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Word Games at the FCC

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Is high-speed Internet “broadband” service, delivered via cable, an information service (like CNN) or a telecommunications service (like Verizon)? Or is it a combination of the two? And why does it matter?

In 2002, a bare majority on the Federal Communications Commission ruled that cable broadband is only an information service. But in 2003, the Ninth Circuit Court of Appeals ruled that cable broadband is both an information service and a telecommunications service. In late August, the Acting Solicitor General petitioned the Supreme Court to overturn the Ninth Circuit’s decision and affirm that of the FCc=

In the Communications Act, Congress defines a “telecommunications service” as “the offering of telecommunications for a fee directly to the public.” It defines an “information service” as “the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing.” In other words, a telecommunications service is the sort of product a phone company offers a consumer, while an information service is electronic content made available by a telecommunications service. Cable broadband consumers, individuals and businesses, pay the cable companies to receive fast Internet service. While Comcast may offer access to its own and other websites, it also offers the ability to send and receive e-mail, and in some cases telephone calls. As the Ninth Circuit recognized, cable broadband consumers pay for both an “information service” and a “telecommunications service.”

So why are the FCC and the Justice Department intent on calling cable broadband service only an information service? Because if Comcast cable broadband is an information service, like CNN, then it doesn’t have to worry about the rules that require telecommunications providers like Verizon to make their lines available to competition. Nor would Comcast necessarily be required to allow government surveillance, or to contribute to the Universal Service Fund – the source of telecommunications support to schools, libraries, health care centers, poor people and under-served rural areas. By simply calling cable broadband an “information service,” a lot of these pesky rules can be avoided. Not surprisingly, Verizon argues that its broadband telecommunications service (DSL) should be redefined too.

It’s easy to understand the FCC’s actions if you focus on the result it is trying to attain. FCC Chairman Michael Powell and the other majority commissioners apparently believe that by relieving cable broadband service providers from the burdens faced by telecommunications providers, they will be inspired to make broadband telecommunications more available at lower costs to the consumer. This is a laudable goal, but there is little evidence, historical or empirical, to support this belief, particularly where cable is concerned.

Historically, cable deregulation has only brought us higher cable prices, with prices rising far above the rate of inflation. In his petition to the Supreme Court, the Acting Solicitor General notes a rise in broadband subscribers of nearly 250 percent per year since 1999 (from 3 million to 28 million by the end of 2003) as support for the FCC action. However, according to the FCC’s own statistics, telephone broadband service (DSL), which is treated as a telecommunications service, rose at a higher rate (25 percent) in 2003 than cable broadband service (20 percent) during the same period.

The FCC and the Acting Solicitor General would like the Supreme Court to defer to the “expert” agency. But even the Rehnquist Supreme Court looks occasionally at whether an agency’s decision is reasonable. The FCC’s decision was based on ideology, not on the law or the facts. When agency expertise is made to serve ideological ends it merits the trust of neither the court nor the public.

The Supreme Court should let the Ninth Circuit decision stand. But if it does decide to hear the case, it should be alert to the broader implications of the FCC’s decision. The agency is currently considering how to respond to the increasing migration of telephone service to the Internet. If all Internet service is classified as an information service, Universal Service funds that support access for schools, libraries, health care centers, poor people and rural areas will dry up. Such a result will not help us achieve the goal Congress set out in the 1996 Telecommunications Act of timely and reasonable access to advanced telecommunications services for all Americans.

Link to the Acting Solicitor General’s petition for certiorari to the Supreme Court: http://www.fcc.gov/ogc/documents/filings/2004/BrandX.pet.
final.pdf

Link to the Appendix that includes the Ninth Circuit decision and the FCC ruling
http://www.fcc.gov/ogc/documents/filings/2004/BrandX.pet.app.
final.pdf

Link to the 6/04 FCC Report on High-Speed Services for Internet Access: http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD
/hspd0604.pdf

Mark Lloyd is a senior fellow at the Center for American Progress focusing on communications policy issues, including universal service, advanced telecommunications deployment, media concentration and diversity.

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