Supreme Court to hear high-speed Internet case

Cable companies may have to open networks

March 29, 2005|By William Patalon III | William Patalon III,SUN STAFF

In a debate that will shape the future of high-speed Internet service, the Supreme Court will hear arguments today to determine whether cable companies must open their networks to competitors.

The court could decide, in effect, how companies can compete to deliver high-speed Internet access to a rapidly growing market and how much choice consumers will have. The case pits the Federal Communications Commission and National Cable & Telecommunications Association, representing cable companies including Comcast Corp. and Time Warner Inc., against Internet service providers such as EarthLink Inc. and consumer groups.

At stake are billions of dollars expected from the emerging new markets such as Internet-based phone service and digital entertainment that high-speed service - or broadband - makes possible.

"What I think that this case will decide is just who's going to get the money," said Eric Easton, a telecommunications expert and associate professor of law at the University of Baltimore School of Law.

The heart of the case is a 2002 FCC ruling that classified Internet service provided by cable companies as an information service, as opposed to a telecommunications service. That designation meant cable companies were not subject to federal rules that required big telecommunications companies like Verizon Communications Inc. to lease their lines to competitors. Telephone companies also have to let competitors offer Internet service over their high-speed digital subscriber lines (DSL).

Brand X Internet Services LLC, a small California Internet services provider, successfully challenged the FCC ruling in federal court, and that was upheld in October 2003 by the 9th U.S. Circuit Court of Appeals. The FCC and cable industry then appealed to the Supreme Court.

Although the case being argued today focuses on cable access, it has much broader implications. The FCC wants to reclassify phone companies' DSL service the same way. That would allow phone companies to kick off ISPs that now offer broadband access over their lines. The commission has put a proposed DSL ruling on hold until the Supreme Court decides the Brand X case.

Aligned with Brand X are public interest and consumer groups and other Internet providers including EarthLink. Telephone giants, including Verizon, SBC Communications Inc. and BellSouth, have joined the cable industry and the FCC.

If the FCC wins, and cable modems and DSL are classified as information services, the industry "would be reduced to a crummy duopoly," said Mark N. Cooper, director of research for the Consumer Federation of America, and one of several public-interest groups that joined Brand X as parties in the case.

Left unregulated, the major cable TV providers would be free to raise prices, make adjustments that highlight some search engines or Internet sites while hiding others, and feel no pressure to make investments or roll out new services, supporters of the Brand X position say.

"This case is a battle for the soul of the Internet," said Andrew Jay Schwartzman, president of the Media Access Project and counsel for the Center for Digital Democracy, another of the organizations aligned with Brand X.

The cable industry says a victory will be good for consumers: By eliminating marginal players, competition will actually increase, and industry players will have the confidence to invest more money in their networks, said Brian Dietz, vice president of communications for the National Cable & Telecommunications Association in Washington.

Broadband cable is nothing like the conventional telephone business, and not even like the dial-up access service that ISPs still provide, he said. Companies in this sector financed and built their own networks, and shouldn't be forced to grant access to competitors.

Internet providers say access is essential for their survival, especially as more and more customers trade in their dial-up modems for the high-speed service that allows them to send digital pictures and quickly download movies and music. And they also say that that extension of the FCC rule to DSL lines means they would lose the limited capacity they now have to offer consumers high-speed delivery.

Carroll County-based Quantum Internet Services Inc. has flourished for a decade by offering high-speed service mostly to businesses over commercial fiber-optic lines supplied by the phone companies; just 10 percent of its business is over DSL.

A loss in the case "would be a disaster," for niche companies like Quantum as well as consumers and the economy in general, said Kevin Brown, Quantum's founder, president and chief executive. "But it would be an enormous win for cable companies and later for the Bell operating companies."

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