FCC to Examine Cable Broadband

SAN FRANCISCO (06/30/2000) - U.S. Federal Communications Commission Chairman William Kennard said Friday that his agency will take a formal look at the high-speed cable Internet access market in a move to eliminate uncertainty caused by an appeals court ruling last week.

The 9th U.S. Circuit Court of Appeals ruled that Internet service over cable should be classified - and potentially regulated - as a form of telecommunications service, which gives the FCC jurisdiction over cable-broadband services.

Internet service providers have already said they plan to fight their continued exclusion from cable broadband offerings by citing both the ruling and relevant telecom law prohibiting discrimination.

Cable operators will oppose those efforts; the resulting legal battles could drag on for years, creating substantial uncertainty for investors and consumers.

But Kennard, who opposes government regulation of the cable Internet market, said at a press conference that the FCC will step into the debate as quickly as possible to clarify the situation. "In the wake of the 9th Circuit decision of last week, it has become clear to me that the FCC will have to address the issues raised by the court," Kennard said.

At the same time, the chairman also reiterated his long-standing opposition to government intervention at this time in the nascent cable broadband market. "I believe there are market incentives at work which give us a chance - a hope - that the market will evolve into an open platform," he said.

The FCC might decide to conduct its own proceeding to reclassify Internet service over cable as something other than a telecommunications service or the agency might adopt the court's classification but exempt such service from telecom rules, Kennard said.

The agency must seek public input before reaching a final decision. FCC staffers would then likely write a proposed finding that would have to be approved by a majority of the commission's five members. Kennard directs the staff but ultimately has only one vote. The process could take anywhere from a few months to more than a year, and even then, it could be challenged in federal court by the affected parties.

Cable companies welcomed Kennard's remarks because they expect that the FCC will follow his lead and continue to avoid regulating cable-broadband services.

"In light of the way some are trying to spin the decision, clarification from the FCC would be expected and welcome," an AT&T Corp. spokesman said.

Members of OpenNet, a coalition of ISPs seeking access to cable systems, called on the FCC to extend the appeals court's ruling nationwide but warned cable companies not to use the FCC proceeding as reason for stalling. "We really are encouraged that the FCC will make open access a nationwide policy," a spokeswoman for the group said. "But we hope this isn't used by the cable industry as a delaying tactic."

In the earlier legal battle resolved by the appeals court last week, the cable franchising authority in Portland, Oregon, tried to force AT&T to share its cable lines with other ISPs as a condition of the company acquiring rights to offer cable television in the city. Both sides argued in court that Internet over cable should be classified as a form of cable TV service. Portland derived its argument from the city's authority to grant cable TV franchises, while AT&T said federal cable law prohibited local regulation of cable-broadband systems.

The appeals court disagreed, however, ruling that the service is no different than high-speed Internet traffic traveling over phone lines. The ruling struck down Portland's regulation, which was based on cable franchising rules, but opened a new door for ISPs seeking access to cable broadband.

The service classification is crucial because providers of telecommunications services are regulated as "common carriers," forbidden from discrimination, while cable providers operate under a looser regime that allows companies to select which channels their customer receive.

AT&T and the rest of the cable industry have so far restricted access to their broadband pipes only to Internet service providers they own. However, AT&T will experiment with open access in Boulder, Colorado, where 500 residents will be offered multiple ISPs over high-speed cable lines.

Telecommunications rules requiring interconnection and prohibiting discrimination might force the industry to share lines even beyond voluntary agreements struck by AT&T and Time Warner Inc. allowing limited open access in a few years.

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