Court rejects FCC's ruling on cable Internet competition

By Matthew Fordahl
Associated Press

SAN JOSE, Calif. — A federal appeals court opened the door yesterday to additional rules on high-speed Internet access over cable television lines, overturning a Federal Communications Commission decision that competitors say has kept them locked out of the cable systems.

In an opinion issued yesterday, a three-judge panel of the 9th U.S. Circuit Court of Appeals in San Francisco said the FCC made a mistake when it classified cable Internet as just an "information service."

The judges, basing their ruling on a decision in an earlier case, said cable-based broadband also is a "telecommunications service," which under current law would make it subject to the steeper rules of the telephone industry.

The FCC voted in March 2002 to exempt cable companies from laws that force phone companies to open their lines to competition. At the time, officials said the move was necessary to spur more investment in high-speed Internet services.

That move left phone companies, which offer the competing digital subscriber line technology, at a disadvantage, critics said. They're subject to much more regulation, including much-debated rules requiring them to lease their infrastructure to competitors.

Consumer groups and competitors for cable Internet customers applauded the decision, which ultimately could lead to rules requiring cable Internet providers to open their lines. In most cases, cable companies act as the Internet service provider for their customers. In Hawai'i, Oceanic Time Warner offers Internet service providers AOL and Earthlink access to its broadband wires as a condition of the merger of AOL and Time Warner. But, competitors such as LavaNet complain they're still locked out.

"Requiring Time Warner to provide open access to the cable telecommunications infrastructure would have many benefits for consumers as it has in other areas: lower prices, better customer service, and service offerings customized to customers needs," said Yuka Nagashima, president for Internet service provider LavaNet Inc.

For Oceanic, the decision could allow AOL onto competing cable company lines on the Mainland, said Norman Santos, vice president for Oceanic's operations.

"This is really good news for Time Warner because I think that would allow AOL on their other systems," he said.

Though there are alternatives for high-speed access such as telephone line-based DSL, fixed wireless and satellite, about 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 the cable and large telephone companies. Consumers Union, the publisher of Consumer Reports magazine, said three-fourths of all independent ISPs have gone out of business in the past five years.

"Many consumers hate their cable companies' privacy policies and their failure to deal with spam effectively," said Chris Murray, legislative counsel for Consumers Union. "Giving consumers a choice of Internet service providers would open the door to more competition, and let people choose services with better privacy and less spam."

Advertiser staff writer Sean Hao contributed the information on Hawai'i.