WASHINGTON – The Supreme Court (search) said Friday it will consider whether Internet providers should be allowed to sell their high-speed service over the cable television system.
Justices will hear two cases challenging a lower ruling forcing cable companies to open their lines to Internet competition. That October 2003 decision by the 9th U.S. Circuit Court of Appeals has been stayed pending the outcome of appeals.
At issue is whether cable-based broadband is a "telecommunications service" that makes it subject to the same FCC rules that phone companies must adhere to — such as allowing access to independent Internet providers.
The 9th Circuit said yes, and reversed an FCC (search) regulation passed in March 2002 exempting cable companies from rules forcing phone carriers to share their networks. The FCC had reasoned that high-speed Internet over cable was just an "information service" that made it different from phone companies.
At the time, agency officials said the move was necessary to spur more investment in high-speed Internet services. Cable companies have invested billions of dollars in upgrading their networks.
But the FCC ruling left phone companies, which offer rival digital subscriber lines, at a disadvantage. Though they must pay for upgrades, they're subject to more regulation, including a much-debated rule requiring them to lease their infrastructure to rivals.
FCC Chairman Michael K. Powell (search) applauded the Supreme Court's move to hear the case.
"The 9th Circuit's decision would have grave consequences for the future and availability of high-speed Internet connections in this country," he said in a statement. "High-speed Internet connections are not telephones."
The challenge is being brought by the FCC and the National Cable & Telecommunications Association in two appeals. They argue that a 1984 Supreme Court ruling requires courts to defer to a federal agency's expertise in deciding the best policy.
The appeals are opposed by Internet service providers and consumer groups, who say the FCC rule is anticompetitive and will lead to higher rates.
Though there are alternatives for high-speed access such as telephone line-based DSL, fixed wireless and satellite, an estimated 60 percent of high-speed Internet users subscribe to their cable company's service, according to recent studies.
That has been harmful to independent Internet providers who lost customers to cable and large telephone companies. Consumers Union, the publisher of Consumer Reports magazine (search), said three-fourths of all independent ISPs have gone out of business in the past five years.
The cases are National Cable & Telecommunications Association v. Brand X Internet Services, 04-277; FCC v. Brand X Internet Services, 04-281.