NCTA SAYS IT'S CONFIDENT 9TH CIRCUIT DECISION WON'T TAKE EFFECT

The FCC has said it will appeal, and NCTA, which was an intervenor in the case along with Charter, Cox, Time Warner Cable and its parent, AOL Time Warner, has said it would support the FCC vigorously. On the other side, Media Access Project (MAP), which was among the FCC’s challengers, said the Commission and NCTA were unlikely to prevail and the judges were correct. MAP and several ISPs, including Earthlink, believe independent ISPs should have access to what they consider “monopoly” cable broadband lines.

The first step, NCTA lawyers said, would be to seek an en banc review by the full 11 judges of the 9th Circuit. The ruling in Brand X v. FCC was by a 3-judge panel, and NCTA officials said they believed the full panoply of judges would decide differently. If the case is turned down for en banc review or if it’s reviewed and the ruling is upheld, the next move for the FCC would be an appeal to the U.S. Supreme Court. NCTA lawyers said they were hopeful the case would be heard by the full appeals court because NCTA believed the 3 judges didn’t decide the case on the merits, but rather on the concept of “stare decisis,” which holds that a circuit be bound by its previous rulings that are on point. In this case, that previous case was AT&T v. Portland, in which the 9th Circuit said cable modem service constituted both an information service and a telecom service. The court said that since the 2 couldn’t be unbundled, the service should be regulated as a telecom service under common carrier regulation.

At the time of that ruling, the court didn’t have guidance from the FCC on the issue, NCTA pointed out, and since then the Commission has declared that cable modem is, in fact, an interstate information service not subject to common carrier regulation. NCTA believes an en banc panel isn’t necessarily bound by stare decisis and instead would be guided by the Chevron standard, which would lead the court to defer to the expert agency when that agency has made a reasonable interpretation of the law.

However, MAP Assoc. Dir. Harold Feld said he believed the court won’t grant en banc review. “For the FCC to get review en banc, they would have to have the 9th Circuit agree to review what their precedent says about when an agency has spoken,” and in this case it has said the FCC acted too late, he said. Because the FCC didn’t act quickly enough, the judges made a legally binding interpretation of the Communications Act, Feld said. He also said he believed the Supreme Court would not take this case because there was no conflict among various circuits and because the high court “historically hates cases” where a party claims a court incorrectly applied the Chevron standard.

The decision wouldn’t take effect for 52 days from the ruling, and FCC Chmn. Powell has said the agency intends to appeal within its 45-day time limit, which effectively would stay the ruling pending that appeal. Since the case could take a year or so, the ruling would be at least deferred during that time. And NCTA’s lawyers predict it never will take effect, not only because they think appeals ultimately will be successful, but because the FCC can use its forbearance authority to ensure that any rules it finds aren’t in the public interest aren’t enforced. Since Powell has indicated that encouraging the deployment of broadband is a major priority for him and that investment and cable modem service would only be hindered by the ruling, NCTA lawyers said they believed Powell wouldn’t hesitate to use forbearance authority -- if the situation ever got that far. Feld said it would be a stretch for the FCC to use its forbearance authority here, though, because “it’s implausible” that such a decision would protect consumers or be in the public interest.

As for future investment by the cable industry in high- speed Internet service, Sachs said most cable operators didn’t bat an eye when briefed by NCTA officials. “We are somewhat accustomed to living with a certain degree of regulatory uncertainty,” Sachs said, and the industry never has been 100% sure about the regulatory treatment of cable modem service: “At the end of the day, we believe the decision in this case is unlikely to stand.” Daniel Brenner, senior vp-law & regulatory policy, said he thought the FCC would consider the ruling when it decided on the regulatory implications of its decision that cable modem was an interstate information service. That rulemaking is pending, although FCC Media Bureau Chief Kenneth Ferree has said the staff has all but finished its work on the item (CD July 16 p5).

Outside counsel Howard Symons also noted that Powell recently said he wanted to begin an examination of Voice- over-Internet Protocol (VoIP) (CD Oct 2 p3), so the ruling wouldn’t have an effect on cable VoIP services. As for traditional circuit switch telephony, cable operators have long been subject to common carrier regulation in that arena and nothing would change that, Symons said.

Meanwhile, local govts. have expressed dismay over the 9th U.S. Appeals Court, San Francisco, decision on the classification of cable modem service, saying it would hurt their ability to collect revenue that paid for public safety, schools and other essential public services. The Alliance of Local Organizations Against Preemption (ALOAP) said it had urged the court to find that cable modem service was a cable service based on 1996 amendments to federal law that were “specifically intended to make clear that information services provided to subscribers over a cable system are cable services.” ALOAP includes the National League of Cities (NLC), the U.S. Conference of Mayors (USCM), the National Assn. of Counties, the National Assn. of Telecom Officers & Advisors (NATOA) and the International Municipal Lawyers Assn. “The 9th Circuit panel ignored this statutory language and legislative history and without ever reaching the merits of the matter, decided this case based on a decision reached in an earlier case involving the city of Portland” (Ore.), NATOA Exec. Dir. Elizabeth Beaty said. This decision was particularly troubling because the regulatory status wasn’t even briefed in the Portland case, she said, and as a result would compound the uncertainty surrounding the legal status of cable modem service. While the 9th Circuit ruled that cable-delivered Internet service was a telecom service, the 4th Circuit in Richmond, Va., had held it was a cable service, she said. NLC Exec. Dir. Donald Borut said: “The net effect of this [9th Circuit] decision is that it deprives local governments of their constitutional right to charge cable monopolies, which should not be exempt from paying fair rent for the use of public property.” Dearborn (Mich.) Mayor Michael Guido, who’s vice chmn. of the USCM Transportation & Communications Committee, said the court didn’t take into account the direct economic impact of cities’ losing 5% franchise fees on cable modem service, which they used for maintaining and repairing the local rights-of-way where cable companies had their infrastructure: “Now we are forced to subsidize this cable operation with resources that we don’t have.” Beaty said local govts. were exploring their options for further review of the court decision.