9th Circuit Overturns FCC's Cable Modem Decision

Decaffeinated Jedi writes "According to this Washington Post article, a federal appeals court in California has overturned a Federal Communications Commission decision that many smaller companies claim has kept them locked out of the high-speed cable Internet business. As Chris Murry of Consumers Union (publisher of Consumer Reports) notes, 'Many consumers hate their cable companies' privacy policies and their failure to deal with spam effectively. Giving consumers a choice of Internet service providers would open the door to more competition, and let people choose services with better privacy and less spam.' As noted in News.com coverage of this decision, however, FCC chairman Michael Powell plans to appeal the ruling." Reader rednaxela provides some more insight (and a link to the ruling itself), below.

rednaxela writes "The 9th Circuit today issued a decision overturning the FCC's classification of cable modem service as an 'information service,' stating instead that cable modem service consists of both an 'information service' *and* a 'telecommunications service.' Telecommunications services are classified under Title II of the Telecommunications Act of 1996, and are subject to all kinds of regulation. Information Services are classified under Title I, and are largely free from regulation. If upheld, this decision will likely require cable modem providers to open their networks to competing ISPs. Further, this is likely to derail, or at least complicate, the FCC's plans to classify DSL service (which is provided primarily over incumbent telco facilities) as a unified 'information service." Bottom line - the 9th Circuit's decision may well have preserved open access for competing ISPs on all forms of wireline networks.' Here is the 9th Circuit's ruling (PDF).

Comments

Competition

[tsanth]

Let's say that there does come pressure for cable companies to lease their lines out to third parties. What about protections to keep those third parties from being charged exorbitant rates for their leased lines?

Re:I'm in Canada

[Pieroxy]

I have trouble understanding the FCC on this one. USA is a country with anti-trust laws, which basically means they know that a monopoly can kill a market, screw people, do a lot of bad things. They know it. And yet they enforce that a cable company will have a monopoly on their small (sometimes ridiculously small) geographic area.

How can you enforce something you know is bad for the market/consumer and therefore bad for the economy overall.

I used to live in Sunnyvale, CA (Not really far far away from the next city, just in the heart of the silicon valley), and where I lived, just *one* provider for cable: Castle Cable. They don't even provide internet cable!!!!!!

Guess who got my 39.99 broadband bill? SBC. No choice. Unless I rent a T1 or something...

Note that SBC is not so bad, so I'm globally happy.

Classic contradiction

[Dr. Transparent]

Regulation inherently leads to less competition in the long run. Forcing ISPs to share infrastructure leads to localized government monoplies because companies can't afford to offer their lines up to everyone and still keep them up and compete with service. This might have short-term benefits, but long term this will be destructive. You will see local government sponsored monopolies on ISPs.

Regulation != Choice

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Just leaving some blood in the water.

Re:Can't have it both ways

[Xtifr]

Now, someone please explain to me how these two "goals" (less spam and more privacy) can co-exist with each other.

Well, just off the top of my head, these companies could respect their customers' privacy by NOT selling the names and addresses to spammers... :)

Re:Competition=good thing.

[dilvie]

I didn't say that. Actually, I dislike most of the regulation in the telecomunications industry, but I also can't overlook the possibility that competition could lower my cable bill, or at least give me an alternative provider that might not screw up my billing every month

Re:9th Circuit

[Anonymous Coward]

The judiciary defined for itself the role of final vetoer in Marbury v. Madison. Before that (it wasn't around for very long before that, of course) it was designed to be the home of justice. The common man couldn't appeal to the Executive branch and certainly couldn't appeal to the Legislative branch of government beyond his single vote at election time. The courts were designed to be the middle ground between the government and the people.

History has brought us to the point where we look at the courts as some sort of 'check and balance' which can be used to rewrite law, but it wasn't designed to be that way.

Read your Constitution again and find the article that describes the Supreme Court's ability to veto laws. You won't find it in there. What you will find is that the people have put so much trust into the courts (not necessarily a bad thing given the alternatives) that they have essentially allowed the courts to become the legislators.

Build competing networks!

[Brian Stretch]

Seriously. The telcos and cable companies shouldn't have to share their hardware. However, local governments need to make it as easy as possible for competitors to get approval to build new networks. Fiber-to-the-home, anyone? HDTV over IP multicast? The "monopolies" are vulnerable if anyone wants to give it a shot.

If the "monopolies" started doing dumb things like blocking Internet traffic between their subscribers and Mom & Pop Internet Co., then you'd have a case for regulation, assuming the free market didn't smack them for such foolishness first. But making companies share their plant to the point that the "competitor" is just a marketeer slapping their name on the same service is silly. Powell is right.

Re:Build competing networks!

[jmorse]

That's exactly the problem. The market isn't free. It costs an exorbitant sum of money to build a cable (or telco) network, which constitutes an almost insurmountable barrier to entry. As such, there would be no mom-n-pop internet companies, because mom-n-pop seldom can seldom raise the billions neccessary to enter the market...not to mention the fact that municipalities typically grant one cable provider (usually the one that bribes, er, campaign finances them the most) a local monopoly, which creates an additional barrier to entry. If you'll remember back to econ 1 (a painful memory for me...2 years of Econ at Berkeley left me pretty burnt out on the subject), you'll remember that one of the primary assumptions/preconditions of a free market was no barriers to entry. If firms can't enter, there's no competition and the whole reason for having a market (providing for societal wants and needs) is moot. That's why we regulate (er, *used to* regulate).

Question

[nemesisj]

Maybe I'm misunderstanding this, but doesn't it seem odd that we're all expecting the cable companies to allow competition on a physical network that they built and own? If someone wants to compete with them, let them build their own network. Am I completely off base?

Re:Question

[softweyr]

There is a lot more at stake than just the wire. The phone companies and in many cases the cable companies were given easements by local governments to run wire under streets, were often given land to place exchange offices on, etc., because they provide a "public good." These days, such rights-of-way can be sold for money, but the telcos and cable companies get a free ride off your tax dollars because they are supposedly providing a public service.

The irony in this is Qwest, generally one of the lousier Baby Bells, has a great DSL service offering. They'll partner with just about any ISPs that will pony up the bucks to drop in a local T-1 or greater connection to the QWest network, and offer dozens to hundreds of ISPs at reasonable rates (starting at roughly $22/month for 256K symmetrical, exclusive of ISP fees).

The cable companies have long complained what a burden it will be to provision cable modems with multiple ISPs, but it's just not true. All they have to be able to do is associate a subscriber, via the MAC address in their cable modem, with a DOCSIS config file that tells them which ISP to communicate with.

The telcos do have a bit of a head start, in that they have a logical and well-defined way to get the data off their network and onto the ISP: they require the ISP to buy telco services, in the form of T-1 or greater lines, to shovel the data across. I'm pretty certain the cable companies will be able to solve this problem in a cable company kind of way, too, if they just put their minds (well, engineers) to it. So let's have it, CableLabs, give us a cable standard for an ISP interconnect over cable.

This decision is more akin to the federal government requiring airlines to fly you to your destination regardless of which rental car company and hotel you will be using, rather than allowing them to refuse to fly you unless you use their rental cars, their hotels, etc. You wanna carry bits around on wire, fine. You wanna provide internet end-point services, that's fine too. Just don't tie the two businesses together.

This removes incentive for improvement

[geekee]

This type of case exemplifies the problem you have when you let a govt. grant a monopoly. Once a govt. grants company a the exclusive right to lay down a physical network (cable, phone, power, etc.), that company is a de facto monopoly. Here's how the game works. Govt. grants exclusive rights initially to the company paying for the netwrok to encourage investment in the network with a guaranteed monopoly. Once the network is working well, the monopoly right is taken away, and other comapnies are allowed to use the network at or below cost. This has the immediate effect of screwing the company that owns the network by changing the rules on a whim in the middle of the game. The secondary effect is that incentive to improve the network has been significantly diminished since money invested won't get a return since it benefits your competitors at your expense. Also extending the network to areas outside the current reach is unlikely for the same reason. The only good solution is to allow two or more companies lay redundant networks. The real competition between AT@T, Sprint, Verizon, etc. has vastly improved long distance and lowered the rates. The artificial competition in local phone markets has not reduced cost or improved service substantially, however. Don't expect there to be any improvement in cable service due to this artificial competition.

Re:This removes incentive for improvement

[ediron2]

The real competition between AT@T, Sprint, Verizon, etc. has vastly improved long distance and lowered the rates.

Um, I used to have a real connection, analog, uncompressed, etc. Now I have a acelp-encoded* 2k datastream that makes non-voice sound like shit, introduces a few tenths of a second lag-time and lets them multiplex a dozen calls into what used to be near-immediate and mine-all-mine! I'll grant that things are cheaper, but I don't see the vastly improved part.

Oh, and I'm not so sure about the cheaper part: virtually every calling plan I look at has some absurd gotchas: 5 cents a minute unless you need a calling card. $40 a month for unlimited long distance as long as you're talking to people on the same calling plan, otherwise it's 23 cents a minute daytime, 17 cents a minute evenings. Collect calls at a buck a minute. Direct-dial in-state for seven times the price of interstate calls.

* or whatever protocol. Point being, call bandwidth/quality has been squeezed downward faster than the rates being charged.

Re:Question?

[softweyr]

I thought the cable companies totally funded the ... system.

As with most things in the USA, some did and some didn't. Some communities laid down cable themselves, some granted rights-of-way in existing underground conduits or on existing poles. Some cable companies strung the cable themselves, over public rights-of-way.

In some cases the early cable operators even strung the cable on poles that belonged to the local telco, without asking permission, and then were granted the ability to keep them by imminent domain laws, after the Bell System was broken up. Isn't that a wonderful sick twist on the whole affair?

Re:Question?

[Divine_Entity]

Well we are forgetting somthing. Sure the cable companies funded the lines and such but the main trunk lines are being run along the roads and many other places that are owned by the government. So what to we except competitors to do run 6/7 different sets of lines when the existing infrastructure will work? That would be like Bell Sprint,AT&T all having there own lines in one city it would be insane.

Re:I'm in Canada

[solprovider]

Phone, cable, power, whatever.

Separation of hardware and software and content.
(like the separation of church and state.)

Infrastructure companies made the investment to install the wires to an area. Let them make their money from renting those wires to other companies that provide services.

The "Cable" companies are winning because they laid the wires for the sole purpose of providing content, and were regulated as content providers. Now they are branching out, but want to keep the laws as they were when they were a content provider that had to create its own infrastructure. They should be considered an infrastructure company that provides content, or better, be forced to separate the functions into distinct financial entities.

The power companies went through the same issues in the last decade. In my area (PA), you can buy your power from several companies, and PECO is responsible for its delivery. The delivery charges are more than the power generation charges, but at least you have some choice.

Let the infrastructure company charge standard rates to all who want to use them, including:
- the sister company that sells service, and
- the sister company that sells content.
- any company that wants to use the wires and can afford to pay the standard rates.

I have 2 choices for information wires to my house: Verizon or Comcast. Neither can keep a connection alive for a week. Verizon has been forced to allow others to sell DSL service over their lines. Comcast has not. I prefer cable, which means I have only one choice for my ISP. It would be better if each functon was separate:
- one company for the physical connection.
- choice of companies for the software connection.
- many choices for service (mail, website hosting) and content providers (news, search sites, CableTV)

HBO could run its own service. You could subscribe to HBO, SF, and UPN without getting QVC and CBS. (I do not watch any television, so I may not have the correct channels for cool vs. uncool.)

Let the government regulate and monitor any company that owns the wires to make certain they are priced appropriately.

government vs commercial ownership problem

[ClarkEvans]

The problem here is that a for-profit entity was granted a monopoly (and usually given special government levys and sometimes even public bonds for funding) instead of setting it up as a non-profit "governmental" entity giving public ownership. This sort of stuff happens with the falacy that just because something is commerially owned that it will be competitive. Corporations in a non-competitive market are usually slower, less attentive, and more costly than government due to profit maximization... at least with government you can kick the ring leader out of office every few years.

On the flip side, government has no business being in a field where their could be competition. And thus even though a non-profit "governmental" organization may own the resource, this does not mean that everything should be done by the non-profit's employees. Within a monpoply are many potential competitive marketplaces, opportunities for capitalism to thrive -- laying the wire, maintaining the wires, content providers, maintainers of wires, etc. Thus, just beacuse a non-profit ("governmental") entity may own the resource does not mean that it should try to do everything internally. The distinction is actually quite clear; for a power company, the non-profit should own the transmission wires, while the power plans themselves can be for-profit (properly charged for polution they create to keep the playing field level).

Unfortunate when it gets all messed up like this, and then regulation is used like a bandaid to fix a more fundamental resource ownship problem. The overall goal is to maximize competition and thus efficiency; phone, energy, and cable companies rarely do this on their own -- the 9th circut is just doing its best to "encourage" a monopoly to be at least somewhat competitive. Ick. The courts would be better off forcing a sale of the "necessary public" aspects of the company to a non-profit and then having the maintanence of these resources open to public bidding. While this would be very painful up front... it would correct the core issue.

Re:No need to worry...

[Schmucky The Cat]

Somebody else paid for?

Are you forgetting that cable operators in almost all areas have municipal charters? Government granted monopolies designed decades ago to spur investment. They've got their ROI. They can still charge for the lines use, but it's about time (and it shouldn't have taken a court to do it) that someone stood up and said it's time to end the cable monopolies.

They're not enforcing a monopoly exactly...

[raehl]

They're just refusing to force existing cable providers to open up their lines. They're not stopping anyone from laying thier own cable to compete.

And, who says cable competition is necessary? End users do not subscribe to cable - they subscribe to internet service, which they can also get by satelite, DSL, modem, cell phone, leased line, etc. Or they subscribe to TV, which they can also get by satelite, broadcast, DVD rental, etc.

Just because products are not the same does not mean that competition doesn't exist.

Re:They're not enforcing a monopoly exactly...

[Alsee]

They're not stopping anyone from laying thier own cable to compete.

False. You will get arrested if you try to dig up the roads to lay cable to compete, or if you try to climb the telephone/power poles to hang cable.

Cable companies are in general handled as utilities. As legally enforced monopolies. You cannot get right-of-way to lay cable to compete.

who says cable competition is necessary? ...satelite, DSL, modem, cell phone

While there is certianly some truth there, that is much like saying you don't need competition and free-markets for cars because there is competition and free markets for tractor-trailers and bicycles.

Modem is about 100 times slower then cable, about the same as the difference between a car and a wheelbarrow. At times satellite is no better than modem, it actually reqires a modem for half of the connection. The only decent comparison you listed was DSL, and even that is generally a fraction of the speed, more expensive, and monopoly as well.

If the government is going to impose a monopoly by only granting right-of-way for for only a single company to lay cables, then it is reasonable to the government to require that company to open the use of that cable to those who were denied the right to their own cable at reasonable prices.

The company that laid the cable is entitled to make a profit on the use of that cable, but they cannot abuse the government action granting a wiring monopoly to exterminate competition.

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