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Brand X: Statement of CFA and CU on the supreme court’s decision

June 27, 2005


The Supreme Court’s decision to overturn the Ninth Circuit ruling in the Brand X case on administrative procedure grounds (i.e. Chevron deference to the agency) should be a wake up call to Congress on both procedural and policy grounds. Congress clearly outlined a specific procedure that the Federal Communications Commission should follow in making important deregulatory decisions and it needs to be more explicit.
More importantly, without careful thought, the Federal Communications Commission (FCC) made the decision to exempt cable modem service from the obligation of providing nondiscriminatory access to the telecommunications network. In its action, the agency abandoned a fundamental principle that has applied to all means of communications throughout U.S. history: Communications and transportation networks must be available to all on a nondiscriminatory basis if they are to serve the public interest. This principle has historically applied to roads, canals, railroads, steamships, airlines, telegraph, and telecommunications.
The decision to abandon nondiscrimination was a grave error, both harming consumers and stifling entrepreneurial innovation. Allowing cable operators to act as gatekeepers on the flow of information has slowed technological progress and adoption of high-speed Internet service. The Court’s ruling also threatens to cement the cozy duopoly of cable modem and DSL service that has made a mockery of competition in American broadband markets and prompted hundreds of communities across the country to build their own local networks. These community Internet systems now represent a safe haven for entrepreneurial innovation, competitive services, and open access.
In the years since the FCC refused to require cable operators to afford nondiscriminatory access to their telecommunications networks, the U.S. has slipped from third in the world in high-speed Internet adoption to sixteenth. Further, this declining rate of U.S. broadband deployment has been inversely proportional to the prices consumers pay to access the high-speed Internet: Americans pay 10 to 20 times on a megabit basis for broadband as the Koreans or Japanese.
With growing concerns about the erosion of U.S. global competitiveness, giving cable and telephone monopolies the ability to stifle innovation by discriminating against Internet service providers (ISPs) and applications developers, whose services might compete with their franchise products, is foolhardy.
It is our view that the FCC clearly abused its discretion in ruling that cable operators should not be constrained in their treatment of independent ISPs. We will continue to urge the Commission to promote nondiscrimination, as opposed to common carrier requirements, in cable modem access through its current Notice of Proposed Rule Making (NPRM) process, and will do the same in its current wireline proceeding to ensure that non-discrimination principles continue to be applied to provision of DSL service.
We will also urge Congress to order the Commission to implement a policy of nondiscrimination in a manner that meets the needs of consumers, entrepreneurs, ISPs and applications developers for access to the network, and the needs of the network operators to have flexibility in advancing the functionality of their networks. Other nations have struck this balance; the FCC and industry incumbents now must find a way to follow the nations that have leapt past us into the 21st century.
Mark Cooper, Research Director, CFA: (301) 807-1623
Gene Kimmelman, Senior Director of Public Policy & Advocacy, Consumers Union: (202) 462-6262
Ben Scott, Policy Director, Free Press (202) 265-1490