FCC Asks Supreme Court To Rule on Broadband

The Federal Communications Commission (FCC) has asked the Supreme Court to hear an appeal that could determine whether cable broadband providers can be forced to open their networks to other Internet providers.

The request, which FCC Chairman Michael Powell announced Monday, was hailed by some industry groups and slammed by some consumer watchdog organizations, who had hoped that an earlier appeals court decision would clear the way for more robust competition and increased choice for consumers.

If the ruling is overturned and the FCC is allowed to lift regulations on broadband providers, third-party ISPs such as America Online and EarthLink (Nasdaq: ELNK) could find themselves shut out of many cable markets where they don’t already have access agreements in place.

Powell, however, said he believes that consumers stand to win if the appeal succeeds since it will free broadband companies from unnecessary and cumbersome regulations dating from the early days of the telephone.

"This is about ensuring that high-speed Internet connections aren’t treated like what they’re not: telephones. A successful appeal of this case would ultimately mean lower prices and better service for American consumers," Powell said in a statement. "Applying taxes, regulations and concepts from a century ago to today’s cutting-edge services will only stifle innovation and competition."

X Marks the Spot

The case, known widely as "Brand X," involves an appeals court ruling that overturned a 2002 administrative decision by the FCC that cable modems are an "information service" without a telecommunications component and are therefore not subject to regulation under existing telecom laws.

One concern for consumer groups is that DSL providers, which include many of the top telecommunications firms, will be treated similarly to cable providers, all but eliminating competition on the broadband front.

That is critical, say analysts, because while just over half of U.S. Internet users now access the Web through broadband connections, that percentage is likely to continue to grow rapidly as narrowband use dwindles.

According to Nielsen//NetRatings, 63 million people used broadband connections to the Web in July, compared to 61.3 million on dial-up connections. Senior analyst Marc Ryan said broadband use grew 47 percent from a year ago, while narrowband usage declined.

"Internet access overall has reached a plateau, but we’re still seeing high double-digit growth in broadband," Ryan told the E-Commerce Times. "We expect to see this trend continue." By the end of 2005, a strong majority of users will be accessing the Internet with a broadband connection, he added.

Stifling Competition?

FCC spokesperson David Fiske pointed out to the E-Commerce Times that Acting Solicitor General Paul Clement agreed to join the appeal and argue on behalf of the federal government if the court takes the case.

Fiske said the appeal is being pursued in part because the FCC feels it is inappropriate for courts to attempt to step into the role of a regulatory agency.

But consumer groups widely panned the move, saying it amounted to the Bush administration siding with industry giants.

Mark Cooper, research director for Consumer Federation of America, which was among the public interest groups that intervened when the case was at the appeals court level, said the moved marked "another dark day for competition and consumers in one of the most vital sectors of our economy."

Jeff Chester, executive director of the Center for Digital Democracy, said the decision echoes the government's stance on telephone competition. In that instance, the FCC decided not to appeal a ruling that threw out rules under which the Baby Bells were forced to provide local calling access to national long-distance carriers.

"This decision is a strong reminder of why the telecommunications sector collapsed under the Bush Administration and the technology sector is limping along," Chester said in a statement.