The line that comes into your house and provides you with telephone service, by law, is open to competition. As a result, homeowners can shop for the best deal for long distance and DSL services. The line that comes into your house and provides you with cable TV, on the other hand, is insulated from competition, based on a 6-3 Supreme Court ruling in NCTA v Brand X Internet Services. (Dissent: Scalia, Souter and Ginsburg)
The crux of the ruling is this: telephone companies are regulated as “telecommunications services” and are required to open their lines to competition. As far as internet services are concerned, this means that independent ISPs buy access to the network at wholesale and then sell that access to their customers.
This became a Supreme Court ruling because, in 2000, the 9th Circuit Court of Appeals ruled that cable provided both information and telecommunications services. Subsequently, the Republican-led FCC ruled that cable is only an information service, exempting cable companies from opening their lines to competition. Anyone who uses the Internet today or who has heard of Voice Over IP knows that this ruling flies in the face of reality.
Consequently, telephone companies must compete not only with cable firms but also with alternative DSL providers. It was the competition with alternative DSL providers that spurred innovation. I’ve had DSL since late 1998, provided by Covad over a Qwest phone line. That’s the only way I could get DSL — Qwest told me that I was too far from its central office. And at that time, the local cable provider did not offer cable-modem service.
Thus, in an Orwellian twist of logic, a ruling that limits competition is being touted as a benefit for consumers. From the National Cable and Telecommunications Association, the industry’s principal trade association:
Today’s Supreme Court decision is a victory for consumers and maintains the momentum to advance broadband in the U.S. Classifying cable modem service as an interstate information service, as the FCC did, keeps this innovative service on the right deregulatory path.
What’s next? Wi-Fi.
At the behest of telephone companies, legislation is being introduced across the country that prohibits state and local governments from providing wireless internet access.
In Congress, former Bell Labs and Southwest Bell executive Pete Sessions (R-TX), introduced the Preserving Innovation in Telecom Act (HR 2726), which prohibits local and state government from offering “telecommunications, telecommunications services, information services or cable service in any geographic area in which a private entity is already offering a substantially similar service.”
In an opposing volly, last week Sen. John McCain (R-AZ) introduced the
Community Broadband Act of 2005 (S 1294), which amends the Telecommunications Act of 1996 by specifically allowing municipalities to offer high-speed Internet access. McCain said:
Many of the countries outpacing the United States in the deployment of high speed Internet services, including Canada, Japan and South Korea, have successfully combined municipal systems with privately deployed networks to wire their countries. As a country, we cannot afford to cut off any successful strategy if we want to remain internationally competitive.
This is a classic example of market protection in the face of innovation. History repeats itself, yet again.
This prohibition movement saw its
first success in Pennsylvania (although Philadelphia was grandfathered out of the prohibition). It put another notch in its belt in June when
Florida Gov. Jeb Bush (R) signed a law similar to HR 2726.
Legislation is pending in
Indiana (House Bill 1148),
Ohio (House Bill 591),
Supreme Court Ruling,