News

Judge Bars Verizon ISP from Cox System

2/10/2002 2:01 PM Eastern

A California federal judge has refused to order cable operator Cox
Communications Inc. to carry a phone company-affiliated Internet-service
provider on its high-speed Internet-access platform.

In a Jan. 29 decision, U.S. Judge Napoleon A. Jones Jr. said ISP Verizon
Internet Solutions was not entitled to cable carriage while the Federal
Communications Commission was determining the regulatory classification of
cable-modem service.

'The regulation of cable Internet involves complex issues with far-reaching
consequences. The issue is clearly not being taken lightly by the experts at the
FCC, and this court defers to that concern and pending investigation,' Jones
wrote in a nine-page opinion.

Jones, who serves in the southern district of California, did not dismiss the
case. He stayed the proceedings, allowing Verizon Communications to refile the
compliant once the FCC had addressed the regulatory classification of cable
Internet access.

Jones said the FCC has primary jurisdiction to settle the classification
dispute.

Since September 2000, the FCC has been trying to decide whether cable
Internet access is a cable service, an information service, or a
telecommunications service.

The commission in March is expected by many in the cable industry to opt for
information service -- a move that based on precedent would not require cable
carriage of unaffiliated ISPs.

Verizon sued Cox in November 2000 asserting that under a decision by the U.S.
Court of Appeals for the Ninth Circuit, Cox was required to carry unaffiliated
ISPs as a telecommunications-service provider subject to common-carrier
obligations in federal law.

Verizon went to court after Cox refused to negotiate a carriage deal.

The Ninth Circuit's decision involved AT&T Corp.'s challenge to an
ordinance adopted by Portland, Ore.

The city refused to allow Tele-Communications Inc. to transfer its cable
franchise to AT&T unless AT&T agreed to provide access to unaffiliated
ISPs. The city said it had the right to require open Internet access due to its
authority over cable services during a franchise transfer.

In its June 2000 decision, the Ninth Circuit said it could not decide the
case without determining whether cable Internet was a cable service.

The court said that cable Internet was not a cable service, but a hybrid of
information service and telecommunications service. In finding that cable
Internet was not a cable service, the court held that Portland could not enforce
its ordinance to the extent that it pertained to telecommunications
services.

In filings with the FCC, Cox has insisted that the controlling holding in the
Ninth Circuit's decision was the finding that cable Internet is 'not a cable
service.'

The court's analysis that cable Internet was a hybrid of information service
and telecommunications service, Cox argued, was nonessential to the disposition
of the case and amounted to judicial dicta.

In his opinion, Jones said he declined to embrace Cox's reading of the Ninth
Circuit's decision, insisting that the Ninth Circuit's hybrid classification was
a 'necessary' ingredient to the Portland case.

'At best,' Jones said, 'the Ninth Circuit's discussion can be considered an
alternative holding, but clearly not dicta.'

Jones noted that his decision to stay the case pending FCC resolution of the
classification issue was consistent with the Ninth Circuit's decision not to
'impinge' on the FCC's 'authority over these matters.'

Despite its move to classify cable Internet as partly a telecommunications
service, the Ninth Circuit noted that the FCC could also classify cable Internet
as a telecommunications service, but then forbear from applying common-carrier
obligations to cable-modem service.

Cox has been relying on the Ninth Circuit's holding that cable Internet is
not a cable service to refuse to collect and remit the 5 percent franchise fee
on cable-modem-service revenue.

Although Cox said such a step was necessary to avoid potential litigation,
some California local governments are planning to sue Cox in order to collect
the franchise-fee revenue.

September
October