Appeals Court Once Again Takes Up Broadband Issue

BY K. C. NEEL

Three years after ruling that cable broadband is a hybrid telecom/information service ? and despite an FCC ruling that it's an information service only ? the 9th Circuit Court of Appeals may again define the product.

A panel of three judges heard oral arguments last week, which stems from a 1999 lawsuit AT&T Broadband filed against Portland, Ore. The city had refused to transfer TCI's cable franchise to AT&T unless the MSO gave third-party Internet access providers access to its network.

AT&T won the transfer without having to provide access to outside ISPs. But the court's decision went beyond that narrow scope by defining broadband service as a hybrid telecom/information product. It was a double-edged sword for operators. They wouldn't have to pay franchise fees on broadband revenue but the service could be subject to common carrier rules. Operators stopped collecting fees on their cable modem revenue and several cities sued. ISPs weren't given automatic access and they cried foul, too. In the interim, the FCC answered cable operators' prayers determining that broadband is an information service only, meaning it isn't subject to local regulation or common carrier rules.

Meanwhile, seven court cases filed by cities, utilities and ISPs were aggregated and the case is now being heard again. The three judges (one wrote the original Portland case ruling and two are former California PUC commissioners) heard oral arguments from NATOA, the California PUC, Earthlink, Verizon, the FCC and others.

?It is always difficult to predict what a court will do from what occurs at oral argument and this case is no exception,? says Michael Schooler, NCTA's deputy general counsel. ?However, it is clear that the panel understood all of the legal, technical and policy issues involved and that FCC counsel and NCTA counsel did a good job in making their positions clear to the court.?

It could be months before a decision is rendered. And no matter what the court decides, experts predict an appeal.

?My gut tells me the court won't overturn their original ruling,? says cable consultant Steve Effros. ?They already ruled that cable modem service isn't a cable service. And if they rule it's a telecom service it still doesn't have much bearing and doesn't automatically mean cable modem service becomes a common carrier service.?

Muddying the waters further, plaintiffs want different things. Cities want broadband service defined as a cable offering so they can regulate it locally and receive franchise fees. Telecoms want parity between cable modems and DSL.

Whatever the outcome, it's not exactly the end the world for the cable industry. ?It's much too early to write an obituary about the cable modem business,? says NCTA chairman and Insight Communications CEO Michael Willner.

Yet John Mansell, a senior analyst with Kagan World Media, believes the case has major ramifications. Just as the Portland decision went beyond the scope of the original lawsuit, this ruling could extend to other parts of the industry. For instance, Mansell says, the California PUC has strongly advocated VoIP service be ruled a telecom and subject to common carrier status.