Court Upholds FCC Wireline Internet Access Order
An appeals court in Philadelphia rejected challenges to an FCC order that reduced regulation of wireline Internet access by reclassifying it an “information service.” The U.S. Appeals Court for the 3rd Circuit found the August 2005 order to be “based on a reasonable interpretation of the Communications Act” and “a proper exercise of agency discretion.” DSL is the most common wireline Internet access service.
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Tuesday’s decision came on combined petitions by Time Warner Telecom, EarthLink, CompTel and a group of competitive local exchange companies such as McLeodUSA and Pac-West. The challengers said the order would let phone companies deny competitors access to their lines, decreasing competition and consumer choice for broadband Internet service.
The FCC order is considered a wireline version of the agency’s earlier decision to reclassify cable modem service, an action upheld by the U.S. Supreme Court as the Brand X case. The wireline order eliminated a requirement that Bell companies unbundle the broadband transmission part of their Internet services and offer it separately as a common carrier service. The order also eliminated a Computer II requirement that local phone companies give independent ISPs nondiscriminatory access to their wireline transmission facilities.
The court was “unpersuaded” by challengers’ claims that the FCC ruling “is improper because it conflicts with past agency decisions,” said the decision, written by Judge Julio Fuentes. The FCC “candidly admitted” to inconsistency between the order and past regulatory treatment but found “ample basis in its prior rulings to support its classification of wireless broadband Internet access service as a functionally integrated information service,” the court said.
The three-judge panel rejected arguments that wireline and cable modem services should be treated differently because they're offered in different ways. “In our view, the record adequately supports the FCC’s conclusion that from the perspective of the end-users, wireline broadband service and cable modem service are functionally similar and, therefore, that they should be subject to the same regulatory classification,” Fuentes wrote. Shooting down a third argument, the court agreed with the FCC that challengers had raised a “red herring” in arguing that wireline broadband is classified differently in the CALEA proceeding. The court said the FCC “has the discretion to interpret the two statutes differently.”
The judges also rejected an argument that the FCC didn’t do a thorough enough market analysis to eliminate the Computer II ISP access requirement. “Despite petitioners’ extensive discussion of conditions in specific customer and geographic markets, we conclude that the FCC’s broad market analysis in this proceeding was both reasonable and consistent with the approach upheld by the Supreme Court in Brand X,” the court said.
An analyst at Stifel Nicolaus said the decision was good news for incumbent telecom companies because it “reduces regulatory overhang” and preserves their increasing parity with cable providers. The court wasn’t expected to overturn the FCC order but there was a possibility it would remand the order for more justification, he said. The 2005 order “helped spur broadband delivery in communities across the nation” so it’s good for consumers that the court decided these policies should remain, said USTelecom President Walter McCormick.