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10/24/2003
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On The Horizon: Who Really Won In The Cable Decision?

It does make a lot of difference what kind of service it's called

David Post
Bradford C. Brown

The 9th Circuit Court of Appeals has been busy. First, there was all the hubbub surrounding the Total Recall. More recently, the court overturned a series of recent FCC rules that classified cable-Internet service as an information service rather than a telecommunications service under the Telecommunications Act of 1996. The FCC's classification, the court said, was inconsistent with what the 9th Circuit had ruled in an earlier case involving AT&T's cable-Internet service. Therefore, it was required by its own precedents to overturn the FCC's rules.

What difference does it make whether, say, Comcast's cable-Internet service is an information service (as the FCC had said) or a telecommunications service (as the 9th Circuit would have it)? A big one, it turns out. For years--ever since the first federal Communications Act gave the FCC jurisdiction to regulate what was then the monopoly provider of all telephone services in the United States, good old Ma Bell--the FCC has imposed the obligations of a common carrier on telecommunications services providers. Common carriers, unlike ordinary businesses, may not discriminate among those whose goods, services, or information they carry for any reason. They may not decide to do business with some customers and not with others or give preferential treatment to some customers at the expense of others; they must offer their services to all, including their competitors, at the same rates.

The implications of this could be quite profound, assuming, that is, that the 9th Circuit decision stands. FCC chairman Michael Powell already has said the agency will ask the full 9th Circuit to hear the case again, and, failing that, will seek Supreme Court review. Imposing common-carrier obligations on cable ISPs will mean they'll have to let all other ISPs use their cable systems at cost and that the FCC will have to crank up its regulatory apparatus to determine what the cost is in this market and to monitor cable companies' compliance with their obligations.

Consumer groups hailed this decision as a victory for competitiveness and consumer choice. We're not quite so sure. A nondiscrimination rule may make some sense when someone has true monopoly power, and it's true that, in many areas, cable providers have been (unnecessarily, in our view) handed nice, fat local-monopoly franchises. But the solution to that problem lies in breaking up the cable monopolies, in opening the cable systems themselves to competition, instead of imposing another regulatory superstructure on the industry, which will, inevitably, entrench the monopolies already in place. When it comes to delivering broadband Internet services, cable companies have a viable argument that they don't have true monopoly power, that they're already subject to serious competition from DSL providers and, increasingly, from wireless and satellite providers.

What the economy needs is more, not less, investment in broadband capacity. If, as the cable folks claim, this ruling slows their investment in broadband (after all, why invest in capacity when you're going to have to share it with competitors?), then consumers may find this to be less of a victory than they might first have thought.

David Post is a Temple University law professor and senior fellow at the National Center for Technology and Law at the George Mason University School of Law. Reach him at postd@erols.com. Bradford C. Brown is chairman of the National Center for Technology and Law at the George Mason University School of Law. Reach him at bbrown2@gmu.edu.


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