FCC Takes Major Step Toward Deregulating Broadband

New cable modem classification frees broadband cable industry from previous regulatory obligations. Wireline broadband reclassification is next on the agenda, as the FCC steps back from regulating the monopolies.

by Roy Mark of www.internetnews.com [March 15, 2002]

The Federal Communications Commission (FCC) approved a rule change this morning reclassifying broadband via cable modem as an "information service," freeing the cable industry from regulations that typically are applied to "telecommunications services," including making access to their lines available to competing Internet service providers.

The rule change is the first of several championed by FCC Chairman Michael Powell as a fast track to greater broadband deployment. In February, the Commission issued for comment a proposed rule that would reclassify telephone-based broadband Internet access services that critics contend will essentially establish DSL service as a monopoly of the Baby Bells.

Thursday's reclassification will allow the cable companies, the nation's largest suppliers of broadband service, to avoid previous regulatory obligations, including nondiscriminatory interconnection and carriage, fair contribution to the support of universal service, and provision of advanced telecommunications to individuals with disabilities.

The rule change is likely to spark a round of contentious legal challenges from state regulatory authorities since, as an information service, the cable industry will contend it is exempt from the local franchise fees it currently pays for the right to deliver Internet service to a community. The industry already pays fees of up to five percent of its gross revenues to local franchise authorities for rights to deliver television service.

Commissioner Michael Copps, who also opposes the February DSL action, was the lone dissenting vote on Thursday's rule change.

"Just one month ago, the Commission adopted a Notice of Proposed Rulemaking (NPRM) regarding the classification of broadband services delivered by wireline providers. I dissented from that Notice and expressed concern that some might read that Notice and conclude that the Commission had a predetermined agenda to deregulate dominant providers in the market," Copps said. "The spate of newspaper stories and magazine articles in the intervening month bears out the concern that I expressed. Many analysts and observers have concluded exactly that."

Copps said he could not support the rule change because it creates "dangerous uncertainty in the growing market for cable broadband services."

An FCC source told Internetnews.com, however, that critics of Thursday's rule change and February's proposed changes for DSL carriers have a shortsighted vision of the future.

"It's not an implausible scenario that instead of having three or four choices of an ISP offered by the cable or telephone companies, consumers will have three or four choices for broadband of which two would be telephone or cable," the source said. "Wireless and satellite services will also be offering broadband services. Our critics seem to think telephone and cable are going to the consumers' only two choices of broadband."

February's proposed rule change would classify Internet service providers as "information services with a telecommunications component," rather than their current status as a telecommunications service. As proposed by the FCC, information services would include voice mail and e-mail, which ride over telecommunications facilities.

Currently, incumbent local exchange carriers must interconnect with local telephone and broadband Internet providers on a non-discriminatory basis under open-access, common carrier rules. Critics fear the proposed new rules will remove the access requirement from the still-growing DSL broadband industry, and further shift market power to the four remaining incumbent local exchange carriers.

"Not only does this classification misconstrue Congress' intentions in the Telecommunications Act of 1996, it threatens to create a regulatory black hole for high-speed Internet services, leaving both local and federal authorities unable to protect public interest concerns in an increasingly centralized industry," said Jeffrey Chester, the executive director of the Center for Digital Democracy.

Dr. Mark Cooper, research director of the Consumer Federation of America, added, "The FCC's decision is fatally flawed and will not provide a workable framework for promoting the deployment of advanced telecommunications capabilities. This policy will undermine the open communications environment that applications developers and content suppliers need to drive innovation, and citizens need to enjoy vibrant civic discourse."

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