In a 6-3 decision led by Justice Clarence Thomas, the court overturned a federal court decision that would force cable companies to share their infrastructure with Internet service providers such as Brand X and EarthLink.
Specifically, the court focused on the question of whether a cable company provides "telecommunications services" or "information services." According to the Telecommunications Act, providers of information services are subject to much less stringent regulations than companies that provide telecommunications services.
(More - What is Brand X Really About?)
The battle over the future of cable broadband is now before the U.S. Supreme Court. The high court will soon decide whether to review a key case involving U.S. broadband policy (known as the Brand X decision [PDF]). Recent filings to the court by municipal governmental groups and the cable lobby reveal important issues at stake for communities in the U.S.
The National League of Cities, the U.S. Conference of Mayors, and the National Association of Counties have asked the court to accept a review of the Brand X case. Local government groups argue that cable broadband service should have the same obligation to serve the needs of a community as cable television systems now have. In their legal brief (see below), they summarized the “enormous potential fiscal consequences” to local government of cable industry-backed policies created by the FCC.
Under a 2002 FCC ruling, now subject to legal challenge, cable operators are no longer required to provide local governments with a 5 percent franchise fee from cable modem service revenues. For decades, cities have charged cable companies 5 percent of gross revenues as compensation for access to city streets (often called “rights of way”). The franchise fee is the principal financial support for public access channels, as well as other community-related technology projects. But because of the FCC decision, cities and counties are now losing “as much as $470 million” each year. Cable’s broadband ISP service is a huge profit center for companies like Time Warner, Comcast and Cox, with estimated revenues around $9.4 billion.
The cities also warned the court that cable could, at will, exert “absolute control” over the content flowing over their broadband lines. The FCC, in developing its 2002 ruling that freed cable from national and local obligations, had claimed that the industry did not have “editorial control” over access to broadband content in the same way it has with multichannel television. But in a strongly worded statement, the cities said: “That cable operators have, so far at least, voluntarily chosen not to exploit that control more fully by blocking some Internet content--or, more accurately, that operators have made the editorial decision that, at this time, it is in their marketplace (or strategic regulatory) interest to provide unfiltered Internet access content—does not, and cannot, alter the fact they possess such control.”
Not surprisingly, a group of leading cable companies, including Time Warner, Cox, Charter, and the trade group National Cable Telecommunications Association, asked the Supreme Court (see below) to ignore the petition from the local governments. They raised all manner of objections, including a technical one that the cities had missed a legal filing deadline. But the industry’s motive is clear. They want to remove cable from all regulation, locally and nationwide. The industry wishes to reap the digital fortunes without having to provide any public interest quid pro quo. Such a position harms the ability of local communities to use the power of broadband to advance the needs of civic discourse, economic growth, and social equity.
Unfortunately, the city position is at odds with the perspectives of such groups as Media Access Project, Consumer Federation, the ACLU (and CDD), and such companies as Earthlink. They have fought successfully in the courts to reverse the FCC by having cable modem service regulated as a “telecommunications service.” That classification would require cable Internet service to operate in a nondiscriminatory manner towards all broadband content and provide the public with a choice of Internet service provider. The Ninth Circuit U.S. Court of Appeals recently supported our position in the Brand X case. The Powell FCC and Bush administration have appealed this decision to the Supreme Court, claiming that cable broadband should basically have no regulatory obligations at all.
But what the cable versus city legal argument really illustrates is the urgent need for the U.S. to develop a new policy for broadband (covering cable, DSL, and wireless). We must combine the best aspects of two, now-separate approaches. First, broadband networks must be required to serve their community, through some form of local agreement (for "community bandwidth," public telecommunications services, etc.). Second, they must also be required to also operate in an open and nondiscriminatory manner, reflecting the heritage of the Internet itself.
As the Congress begins the lobbying free-for-all in its reworking of the 1996 Telecommunications Act, the issue of how broadband serves the public interest should be at the core of the debate.
August 30, 2004
The Department of Justice last Friday asked the U.S. Supreme Court to reverse a lower court decision that affirmed the broadband Internet’s obligation to serve as a nondiscriminatory medium. The DOJ thus joined both the FCC and the cable industry, which also want to see a reversal of what is called the "Brand X" case (for the Santa Monica-based Internet service provider of that name). A federal Court of Appeals (Ninth Circuit) found last year that the Michael Powell FCC erred when it declared that the cable industry could, in essence, operate closed broadband networks. Fighting that decision in court were ISPs Brand X and Earthlink, along with Consumer Federation of American, Consumers Union, Media Access Project (as our counsel), and CDD.
The Brand X case is vitally important to the future of the Internet as a democratic medium. As the Bush DOJ told the Supreme Court: “This case is likely to determine the regulatory classification under the Communications Act that will apply to broadband (i.e., “high-speed”) Internet access services in the United States.” In essence, the federal government has come to the aid of its embattled great deregulator, FCC chairman Michael Powell. In May 2002, Powell, as part of his agency’s “leave no media monopoly behind” policy, approved rules that permitted cable companies to extend their monopoly in multichannel television to the broadband market. Broadband provided by cable would not have to retain the characteristics of the dial-up Internet under his new policy, which meant that cable companies could deny access to their network by all other ISPs (forcing cable broadband subscribers to use the cable operator's monopoly ISP provider). In addition, by eliminating nondiscrimination safeguards for broadband service, Powell made it much easier for cable companies to manipulate their Internet platforms to further benefit commercial media content.
The DOJ cited sections of the non-regulatory 1996 Telecommunications Act as its basic rationale for supporting the Powell plan. It’s more important to speed the availability of broadband access to the public by eliminating rules and safeguards, claim the FCC and DOJ. That such a stripped-down and conglomerated Internet might not be what the public wants--and especially needs--was not part of the Bush Administration formula.
Under Powell, broadband cable (and also, for the most part, broadband delivered by DSL) is now classified as an “Information Service,” a deregulatory black hole in which narrow private interests get to determine what rules, if any, are applied to high-speed service.
Compare this with the Telecommunications Service classification, which still governs the dial-up Net. Under this framework, supported by Brand X and the public interest community, broadband providers must “charge just, reasonable, and nondiscriminatory rates”; ensure interconnection with ISPs; and support universal service goals related to closing the digital divide and expanding educational access. But the DOJ wants to Supreme Court to overturn the 9th Circuit and affirm the Powell FCC's policy on cable broadband.
The cable lobby, which includes some of the biggest media companies in the country, has supported the intervention of the Administration. With cable as the country’s leading broadband provider (17 million homes), the industry has found tremendous profits in providing the service. But cable’s broadband plans for the future depend on deepening their control of Internet traffic and offering new services such as Voice over Internet. To generate the revenues they desire, cable wants to remain free of any public policy requirement mandating openness and competition. The Bush Administration has now sent a cable lobby love letter to the Supreme Court. Stay tuned.
3 December 2004
The Supreme Court's announcement today that it will review the "Brand X" case concerning cable Internet service sets the stage for a landmark telecom decision--one that will help shape the future of the broadband Internet. So named for the Santa Monica-based Internet service provider (ISP) that was rebuffed in its efforts to offer service over cable's high-speed data lines, the Brand X case will focus squarely on the way in which the FCC classifies cable modem service (by far the most popular means of broadband access, reaching some 19 million US homes).
Traditionally, dial-up Internet access has been classified as a telecommunications service, under which network operators must “charge just, reasonable, and nondiscriminatory rates”; ensure interconnection with independent ISPs; and support universal service goals related to closing the digital divide and expanding educational access.
The cable service classification, in contrast, comes with no such nondiscriminatory guarantees--although cable operators are obliged to pay a 5 percent franchise fee to the communities in which they enjoy their near-monopoly status. (Such fees, amounting to as much as $470 million in potential cable modem franchise fees, have put cash-strapped cites in the unfortunate position of having to choose between open access and increased revenues).
For its part, the FCC in March 2002 took a cable-friendly "neither-fish-nor-fowl" approach to the matter, declaring that cable modems fall under an unregulated information service category--with neither franchise fee nor ISP access requirements standing in the way of broadband monopoly profits.
The FCC's decision was successfully challenged in the Ninth Circuit US Court of Appeals by public interest groups including the Consumer Federation of America, ACLU, CDD, and the Media Access Project (serving as counsel). The court ruled that Internet access, whether by dial-up or cable modem, is essentially a telecommunications service, requiring network operators to operate in a nondiscriminatory manner towards all broadband content and to provide the public with a choice of Internet service provider.
Arguments on the Brand X case are expected to be heard by the Supreme Court early next spring, with a decision possibly coming in June.
FOR IMMEDIATE RELEASE
October 8, 2003
Contact: Jeff Chester, Center for Digital Democracy (202) 452-9898
This decision should "stop in its tracks" the attempt by both the cable industry and FCC chairman Michael Powell to change the fundamental nature of the Internet. It helps preserve the Internet's unique ability--as it makes the leap to a high-speed broadband system--to promote diversity of expression.
The court found that the cable industry and the FCC must uphold the Internet's open architecture, including providing a choice of Internet Service Providers (ISPs). The ruling now derails, for the moment, the cable industry's plan to expand its monopoly business model into the broadband arena. Despite the claims of Comcast and others, the cable industry is not providing the public with real choice when it comes to broadband communications. Finally, the decision underscores the need for a "regime change" at the FCC. Michael Powell's peculiar theories, which ultimately promote monopoly control over both broadcasting and broadband instead of fostering real competition and choice, are clearly being rebuked.
CDD was one of the three public interest petitioners in the case, which included Consumers Union and Consumer Federation of America. We were represented by the Media Access Project.