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

From: Declan McCullagh (declan@private)
Date: Tue Oct 28 2003 - 06:20:42 PST

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    Subject: CEI's C:Spin - Classifying Cable Modem Service
    Date: Thu, 23 Oct 2003 13:58:26 -0400
    Message-ID: <34E9D04BDDD3DB41BD4CA41945557C27D8EB28@private>
    From: "Richard Morrison" <rmorrison@private>
    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.
    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 
    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 
    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
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