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Supreme Court Mulls ISP Issue

The cable industry is cautiously optimistic that the Supreme Court will uphold Federal Communications Commission rules allowing local cable franchises to keep rival Internet-service providers off their high-speed networks after several justices voiced sympathy for the agency's reasoning during oral argument Tuesday.The FCC's 2002 decision not to impose ISP open access on cable operators was a "classic example of what an agency does," and the high court should be reluctant to second guess, said Justice Stephen Breyer. Ailing Chief Justice William Rehnquist, speaking with the aid of an electronic device, pointed out that the 1996 Telecommunications Act, upon which the FCC's cable-modem rule is based, largely ordered the agency to lean toward less regulation of the communications business. Consequently, he said, any time the FCC interprets ambiguous portions of the statute, it generally should err on the side of deregulation.

"It was clear the justices believed the FCC has jurisdiction to decide the cable-modem rules," said Daniel Brenner, general counsel for the National Cable & Telecommunications Association.

Only Justice Antonin Scalia voiced strong skepticism of the FCC's decision to keep cable-modem service free of access rules. He said the decision was inconsistent with separate rules requiring telephone companies to make room for rival ISPs on their high-speed digital subscriber-line networks. Deputy Solicitor General Thomas Hungary, arguing on behalf of the FCC, explained that telephone companies are treated differently because they have traditionally been required to lease access to their backroom telecommunications transmission services.

Scalia was unimpressed. "It still doesn't explain to my satisfaction why [DSL] becomes a separate product."

Thomas Goldstein, representing Brand X and other ISPs, said cable services also have the capacity to lease their telecommunications service—the connections that physically allow Internet users to transmit data back and forth. Under the FCC's regime, he said, cable's telecommunication operation escapes all regulation for no good reason.

The justices are reviewing a seven-year legal fight over independent Internet service providers’ access to cable operators’ online networks. At issue is a 2002 FCC decision declaring the agency did not need to impose access mandates on cable until there was evidence that cable operators are significantly interfering with consumers’ ability to navigate the Internet.

ISPs Earthlink and Brand X, along with the largest consumer groups, argue that competition will be strangled in the broadband market if independent service providers are blocked from the cable pipeline, the best Internet platform available. The FCC was wrong to reject access mandates, they say, because current telecommunications law already obligates cable operators to lease access to competing providers.

Cable operators counter that rivals will have a huge competitive advantage in setting prices for broadband service if they are allowed to piggyback at low cost on the new digital pipeline the cable industry spent $95 billion building.