Cable Lines Opened to ISPs

WASHINGTON —  Inviting more competition in high-speed Internet access, a federal appeals court this week refused to reconsider an order requiring cable operators to share their networks with rivals.

The 9th Circuit Court of Appeals in San Francisco dismissed arguments from the Federal Communications Commission and the cable industry that cable-based Internet access should be exempt from the rules that require telephone companies to lease their lines to competitors.

Instead, the court late Wednesday upheld, without comment, its October 2003 ruling that cable and phone networks should be treated similarly. Barring a stay, the order takes effect next week.

Experts said the decision ultimately could trigger the same kind of rivalry for customers of cable high-speed Internet access that exists with slower dial-up service.

Competition among Time Warner Inc.’s America Online and more than 2,000 other providers has driven dial-up rates below $10 a month -- less than a quarter of the average price of high-speed service, or broadband.

“This creates a true opportunity for consumers to pick and choose from a broad array of cable Internet services,” said Gene Kimmelman, Washington office director for Consumer’s Union.

Internet service providers such as EarthLink Inc. are eager to use cable as well as phone lines, but Robert Sachs, president of the National Cable & Telecommunications Assn., said the court’s order “would deter new investment and impose unnecessary costs on broadband services.”

Cable operators have spent $85 billion modernizing their networks over the last two decades, and more than half of the 25 million customers with high-speed Internet access subscribe through their cable companies.

The decision also marks another setback for FCC Chairman Michael K. Powell, who wants to spur wider broadband deployment with less government oversight of the cable industry.

Other attempts by Powell to loosen regulations on phone service and media ownership have been thwarted by the courts, Congress and his fellow commissioners.

“I am disappointed,” Powell said Thursday. “The commission has worked tirelessly to advance economic growth and investment in high-speed Internet networks. By standing on a prior decision, this court ... effectively stops a vitally important policy debate in its tracks” and “prolongs uncertainty to the detriment of consumers.”

The FCC for decades has granted the cable industry broad leeway to build out its networks without the heavy regulation imposed on telephone carriers. In March 2002, the agency exempted cable companies from laws that force phone companies to open their lines to rivals.

Powell and other commissioners supported the cable industry’s argument that the regulatory disparity was necessary to encourage debt-laden cable operators to upgrade their networks to be capable of offering hundreds of video channels, high-speed Internet access and even phone service.

Appealing the 9th Circuit decision would prolong the very regulatory uncertainty Powell decries. Adding to the uncertainty, the D.C. Circuit Court of Appeals last month tossed out the FCC’s rules forcing phone companies to open their lines. In that case, Powell wants local phone companies and their competitors to negotiate rates rather than spend more time in court.

What’s more, an FCC appeal might be opposed by the Justice Department, which is concerned that greater deregulation could complicate its law enforcement efforts.

The FBI has held talks with the FCC to iron out rules giving investigators clear authority to wiretap new communications technologies such as Internet telephony. A lengthy appeal could complicate those discussions, sources close to the FCC say.

In the meantime, service providers like EarthLink could petition the FCC to implement the court’s ruling, FCC officials said. Or they could approach cable companies directly and negotiate access to cable networks.

Some cable companies -- notably Time Warner -- have struck deals with independent broadband providers as a result of government pressure during Time Warner’s merger with AOL in 2001. But experts say other big cable operators like Cox Communications Inc. and Comcast Corp. are unlikely to follow Time Warner unless forced.

Dave Baker, vice president for law and public policy at EarthLink, said his company supported the court ruling but had not decided whether to approach cable companies for access to their lines.

“We agree with the concept,” Baker said. “This ruling is definitely a step in the right direction ... but we will have to see what the cable industry and the FCC do in the next 90 days.”

If the ruling stands, a key issue is likely to be whether regulators will require cable operators to offer their networks at discounted prices the same way local phone companies like SBC Communications Inc. must.

Although Baker said independent Internet service providers could differentiate themselves by offering extras such as virus protection and firewalls, he acknowledged price would probably be key.

More than 7.4 million people signed up for broadband services last year, bringing the total to nearly 25 million subscribers in the United States, according to market tracker Leichtman Research Group Inc. But broadband growth, particularly in cable, has slowed in recent months as customers balked at high prices.