allow the Federal Communications Commission to use certain legal standards to shield cable-modem service from potentially intrusive regulation.

The 9th Circuit’s decision had the effect of perpetuating the legal limbo hanging over cable-modem service since 1999, and probably introduced more uncertainty over whether FCC chairman Michael Powell can graft his cable policies onto digital subscriber line (DSL) services provided by the Baby Bell phone giants.

Legal clarity is nowhere within sight. The current litigation could putter along for a few more years, at the conclusion of which the FCC might find it necessary to modify its policies. Those new policies would undoubtedly trigger a new round of litigation. Somewhere along the line, Congress could always step in with a new law.

One more factor to weigh: a victory by Sen. John Kerry (D-Mass.) in the November presidential election could lead to the installation of a committed pro-regulatory FCC majority that could force cable to share its broadband facilities with the competition.

The legal jockeying is expected to continue by this Wednesday, as the FCC or National Cable & Telecommunications Association is expected to ask the 9th Circuit to stay its decision while the case makes its way to the U.S. Supreme Court.

Powell, who has pushed for minimal broadband regulation to spur private-sector deployment, hinted at further litigation in a statement after release of the 9th Circuit’s order.

“We will study our options and explore how to continue to advance broadband deployment for all Americans,” Powell said.

Opponents of Powell policies — who favor cable carriage of third-party ISPs at regulated rates — want the FCC to take the punishment doled out by the court and start applying open-access rules to cable’s high-speed data plant.

“Cable open access is now the law of the land. It promotes free speech and innovation. [The FCC] should accept this result and implement cable open access as fast as it can,” said Andrew Jay Schwartzman, president of the Media Access Project, who represented consumer groups before the 9th Circuit.

NCTA president Robert Sachs shot back that forced-access mandates would reverse policies that have inspired cable to spend $85 billion on upgrades and would run “counter to President Bush’s vision of universal affordable broadband service for all Americans.”

The FCC and the 9th Circuit are at odds over the correct regulatory classification for cable-modem service.

In March 2002, the FCC voted to classify cable-modem service as an interstate information service under federal law, putting regulation of it beyond the reach of the states and their political subdivisions.


The FCC ruling was costly to local governments, which lost the ability to collect millions of dollars in franchise fees assessed against cable-modem revenue.

By lottery, the 9th Circuit was assigned the case, titled Brand X Internet Services v. FCC. Last October, a three-judge panel vacated the FCC order, claiming it conflicted with 9th Circuit precedent.

That was a reference to the June 2000 decision in which a 9th Circuit panel held that cable modem service was partly a telecommunications service.

Telecom-service providers have common carrier obligations under federal law, such as third-party ISP access, although the FCC has authority to forbear from applying those regulations.

EarthLink Inc., a major ISP, said the 9th Circuit ruling confirmed that cable modems deliver a telecommunications service, a point ISPs have been making for five years.

“The practical result of such a classification is that cable broadband providers would be required to open their lines to competing ISPs. Cable modem users deserve choice in high-speed Internet providers,” said Earthlink’s vice president of law and public policy, Dave Baker, in a prepared statement.

Representatives of local governments said they were not surprised by the ruling, calling the attempt at a rehearing “a long shot.” Statistically, that court hears only 1% to 2% of the appeals presented to it, veteran attorneys said.

“Without a single judge voting to review the case, it may suggest the level of consensus on the first decision,” said attorney Bill Marticorena of Rutan & Tucker in Orange County, Ca.


If an appeal is made to the Supreme Court, local cities will be players, added Nick Miller of Miller & Van Eaton in Washington D.C.

Most franchises are based on federal policy which uses two definitions of services entering the home via the cable wire. The 9th Circuit then introduced a third term into the works, leaving no one with clear authority for oversight on issues such as consumer protection.

Cities, which were a party to the 9th Circuit action, assert that data delivered via cable modem is a cable service. He predicted local officials will rededicate themselves to efforts to get the FCC and Congress to “fill in the legal gaps” on telecommunications policy.

The odd fact about the Brand X decision was that it mechanically applied precedent without any substantive analysis of the FCC’s conclusion that cable-modem service is exclusively an information service. A court that wasn’t bound by precedent would have allowed the FCC to make a case that the order was consistent with it regulatory authority.

Daniel Brenner, the NCTA’s top lawyer, expressed confidence that the Supreme Court would support the FCC on the merits, if given the chance.

“We believe that if and when the 9th Circuit’s decision is given a full substantive review by the Supreme Court, it will be reversed,” Brenner said.


Some analysts noted that controversy between the FCC and the Justice Department could impair cable’s ability to get a hearing before the Supreme Court with the full backing of the Bush administration.

For months, the Justice Department’s criminal division and the FBI have complained that the FCC’s classification of high-speed data access would prevent law enforcement from tracking criminals and terrorists under the Communications Assistance and Law Enforcement Act.

By contrast, law enforcement would not see its authority degraded if high-speed access is a partly telecommunications service, as the 9th Circuit ruled.

Clashing interest within the federal government might cause U.S. Solicitor General Theodore Olson — whose influence with the Supreme Court on docketing cases is substantial — to back Justice and the FBI and refuse to endorse an FCC appeal of the 9th Circuit decision.

The Supreme Court receives about 5,000 appeals a year but has been taking just 70 to 90 cases in recent years. The odds of landing on the court’s calendar improve with Olson’s support.


One option under consideration at the FCC is moving ahead with the DSL rulemaking and hoping the appeal isn’t assigned to the 9th Circuit.

The battle between the FCC and the 9th Circuit could prompt congressional intervention.

At Powell’s suggestion, Congress is considering changes to the Telecommunications Act of 1996, which established separate regulatory categories for voice, video and data services that no longer appear sustainable when all three have become Internet applications.

House Energy and Commerce Committee chairman Joe Barton (R-Texas) wants to use the balance of 2004 to set the stage for legislation in 2005 in a GOP-controlled House. Both Sens. Ted Stevens (R-Alaska) and Daniel Inouye (D-Hawaii) have similar plans for next year, regardless of the party in control of the Senate. Either Stevens or Inouye is expected to be Commerce Committee chairman next year.

Portland Baggage
Key 9th Circuit cable-modem service rulings:
June 2000: Judges’ panel from 9th Circuit U.S. Court of Appeals rules Portland, Ore., can’t require that AT&T Broadband carry third-party Internet service providers because cities can’t force cable to provide a telecommunications service or telecommunications facilities as a franchise transfer condition.
March 2002: FCC classifies cable-modem service as an interstate information service, a ruling that clashed with 9th Circuit’s holding in the Portland case. By lottery, the 9th Circuit was assigned appeal of FCC order.
Oct. 2003: 9th Circuit panel, in Brand X Internet Services v. FCC, vacates FCC cable modem order as inconsistent with June 2000 Portland ruling that cable modem was partly a telecommunications service. Panel refused to review substance of FCC order. FCC seeks en banc review from 9th Circuit
March 2004: 9th Circuit judges reject FCC review request.
Source:Multichannel News research

Linda Haugsted contributed to this report.

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