Monday, July 04, 2005
Cable Companies Retains Grip on Net
The Supreme Court ruled yesterday that Comcast and other cable companies do not have to share their networks with competitors who might offer high-speed Internet access at lower rates. The ruling was a defeat for Internet service providers that piggyback on phone companies' networks and had hoped to do the same on cable's. The lawsuit had been brought by a California provider, Brand X Internet.
The 6-3 decision was an important milestone on a still-evolving highway on which cable, telephone, satellite, software and even electric companies are jockeying for some control over the flow of information and entertainment into American homes -- and access to the dollars that flow out.
Consumer groups pounced on the decision in the case, titled Brand X Internet v. the Federal Communications Commission. Gene Kimmelman of the Consumers Union said it would allow "cable companies to maintain a choke hold over Internet access." But the head of a cable industry trade group called the decision "a victory for consumers" because it will speed the arrival of new products and services. Kyle McSlarrow, president of the National Cable and Telecommunications Association, said it gave his industry "regulatory certainty" that it could continue to invest in network improvements without having to surrender some of its customers to competitors.
A Comcast spokesman said the Philadelphia-based company would defer to the NCTA in commenting on the ruling. Specifically, the decision turned on a hair-splitting regulatory question: Should Internet access over cable networks be classified by the Federal Communications Commission as an "information service" or a "telecommunications service"? The arguments were arcane, but much was at stake in the outcome: A telecommunications service, such as a telephone company's network, must be open to anyone willing to pay to use it -- including companies that would compete with the owner.
Cable companies' Internet connections are information services, the court found, because they provide more than just a connection over a wire, including such products as photo and video management tools. Even while phone companies are engaged in vigorous competition with cable systems in the Internet access business, they sided with the cable industry in this case. The companies hope the ruling will lead the FCC to eventually rule that their high-speed Internet service should be freed from providing access to a host of competitors.
The court addressed that question in the ruling written by Justice Clarence Thomas: "We express no view on how the commission should, or lawfully may, classify" the phone companies' Internet access service. The high court overruled the decision of the U.S. Court of Appeals for the Ninth Circuit that the FCC erred in March 2002 when it classified cable's service as an information service. Joining Thomas in the majority were Chief Justice William H. Rehnquist and Justices Stephen G. Breyer, Anthony M. Kennedy, Sandra Day O'Connor and John Paul Stevens.
Justice Antonin Scalia wrote a dissenting opinion and was joined by Justices David H. Souter and Ruth Bader Ginsburg. "After all is said and done ... and the smoke of agency expertise blown away, it remains perfectly clear that someone who sells cable-modem service is 'offering' telecommunications," Scalia wrote.
About 77.5 million U.S. households have access to the Internet, according to Jupiter Research. Of that number, the market research firm reports, about 45 percent use dial-up connections, 20 percent use high-speed phone -- or DSL -- connections, and 35 percent use cable connections.
Dial-up customers are quickly converting to high-speed -- or broadband -- connections. Phone and cable companies are dueling for those customers. Phone companies and other Internet service providers generally charge less than cable companies for broadband service. But cable generally has a significant speed advantage -- for now. Phone companies such as Verizon Communications and SBC Communications are upgrading their networks to provide faster connection speeds than cable -- plus video services. That could make them formidable competition for the cable-satellite duopoly for TV.
New technologies, including wireless Internet access and communications over power lines, could also come into play in that marketplace. With yesterday's ruling, more authority for the shaping of that marketplace was given to the FCC, which is currently composed of two Democrats and two Republicans. "We really have our work cut out for us now," wrote Commissioner Michael J. Copps, a Democrat, shortly after the ruling. "In the wake of this decision, the FCC confronts the challenge of protecting consumers, maintaining universal service and ensuring public safety in uncertain legal terrain. Today's decision makes the climb much steeper."
For more information, please visit Guardian eCommerce.
The 6-3 decision was an important milestone on a still-evolving highway on which cable, telephone, satellite, software and even electric companies are jockeying for some control over the flow of information and entertainment into American homes -- and access to the dollars that flow out.
Consumer groups pounced on the decision in the case, titled Brand X Internet v. the Federal Communications Commission. Gene Kimmelman of the Consumers Union said it would allow "cable companies to maintain a choke hold over Internet access." But the head of a cable industry trade group called the decision "a victory for consumers" because it will speed the arrival of new products and services. Kyle McSlarrow, president of the National Cable and Telecommunications Association, said it gave his industry "regulatory certainty" that it could continue to invest in network improvements without having to surrender some of its customers to competitors.
A Comcast spokesman said the Philadelphia-based company would defer to the NCTA in commenting on the ruling. Specifically, the decision turned on a hair-splitting regulatory question: Should Internet access over cable networks be classified by the Federal Communications Commission as an "information service" or a "telecommunications service"? The arguments were arcane, but much was at stake in the outcome: A telecommunications service, such as a telephone company's network, must be open to anyone willing to pay to use it -- including companies that would compete with the owner.
Cable companies' Internet connections are information services, the court found, because they provide more than just a connection over a wire, including such products as photo and video management tools. Even while phone companies are engaged in vigorous competition with cable systems in the Internet access business, they sided with the cable industry in this case. The companies hope the ruling will lead the FCC to eventually rule that their high-speed Internet service should be freed from providing access to a host of competitors.
The court addressed that question in the ruling written by Justice Clarence Thomas: "We express no view on how the commission should, or lawfully may, classify" the phone companies' Internet access service. The high court overruled the decision of the U.S. Court of Appeals for the Ninth Circuit that the FCC erred in March 2002 when it classified cable's service as an information service. Joining Thomas in the majority were Chief Justice William H. Rehnquist and Justices Stephen G. Breyer, Anthony M. Kennedy, Sandra Day O'Connor and John Paul Stevens.
Justice Antonin Scalia wrote a dissenting opinion and was joined by Justices David H. Souter and Ruth Bader Ginsburg. "After all is said and done ... and the smoke of agency expertise blown away, it remains perfectly clear that someone who sells cable-modem service is 'offering' telecommunications," Scalia wrote.
About 77.5 million U.S. households have access to the Internet, according to Jupiter Research. Of that number, the market research firm reports, about 45 percent use dial-up connections, 20 percent use high-speed phone -- or DSL -- connections, and 35 percent use cable connections.
Dial-up customers are quickly converting to high-speed -- or broadband -- connections. Phone and cable companies are dueling for those customers. Phone companies and other Internet service providers generally charge less than cable companies for broadband service. But cable generally has a significant speed advantage -- for now. Phone companies such as Verizon Communications and SBC Communications are upgrading their networks to provide faster connection speeds than cable -- plus video services. That could make them formidable competition for the cable-satellite duopoly for TV.
New technologies, including wireless Internet access and communications over power lines, could also come into play in that marketplace. With yesterday's ruling, more authority for the shaping of that marketplace was given to the FCC, which is currently composed of two Democrats and two Republicans. "We really have our work cut out for us now," wrote Commissioner Michael J. Copps, a Democrat, shortly after the ruling. "In the wake of this decision, the FCC confronts the challenge of protecting consumers, maintaining universal service and ensuring public safety in uncertain legal terrain. Today's decision makes the climb much steeper."
For more information, please visit Guardian eCommerce.
