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At stake is whether cable broadband providers must share their lines with rivals--as happens in the phone industry--or whether they should be exempt from such rules. Though seemingly arcane, the issue could influence how quickly high-speed Internet services come online across the country, what features they will have and how much they will cost--particularly in those regions where cable is the only broadband choice for consumers.
The case pits the Federal Communications Commission against Brand X, a Santa Monica, Calif., Internet service provider.
Brand X is hoping for a ruling that will force cable companies to lease their lines at a discounted rate, so the ISP can sell broadband service to its customers. If cable companies are not required to share in this way, Brand X argues, consumers will pay higher prices and have fewer choices. The FCC, on the other hand, will try to make the case that rules hammered out in the phone industry have led to higher prices and slower broadband growth. Keeping cable companies exempt from line-sharing rules will spur investment, and benefit consumers more in the long run.
What's new:
A California ISP's challenge against the FCC's broadband rules heads to the Supreme Court next week.
Bottom line:
The case could force cable companies to open their broadband lines to other ISPs, or it could hand cable and the Baby Bells more control of their networks. This could affect how quickly--and how cheaply--broadband service rolls out.
"I don't think the FCC feels that high regulation in these industries is beneficial to broadband progress overall," said Patrick Mahoney, an analyst at market researcher The Yankee Group.
Though the nation's highest court will not make a formal decision until early summer, the impact could go well beyond Internet services. Cable and phone providers plan to use broadband for more than just letting people surf Web sites faster. It'll be used to feed high-definition television stations, nationwide voice calling and future digital services into peoples' homes. All these services could be affected by the court's ruling.
Tuesday's arguments are expected to highlight wildly divergent views about the impact of forcing cable operators to lease their lines to smaller ISPs such as Brand X.
Critics of open-access rules point to the lesson of the Baby Bells, who were forced to lease their DSL, or digital subscriber line, lines to competitive ISPs as part of the 1996 Telecommunications Act. While the cable industry began pouring money into network upgrades, the Bells pulled back on their improvements, arguing that any investments would be cannibalized by rivals who could lease the lines at rates set by the government.
Advocates of open access argue that the Bells were simply stalling. Once they realized the cable industry had taken a dangerous lead, the phone companies brushed past regulatory concerns and quickly began closing the gap.
For more than two years, the Bells have aggressively marketed their DSL services by dropping subscriptions to as low as $26 a month in some areas. DSL subscriptions have surged, and most major cities can now get service.
The result is a fiercely competitive market that pits cable giants against phone companies, with little room for small fry such as Brand X.
In response to DSL's gains, cable companies have hiked download speeds to as high as 5mbps for standard service, although the higher monthly subscriptions average about $45.
In 2004, broadband subscriptions grew by 8.6 million to a national total of 33.2 million, according to Leichtman Research Group. Cable remains the leader, with about 60 percent of the market, and DSL with most of the rest.
In effect, Brand X will have to argue that competition would have been even fiercer with tough cable regulations in place.
A case of definitions
Legal experts said the case will come down to an interpretation of two words: "telecommunications" and "information."
Phone companies are deemed telecommunications services, making them subject to regulations that require them to share their broadband DSL lines with competitors. Cable companies are defined as information services, which means their broadband networks are not normally subject to line sharing or local regulations. One exception is Time Warner Cable, forced to lease its lines to rivals as a condition of the 2000 merger between parent Time Warner and America Online.
The distinction has had wide-ranging effects on the Baby Bell phone companies--Verizon Communications, SBC Communications, BellSouth and Qwest Communications International--which have argued for many years that the rules are unfair to their DSL businesses. Because the Bells are considered telecommunications services, they
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-We're not only talking about cable companies anymore. This relates to all businesses. Where's room for a small software co. in the midst of Microsoft that corners the market? Or how about a small bookstore? Where does it fit in between B&N and Borders?
We're rehashing the same old story: company A won't play well with company B. In the end those who are in business will tell you that that's how it is - get used to it.
Those of us that use cable/dsl lines will tell you that in the end it's really up to the consumer and what they think is reliable and who is reliable.
I pay more for the dsl and receive slower speeds but I pay the price that I pay for the customer service. To me that is more important than receiving the fastest connection possible.
If these cable/dsl companies realize this they would work together to find a better and faster solution than squabbling over cable lines.
Let the small guy in and see what he has to offer-
If he can't survive then no one really loses anything.
Remember that? It means that unfairly applying one set of rules to one industry, while exempting another (in this case cable) is unfair. Were it not for the political might of the cable comnpanies,their monopolies would have long been deregulated, subjected to free market conmpetition.
The simple fact is that when the Supreme court determined that ATT should be broken up to allow for competition, they did absolutely the right thing for consumers; long distance service is more ubiquitous and costs 95% LESS than twenty years ago. Allowing competitive use of cable access to the home would not only lower costs drmatically, it would force all competitors to allow "ick and cloose" offerings of entertainment, communication, and other services, like security monitoring, electronic housdehold management, and on and on. That's a real and substantial benefit for consumers. They could expect a full information package of services; HDTV - Cable charges for HDTV service, and the FCC wanted it to be offered and is offered for free by network broadcasters (The top TV markets offer braodcast HDTV for FREE! and cable turns around and charges you for the same signal). Broadband: with competitive access, broadband service prices could decline by up to 70%; there is no economic reason that broadband is priced this high, except for greed, DSL would show similar declines.
The average "full service" cable bill, including broadband, basic cable, and HDTV with the cable company box, is over $100.00 per month!
With competitive access, that could decline by up to 50% or more!
It's no coincidence that cable rates are up over 200% (while long-distance rates are down over 95% due to competition, as noted above)since politically-driven legislation allowing cable monoplolies to exist, was passed.
If the cable companies get to control VOIP(Voice Over Internet Protocol) the opportunity for free or reduced cost local and long distance, communication all over the world just a click away, goes away.
I hope the Supreme Court reflects on the positive good evolving from previous decisions to reduce and eliminate monopolies; in a free market system, competition assures market-reality pricing. Just look at the cost of flying to San Francisco from New York; down over 70% since airline deregulation. There are numerous examples that prove the free market system works. Let's keep pushing for an anti-monopoly, open competition decision from the court. Politics aside, the interests of free markets and consumers must prevail.