Cable Loses Feds on HSI

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In the legal battle to keep its high-speed Internet service deregulated, the cable industry might have lost its best friend: the federal government.

The Justice Department and the Federal Communications Commission last week dropped strong hints that a policy squabble related to law enforcement could jeopardize FCC chairman Michael Powell’s quest to vindicate his hands-off broadband strategy in court.

The FCC is reeling from setbacks in the U.S. Court of Appeals for the 9th Circuit.

While the FCC is determined to fight on, the Justice Department appears to be willing to toss in the towel and force Powell to craft a new plan that in no way would legally impair Justice’s ability to track criminals and terrorists that use the Internet.

The split was on public display last week, when the DOJ and FCC asked the 9th Circuit to stay its decision in Brand X Internet Services v. FCC, a ruling which could force cable to provide regulated wholesale access to rival Internet-service providers.

The request was routine except for this: the U.S. government failed to announce it would appeal to the Supreme Court. The stay request said the idea was being only considered.

By contrast, the National Cable & Telecommunications Association, which also sought a stay, clearly declared that it had every intention of trying to get the Supreme Court to scuttle the ruling.

The upshot is that NCTA’s chances of a date with the Supreme Court do not improve without backing from the Justice Department’s Solicitor General, Theodore Olson. In fact, they deteriorate.

Cable’s at this stage after the 9th Circuit affirmed a prior ruling that cable-modem service is partly a telecommunications service, a classification in federal communications law that exposes the industry to open-access mandates.

That ruling overturned the FCC’s finding that cable-modem service was purely an unregulated information service under federal law and meaning no open-access requirements.

DOJ is comfortable with the telecommunications service classification because it evidently wouldn’t dilute its wiretapping authority under the Communications Assistance and Law Enforcement Act at a moment when the federal government is at war with Osama Bin Laden’s al Qaeda global network.

Powell prefers information service — not only because that’s his reading of federal law, but also because that enables the FCC to exclude state and local governments from broadband regulation.

There could be a failsafe mechanism, though.

If cable loses the litigation, the FCC would retain authority to shield cable from open-access mandates under forbearance provisions in the law.

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