Monday, August 30, 2004

Going to Supreme Court in Defense of Closed Cable Networks

The Washington Post reports in it's Tuesday edition that the Bush administration will ask the U.S. Supreme Court to overturn a 9th Circuit Court of Appeals ruling that cable companies must provide internet service providers (ISPs) access to their networks.

This battle has been raging for years. It started, as I recall, in Tacoma, Washington, in the late 1990s where the City Council wanted to write a requirement for open network access into its cable franchise agreement. After numerous court hearings and appeals, I think that case was ultimately resolved in favor of the cable companies. But, as the Washington Post reports, a group of independent ISPs brought a separate action challenging a Federal Communications Commission (FCC) ruling which classified cable services as information services rather than telecom services.

The cable companies (and the Bush administration) argue that upholding the 9th Circuit ruling would subject cable services to charges like Universal Service Fund fees. They're right.

However, whether that would mean higher prices to consumers is an open question. Why? Open networks would bring competition to Internet-based services delivered over now-closed cable networks. Competition has been shown to have a very positive impact for consumers on what used to be the straight telephone side of this evolving industry.

That the FCC ruled in a way that protected the proprietary hold of cable companies over their networks should come as no surprise. This is consistent with the 'competition among modalities' approach to competition that FCC Chairman Michael Powell champions. It is consistent with FCC rulings that have exempted incumbent local exchange carriers from having to grant competitors access to new fiber networks.

This particular Powell Doctrine represents a sharp change from the policies that were in place which enabled the Internet to become a hotbed for innovation. It is consistent with a world view which says that inter-modal competition among corporate monopolists is a good thing.

Could be, but good for whom?

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