November 19, 2003 2:47 PM PST

Court grants FCC extension on cable ruling

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A federal appeals court has granted the Federal Communications Commission an extension for filing a petition to rehear a controversial case involving cable regulation, an FCC source confirmed.

The Ninth Circuit Court of Appeals on Monday said the FCC now has until Dec. 4 to file a petition asking the court to reconsider a previous ruling involving cable broadband regulation. If the petition is granted, another panel of judges will take a fresh look at the case in what's called an "en banc" hearing. The panel will then offer a separate ruling based on their examination.

The deadline extension stems from an October ruling by a three-judge panel from the Ninth Circuit, which said the FCC erred when it designated cable broadband as an "information" service. The label is important, because information services such as cable TV systems are outside the reach of federal regulations. However, the Ninth Circuit said cable broadband services have elements of both an information service and regulated "telecommunications" services.

Immediately after that ruling, the FCC criticized the judges' decision and vowed to appeal. But the FCC did not say at the time whether it would ask for a new hearing with the Ninth Circuit or take the appeal to the U.S. Supreme Court. The Monday deadline extension suggests that the FCC will take it back to the Ninth, the FCC source said.

If cable broadband companies are deemed telecommunications services, regulators could force the companies to share their lines with competitors and impose new taxes on the services. The Baby Bell phone companies-- SBC Communications, Verizon Communications, BellSouth and Qwest Communications International--have to allow outsiders to lease their digital subscriber line (DSL) services, because they are considered telecommunications services.

Cable industry lobbyists have successfully argued that regulation would hurt the expansion of residential broadband service. Cable companies have invested billions of dollars upgrading systems and wiring homes for broadband access. This investment has given cable an early market share lead over DSL, and the industry wants to continue fending off regulations to get its return on investment.

Cable's "argument of 'don't mess with a good thing by reregulating' it is still very strong," said Mike Paxton, an analyst at market researcher In-Stat/MDR. "Lots of people are making money on a service with high demand."

At the end of September, 64 percent of U.S. broadband households subscribed to cable, while the remaining 36 percent were DSL users, according to a study by the Leichtman Research Group. However, a recent wave of price cuts is helping the Baby Bells slowly bridge the market share gap between cable and DSL.

 

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