FCC Broadband Items Must Wait on ‘Brand X’ Decision

In Brand X, the Supreme Court is considering the regulatory classification of broadband. Brand X, a Santa Monica, Cal.-based Internet service provider (ISP), sued the FCC after it was denied access to cable broadband lines. The FCC denied Brand X access because it had determined that cable modems are an “information service,” which doesn’t have regulatory obligation to share lines, as opposed to a telecom or cable service, which do have interconnection and other obligations. The 9th U.S. Appeals Court, San Francisco, ruled in favor of Brand X, but the FCC appealed to the Supreme Court. The case was argued in late March and decision is expected around June.

Until Brand X is decided, it’s unlikely the FCC will make any major regulatory changes in broadband. In 2002, the FCC proposed regulating wireline broadband as an information service, just as it had with cable. It’s unclear if the FCC will resume this proceeding if the Supreme Court agrees that cable broadband is an information service.

VoIP is one area where the FCC seeks to set some rules, though emphasis is on a “light touch.” The FCC will likely try to keep VoIP free of many standard telecom regulations. However, VoIP is likely to face requirements on 911, access to law enforcement, and be subject to access charges and universal service obligations. The FCC is considering applying the Communications Assistance to Law Enforcement Act (CALEA) to VoIP, which would let police tap Internet phone conversations. The FCC is also engaged in a review of the Universal Service Fund and intercarrier compensation regime, which could eliminate the need for action on those topics regarding VoIP. Also, Congress is likely to consider legislation on IP-enabled service, which could further obviate the need for FCC action.

Another emerging issue at the FCC is whether incumbent telephone carriers should be forced to offer broadband service without requiring phone service, often referred to as “naked DSL.” BellSouth has petitioned the FCC to exempt carriers from having to offer DSL without phone service, but Qwest already offers naked DSL and Verizon and SBC have said they are trying to follow suit. Naked DSL was a topic among several Senate Judiciary Committee members, who suggested such a condition should be applied to the proposed SBC-AT&T and Verizon-MCI mergers. Senators said without naked DSL, there would be little incentive for consumers to choose VoIP as an alternative to standard telephone service.

Delivery of broadband over powerlines (BPL) is an issue that could see action in both the states and the FCC. A recent National Assn. of Rural Utility Commissioners (NARUC) report urged states to take a light regulatory approach to BPL. From the federal side, the question is whether the FCC or perhaps the Federal Energy Regulatory Commission will preempt state regulation of BPL, industry sources said.

Some states are considering legislation to deregulate some telecom services. Tex. is considering legislation that would preempt the state PUC from regulating VoIP and other IP-enabled services. Ia. has passed legislation that would let VoIP, cable and other phone services be considered competition to standard phone service as part of legislation to deregulate phone rates.

Another issue likely to emerge in states is whether municipalities can create their own broadband networks. Frustrated with slow rollout to rural areas, some towns have proposed building their own networks. However, Pa. has already passed legislation that would prevent municipalities (excluding Philadelphia) from building networks. Tex., Colo., Ia. and Fla. are considering similar legislation. Also, some rural municipalities are trying to lure broadband by using the “anchor approach,” a source said. The idea is to lure broadband deployment by guaranteeing revenue from city hall, the library and other govt. buildings in return for guarantees that providers will make broadband available to the surrounding community.