December 3, 2004 3:52 PM PST
Supreme Court to hear broadband case
The nation's highest court will determine whether the controversial "Brand X" ruling of a U.S. appeals court should stand. The case involves whether the government should regulate cable companies in the same way as phone companies. Phone companies are required to allow third-party providers to offer broadband service over their networks, but cable companies are not.
The difference arises from the Federal Communications Commission's classification of cable as an information service rather than a telecommunications service. The government can regulate telecommunications services, but cannot touch information services. In October 2003, the 9th U.S. Circuit Court of Appeals ruled that the FCC was incorrect in making that distinction.
The FCC has maintained that cable companies should remain information services, free from government requirements to open their networks to competitors. After the Ninth Circuit rejected the FCC's request for a re-hearing, the FCC headed to the Supreme Court.
FCC chairman Michael Powell applauded Friday's announcement, hoping the court would agree with his view that cable and telephone systems are similar but inherently different.
"High-speed Internet connections are not telephones, and I'm glad the Supreme Court has agreed to review the 9th Circuit's ruling that they are," Powell said in a statement.
Regardless of the Supreme Court's outcome, the decision will have profound effects on the Baby Bell phone giants and the cable industry. Both sides are in heated competition and heading down similar paths to provide digital phone, video and data.
The Bells plan to spend billions of dollars upgrading their copper wires with fiber optics, laying the groundwork for video delivery. Cable companies invested an estimated $75 billion in the 1990s, upgrading their networks with higher-bandwidth fiber lines.
The Bells and cable are becoming more similar than different. Both want to offer households a single, powerful data connection that can serve all communications and entertainment needs, such as Internet access, high-definition TV, Net phone calling and digital video recording.
However, Powell warns that changing the regulatory framework for cable companies would do more harm than good.
Powell has tried to balance encouraging broader adoption of broadband with pleasing the interests of the nation's top phone carriers. The Baby Bell phone giants have lobbied aggressively for the FCC to nullify their open-access regulations, or to impose similar regulations on cable companies to level the playing field.
Powell fears that cable companies will be slower to expand and improve their broadband services if they are forced to share their lines.
"The 9th Circuit's decision would have grave consequences for the future and availability of high-speed Internet connections in this country," Powell said.
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