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Court ruling opens cable lines

Posted on: Tuesday, 7 October 2003, 06:00 CDT

Court ruling opens cable lines

Decision could provide some Internet users new online options

By CHRISTOPHER STERN AND JONATHAN KRIM Washington Post

Tuesday, October 7, 2003

Cable companies would be required to open their networks to rival high-speed Internet service providers under a federal appeals court ruling Monday that could lead to more choices for consumers and subject the industry to the same competitive pressures roiling the telephone market.

The ruling by the 9th Circuit U.S. Court of Appeals in San Francisco bars the Federal Communications Commission from following through with plans to allow cable companies to exclude rivals from selling competing brands of Internet services over their lines.

The FCC had adopted its deregulatory approach last year, betting that it would give the cable industry an incentive to continue investing in sophisticated fiber optic networks. But the court said the agency must continue to classify cable's Internet offering as a telecommunications service, thus subjecting it to the same regulations governing high-speed Internet service provided by telephone companies.

Currently, the vast majority of the nation's approximately 14 million homes that subscribe to cable high-speed Internet service have no choice when it comes to their service provider. If the ruling survives a likely appeal, the decision could provide broadband Internet users with new options for the content they see online, their e-mail addresses and potentially the monthly rates they pay.

The decision also could benefit companies, such as Earthlink and America Online, that are trying to move their customer base from slower dial-up connections to higher-speed data services. Armed with the most recent decision, those companies can now demand access to cable's broadband networks.

"Cable modem users deserve choice in high-speed Internet providers," said Dave Baker, vice president for public policy for Earthlink Inc., the nation's third-largest Internet provider. "Today's ruling is a big step towards finally affording them that choice."

The three-member appeals panel said it was obligated to block the FCC action because it had previously ruled that the two-way nature of cable Internet service made it more like a telecommunications service than a pay television service that could be regulated by local governments.

At least one member of the appeals court, Judge Diarmuid F. O'Scannlain, expressed discomfort at getting in the middle of a policy debate even as he concurred with the panel's ruling. "Strange as this result may seem, I concur in the court's opinion only because I believe our court's precedent compels it," he wrote.

FCC Chairman Michael K. Powell vowed to appeal the decision. In a brief statement, Powell quoted from the judge's comments: "Unfortunately, as noted by Judge O'Scannlain, the ruling 'effectively stops a vitally important policy debate in its tracks,' producing 'a strange result' which will throw a monkey wrench into the FCC's efforts to develop a vitally important national broadband policy."

Cable industry sources noted that Powell is not obligated to enforce regulations even if cable is classified as a telecommunications service. Under current law, Powell has the right to "forbear" the enforcement of regulations in cases in which rules could cause more harm than good.

In a series of rule-making steps over the past two years, Powell has sought to remove all Internet-related services from the arcane world of regulations that govern cable and telephone service. Those regulations, Powell argues, stunt the incentive of broadband providers to expand their networks by forcing them to share their lines with competitors.

Consumer activists, along with smaller Internet providers, counter that if owners of monopoly networks can control the gateways to the Internet, they can charge more and potentially discriminate against content offered by competitors.

The appeals court's ruling "completely changes the terrain of the debate," said Mark Cooper, research director of the Consumer Federation of America. Cooper's group was among several public interest groups that challenged the FCC's decision in federal court.

The decision is also a setback for the telephone companies that had asked the FCC to treat their high-speed Internet service, widely known as digital subscriber line, or DSL, with the same deregulatory approach as cable. A separate effort by the FCC to eliminate some of the regulations governing high-speed Internet service over phone lines is now effectively in limbo until the issue is resolved.

Even though cable companies are not required to open their networks to rivals, companies have begun to do so voluntarily in a few markets. Comcast Corp. has reached deals with six Internet service providers, including AOL Broadband, Earthlink and United Online Inc., to offer their competing brands of services in some markets.

Time Warner Cable, meanwhile, was required to give some rivals access to its customers as a condition of its parent company's merger with America Online.

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