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Cable states its pole position

Utilities could stall introduction of high-speed Internet service if they are allowed to boost the rates that operators pay to share their power poles. That was the message from government and cable-industry attorneys to the Supreme Court last week.

The justices are weighing whether Congress granted the FCC authority to cap pole-attachment rates when cable companies offer Internet service or whether the existing cap applies only to lines used to carry TV programming and telephony.

If the court bars the FCC from capping rates on lines used for both TV programming and cable Internet, franchises that continue to offer Internet service could be forced to pay several billion dollars in extra fees, according to rough projections of the cable industry. The decision also could create open-access requirements that would force cable companies to open their broadband platform to rival Internet providers.

The FCC and the cable industry argue that Congress intended the FCC to cap pole rates for various types of service, including Internet, to help speed the introduction of broadband and telecommunications services. "The only way to achieve both is to cover commingled attachments," Peter Keisler, attorney for the National Cable and Telecommunications Association, told the court in oral arguments Oct. 2.

The NCTA is appealing a decision handed down by the federal appeals court in Atlanta striking down FCC authority to cap poles rates when cable companies add Internet offerings.

Utility companies had challenged the FCC price controls, arguing that the commission has no authority over Internet business. Utility-industry attorney Thomas Steindler argued that pole rates were first capped in 1978 to protect "mom-and-pop" cable companies from monopoly prices charged by utility companies. Years of consolidation, he said, have eliminated most small cable companies while giant multiple-system operators, like AOL Time Warner, have gained sufficient market power to negotiate fair pole rates.

Since the lower court's ruling, several power companies have announced plans to raise monthly pole rates from roughly $7 to $38, a 500% increase. If the increases are permitted, monthly rates for subscribers could climb $1.50 or more, NCTA said. The cable industry is desperate to preserve the government caps because operators want Internet revenue to offset declining growth in traditional cable-TV subscribership.

The cable industry wants the FCC to declare Internet service a "cable service," which would shield the business from government rules mandating carriage of multiple providers. Consumers Union wants the agency to say the services should be regulated like other "telecommunications" services, such as telephony, which would give the FCC power to impose less stringent caps but would lead to open-access requirements. Utilities say the business should be declared an "information service," which would eliminate the government's price-setting authority altogether.

Several justices voiced frustration that the FCC has failed to decide how cable-delivered Internet service should be regulated. The commission launched an inquiry into that question a year ago but does not appear close to ruling.

"What I don't understand is how the FCC can resolve this [cap] issue without deciding whether Internet service is telecommunications," said Justice Antonin Scalia. Similar comments by Justices Ruth Bader Ginsburg and David Souter generated speculation that the court will order the FCC to decide which regulatory framework cable Internet falls under before reaffirming its authority to set rates, although the justices frequently play devil's advocate to test the strength of arguments.

"At least three justices were incredulous that the FCC has not addressed this issue," said Cheryl Leanza, a Washington attorney who prepared "friend of the court" briefs for Consumers Union. NCTA general counsel Daniel Brenner, on the other hand, said the FCC has clear jurisdiction over cable Internet services and is under no obligation to settle the open-access question to protect its authority to set pole rates.