MEMORANDUM

 

TO:                  Judy Harkins
                        Gregg Vanderheiden
                        RERC on Telecommunications Access 
            Karen Peltz Strauss
                        KPS Consulting

 RE:                 Summary of FCC Proceeding on Broadband
                        In the Matter of Inquiry Concerning High-Speed Access
                        to the Internet Over Cable and Other Facilities, Internet
                       over Cable Declaratory Ruling, Appropriate Regulatory
                       Treatment for Broadband Access to the Internet Over
                       Cable Facilities, GN Docket 00-185; CS Dkt. 02-52
                        Comments due June 17, 2002
                        Reply Comments due July 16, 2002

 

I.  Introduction

 

The Federal Communications Commission (FCC or Commission) has released a Declaratory Ruling on the classification of cable modem Internet service.  The ruling is accompanied by a Notice of Proposed Rulemaking (NPRM) which seeks input on the appropriate regulatory framework for cable modem service providers.  As was true for the NPRM on wireline broadband access service, both parts of this Commission proceeding is guided by the following policy goals:

 

1.  The Commission’s primary policy goal is to “encourage the ubiquitous availability of broadband to all Americans.”  Congress directed the Commission to encourage the deployment of advanced telecommunications capability to all Americans on a reasonable and timely basis, by measures designed to promote competition and “regulatory forbearance.”

 

2.  Broadband services should “exist in a minimal regulatory environment that promotes investment and innovation in a competitive market.”  As with the wireline broadband NPRM, the Commission wants to “remove regulatory uncertainty” that may “discourage investment and innovation.”

 3.  The Commission seeks to develop an approach that is consistent across multiple high-speed access platforms, including wireline, cable, wireless and satellite.

            The Commission reports that high-speed Internet access service is now available to approximately 75-80% of all the homes in the United States, and that approximately 11% of households subscribe to these services.  Cable modem service is the most widely subscribed to technology, holding approximately 68% of the residential market.  The Commission makes a point of noting the benefit of cable modem’s high speed access, i.e., being able to use sophisticated “real-time” applications, and being able to view streaming video content at a higher resolution and on a larger portion of the screen than is available with narrowband.

            The FCC explains that cable modem service consists of “Internet connectivity, enhanced applications, operations, and customer service.”  Internet connectivity functions include establishing a physical connection with the Internet by interconnecting with Internet backbone facilities, and may include protocol conversion, IP address number assignment, domain name resolution, network security, and caching.[1]  Internet access functions including making available content, e-mail, access to news groups, and the creation of a personal web page.  Customer service may include the installation of hardware and software in the subscriber’s computer, wiring of the customer’s premises, technical support, and customer service including billing, sales and marketing.

Among other things, the Commission’s ruling discusses many of the business relationships between cable modem service providers and ISPs, and notes that the models for these relationships are still evolving.  The Commission notes that cable operators typically offer “click through” access to all content and services available on the Internet, so that subscribers do not have to contract separately to have e-mail accounts or access to the World Wide Web. 

 

II.  Declaratory Ruling – Classification of Cable Modem Internet Service

 

In this proceeding, the Commission has determined that cable modem Internet service is an interstate information service.  It concludes that this service does not consist of a separate offering of a telecommunications service; nor is it a “cable service” under Title VI of the Communications Act.

Focus on the Function of the Service.   In determining the appropriate classification for cable modem service, the Commission first turns to the statutory definitions of telecommunications service, telecommunications and information service.  The Commission then concludes that each of these definitions rests on the functions that each service makes available, not the particular types of facilities that the service uses.  The Commission goes on to explain that in its Universal Service Report, it found that Internet access service combines “computer processing information provision, and computer interactivity with data transport,” and allows the use of a variety of applications including e-mail, access to Web and newsgroups, on-line data retrieval, directory service, etc.  Thus, Internet access providers offer subscribers a single integrated Internet access service, not individual or separate services (e.g., e-mail or transmission services) thateach have separate legal status.  Because these integrated applications together encompass the ability to generate, acquire, store, transform, process, retrieve, utilize or make available information, the Commission concludes that the cable modem service used to access these applications is an information service.  The Commission states that this is so regardless of whether subscribers use all the functions of a particular cable modem service that are available, and regardless of whether each cable modem service provider offers all of these functions. 

            Because the Commission concludes that the classification of cable modem service “turns on the nature of the functions that the end user is offered,” it does not matter that this service offers Internet capabilities via telecommunications.  The FCC explains that the telecommunications component is not separable from the data processing applications of the service.  Although the transmissions of information between computers are telecommunications transmissions, the Commission says that this does not constitute the offering of a separate telecommunications service.  Rather than offering telecommunications service to the end user, the cable modem operator is “merely using telecommunications to provide end users with cable modem service.”  Though the Commission acknowledges that by definition an information service includes a telecommunications component, it concludes that “the mere existence of such a component, without more, does not indicate that there is a separate offering of a telecommunications service to the subscriber.”

 

A Private Carrier Service.   The analysis above focuses on the “single, integrated information service” received by the cable modem service subscriber.  The Commission explains that the underlying transmission is not a stand-alone service offering to subscribers.  Moreover, although cable modem service providers may offer this telecommunications transmission capability to information service providers, the Commission says that this, too, does not constitute the offering of a telecommunications service.   The Commission acknowledges that some companies – e.g., AOL Time Warner – provide a stand-alone telecommunications offering to certain ISPs, but it concludes that this offering is a private carrier service, not a common carrier service.  This is because AOL Time Warner determines whether to deal with particular ISPs and the terms on how to conduct those relationships on an individual basis.  When a carrier chooses its clients and sets individual terms, the Commission states, it is a private carrier for particular services.   This is in contrast to a common carrier (covered under Title II) that must serve all people “indiscriminately.”

 

Interstate service.  As noted above, the Commission concluded not only that cable modem access service is an information service, but also that it is an interstate information service. Although traffic carried by cable modem services is both interstate and intrastate, the Commission uses an “end to end” analysis to determine its jurisdiction.  Because Internet traffic travels along points that cross different states and countries, it is considered an interstate service.

 

Not a Cable Service.   The Commission decided that that cable modem access service is not a cable service under Title VI of the Communications Act because subscribers to modem services have far greater control over the retrieval of information through a modem service than do subscribers of cable TV service.  The Communications Act defines cable service as:  “(A) the one-way transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service.”  A cable operator is in control of the selection and distribution of content to subscribers.  In contrast, a cable modem service provider allows the subscriber to be in total control of the information obtained through web searches and inquiries, the exchange of e-mail, and the production of the subscriber’s own information.  Because most of the information obtained over the Internet is chosen individually and is tailored to the subscriber’s interests, without the cable provider’s involvement, the FCC concludes that cable modem access service should not be regulated as a cable service.

 

III.  Notice of Proposed Rulemaking

 

The NPRM begins by noting that, in determining an appropriate regulatory framework for the deployment of cable modem service, the Commission is to be guided by the set of goals listed above – i.e., the availability of broadband to all Americans, an interest in minimizing regulation to promote competition, and the attempt to achieve regulatory parity.

Ancillary Jurisdiction.  The Commission explains that federal courts have consistently upheld the Commission’s authority to issue regulations intended to achieve the goals of the Communications Act, even where there has been no direct or explicit regulatory authority to do so.  All that is required is that the rules be “reasonably ancillary [related] to existing Commission statutory authority.”  The FCC has used its ancillary jurisdiction to cover information services, first in the “Computer Inquiries” proceedings, and later in its Section 255 rules, to cover voicemail and interactive voice response (IVR) services.  In the Section 255 proceeding, the Commission found that because obtaining access to voice mail and IVR services was needed in order to be able to access many telecommunications services, it had the authority to extend Section 255’s requirements to these information services.  The Commission asks whether it should now again exercise its Title I authority with respect to cable modem service.  The Commission also asks how its findings in this proceeding should impact its finding in the wireline broadband NPRM.

            The Commission suggests that parties who assert that the Commission has authority under Title I should provide specific statutory provisions, “including expressions of congressional goals” that would be furthered by the exercise of ancillary jurisdiction.  

Multiple ISP Access.  The Commission mentions that its first Notice in this proceeding had requested comment on models by which a cable operator could be required to provide multiple ISP access:

 

“Under one open access model, no particular connecting ISP has a privileged or preferred relationship with the cable operator; rather, each ISP purchases transmission capability and customer access from the cable operator on nondiscriminatory prices, terms and conditions, and the cable operator manages the network on a nondiscriminatory basis. Under a second open access model, multiple ISPs purchase transmission capability and customer access from the cable operator on nondiscriminatory prices, terms, and conditions, but an affiliated or preferred ISP manages the network on a nondiscriminatory basis. Under a third model, multiple unaffiliated ISPs would obtain access to the cable modem platform according to agreements negotiated between those ISPs and cable operators.”[2]

             The Commission notes that several parties have already submitted comments on these models to mandate multiple ISP access.  Some have suggested that multiple ISP access should be achieved through private negotiation among cable operators and ISPs; others have proposed regulations to require access.   The Commission asks parties that address this issue to specify whether they are addressing a specific form of multiple ISP access or all the forms proposed.  In addition, the Commission raises the following issues with respect to multiple ISP access:

            First and Fifth Amendment.   The Commission states that many commenters have debated whether a requirement for multiple ISP access would violate the First Amendment rights of cable operators.   Other commenters have argued that mandating multiple ISP access would be like the government taking the cable operator’s property without fair compensation under the Fifth Amendment to the U.S. Constitution.   The Commission asks for comment on these positions.

            ISP Market.  The Commission notes that the ISP market has changed significantly over recent periods and asks whether the market can provide subscribers a choice of ISPs without government intervention.  If not, the Commission asks what type of intervention is necessary.

            Commission goals.  The Commission asks to what extent would multiple ISP access further its goals (listed in section I above.)

            Regulatory parity.  The Commission asks whether it should apply the same rules on multiple ISP access to all technologies – cable, wireline, wireless, satellite  - that offer high-speed Internet access service.

            Consumer Demand.   The Commission asks whether there is a demand for access to several ISPs, and whether that demand is being met.  Specifically, the FCC asks whether “click through” access to any ISP and the Web produces the same benefits that a mandated system of multiple ISP access would produce.  It wishes to ascertain whether any cable operator or ISP is denying “click through” access to other ISPs.  Similarly, the Commission asks whether there is any threat that a subscriber’s access to content not affiliated with a cable modem service provider would be blocked.

            Costs and Benefits.  The FCC is seeking input on the costs of a multiple ISP access mandate on cable operators as well as the benefits of such a mandate for consumers.  

IV.  Regulatory Forbearance

            Under the Telecommunications Act of 1996, the FCC is permitted to “forbear” or not apply its Title II (i.e. common carrier) rules if believes this action is justified.  In this proceeding, the Commission proposes that even to the extent that cable modem service is given a telecommunications service classification, it forbear from applying its Title II rules to this service.  The Commission explains that because cable modem service will, for the most part, be treated as an information service, forbearance would be in the public interest.  Specifically, the public interest would be served because “cable modem service is still in its early stages; supply and demand are still evolving; and several rival networks providing residential high-speed Internet access are still developing.” The Commission asks for comment on its tentative proposal not to apply Title II provisions and common carrier rules to cable modem service providers.  It asks whether such regulation is needed for the protection of consumers.

V.  State and Local Regulation

            The Commission asks for input on whether FCC rules should preclude State and local authorities from regulating cable modem service.  It notes that it has authority under Title I to preempt non-Federal regulations that impede the Commission’s goals.  Commenters are asked to address three types of local requirements, including the extent to which FCC rules should preempt regulatory authority that State and local governments may have for imposing multiple ISP access requirements.

 

This summary was prepared as part of the RERC on Telecommunications Access, a joint project of Gallaudet University and the Trace Center, University of Wisconsin-Madison under funding from the National Institute on Disability and Rehabilitation Research (NIDRR) of the US Dept of Education Grant H133E990006.  The opinions offered herein are those of the author and do not necessarily represent those of the RERC on Telecommunications Access, the Universities or funding agencies.

 

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