INTERNET OVER CABLE: DEFINING THE FUTURE IN TERMS OF THE PAST
Barbara Esbin*
CONTENTS
EXECU TIVE SU M M ARY ...... 38 A . B ackground ...... 38 B. Sum m ary of Contents ...... 39 C. Purpose of this Exam ination ...... 42 I. IN TRO D U CT IO N ...... 42 II. THE INTERNET AND THE 1996 ACT ...... 45 A. A Brief Description of the Internet ...... 45 1. G eneral Background ...... 45 2. Features and Functions of Communications Over the Internet ...... 50 B. Statutory Definitions and Policies ...... 55 III. VOICE AND DATA COMMUNICATIONS UNDER THE COMMISSION'S RULES ...... 57 A . C om puter I ...... 58 B. Com puter II and Com puter III ...... 59 C. BOC Provision of Internet Access Under Computer III ...... 64 D . Fram e Relay O rder ...... 65 IV. TELECOMMUNICATIONS AND INFORMATION SERVICES UNDER THE 1996 ACT .... 67 A. Interconnection Rights and Obligations Under Section 251; Who is a "Telecom m unications Carrier"? ...... 68 B. Universal Service; Status of Internet Services and Service Providers Under Section 2 5 4 ...... 6 9 1. Requirem ents of Section 254 ...... 69 2. Section 254(c) (1) "Core" Telecommunications Services Do Not Include Internet A cce ss ...... 70 3. Supportable Services for Schools and Libraries Include "Basic Conduit Access to th e In tern et" ...... 70 4. Non-Telecommunications Carriers May Receive Support for Internet Access Services Provided to Schools and Libraries ...... 71 5. Telecommunications Carriers Alone Must Contribute to Universal Service S u p p o rt ...... 7 1 C. BOC Safeguards Under Sections 271 and 272 for InterLATA Information Services .... 72 1. Enhanced Services are Information Services ...... 73 2. Protocol Processing Services are Information Services ...... 73 D. BOC Safeguards Under Section 274 for Electronic Publishing ...... 75
* Partner, Dow, Lohnes & Albertson, PLLC, Washington, stages of the project. The author is also indebted to Robert D.C., B.A., Antioch College, J.D., Duke University. Ms. Esbin Pepper, Dale Hatfield and Staag Newman for their guidance served at the Federal Communications Commission as and assistance with the final project. The views expressed Associate Bureau Chief in the Cable Services Bureau. The herein are those of the author, and do not necessarily author would like to thank William Johnson and JoAnn represent the views of either the Federal Communications Lucanik for their helpful advice and comments in the earlier Commission or Dow, Lohnes & Albertson. COMMLAW CONSPECTUS [Vol. 7
E. Access Reform Order/Internet Usage NOI ...... 1. A ccess C harges ...... 2. Access Reform Order; Internet Service Providers Will Continue to be Treated as A ccess Service End U sers ...... 3. Internet Usage NOI; Inquiry Begun on Broader Issues ...... F. Report to Congress (Universal Service) ...... G . Su m m ary ...... V. EVOLUTION OF CABLE SERVICE ...... A. Definition of "Cable Service" Under the 1984 Cable Act ...... B. "Cable Service" and "Cable System" Under Heritage ...... C. Features of Internet Services Provided Over Cable Systems ...... 1. Advanced Cable Architecture ...... 2. Current Cable Internet Services ...... VI. INTERNET SERVICE AS "CABLE SERVICE" UNDER THE 1996 ACT ...... A. Revised Definition of "Cable Service" Under the 1996 Act ...... B. Selected Cable Regulatory Issues ...... 1. Pole A ttachm ents ...... 2. Scope of Local Cable Franchises ...... 3. Fran ch ise Fees ...... 4. Unbundling/Competitive Neutrality ...... 5. Resale/Interconnection of Cable Internet Access ...... 6. C ross-Su bsidy ...... 7. O ther T itle VI Issues ...... a. Regulation of Cable Facilities and Equipment ...... b. Program m ing-Based Regulation ...... c. Regulation Based on System Capacity or "Use of Channels" ...... d. Protection of Subscriber Privacy ...... C . Su m m ary ...... VII. INTERNET POLICY ISSUES AND PERSPECTIVES ...... A. New Issues for Com munications Policy ...... B. Regulatory A lternatives ...... VIII. C O N C LU SIO N ......
EXECUTIVE SUMMARY the pro-competitive, de-regulatory program of the 1996 Act depends upon the viability of distinct A. Background regulatory categories for services, facilities, and The Internet poses significant challenges for service providers to establish the rights and obli- government policy makers and regulators. Diffi- gations of carriers as competition is introduced to cult legal and policy issues arise from the fact that formerly monopoly-based markets. Integrated Internet-based services do not fit easily into the digital service offerings, such as those provided longstanding classifications for communications over the Internet, present fundamental problems services under federal law or FCC regulations. to a regulatory framework dependent upon tech- Against these underlying category difficulties, the nological distinctions reflecting delivery of analog Telecommunications Act of 1996 ("the 1996 Act") communications services. radically restructured the regulatory landscape for The Federal Communications Commission the provision of local telephone communications ("FCC") has already begun to grapple with the services, attaching significant new consequences problems "integratedl" or "converged" broadband to statutory definitions derived from the technolo- digital services and service providers pose in terms gies of the past. of the two fundamental regulatory categories: While the Internet arguably represents one "telecommunications" versus "information serv- form of technological and service convergence, ices." A third and equally important regulatory 1999] Internet Over Cable category is that of Title VI "cable services." The [and] to preserve the vibrant and competitive free issue of the regulatory status of Internet-based market that presently exists for the Internet and services provided by cable operators over their other interactive computer services, unfettered by cable systems arises as a result of revisions to the Federal or State regulation." definition of "cable services" contained in the SECTION III reviews the treatment of voice and 1996 Act. This issue has yet to receive compre- data communications under the FCC's Computer hensive assessment by the FCC. How the FCC re- Inquiry framework. solves issues concerning Internet access and the * This series of proceedings, begun in the late provision of Internet-based communications serv- 1960s, focussed on how to reconcile the conver- ices by cable operators has vast implications for gence and interdependence of communication both providers and consumers of Internet-based and data processing technologies within the stric- services. tures of Title II common carrier regulation. This Working Paper is intended to stimulate * The FCC established two categories of serv- discussion and critical comment on these signifi- ices: "basic" (telephone communications) and "enhanced" (data cant issues of regulatory classification and their processing). The former when consequences. It suggests, without advocating provided by telephone carriers would be regu- particular outcomes, that regulatory classification lated as common carrier telephone services under must be done in light of agreed-upon policy Title II; the latter would be treated as non-regu- objectives. lated "wire communications," subject only to the FCC's ancillary jurisdiction under Title I. * Basic telephone service would be provided B. Summary of Contents as a common carrier service, subject to the FCC's Title II interconnection, tariffing, and facilities SECTION I introduces the Internet regulatory construction approval authority. Under Computer classification issues arising under the 1996 Act, II,the subject common carriers would have to of- from the telecommunications and cable perspec- fer enhanced serviced subject to structural safe- tives, including the FCC's historical approach to guards. Enhanced service offerings themselves services like those now being provided by means would not be regulated. Competing enhanced of the Internet by enhanced service providers service providers would be treated as non-carrier ("ESPs") and its current approaches implement- end users, able to purchase the underlying basic ing the provisions of the 1996 Act regarding "tele- service as end users on an unbundled, tariffed ba- communications" and "information services." sis. Computer Ill permitted certain dominant com- SECTION II surveys the development of the In- mon carriers to provide enhanced services on an ternet and its treatment in the 1996 Act. integrated basis, subject to non-structural ac- * The first portion contains a brief descrip- counting and interconnection safeguards. tion of the Internet, its history and development, SECTION IV examines several of the key 1996 and identifies some of the qualities that set it Act implementation orders the FCC issued in apart from traditional communications networks which it addressed the treatment of telecommuni- and services. This discussion is crafted to high- cations and information services. light features of the Internet industry and In- 0 "Telecommunications" is defined in the ternet communications relevant to the legal and 1996 Act as the transmission, between or among policy analyses that follow. points specified by the user, of information of the * The second portion examines the 1996 Act's user's choosing, without change in the form or statutory definitions and policies that directly ap- content of the information as sent or received. ply to the Internet, and the court decisions rele- * "Information service" is defined in the 1996 vant to these sections. Act as the offering of a capability for generating, * The most significant statement of policy acquiring, storing, transforming, processing, re- contained in the 1996 Act regarding the Internet trieving, utilizing or making available information is section 230(b)'s declaration that is the policy of via telecommunications, and includes electronic the United States, "to promote the continued de- publishing. Excluded is the use of such capability velopment of the Internet and other interactive computer services and other interactive media COMMLAW CONSPECTUS [Vol. 7 for telecommunications system or service manage- * The 1984 Cable Act established a fundamen- ment. tal distinction between a service that is provided * Internet-based services and Internet service over a cable system that is "cable service," and a providers fall within the regulatory categories of broadband service provided over such a system both "information" and "enhanced" services. that is not within the statutory definition. * All of the services the FCC had previously * The excluded category included two-way classified as "enhanced" services would be treated communications services such as e-mail, facsimile as "information" services under the 1996 Act. transmissions and data processing, services which * Information services are not telecommuni- are identical to those long defined by the Com- cations services. mission as "enhanced services" under the Com- * Telecommunications carriers' telecommuni- puter Inquiry decisions, as well as basic telephone cations service offerings are subject to intercon- communications services. nection obligations; universal service contribu- * The 1984 Cable Act's legislative history tions; and other common carrier obligations such makes it clear that, such interactive information as the payment of access charges for the origina- and enhanced services as are provided over the tion and termination of long distance calls and Ti- Internet could not come within the original defi- tle II facilities-authorization requirements. nition of cable services insofar as they generally * Internet service providers and other online provide the subscriber with a two-way capacity to service providers that had previously been consid- engage in transactions, or to store, transform, ma- ered as providing enhanced services under the nipulate, or otherwise process information or Computer Inquiry decisions would continue to be data. treated as unregulated non-carriers. * Prior to the 1996 Act's revision to the defini- * In the future, certain services offered over tion of cable service, it would not have been possi- the Internet, such as phone-to-phone Internet ble for the FCC to have interpreted the section Protocol telephony, may be functionally indistin- 602(6) definition of "cable service" to include In- guishable from traditional telecommunications ternet-based services provided over cable systems. service offerings, and their non-regulated status 0 The final portion of this section describes may warrant re-examination. technological advances in cable system architec- SECTION V addresses the evolution of cable ser- ture that make it possible for cable operators to vice from its inception in the late 1950's through provide two-way, Internet-based broadband com- today. It is divided into two main portions. munications services. It concludes with a survey * The first portion discusses the definition of of the features of several of the major cable In- cable service and cable systems under the 1984 ternet services currently available. Cable Act (Title VI) and the FCC's application of SECTION VI analyzes the significance of the revi- these definitions in particular cases. sions to the definition of cable services under the * In 1984, "cable service" was defined as the 1996 Act, and concludes that the FCC could find one-way transmission to subscribers of video pro- that Congress amended the section 602(6) defini- gramming or other programming service, and any tion of cable services to include certain cable-pro- subscriber interaction required for the selection vided Internet services. of such programming. "Video programming" is * The 1996 Act added the phrase "or use," programming comparable to, or provided by, a changing the definition of cable service to the: television broadcast station. "Other program- "one-way transmission to subscribers of video pro- ming service" is information that a cable operator gramming or other programming service, and makes available to all subscribers generally. Cable subscriber interaction, if any, which is required service was a bundled offering of transmission and for the selection or use of such video program- content or programming. ming or other programming service." * Cable operators are not subject to intercon- * The legislative history of this revision refers nection or facilities unbundling requirements; to cable services as now including "interactive they were subject to carriage requirements that re- services such as game channels and information quire them to reserve channel capacity for certain services made available to subscribers by the cable programming provided by other entities. operator, as well as enhanced services." 19991 Internet Over Cable
0 If cable services now include information Title VI. They highlight the tensions between the and enhanced services, and Internet-based serv- two regulatory frameworks. ices such as those provided by the typical Internet SECTION VII links the analysis of the current service provider are enhanced/information serv- regulatory framework to the problems posed for ices, then cable services may include Internet- communications policy by integrated networks based services "by definition." and services. * The FCC could reasonably conclude that 0 The communications and communications cable Internet-based services, such as Road Run- services made possible by the Internet are funda- ner, @Home and like offerings, when provided by mentally unlike those provided in the past over a cable operator over its cable system in its the technologically separate public switched tele- franchised service area, come within the defini- phone network, data networks, broadcast net- tion of "cable services" under Title VI. works, and cable television systems, in that a sin- * The result of such classification would be gle medium is capable of delivering nearly any the creation of "parallel universes" for regulation type of communications service on an integrated of cable and telephony-provided Internet services. basis. This renders application of existing regula- Cable operators would be permitted to provide tory categories difficult, if not impossible, for such advanced cable services under a Title VI re- many forms of Internet-enabled communications. gime, free of interconnection and unbundling re- SECTION VIII concludes that, in the future it will quirements, while certain telecommunications become increasingly difficult to maintain that par- carriers would be obligated under the 1996 Act ticular facilities and services are "cable" as op- and the Commission's rules to offer network in- posed to "telecommunications." terconnection, unbundled network elements, and • This problem will be evident in the case of tariffed rates to competing enhanced and infor- regulatory requirements written in terms of "cable mation service providers. operators" as opposed to "telecommunications * Whether this differing regulatory treatment carriers" and "information service providers." is sustainable must be answered in light of con- * When a single provider offers all three types gressional intent and the policy goal (or goals) to of services in digital format over primarily fiber be achieved. optic broadband plant, how these categories will * The remainder of the section analyzes se- apply is questioned. The same is true of regula- lected regulatory issues that would flow from the tory requirements that are placed upon certain classification of cable Internet services as Title VI services, when a single software application to- cable services. These issues are broken down in 7 gether with access to the Internet makes it possi- main categories: (1) pole attachments; (2) the ble to provide voice, video or data communica- scope of local cable franchises; (3) franchise fees; tions, at the initiation of the end user, rather than (4) unbundling/competitive neutrality; (5) re- the "network" operator. sale/interconnection; (6) cross-subsidy; and (7) * The challenge for the regulator, at each other issues arising under Title VI, including step, is to examine the underlying purposes and cable facilities and equipment regulation, pro- policy goals behind existing regulatory categories, gramming-based regulation, system capacity issues and to apply them only where those purposes and and protection of subscriber privacy. policy goals make sense. Any regulatory efforts in * Issues 1, 2, 3 and 7 are discussed in terms of this arena should begin with an analysis of the "regulatory fit" of cable Internet-based serv- whether the operator in question exercises undue ices under Title VI cable television rules and re- market power over an essential service or facility quirements. The discussion highlights, where ap- necessary to provide an essential service. propriate, areas of relative ease and relative * Ultimately, the FCC (and perhaps Con- difficulty that appear when old service categories gress) may need to develop a new regulatory para- are amended to incorporate new forms of service. digm and language that fits the new global com- * Issues 4 through 6 focus on certain ques- munications medium known as the Internet. The tions of regulatory parity that would arise under regulatory categories, for example, of "basic" tele- Titles II and VI if the FCC were to classify cable- phone and "enhanced" or "information," and provided Internet services as cable services under "cable" services are more than twenty years old, COMMLAW CONSPECTUS [Vol. 7
whereas the technologies they are being applied the Telecommunications Act of 1996 ("1996 to are new, and evolving rapidly in unforeseen Act")' that has yet to receive comprehensive as- and unforeseeable ways. sessment by the Federal Communications Com- * Although the FCC has repeatedly found that mission ("the Commission"). How the Commis- the old regulatory categories are essentially car- sion resolves issues concerning Internet access ried forward in the 1996 Act's new "telecommuni- and the provision of Internet-based communica- cations" and "information" service categories, the tions services by its regulated industries has vast 1996 Act also gives the FCC the new and flexible implications for both providers and consumers of regulatory category of "advanced telecommunica- Internet-based services. tions capability" in section 706. It is widely recognized that the Internet has rev- * Rather than concentrate solely on trying to olutionized the computer and communications squeeze the Internet and Internet-based services industries in an unprecedented manner. Accord- into familiar categories, the Working Paper sug- ing to those involved in its development, "[t]he gests that the FCC might better endeavor to give Internet is at once a world-wide broadcasting ca- full meaning and effect to this new regulatory cat- pability, a mechanism for information dissemina- egory in its domain. tion, and a medium for collaboration and interac- tion between individuals and their computers 2 C. Purpose of this Examination without regard for geographic location." With respect to the Internet and related developments, The Paper is intended to promote greater un- traditional dividing lines have become blurred as derstanding on the part of both government and individual companies provide both their own con- the private sector, of the unique policy issues that tent and the capacity to transmit communications the provision of Internet-based services by cable for others. operators raises for the FCC, local franchising au- The emergence of the Internet as a preeminent thorities, and other governmental offices. The global communications medium was largely con- discussion of the regulatory classification issue for temporaneous with the development of the 1996 Internet over cable systems, and the related com- Act's fundamental regulatory framework. As a re- mon carrier issues, is intended to map the con- sult, the 1996 Act's primary approach to commu- tours of the legal and policy issues that surround- nications services, service providers and facilities ing the clash of new, advanced capabilities such as neither fully reflects nor anticipates the impact of the Internet with the old regulatory framework. Internet-based communications capabilities on The discussion of an issue is not a suggestion existing networks and the regulatory regimes that that a particular outcome is either mandated or govern them. While the Internet arguably repre- desirable. Rather, the goal of this mapping exer- sents one form of technological and service "con- cise is to facilitate informed discussion and deci- vergence," the 1996 Act's deregulatory, pro-com- sion-making in this very important area by identi- petitive program depends upon the viability of fying the correct coordinates and posing the distinct regulatory categories for services, facili- relevant questions. ties, and service providers to establish the rights and obligations of carriers as competition is intro- I. INTRODUCTION duced to formerly monopoly-based markets. As the Commission has recognized: "All of the spe- The regulatory status of Internet-based services cific mandates of the 1996 Act depend on applica- provided by cable operators over their cable sys- tion of the statutory categories established in the tems is a significant implementation issue under definitions section."'3
I See Pub. L. No. 104-104, 110 Stat. 56 (1996). The 1996 3 By amendment to its 1998 appropriations legislation, Act amends the Communications Act of 1934. 47 U.S.C. Congress required the Commission to undertake a review of § 151 et. seq. The 1996 Act established a "pro-competitive, de- its implementation of the provisions of the 1996 Act relating regulatory national policy framework" for the U.S. communi- to and impacting universal service, including telecommunica- cations industry. S. CONE. REP. No. 104-230, at 1 (1996). tions and Internet access. See Common Carrier Bureau Seeks 2 Barry M. Leiner et al., A Brief Histoiy of the Internet, ver- Comment for Report to Congress on Universal Service sion 3.1 (last modified Aug. 26, 1998)
The 1996 Act's distinction between "telecom- cability, of existing rules whose terminology was munications" and "information" services, and the established without regard to this new medium differing regulatory consequences that attach, for delivering communications services. How the largely carry forward the "basic" versus "en- existing regulatory categories may be adopted to, hanced" distinction created by the Commission or walled-off from, new developments such as the during the course of its Computer Inquiry proceed- Internet, which fundamentally differs from ex- ings, beginning in the late 1960s.4 Integrated ser- isting communications capabilities, is a topic only vice offerings, such as those provided over the In- beginning to be explored here7 and abroad.8 ternet, present fundamental problems to a To date, that exploration has focused entirely regulatory framework dependent upon techno- on the issue from a telecommunications perspec- logical distinctions. As one writer recently ob- tive. 9 Future examinations must also consider the served, "[w]hen basic and enhanced services be- case of cable-provided Internet services. Cable come intertwined and indistinguishable, the service has traditionally been regulated and deliv- current regulatory system implodes."5 ered as an integrated video, information content, Currently, the over-arching consensus among and conduit service under Title VI.10 The regula- domestic policy makers is that the government tory model for cable services presents a particu- should recognize the unique qualities of the In- larly intriguing model in terms of current and fu- ternet, and avoid unnecessary regulation and un- ture integrated digital communications offerings. due restrictions on electronic commerce con- The pre-1996 Act definition of cable services in ducted over the Internet.6 Yet regulators charged the Communications Act was descriptive of the with implementing communications regulation way cable services, which were developed to re- find themselves unavoidably drawn into a process ceive and transmit analog broadcast television sig- of determining the proper application, or inappli- nals by wire, were provided. Cable services have
Joint Board on Universal Service, Report to Congress, 11 ified Internet content. Compare 47 U.S.C. § 230 (b) with 47 Comm. Reg. (P & F) 1312, para. 21 (April 10, 1998) [herein- U.S.C. § 223 (a), (d). after Report to Congress]. 7 Concurrent with the initiation of its proceeding to re- 4 See Regulatory and Policy Problems Presented by the In- form the Commission's "access charge" rules, the Commis- terdependence of Computer and Communication Service sion launched an inquiry into Internet-based services and re- and Facilities, Notice of Inquiry, 7 F.C.C. 2d 11 (1966); see also lated regulatory questions. See discussion infra Section IV.E. Regulatory and Policy Problems Presented by the Interde- See also Report to Congress, supra note 3. pendence of Computer and Communication Service and Fa- 8 In a statement released on January 15, 1998, the Euro- cilities, Supplemental Notice of Inquiry, 7 F.C.C. 2d 16 (1967) pean Commission decided that at this time telephony deliv- [entire series of proceedings referred to hereinafter as Com- ered over the Internet is not mature enough to be consid- puter Inquiry]. See also Report to Congress, supra note 4, at para. ered "voice telephony," and should not be subject to 45. licensing or universal service fund requirements by national 5 Ira H. Goldman, Technology Will Kill Telecom Taxes, WALL authorities within the European Union. Status of Voice Com- ST. J., Aug. 10, 1998, at A14. munications on Internet Under Community Law, and in Particular, 6 See, e.g., 47 U.S.C. § 230 (b) (stating that it is the policy Under Directive 90/388/EEC, Council Directive 10.1, OJ No. of the United States to "preserve the vibrant and competitive (C 6), free market that presently exists for the Internet and other at 4 (suggesting that phone-to-phone Internet teleph- ony would be treated as "voice telephony," and potentially interactive computer services, unfettered by Federal or State regulation."); see also Secretariat on Electronic Commerce, subject to EC universal service fund contributions, in the fu- ture if U.S. Department of Commerce, The Emerging DigitalEconomy the service were marketed to the public as an alterna- (last modified Aug. 5, 1998)
11 See 47 U.S.C. § 522 (6). grandfathered in the moratorium, including sales and trans- 12 See S. REP. No. 104-230 at 169 (1996) [hereinafterJoint action taxes, telephone taxes, and cable franchise fees. See id. Explanatory Statement]. Arguably, this exemption from the moratorium is an addi- 13 See, e.g., Report to Congress, supra note 3, at paras. 52, 55, tional indication that Congress may view cable Internet serv- 61-82. See discussion infra Section V. ices as Title VI cable services, subject to franchising obliga- 14 See Robert Cannon, What is the Enhanced Service Provider tions and fees. See id. Since late 1997, the approach of the Status of Internet Service Providers?, FCBA NEWS, Feb. 1997 at draft legislation has undergone significant change. See 11 [hereinafter ESP Status of ISPs]. COMM. DAILY, July 29, 1998. In the Senate, the Committee on 15 The National Cable Television Association ("NCTA") Commerce, Science and Transportation's bill was referred to and several individual cable operators have advocated this the Senate Finance Committee for mark-up in late July, 1998. both formally and informally before the Commission. See dis- See S. 442, 10 5 h Cong. (1998). The Senate Finance Commit- cussion infra Section VI. tee passed a new version of the Internet Tax Freedom Act, 16 The "Internet Tax Freedom Act," which originated in replacing the 6-year moratorium on new state and local In- the House of Representatives, continues to undergo signifi- ternet taxes with a 2-year ban on new Internet taxes, likely to cant change as it progresses through the House. See H.R. go to the Senate floor for a vote in September. See id. As 1054, 105th Cong. (1997). H.R. 1054 contained a six-year reported out by the Finance Committee, the substitute bill moratorium imposed on the collection of taxes and fees on would impose a moratorium on Internet access taxes, "bit" access to, or use of, Internet or on-line services and related taxes, and multiple and discriminatory electronic commerce applications. See id. By October, 1997, the draft bill also in- taxes. See Senate Finance OKs 2-Year Internet Tax Moratorium, cluded a list of state and local taxes that would be TELECOMM. REPs, Aug. 3, 1998 at 22. 1999] Internet Over Cable
Internet services as cable services under Title VI, the Internet and other interactive computer serv- the result would be the creation of "parallel uni- ices,"1' 8 may be fully realized. verses" for regulation of cable and telephony In- ternet-based services. Cable operators would be II. THE INTERNET AND THE 1996 ACT permitted to provide advanced cable services under a Title VI regime, free of interconnection A. A Brief Description of the Internet and unbundling requirements, while certain tele- would be obligated communications carriers 1. General Background under the 1996 Act and the Commission's rules to offer network interconnection, unbundled net- The Internet is not a single physical or tangible work elements, and tariffed rates to competing entity, but rather a complex series of intercon- service providers. 17 enhanced and information nected computer networks forming a widespread The first portions of this paper provide a de- information infrastructure, commonly described scription of the Internet and how it functions. It as a "network of networks."'19 Such networks are reviews the 1996 Act's approach to the Internet connected in a manner which permits each com- and Internet-related definitions while examining puter in any network to communicate with com- the Commission's historical approach to services puters on any other network in the system by us- like those now being provided by Internet service ing the non-proprietary Internet protocol ("IP"), providers. The paper will also analyze the Com- a set of rules for exchanging data.20 This global mission's implementation of the provisions of the web of linked networks and computers is referred 1996 Act with respect to the regulatory treatment to as "the Internet." Some of the computers and and classification of the Internet. The final sec- computer networks that make up the Internet are tions focus on the pre-1996 definition of cable owned by governmental and public institutions, services; the significance of the 1996 Act revision; some are owned by non-profit organizations, and and the specific issues raised by Congress' revision some are privately owned by corporations. "The to the definition of cable services vis-a-vis Internet resulting whole is a decentralized, global medium services, from both a definitional and policy per- of communications-or "cyberspace"-that links spective. They also discuss the regulatory conse- people, institutions, corporations, and govern- quences that would flow from a classification of ments around the world."21 cable-provided Internet services as Title VI cable Spiraling growth is one of the hallmarks of the services, and review several proceedings pending Internet. By January 1997, "there were over six- before the Commission. teen million host computers on the Internet, An understanding of this regulatory backdrop more than ten times the number of hosts" five should provide the basis upon which informed de- years earlier.22 While the largest proportion of In- cisions regarding Internet-based communications ternet users and traffic remain in the United services may be made so that the goals of the 1996 States, more than 175 countries are now con- Act, to preserve and promote the "vibrant and nected to the Internet. 23 As many as 40 million competitive free market that presently exists for people around the world were estimated to access
17 See 47 U.S.C. § 271. 21 See ACLU v. Reno, 929 F. Supp. 824, 831 (E.D. Pa. 18 See 47 U.S.C. § 230 (b). 1996), affd Reno v. ACLU, 117 S. Ct. 2329 (1997); see also 19 Digital Tornado, supra note 6, at 10. Shea v. Reno, 930 F. Supp. 916, 925 (S.D.N.Y. 1996), affd 20 IP is a routing protocol that "defines the structure of Reno v. Shea, 117 S. Ct. 2501 (1997). The District Court deci- sion in ACLU v. Reno made extensive findings of fact, most of data, or 'packets,' transmitted over the Internet." Digital Tor- which were based on a detailed stipulation prepared by the nado, supra note 6, at 10 n.12. "The higher-level 'transmis- parties. See Reno, 929 F. Supp. at 830-849. The findings de- sion control protocol' (TCP) and the 'user-defined protocol' scribe the character and the dimensions of the Internet, the (UDP)" are transport protocols that control the transmission availability of sexually explicit material in that medium, and of these packets across networks." Id. "Most Internet services how one accesses and sends messages over the Internet. See often referred to as use TCP, and [therefore] the Internet is id. These undisputed facts also formed the underpinnings a 'TCP/IP' network." Id. The important fact is that this sim- ple IP protocol separates new services and applications devel- for the Supreme Court's discussion of the legal issues in Reno v. ACLU. See Reno, 117 S. Ct. at 2334. opment from the transmission and switching of the digital 22 Digital Tornado, supra note 6, at 21. bits, so that.new services can be introduced without affecting the Internet. See id. 23 See id. COMMLAW CONSPECTUS [Vol. 7 the Internet by 1997.24 By 1998, the number us- nications if one or more individual links were ing the Internet is estimated to have grown to damaged or otherwise unavailable."' 3 over 100 million, with traffic on the Internet After implementing a system for the reliable doubling every 200 days. 2 5 This rapid expansion transfer of information over a computer network, is producing dramatic increases in computer, ARPA began to support the development of com- software, services and communications invest- munications protocols for transferring data and ments.26 electronic mail (e-mail) between different types of computer networks. 34 Recognizing the usefulness Origins of computer networking, and especially e-mail, many universities, research facilities, and commer- The Internet originated in a 1969 experimental cial entities began to develop and link together project of the U.S. Department of Defense's Ad- their own networks implementing these proto- vanced Research Project Agency (ARPA), dubbed cols. 35 For example, the U.S. Department of En- the 'ARPANET.' 27 The ARPANET "linked com- ergy established "MFENET" for its researchers in puters and computer networks owned by the mili- Magnetic Fusion Energy; NASA Space Physicists tary, defense contractors, and university laborato- established "SPAN"; several individuals estab- ries conducting defense-related research." 28 As lished "CSNET" for the (academic and industrial) ARPANET grew during the 1970s and early 1980s, computer science community with an initial grant several similar networks were established, primar- from NSF; AT&T disseminated the UNIX com- ily between universities.29 The Internet was based puter operating system, which gave rise to on the idea that there would be multiple in- "USENET" and the development by two individu- dependent networks of rather arbitrary design, als of the "BITNET," which in turn linked aca- beginning with the ARPANET as the pioneering demic mainframe computers in an "e-mail as card packet switched network, but soon to include images" paradigm. With the exception of packet satellite networks, ground-based packet ra- BITNET and USENET, many of the initial net- dio networks and other networks.3 ° A key under- works were intended for, and largely restricted to, lying technical concept for the Internet was "open closed communities of scholars and researchers in architecture networking."' 9 Within "an open ar- particular scientific and academic areas and there chitecture network, the individual networks may was little pressure for the individual networks to 36 be separately designed and developed and each be compatible with one another. may have its own unique interface which it may offer to users and/or other providers, including Internet Protocols other Internet providers."3 2 The Internet was designed from its inception "to be a decentral- "TCP," or "Transmission Control Protocol," ized, self-maintaining series of redundant links be- converts messages into streams of packets at the tween computers and computer networks, capa- source, then reassembles them back into messages ble of rapidly transmitting communications at the destination. "IP," or "Internet Protocol," without direct human involvement or control, handles the addressing, seeing to it that packets and with the automatic ability to reroute commu- are routed across multiple nodes and even across
24 Id. at 21 n.38 issues such as scale, performance, and higher level function- 25 The Emerging Digital Economy, supra note 6, at 2, 7. ality. See id. The second is the operations and management 26 See generally id. at 7. aspect of a global and complex operational infrastructure. 27 ACLU v. Reno, 929 F. Supp. 824, 831 (E.D. Pa. 1996). See id. The third is the social aspect, which has resulted in a The ARPA changed its name to Defense Advanced Research broad community of "Internauts"working together to create Project Agency ("DARPA") in 1971. See Brief Histoty of the In- and evolve the technology. See id Finally, there is the com- ternet, supra note 2, at 21 n.4. munications aspect, resulting in an extremely effective transi- 28 [d. tion of research results into a broadly deployed and available 29 See ACLU v. Reno, 929 F. Supp. at 831. infrastructure. See id. 30 See Brief History of the Internet, supra note 2, at 3-6. Ac- 31 See id. at 3-6. cording to the authors, the Internet's history revolves around 32 Id. four distinct aspects. See id. at 3-6. The first is the technologi- 33 ACLU v. Reno, 929 F. Supp. at 831. cal evolution that began with early research on packet switch- 34 See Shea v. Reno, 930 F. Supp. 916, 926 (S.D.N.Y. 1996). ing and the ARPANET (and related technologies), and 35 See Brief History of the Internet, supra note 2, at 7. where current infrastructure research continues to examine 36 Id. 1999] Internet Over Cable multiple networks with multiple standards, includ- tegrated into the Defense Data Network by the ing Ethernet, "FDDI" and X.25 protocol.3 ' The early 1980s, and the civilian portion of ARPANET TCP/IP enables communications between distant was taken out of service in 1990. By that time, the public and private networks running over any me- NSFNET had supplanted ARPANET as a national dium: analog or digital phone lines, traditional backbone to which smaller regional networks network lines, fiber, cable television facilities and were connected. "It is this series of linked net- wireless systems. It is also "computer independ- works (themselves linking computers and com- ent," running across personal computers (PCs), puter networks) that is today commonly known as 44 Macintoshes, workstations and mainframes. the Internet." Other Internet protocols are the "file transfer According to several of the developers of the protocol" or "ftp," which specifies how directories Internet, in addition to selecting the critical TCP/ of files are named and exchanged among client IP protocols for the NSFNET program, federal and server computers, and "mail transfer proto- agencies made and implemented several other cols" or "MTP," which are used by client com- policy decisions which shaped the Internet of to- 45 puters to send and receive electronic messages- day. These significant decisions are: e-mail-through mail servers, which store, copy, * Federal agencies shared the cost of common distribute, and forward the messages to their des- infrastructure and jointly supported "managed in- 38 tinations. terconnection points" for interagency traffic, which served as the models for the Network Ac- Government Internet Policy cess Points ("NAPs") and facilities that are promi- nent features of today's Internet architecture. In 1985, the "NSFNET," a high-speed "back- * To coordinate this sharing, the Federal bone" network, funded and sponsored by the Na- Networking Council ("FNC") was formed. The tional Science Foundation, announced programs FNC also cooperated with other international or- intended "to serve the entire higher education ganizations, such as RARE in Europe, through the community, regardless of discipline. ' 39 Receipt of Coordinating Committee on Intercontinental Re- NSF funding by U.S. universities for an NSFNET search Networking ("CCIRN") to coordinate In- connection was conditioned on the connection ternet support of the research community world- being "made available to all qualified users on wide. campus."40 That same year, in recognition of the * This sharing and cooperation between agen- need for a wide-area networking infrastructure to cies on Internet-related issues dates back to an support the general academic and research com- agreement in 1981 between CSNET, the NSF and munity, NSF made the critical decision that TCP/ ARPA that permitted CSNET traffic to share IP would be the mandatory protocol for the ARPANET infrastructure on a statistical and non- NSFNET program.41 This decision also sup- metered settlements basis. ported the related decision to develop a strategy * NSF subsequently encouraged its regional for establishing such infrastructure on a basis ulti- (initially academic) networks of the NSFNET to 42 mately independent of direct federal funding. seek commercial non-academic customers, ex- One step in the process was to ensure the inter- pand their facilities to serve them, and exploit the operability of ARPA's and NSF's pieces of the In- resulting economies of scale to lower subscription ternet by having the two organizations jointly au- costs for all. thor the formal specifications for "Internet * On the NSFNET Backbone, the national- 43 Gateways." scale segment of the NSFNET, NSF enforced an The military portion of ARPANET had been in- "Acceptable Use Policy" which prohibited Back-
37 See, e.g., Digital Tornado, supra note 6, at 10 n.12. See 4' See id. also "Internet Futures," a lecture delivered by Dr. Robert Met- 42 See id. at 13. calfe for the Massachusetts Institute of Technology Enter- 43 Id. at 9-12. prise Forum, June 26, 1997, available upon request at:
46 See Improvement of Technical Management of In- 54 See id.; see also David Hilzenrath, Network Solutions ternet Names and Addresses, 63 Fed. Reg. 8826 (1998) (to be Dropped as Registrar of Internet Domains, WASH. POST, Apr. 24, codified at 15 C.F.R. ch. XXIII) (Internet domain name sys- 1997, at El; see also ITU to Serve as 'Depository'forInternet Do- tem improvement proposed by the National Telecommunica- main Document, TELECOMM. REP., Apr. 28, 1997, at 29. Shortly tions and Information Administration, Deptartment of Com- after the NSF announcement, an international accord was merce, February 20, 1998) [hereinafter NTIA DNS Proposal]. signed (Memorandum of Understanding "MoU") that directs See also Digital Tornado, supra note 6, at 18. the International Telecommunications Union ("ITU") to act 47 See id. as depository for the MoU. See id. Although not all Internet 48 Id. service providers have agreed to this accord, the MoU sets up 49 Id. a new self-governing system for registration of Internet ad- 50 See The Emerging Digital Economy, supra note 6, at 2. dresses. See Francis Williams, Pact will regulate registration of 51 See id. Internet addresses, FINANCIAL TIMES, May 1, 1997, at 6; see also 52 See Rebecca Quick, Internet Addresses Spark Storm in Internet Group Signs Accord on Addresses; But Holdouts Remain, Cyberspace, WALL ST. J., Apr. 29, 1997, at B1. WALL ST. J., May 2, 1997, at B2; see also NTIA DNS Proposal, 53 Id. supra note 46. The U.S. prepared a revised version of its pol- 1999] Internet Over Cable names. 55 decided to use common data transfer protocols to The Internet domain name governance issue is exchange communications and information with currently under examination both domestically other computers (which in turn exchange com- and abroad. 56 Recent U.S. and European policy munications and information with still other com- proposals on the future governance of the In- puters). "There is no centralized storage location, ternet indicate a growing consensus "that all control point, or communications channel for the pending decisions on Internet governance should Internet."60 be referred to the new private-sector, self-regula- No single government or network entity has re- tory Internet Assigned Numbers Authority sponsibility for managing the Internet as a whole. (IANA), which is to be created in the next few Nonetheless, certain functions, such as domain months. "s name routing and standards setting, must be co- ordinated to ensure technical compatibility.6' Such coordination functions have largely been ac- Decentralized Control complished through voluntary agreements be- large user organizations.6 2 During the 1990s, the Internet expanded explo- tween As the Internet continues to evolve away from sively beyond universities and scientific sites to in- its origins as a method of linking military, scien- clude businesses and individual users connecting and academic communities to a commercial through commercial ISPs and consumer online tific medium, changes in the way ac- services. 58 By the time federal agencies had communications and service are provided are likely to in- ceased direct funding for the Internet, the TCP/ cess changes, in turn, are likely to result IP protocols had supplanted or marginalized most crease. These in increased calls for regulation. other wide-area network computer protocols. Collaborative coordinating activities were respon- sible for much of the practical, engineering and Defining the Internet standard-setting functions supporting Internet communications. Given that "the Internet links On October 24, 1995, the Federal Networking together independent networks that merely use Council passed a resolution defining the term In- the same data transfer protocols, it cannot be said ternet, in consultation with members of the In- that any single entity or group of entities controls, ternet and intellectual property rights communi- or can control, the content made publicly avail- ties. The definition is as follows: able on the Internet or limits the ability of others RESOLUTION: The Federal Networking Council to access public content."59 Rather, the Internet (FNC) agrees that the following language reflects our definition of the term "Internet". "Internet" refers to exists and functions as a result of the fact that the global information system that-(i) is logically hundreds of thousands of separate operators of linked together by, a globally unique address space computers and computer networks independently based on the Internet Protocol (IP) or its subsequent icy regarding Internet governance inJune 1998. See European 1992, is the closest thing to an authoritative body." Get Smart: Commission Paper Welcomes Changes in U.S. Plan for Future In- Customer Tutorial, Episode One: Mitchell Masters Basic Facts About ternet Governance, TELECOMM. REPs., Aug. 3, 1998, at 21. The the Internet, (last modified Dec. 19, 1998)
extensions/follow-ons; (ii) is able to support communi- cols, permitting many different types of networks cations using the Transmission Control Protocol/In- ternet (TCP/IP) suite or its subsequent extensions/fol- and facilities to be transparently linked together, low-ons, and/or other IP-compatible protocols; and and over which multiple services can be provided (iii) provides, uses or makes accessible, either publicly to different users. 70 Packet-switching splits up or privately, high level services layered on the commu- 6 3 nications and related infrastructure described herein. data transmitted over packet-switched networks into small chunks or "packets."'7 1 In contrast to As the foregoing definition demonstrates, it re- circuit-switched networks, it does not require a mains difficult even today to describe the Internet dedicated end-to-end transmission path (or cir- without lapsing into highly technical language. cuit) to be opened for each transmission. 72 In- There are a huge variety of potential applications stead, each router "calculates the best routing for for the new Internet-based technologies, all of a packet at a particular time, given current traffic which offer broader options for global communi- patterns, and sends the packet to the next router" cation among telephone subscribers and com- 73 through a process known as "dynamic routing. puter users. Netscape has described the new para- At the destination point, packets must be reassem- digm of the Internet as "a connectionless protocol bled.7 4 Packets that do not arrive must be re- for communications traversing multiple intercon- sent.75 Such a "system allows for network re- nected carrier networks. ' 64 The Internet also en- sources to be used more efficiently, as many compasses numerous "intranets" and sector enter- different communications can be routed simulta- prise networks which, although operated ' 76 neously over the same transmission facilities." privately, use the same physical networks, technol- ogies and protocols.65 Netscape argues that "In- ternet technology is rapidly opening the way for 66 Common Protocols new forms of 'intermodal' competition." The TCP/IP protocols function by sending data packets on any available path, with dynamic self- 2. Features and Functions of Communications Over 77 the Internet adapting routing. The data comprising an In- ternet communication can therefore be handled Packet Switching by numerous different networks, with different portions of the communication being routed over The basic operational characteristics of the In- completely different computer networks. In- ternet are that it is a distributed, interoperable, ternet routers have no fixed routing tables, but packet-switched network. 67 It "is comprised of an rather dynamically update themselves by "talking" interconnected web of "host" computers, each of autonomously to other routers on the Internet in which can be accessed from almost any point on order to find available paths over which to trans- the network." 8 Routers (other computers) mit Internet data packets. It is not certain that IP throughout the network regulate the flow of data packets will follow the same path for a continuing at each connection point, in contrast to the cen- stream of data or session; and if the underlying tralized public switched telephone network, in connectivity is broken or if congestion arises, an which all users within a local exchange connect to almost infinite array of alternative paths could be a single switch location. 69 The network is inter- employed without the user or ISPs knowing it.78 operable through use of common or open proto- When information is sent over the Internet, the
63 Brief History of the Internet, supra note 2, at 13. 67 See Digital Tornado, supra note 6, at 10, 17-18; see also 64 In re The Provision of Interstate and International In- ACLU v. Reno, 929 F. Supp. 824, 831 (E.D. Pa. 1996). terexchange Telecommunications Service Via the Internet by 68 See id. at 17. Non-Tariffed, Uncertain Entities, America's Carriers Tele- 69 See id. communication Associateion Petition for Declaratory Ruling, 70 See id. Special Relief, and Institution of Rulemaking, Joint Opposi- 71 See id. tion of Netscape Communications Corporation, Voxware, 72 See id. Inc. and Insoft, Inc., RM No. 8775, at 14 (May 8, 1996) (origi- 73 Id. nal emphasis omitted) (available at
79 See Digital Tornado, supra note 6, at 18. 92 See id; see also Report to Congress, supra note 3, at paras. 80 See id. 76-77 (describing services that Internet access providers 81 Id. (ISPs) typically provide their subscribers). 82 See id. 93 See ACLU v. Reno, 929 F. Supp. 824, 836 (E.D. Pa. 83 See id. 1996). 84 See id. at 19. 94 See id. 85 Id. 95 Id. 86 Id. 96 Id. 87 See id. 97 See id. 88 See id. 98 See ACLU v. Reno, 929 F. Supp. 824, 836 (E.D. Pa. 89 See id. 1996). 99 See id. 100 See id. COMMLAW CONSPECTUS [Vol 7 designed to represent the organization, and through which people and organizations can through links from the home page, guide the user communicate through shared information. directly or indirectly to information about or rele- When information is made available, it is said to vant to that organization."''10 Thus, full-scale user be "published" on the Web. Publishing on the interfaces and complex services such as online Web simply requires that the "publisher" has a shopping, continuously updated news informa- computer connected to the Internet and that the tion, and interactive games can be provided computer is running Web server software. 10 9 through the Internet over a non-proprietary sys- Various "search engines," or "browsers," such as tem. Increasingly, the Web is becoming an inter- "Yahoo," "Lycos" and "Magellan," have been de- active medium, where sites invite visitors to offer veloped to allow users of the Web to search for feedback via e-mail and to participate in online particular information among all of the public chats. The Web thus forms the foundation for vir- sites that are part of the Web. 110 The browsers tually all of the new Internet-based services that permit the user to access information by pointing are now under development. to it with a computer "mouse" or keystroke. The Web utilizes three Internet protocols. 10 2 The first, URLs, "are a standard way of specifying Service Providers a type of Web document, the [domain] name of the server where it is to be found, and the loca- As noted above, in 1 3 contrast to traditional tele- tion of the document on the server's disk." 0 phone networks, no one entity or organization The second, "Hypertext Markup Language" governs the Internet.''' Each facilities-based net- (HTML), "is a standard format for Web docu- work provider that is interconnected with the ments that allows them to be formatted richly and global Internet controls operational aspects of its to make references[, or] 'Hyperlinks,' using own network. It is still possible to differentiate 10 4 URLs, to other Web documents." The third, "online service providers" from "Internet service "Hypertext Transfer Protocol" (HTTP), "uses providers" or "ISPs,"' 12 although the distinctions DNS to resolve URLs and uses TCP/IP to have grown blurred in practice. Online service download HTML documents from servers to cli- 10 5 providers, such as America Online, Inc., Com- ent browsing software." puServe, Inc., Netcom, Earthlink and the "The Web links together disparate information Microsoft Network, generally combine content on an ever-growing number of Internet-linked origination, computer database services and pro- computers by setting common information stor- prietary interfaces with IP access (i.e., a computer age formats (HTML) and a common language" or connection) to the Internet.113 These services of- open architecture coding format that drives text fer nationwide computer networks so that sub- 10 6 and graphics for Web documents (HTTP). scribers can dial-in to a local telephone number, The Web was designed to allow organizations with provide extensive and well-organized content computers containing information to become within their own proprietary computer networks, part of the Web by simply "attaching their com- and allow subscribers to link to the much larger puters to the Internet and running appropriate resources of the Internet. ISPs generally offer 7 Web software.""' Although from the user's per- consumers and businesses access to the Internet, spective it may appear to be a single, integrated including at least an IP connection to an Internet system, in reality it is a distributed system with no host/router. Often, they offer a full point-to- centralized control point.""' point protocol IP connection, allowing the end The Web exists fundamentally as a platform user to connect to the Internet using communica-
101 Id. 109 See id. 102 See Metcalfe Lecture, supra note 37. 110 See id. 103 Id. I See id. 104 Id. 112 See id. at 833. 105 Id. 113 See Report to Congress, supra note 3, at para. 63. Online 106 ACLU v. Reno, 929 F. Supp. 824, 837-38; see also Digital service providers package proprietary content with Internet Tornado, supra note 6, at 19-20. access. See id. ISPs increasingly are adding content, such as 107 ACLU v. Reno, 929 F. Supp. at 838. Internet directories, search engines, and user-configuration 108 See id. real-time information distribution, to their services. See id. 1999] Internet Over Cable tions software on his or her own computer. ISP high-speed long-haul circuits and employ large, offerings typically include dial-up analog, ISDN, fast routers and switches to provide their service; and both dedicated and frame-relay based In- "dial-up" ISPs that specialize in many points of ternet connections.11 4 Information is made avail- presence (POP's), which allow clients using able by content providers on 'servers' connected modems to dial-in calls locally; "backend" ISPs to the Internet, where end users may gain access that specialize in Web hosting and transmitting to it.115 frequently-accessed information to server caches By mid-1997, there were more than 3,700 ISPs near large populations of users; and "frontend" in North America alone. 1 6 More recent esti- ISPs that specialize in both high-performance ac- mates indicate that the number of local and re- cess and data caching for local user popula- gional ISPs has grown to over 4,800.117 At one tions. 122 In addition, the large telephone compa- point, the "Big Four" online service companies- nies are beginning to integrate into Internet America Online, Inc. ("AOL") CompuServe markets, in part through vertical and horizontal (CompuServe was later acquired by AOL), mergers.'2 3 Infonetics Research, Inc. has also rec- Microsoft Corp., and Prodigy, Inc.-collectively ognized segmentation among ISPs, and has classi- served 84% of the total audience. 118 The addition fied providers into five distinct groups: "local and of AT&T Corporation's "WorldNet" (the largest regional ISPs, competitive local exchange carriers, so-called "pure" Internet access provider), thus cable operator ISPs, major Internet backbone 2 4 creating a "Big Five," increases the collective total providers, and telco ISPs."' market share to 88% and underscores the rising Backbone providers "route traffic between In- contribution of Internet access services to the on- ternet access providers, and interconnect with line services sector as a whole. 119 At the time of other backbone providers."'125 Reports in mid- the lower court cases challenging the Communi- 1997 indicated that five Internet backbone suppli- cations Decency Act, these commercial online ers in the United States - MCI Communications, services had almost 12 million individual subscrib- Sprint, UUNet Technologies Co. (subsequently 0 ers.12 acquired first by MFS Communications, Co. and Both ISPs and online service providers trans- later by WorldCom), BBN (later a unit of the GTE port TCP/IP packets to the next IP router up the Corporation), and ANS - handled approximately 26 line, typically a mid-level or backbone Internet 80 percent of the nation's Internet traffic.' gateway.' 21 Metcalfe divides ISPs into the follow- Worldcom Inc., then a Jackson Miss. telephone ing categories: "backbone" ISPs that specialize in company, announced in early September, 1997
114 See generally, Report to Congress, supra note 3, at para. 63 118 See Online Services Households Top 20 Million Mark; IISR (stating that "[a] ccess providers, more commonly known as In- Scoreboard Shows Big 4 Serve 84% of the Total Audience, ternet service providers, combine computer processing, in- TELECOMM. REPs. DAILY, Apr. 28, 1997 (reporting results of formation storage, protocol conversion, and routing with quarterly census conducted by Telecommunication Reports transmission to enable users to access Internet content and Daily's sister publication, Information & Interactive Services services."). "Internet access providers" and "Internet service Report). providers" are used interchangeably in the Report). See id. 119 See id. "Erols" is an example of another "pure" In- 115 See id. at para. 63. The Commission has identified ternet access provider. major content providers to include Yahoo, Netscape, and 12o See Reno v. ACLU, 117 S. Ct. 2329, 2334 (1997). Time Warner's "Pathfinder" service. See id. 121 See generally Metcalfe Lecture, supra note 37. 116 See Metcalfe Lecture, supra note 37. Because wide- 122 See id. spread use of the Internet is fairly recent and its uses are de- 123 See id. veloping rapidly, reliable figures are difficult to find. This discussion cites generally accepted figures reported over the 124 Howard, supra note 117, at 43. The author is the di- last year to illustrate the magnitude of the industry. Carriers rector of service provider programs at Infonetics Research, are cited by name and industry position for similarly illustra- Inc. See id. at 44. The article primarily discusses the results of tive purposes. The pace of industry consolidations and re- its survey of the ISP industry with respect to local and re- lated corporate changes complicates the task facing any writ- gional ISPs. See id. Infonetics explains that a "local ISP has ten analysis of the Internet industry. points of presence (POPs) within one state, and a regional 117 See Matt Richtel, Power Companies Embrace the Internet, ISP has POPs in more than one state but does not have direct N.Y. TIMES, Aug. 3, 1998, at D3 (citing Boardwatch Magazine, connections to network access points on both the East and an industry trade journal). See also Greg Howard, What Mom West Coasts." Id. and Pop are Doing, TELE.COM, Apr. 1998, at 43 (reporting re- 125 Report to Congress, supra note 3, at 63. sults of 1998 survey conducted on local and regional Internet 126 See Steve Lohr, The Internet as Commerce: Who Pays, providers by "Infonetics Research"). Under What Rules?, N.Y. TIMES, May 12, 1997, at D1. COMMLAW CONSPECTUS [Vol. 7
that it would acquire Compuserve and then sell its schools and employers.' 33 "Many educational in- consumer subscription service to AOL, the largest stitutions, businesses, libraries, and individual on-line provider in the U.S.12 7 In return, AOL communities maintain a computer network was to sell its Internet telecommunications unit, linked directly to the Internet and issue account ANS, to WorldCom.128 WorldCom also became numbers and passwords enabling users to access 3 4 owner of UUNet through its purchase of MFS the network directly or by modem."' Commu- 'Communications.1 29 Since then, WorldCom has nity networks known as "free-nets" have been es- successfully acquired MCI Communications tablished in many communities across the country Corp., another significant provider of Internet in- to provide a local link to the Internet for their citi- frastructure.130 Before the acquisition, MCI and zens, and to provide local-oriented content and WorldCom announced an agreement "to sell discussion groups.135 In addition, some of the lo- MCI's Internet holdings to address concerns by cal dial-in computer services, often referred to as U.S. and European regulators that the combined "bulletin board systems" or "BBSs," allow individu- 36 company would unfairly control traffic on the In- als to access the Internet. ternet." 3 '
Communicating Over the Internet Network InterconnectionArrangements
The sharing of traffic over the interconnected There are a variety of different, constantly- networks forming the Internet on a statistical and evolving methods of communication and informa- un-metered "settlements" (or "bill & keep") basis tion exchange over the network that are available was a hallmark of early federal agency involve- once one has access to the Internet.1 37 Although ment in the development of the Internet. This constantly evolving, there are six rough categories system of traffic carriage free of charge became that constitute the most common methods of 13 2 known as "peering."' Another arrangement for communications over the Internet (and within traffic carriage was for one network to purchase the major online services): the ability to have its traffic transit another net- (1) one-to-one messaging (such as "e-mail"), (2) one-to- work to other points on the Internet. many messaging (such as "listserv"), (3) distributed message databases (such as "USENET newsgroups"), (4) real time communication (such as "Internet Relay Accessing the Internet Chat"), (5) real time remote computer utilization (such as "telnet"), and (6) remote information retrieval (such 138 There are multiple options for individuals to ac- as "ftp," "gopher," and the "World Wide Web"). cess the Internet in addition to the commercial Various types of information, including text, on-line services, including access through their data, computer programs, sound, visual images
127 SeeJared Sandberg, Worldcom to Buy CompuServe Corp., Internet service providers, WorldCom dropped this plan. See WALL ST, J., Sept. 8, 1997, at A-3; Thomas E. Weber & Re- WorldCom and GTE Lawyers Trade Claims on Competitive Benefits becca Quick, Would WorldCom-MCI Deal Lift Tolls on the Net?, of MCI Merger, COMM. DAILY, Oct. 22, 1997, at 2, 3 (reporting WALL ST.J., Oct. 2, 1997, at B-1. views of GTE General Counsel William Barr regarding rela- 128 See Sandberg, supra note 127; see also Weber, supra tive merits and problems with respect to WorldCom versus note 127. GTE bids to acquire MCI). 129 See id. 13-3 ACLU v. Reno, 929 F. Supp. 824, 832 (E.D. Pa. 1996). 130 See Weber, supra note 127. 134 Shea v. Reno, 930 F. Supp. 916, 926 (S.D.N.Y. 1996). 131 Mike Mills, Cable & Wireless, MCI Reach Deal, WASi-i. A "modem" (a contraction of "modulator" and "demodu- POST, July 14, 1998, at Cl. lator") is a device that translates digital information into a 132 See Brief History of the Internet, supra note 2, at 7-10. In signal for transmission over a telephone (or cable) line May, 1997, WorldCom's ISP subsidiary, UUNet, announced ("modulation") and translates a signal received over a tele- that it would no longer provide "peering" service to smaller phone line into digital information ("demodulation"). See id. ISPs whose traffic is not routed on a "bilateral and equal ba- at n.4. For purposes of the Communications Decency Act, sis." See Lohr, supra note 126. UUNet would continue peer- the court in ACLU v. Reno found that a modem could be con- ing traffic exchanges only with ISPs that operate a national sidered a "telecommunications device." See Reno, 929 F. network with dedicated diversely routed DS-3 or faster back- Supp. at 828 n.5. bone facilities. See id. For companies whose infrastructure 135 See id. at 833 does not support the exchange of similar traffic levels, 136 See id. UUNet would impose a monthly charge based upon the ca- 137 See id. at 834. pacity of the connection. See id. Following an outcry among 138 Id. 19991 Internet Over Cable
(i.e., pictures), and moving video images can be both in the general definitions of Title I, section transmitted by most of these methods. 3, and in specific provisions under Title VI. Defi- Each of these six categories involves one of two nitions relevant to the classification and regula- basic uses of the Internet. First, someone who has tory treatment of Internet-based services ex- obtained access to the Internet can correspond or amined in this paper are found throughout Title exchange views with a single or multiple other In- I, governing wire communications ("telecommu- ternet users.139 Second, one accessing the In- nications," "telecommunications carrier," "tele- ternet can locate and retrieve information from communications service," "information service," 1 40 other computers. Communication over the In- "wire communication") ;146 Title VI, governing ternet requires two pieces of software that adhere cable communications ("cable service," "video to the same communication protocol.14 1 Certain programming," "other programming service," kinds of "client" software that enables a computer "cable system," "cable operator," "interactive on- to communicate with and make requests of re- demand services,")1 47 ; and Section 706 of the mote computers where information is stored must 1996 Act ("advanced telecommunications capabil- be accessible.1 42 These remote computers "must ity") .148 be running 'server' software, which provides in- The operative provisions of the 1996 Act deal formation in response to requests by client with the Internet itself in fairly limited ways. The software. "143 general approach to the Internet in the 1996 Act appears to have been that computer networks, B. Statutory Definitions and Policies web pages and on-line services comprised a mar- ket that was sufficiently competitive so that federal The 1996 Act defines the Internet as "the inter- regulatory intervention was both unnecessary and national computer network of both Federal and undesirable. 149 The major area where Congress non-Federal interoperable packet switched data did attempt to regulate interactive computer serv- networks."' 144 It defines the term "interactive ices involved the presentation of indecent mate- computer service" as "any information service, sys- rial which could be accessed by minors. In addi- 150 tem, or access software provider that provides or tion to several noncontroversial provisions, enables computer access by multiple users to a section 223 makes it a criminal offense to use in- computer server, including specifically a service teractive computer services to display "patently of- or system that provides access to the Internet and fensive" sexually explicit material so that it was 51 such systems operated or services offered by li- "available" to minors.' 145 braries or educational institutions."' Section 223(e) (6), which lists defenses to The 1996 Act added many definitions to those claims of violations of the operative provisions in contained in the Communications Act of 1934, subsection (a) and (d), specifically states that
139 See Shea, 930 F. Supp. at 926. and secondary schools and classrooms, and to take appropri- 140 See id. ate action to accelerate deployment of such services. See 47 141 See id. at 927. U.S.C. § 157 (a), (b). 142 See id. 149 See Michael I. Meyerson, Ideas of the Marketplace: A 143 Id. Guide to the 1996 Telecommunications Act, 49 Fed. Comm. L.J. 144 47 U.S.C. § 230 (e) (1). 251, 284-85 (1997). 145 47 U.S.C. § 230 (e) (2). 150 For example, the section 508 of the 1996 Act makes it 146 See 47 U.S.C. § 153 (43) (telecommunications), § 153 a crime to use telecommunications devices to induce a minor (44) (telecommunications carrier), § 153 (46) (telecommu- to engage in any illegal sexual act. See 18 U.S.C. § 2422 (b). nications service), § 153 (20) (information service), § 153 Section 502 makes it a crime to annoy or harass another per- (51) (wire communication or communication by wire). son either with obscene and indecent communication or by 147 See 47 U.S.C. § 522 (6) (cable service), § 522 (20) repeated telephone calls. See 47 U.S.C. § 223 (a) (1) (B), (video programming), § 522 (14) (other programming ser- (D)-(E). Section 508 of the Act also clarifies that it is a felony vice), § 522 (7) (cable system), § 522 (5) (cable operator), to use a computer to transmit obscene material. See 18 § 522 (12) (interactive on-demand services). U.S.C. § 1462. Pre-existing obscenity law was generally inter- 148 See 47 U.S.C. § 157 (c) (1) (advanced telecommuni- preted to reach that result. See United States v. Thomas, 74 cations capability). Section 706 of the 1996 Act, entitled, F.3d 701, 704-05 (6th Cir. 1995) (affirming obscenity convic- "Advanced Telecommunications Incentives," directs the tions for the operation of a computer bulletin board); see Commission to periodically initiate and complete inquiries also Meyerson, supra note 149, at 285 n.210. concerning the availability of "advanced telecommunications 151 47 U.S.C. § 223 (a)-(h). capability" for all Americans, and in particular, elementary COMMLAW CONSPECTUS [Vol. 7
"[n]othing in this section shall be construed to tions.156 Citing the District Court's finding that treat interactive computer services as common "the content on the Internet is as diverse as carriers or telecommunications carriers." 152 On human thought[,]" the Supreme Court con- the other hand, the Act protects what it terms curred with the lower court's conclusion "that our "good samaritan" blocking of certain program- cases provide no basis for qualifying the level of 1 53 ming. The 1996 Act also protects those who First Amendment scrutiny that should be applied 157 provide connections to the Internet or networks to this medium."' they do not control, and who are not responsible The Court found that the "vast democratic fora for on-line content. This protection is reserved of the Internet [has not] been subject to the type for "entities that simply offer general access to the of government supervision and regulation that Internet and other online content." 5 4 Thus, a has attended the broadcast industry," and that the 1 58 possible distinction appears to be imbedded in Internet is not as invasive as radio or television. these provision of 1996 Act between the regula- The Internet is also not supervised by any federal tory treatment of entities that provide only access agency, and cannot be considered a "scarce" ex- to the Internet, but no content of their own origi- pressive commodity like broadcast spectrum at nation, and Internet-based service providers who the outset of governmental regulation. Moreover, originate and provide their own online content it is a "dynamic, multifaceted category of commu- together with access to the Internet. nication [that] includes not only traditional print Several provisions of the CDA were held uncon- and news services, but also audio, video, and still stitutional by two different threejudge courts in images, as well as interactive, real-time dia- 59 ACLU v. Reno and Shea v. Reno. 1 55 These judg- logue."' ments were affirmed by the Supreme Court in The remainder of the CDA, apart from the "in- Reno v. ACLU. The Supreme Court held that the decent transmission" and "patently offensive dis- "indecent transmission" provision, section 223(a), play" provisions, was left intact by the Court's de- and the "patently offensive display" provision, sec- cision in Reno v. ACLU One of the remaining tion 223(d), violated the First Amendment on the portions of the CDA is the "On-line Family Em- grounds that they were facially over-broad, con- powerment," provision. 160 Section 509 of the tent-based restrictions on speech. 1996 Act, "Online Family Empowerment," Significantly, the Supreme Court rejected at- amended Title II of the Communications Act of tempts to find a proper analogy for the Internet 1934 by adding at the end new section 230, "Pro- to other previously recognized media of commu- tection for 'Good Samaritan' Blocking and nications, and instead focused on the unique na- Screening of Offensive Material." 16 Section ture of the Internet and Internet communica-
152 47 U.S.C. § 223 (e) (6). Section 223 (e) (6) by its (holding that (1) the First Amendment was violated by provi- terms applies only as a defense to charges that a provider of sions of CDA that prohibited transmission of obscene or in- interactive computer services has violated the Communica- decent communications by means of telecommunications de- tions Decency Act provisions of the 1996 Act. See id. None- vice and that prohibited sending patently offensive theless, it is instructive of a broad congressional policy to communications to person under the age of 18 through use temper the Commission's authority with respect to the rap- of interactive computer service; and (2) for purposes of CDA, idly changing information services market. a modem is a "telecommunications device."). The Court de- 153 47 U.S.C. § 230 (c) (2). This provision states that ferred resolution of tension between terms "telecommunica- those who run interactive computer services may not be held tions device" and "interactive computer service" in the statute liable if they voluntarily restrict access to material they con- for another day). See id. sider, in good faith, to be "obscene, lewd, lascivious, filthy, 156 See, e.g., Reno v. ACLU, 117 S. Ct 2329, 2334-35 excessively violent, harassing or otherwise objectionable. (1997) (stating that Internet communication and informa- Id. tion retrieval methods such as e-mail, listservs, newsgroups, 154 Joint Explanatory Statement, supra note 12, at 190; see chat rooms, and the World Wide Web, taken together "con- also 47 U.S.C. § 223 (e). stitute a unique medium-known to its users as 'cyberspace'- 155 See generally ACLU v. Reno, 929 F. Supp. 824 (E.D. Pa. located in no particular geographic location but available to 1996) (holding that the First Amendment was violated by anyone, anywhere in the world, with access to the Internet."). provisions of the Communications Decency Act that prohib- '57 Id. at 2344 (citing Reno, 929 F. Supp. ited transmission of obscene or indecent communications by at 842). 158 Id. means of a telecommunications device and that prohibited at 2343. sending patently offensive communications to person under 159 Id. at 2344. the age of 18 through use of interactive computer service); 160 47 U.S.C. § 230 (c). see generally Shea v.Reno, 930 F. Supp. 916 (S.D.N.Y. 1996) 161 Id. 1999] Internet Over Cable
230(a) contains five significant congressional Commission scrutiny; and that they obtain Com- findings with respect to the Internet: mission approval before acquiring or constructing 165 (1) The rapidly developing array of Internet and other new lines."' interactive computer services available to individual How to reconcile the "convergence and inter- Americans represent an extraordinary advance in the dependence of communication and data process- availability of educational and informational resources to our citizens. (2) These services offer users a great ing technologies" with the strictures of Title II degree of control over the information that they re- common carrier regulation has been the subject ceive, as well as the potential for even greater control in of one of the Commission's longest running, and and the future as technology develops.(3) The Internet 166 In the other interactive computer services offer a forum for a most complicated, set of proceedings. true diversity of political discourse, unique opportuni- mid-1960s, the Commission determined that com- ties for cultural development, and myriad avenues for munications over telephone lines increasingly in- intellectual activity.(4) The Internet and other interac- respect to both the means tive computer services have flourished, to the benefit of volved computers, with all Americans, with a minimum of government regula- of communication-how a message is transmitted tion. (5) Increasingly, Americans are relying on interac- and switched-and the content of the communi- for a variety of political, educational, cul- tive media 16 2 cation-providing data processing services to tural, and entertainment services. users.1 67 The Commission initiated a series of in relevant part, states that it is Section 230(b), proceedings in 1966, known as the "Computer In- the the policy of the United States, "to promote quiry" proceedings, which, at the outset, at- and other continued development of the Internet tempted to separate the regulatory treatment of computer services and other interac- interactive computers that were involved in the means of to preserve the vibrant and com- tive media [and] communication from the treatment of computers petitive free market that presently exists for the which perform data processing services.' 68 services, Internet and other interactive computer From the outset, the central regulatory and pol- regulation..."163 unfettered by Federal or State icy questions in the Computer Inquiry proceedings were: "(a) [t]he nature and extent of the regula- III. VOICE AND DATA COMMUNICATIONS tory jurisdiction to be applied to data processing UNDER THE COMMISSION'S RULES services; and (b) [w]hether, under what circum- stances, and subject to what conditions or safe- The Communications Act of 1934, as amended guards, common carriers should be permitted to ("the Act"), gave the Commission extensive au- engage in data processing."' 69 The primary focus thority over all "common carriers," which the Act of the Commission's effort was the establishment defined to include all persons "engaged as a com- of regulatory safeguards that would permit effi- mon carrier for hire, in interstate and foreign cient telephone company participation in com- communication." 164 Title II of the Act requires, petitive computer and data processing service inter alia, "that common carriers provide service at markets, while at the same time protecting their just and reasonable prices, and subject to just and customers and competitive service providers reasonable practices, classifications and regula- against unlawful cross-subsidization and intercon- tions; that they make no unjust or unreasonable nection discrimination through the establishment discrimination; that they file tariffs, subject to
162 47 U.S.C. § 230 (a). This piece discusses only the (1970) [hereinafter Computer I Tentative Decision]; Final Deci- portion of section 130 containing legislative findings and a sion and Order, 28 F.C.C. 2d 226 (1971) [hereinafter Computer statement of policy. See id. I FinalDecision], affd in part sub nom. GTE Serv. Corp. v. FCC, 163 47 U.S.C. § 230 (b). 474 F.2d 724 (2nd Cir. 1973) [hereinafter Computer 1], deci- 164 Report to Congress, supra note 3, at para. 22. sion on remand, 40 F.C.C. 2d 293 (1973) [hereinafter Computer 165 Id. (footnotes omitted) (citing 47 U.S.C. §§ 201 (b), I Remand]. In Computer I Tentative Decision, the Commission 202 (a), 203-205, 214). identified possible dangers to the competitive data process- 166 In re Regulatory and Policy Problems Presented by ing markets posed by common carrier entry as follows: "The the Interdependence of Computer and Communication dangers ... relate primarily to the alleged ability of common Services and Facilities, Notice of Inquiry, 7 F.C.C. 2d 11, 12 carriers to favor their own data processing activities by dis- (1966) [hereinafter Computer NO]]. criminatory services, cross-subsidization, improper pricing of 167 See ESP Status of ISPs, supra note 14, at 11. common carrier services, and related anticompetitive prac- 168 See Computer NOL, 7 F.C.C. 2d at 11; see also Supplemen- tices and activities." See Computer I Tentative Decision, 28 F.C.C. tal Notice of Inquiry, 7 F.C.C. 2d 16 (1967). 2d at 301-302. 169 See Computer I Tentative Decision, 28 F.C.C. 2d 291, 295 COMMLAW CONSPECTUS [Vol. 7
of competitive safeguards. 170 The regulatory cate- mission chose to regulate what it described as gories that emerged reflect these goals, and still "communications services" as common carrier of- form the basis for regulation of certain Internet ferings under Title II of the Act. 1 76 Thus, com- access services provided by Title II common carri- puter processing involved in the means of com- ers. munications, such as message-switching, would be regulated under Title II of the Communications A. Computer I Act, whereas computer services providing data processing to end users over the telephone net- Computer I delineated the circumstances in work would not be regulated under Title II. which computer use constituted common carrier "Hybrid" services, which the Commission de- communication subject to regulation under Title fined as offerings that combine remote access II of the Act as opposed to unregulated data data processing and message-switching to form a processing.' 7' Under Computer I, the Commission single integrated service, were to be treated as looked at the manner in which computerization either data processing or communications serv- was employed to determine how a service would ices based on case-by-case determinations as to be regulated. To facilitate this functional ap- which of the two functions were predominant in proach, the Commission established a three-part the particular hybrid service. The Commission classification of computer and communications specifically declined to regulate hybrid services services, based on their technological and func- that are primarily data processing services under tional characteristics, with a different regulatory Title II, despite their incorporation of a commu- treatment for each classification. "Data process- nications component, and regardless of whether ing" was defined as "the use of a computer for the that hybrid service was offered by a common car- processing of information as distinguished from rier or non-common carrier. 177 Although data [the use of computers for] circuit or message- processing services were not regulated under Title switching."' 172 "Processing" was defined as involv- II, the Commission found that it had jurisdiction ing the "use of the computer for operations which over these services under the ancillary jurisdiction include, inter alia, the functions of storing, retriev- of Title 1.178 ing, sorting, merging and calculating data, ac- Under Computer I, the Commission permitted 73 cording to programmed instructions."' common carriers over a certain size to provide Title II empowers the Commission to regulate data processing services subject to a "maximum only common carriers engaged in interstate or separation" requirement. 179 The maximum sepa- foreign communication by wire or radio. 174 The ration requirement meant that common carriers Commission determined not to regulate "data could offer data processing services only through processing" services, which it found were being of- a separate corporate entity having separate ac- fered on a highly competitive basis. 175 The Com- counting records, personnel, equipment and fa-
170 See Computer I Tentative Decision, 28 F.C.C. 2d at 301- n.35 (9th Cir. 1990) (holding that the Commission's Title I 302. jurisdiction over enhanced services is ancillary to its Title II 171 See Computer I Final Decision, 28 F.C.C. 2d at 268-70 authority over common carrier communications services). (discussing the extent of Commission jurisdiction over data 172 Computer I Final Decision, 28 F.C.C. 2d at 268 n.3 (cit- processing not necessary in light of decision not to regulate ing Computer I Tentative Decision, 28 F.C.C. 2d at 291, para. date processing as such, but that the Commission reserves 15). the right to reexamine its policies in future should significant 173 See id. changes in the structure of the industry develop or if abuses 174 See id. at 264; see also 47 U.S.C. §§ 152. occur that require the exercise of corrective action); Com- 175 See puter I Tentative Decision, 28 F.C.C. 2d at 295-98 (finding that id. at 270. the Commission has both broad regulatory jurisdiction over 176 See id. at 274. communications by wire or radio that may encompass data 177 See id. at 276-78; see also Computer I Tentative Decision, processing services and discretion in determining jurisdic- 28 F.C.C. 2d at 305 (finding that "where message-switching is tional base and regulatory tools most effective in advancing offered as an integral part of and as an incidental feature of a Congressional objectives; that effective competition in data package offering that is primarily data processing, there will processing market renders- governmental regulation of such be total regulatory forbearance with respect to the entire ser- activities at this time unnecessary, except to limited extent of vice whether offered by a common carrier or non-common regulating provision of such services by certain common car- carrier."). tiers). See also ESP Status of ISPs, supra note 14, at 11; see also 178 See Computer I Final Decision, 28 F.C.C. 2d at 268-70. People of the State of California v. FCC, 905 F.2d 1217, 1240 179 See id. at 275. 19991 Internet Over Cable cilities. This requirement was designed to protect mission adopted "a regulatory scheme that distin- telephone ratepayers and competitive data guished between the common carrier offering of processing service providers by preventing the basic transmission services and the offering of en- common carriers from engaging in anticompeti- hanced services."'184 This decision introduced the tive behavior, such as interconnection discrimina- concepts of "basic" and "enhanced" services, and tion and from unfairly burdening their regulated divided these services into two non-overlapping communications services with costs properly at- categories.' 8 5 These categories rest upon the na- tributable to unregulated data processing services. ture of the processing performed. Basic service The Commission did not establish requirements was limited to "the common carrier offering of for AT&T and its affiliated Bell System companies transmission capacity for the movement of infor- in Computer I, based upon the assumption that mation," 86 or "a pure transmission capability over they were precluded from offering any type of a communications path that is virtually transpar- data processing services by the terms of an anti- ent in terms of its interaction with customer sup- trust consent decree then in effect.'8 0 plied information."18 7 Data processing, computer memory or storage, and switching techniques can B. Computer II and Computer III be components of a basic service if they are used solely to facilitate the movement of informa- Although the Computer I rules were upheld on tion. 188 appeal, case-by-case determination of which hy- Enhanced services were defined as "any offer- brid services were to be treated as unregulated ing over the telecommunications network which data processing, as opposed to Title II common is more than a basic transmission service," and as carrier services, ultimately proved unsatisfactory combining basic service with "computer process- in light of the increasing convergence of these ing applications that act on the format, content, services."" In response, the Commission initiated code, protocol or similar aspects of the sub- the Computer I1182 and, later, the Computer IIP83 scriber's transmitted information, or provide the proceedings. subscriber with additional, different, or restruc- tured information, or involve subscriber interac- 8 9 Computer H tion with stored information."' The Commis- sion's rules were revised as follows to define In its 1980 Computer II Final Decision, the Com- enhanced services in terms of the functions that
180 See United States v. Western Electric Co., 13 Rad. Rcd. 3072 (1987) [hereinafter Computer III Phase II Order], Reg. (P&F) 2143, 1956 Trade Cas. (CCH) 71,134 (D. N.J. further reconsidered, 4 FCC Rcd. 5927 (1989), rev'd in part, see 1956) [hereinafter 1956 Decree]. also California v. FCC, 905 F.2d 1217 (9th Cir. 1990), on re- 181 See ESP Status of ISPs, supra note 14, at 12. mand, Report and Order, 6 FCC Rcd. 7571 (1991), vacated in 182 See In re Amendment of Section 64.702 of the Com- part and remanded, California v. FCC, 39 F.3d 919 (9th Cir. mission's Rules and Regulations (Second Computer In- 1994); see also Computer III Further Remand Proceedings: quiry), Final Decision, 77 F.C.C. 2d 384 (1980) [hereinafter Bell Operating Company Provision of Enhanced Services, No- ComputerII Final Order], reconsidered,Memorandum Opinion and tice of Proposed Rulemaking , 10 FCC Rcd. 8360 (1995). Order, 84 F.C.C. 2d 50 (1980), further reconsidered, Memoran- 184 Computer I Final Order, 77 F.C.C. 2d at 384, para. 5. dum Opinion and Order on FurtherReconsideration, 88 F.C.C. 2d 185 See In re Implementation of the Telecommunications 512 (1981), aff'd, Computer and Communications Indus. Act of 1996: Telecommunications Carriers' Use of Customer Ass'n v. FCC, 693 F.2d 198 (D.C. Cir. 1982) [hereinafter Proprietary Network Information and Other Customer Infor- CCIA], cert. denied, 461 U.S. 938 (1983). mation, Implementation of the Non-Accounting Safeguards 183 See In re Amendment of Section 64.702 of the Com- of Section 271 and 272 of the Communications Act of 1934, mission's Rules and Regulations (Third Computer Inquiry); as Amended, Second Report and Order and FurtherNotice of Pro- and Policy and Rules Concerning Rates for Competitive posed Rulemaking, 13 FCC Rcd. 8061, para. 46 (1998) [herein- Common Carrier Services and Facilities Authorizations after Use of CPNI] (summarizing Commission precedent as in- Thereof, Communications Protocols under Section 64.702 of dicating that telecommunications services and information the Commission's Rules and Regulations, Report and Order, services are "separate, non-overlapping categories, so that in- 104 F.C.C. 2d 958 (1986) [hereinafter Computer III Phase I Or- formation services do not constitute 'telecommunications' der], modified on reconsideration, Report and Order, 2 FCC Rcd. within the meaning of the 1996 Act"). 3035 (1987), further reconsidered, Memorandum Opinion and Or- 186 Computer II Final Order, 77 F.C.C. 2d at 384, para. 93. der on FurtherReconsideration, 3 FCC Rcd. 1135 (1988), second 187 Id. at para. 96. further reconsideration, Memorandum Opinion and Order on Fur- ther Reconsideration and Second Further Reconsideration, 4 FCC 188 See id. at para. 95. Rcd. 5927 (1989); see also Phase II, Report and Order, 2 FCC 189 Id. at para. 5. COMMLAW CONSPECTUS [Vol. 7 were considered to be different from basic tele- nent" in all of these enhanced services, over phone service: "services, offered over common which the agency had never imposed a scheme of carrier transmission facilities used in interstate regulation.1 96 Any agency regulatory decision in communications, which employ computer this area, the Commission asserted, "must assess processing applications that act on the format, the merits-as we do in this order-of extending content, code, protocol or similar aspects of the regulation to an activity simply because a part of it subscriber's transmitted information; provide the is subject to the agency's jurisdiction where such subscriber additional, different, or restructured regulation would not be necessary to protect or 197 information; or involve subscriber interaction promote some overall statutory purpose. with stored information."' 90 The Commission observed that because en- The Commission acknowledged that with re- hanced service was not explicitly contemplated in spect to the line it drew between basic and en- the Act: hanced services, "[p]lausible arguments can be [t]here is no more a requirement to confront it with a tendered for drawing it elsewhere."' 91 At the mar- specific traditional regulatory mechanism than there was, for example, with cable television [then unregu- gin, the Commission asserted, "some enhanced lated under the Act], which has formal elements of services are not dramatically dissimilar from basic common carriage and broadcast television... Precedent services or dramatically different from communi- teaches that the Act is not so intractable as to require us as defined in the Computer Inquiry L"192 to routinely bring new services within the provision of cations our Title II and III jurisdiction even though they may Nonetheless, the Commission refused to re-draw involve a component that is within our subject matter 198 the line at this margin because such action poten- jurisdiction. tially would subject the issue to constant adjudica- Because the Commission determined that the tion over the status of individual services offer- enhanced services market was competitive, and ings.193 In addition, in recognition of the policy that consumers were deriving benefits from this "that substance, not form, govern the treatment competition, the Commission declined to regu- of services within the Act's reach, the Commission late enhanced services as common carriage under stated that it had tried to draw the line "in a man- Title II of the Act.1 9 9 Such comprehensive regula- ner which distinguishes wholly traditional com- tion of competitive services, the Commission as- mon carrier activities, regulable under Title II of serted, would not be "directed at protecting or the Act, from historically and functionally com- promoting a statutory purpose."20 0 Nonetheless, petitive activities not congruent with the Act's the Commission again noted that it had jurisdic- traditional forms."19 4 The Commission stated that tion over enhanced services under the ancillary it had acted on the policy of substance over form jurisdiction of Title I, on the grounds that the en- by "applying traditional Title II regulatory mecha- hanced services under consideration constitute nisms to basic services and applying no direct reg- the electronic transmission of writing, signs, sig- 1 95 ulatory mechanism for enhanced services." nals, pictures, etc. over the interstate (and for- The Commission further stated that although it eign) telecommunications network. 20 1 It further recognized "the existence of a communications found that it could reasonably exercise these an- component" and that "some enhanced services cillary powers by imposing certain separate subsid- may do some of the same things that regulated iary requirements where required, to assure wire communications services did in the past," there was also a "substantial data processing compo-
190 47 C.F.R. § 64.702 (a) (1998). Thus, enhanced serv- 199 Id. at paras. 119, 127, 129. ices under Computer H include both data processing services 200 Computer II Final Order, 77 F.C.C. 2d at 384, paras. under Computer I and "hybrid" forms of communications. 126, 127. 191 Computer H Final Order, 77 F.C.C. 2d at 384, para. 130. 201 See id. at paras. 124-25; see also California v. FCC, 905 192 Id. F.2d 1217, 1240 n.35 (9th Cir. 1990) (stating that "Title I ju- 193 See id. risdiction, [which] is not an independent source of regula- 194 Id. at para. 131. tory authority[,]... confers on the FCC only such power as is 195 Id. ancillary to the Commission's specific statutory responsibili- 196 Computer II Final Decision, 77 F.C.C. 2d at 384, para. ties" and that "[i]n the case of enhanced services, the specific 132. responsibility to which the Commission's Title I authority is 197 Id. ancillary [is] its Title II authority over common carrier serv- 198 Id. at para. 121. ices."). 1999] Internet Over Cable communications services at reasonable rates. 20 2 the AT&T companies and GTE, to provide en- Regulation of enhanced services provided by com- hanced services and CPE only through corporate mon carriers was deemed necessary to prevent the affiliates fully separated from their basic services 20 5 dominant carrier from burdening its basic trans- operations. mission service customers with part of the cost of Section 202 of the Act prohibits common carri- providing competitive enhanced services. In addi- ers from discriminating unreasonably in their pro- tion, the Commission stated that it could rely on vision of communications services. 206 Pursuant to the direct regulation it retains with respect to the section 203, common carriers are required to 20 7 independent provision of basic services, which re- tariff their interstate communications services. main a component of the charges for enhanced Although the separate subsidiary requirements of 03 services. 2 Computer II applied only to AT&T (and later to the It is clear from the foregoing discussion that divested Bell Operating Companies, "BOCs") ,208 the Commission created its distinction between the other requirements of Computer II applied to basic and enhanced services with the jurisdic- all facilities-based common carriers, regardless of tional consequences of regulation versus no regu- whether their revenues exceeded the Computer I lation (i.e., Title II versus Title I) very much in threshold. Carriers owning common carrier mind. Again, as in Computer Inquiry I, the Com- transmission facilities and providing enhanced mission's primary concern was in setting up defi- services must unbundle the basic from the en- nitional categories and regulatory consequences hanced components of their services. They must that would curtail the potential for anti-competi- offer the unbundled transmission capacity to tive conduct that could result from telephone car- other enhanced service providers pursuant to the rier participation in competitive markets by same tariffed terms and conditions under which means of integrated operations and service offer- they provide such services to their own enhanced 20 9 ings. Of particular concern was that carriers with service operations. local telephone distribution networks could use On August 11, 1982, the District Court for the their control over basic services to discriminate District of Columbia entered a consent decree, against other enhanced service providers' (ESPs) known as the "Modification of Final Judgment" or services and products, as well as with the potential "MFJ," settling the antitrust lawsuit against the for anti-competitive cross-subsidization from un- AT&T's Bell System. The MFJ required AT&T to regulated to regulated activities. 20 4 To guard divest itself of the BOCs. The MFJ distinguished against such abuses, the Commission required the between "telecommunications" and "information" major carriers with local distribution networks, services. 210 The BOCs were to provide local ex-
202 See Computer II Final Order, 77 F.C.C. 2d at 384, para. Cellular Communications Services by the Bell Operating 132. Companies, Report and Order, 95 F.C.C. 2d 1117, 1117 (1983) 203 See id. (BOC Separations Order) (applying Computer II structural safe- 204 Cross-subsidization occurs when a carrier mis-attrib- guards to BOCs) (subsequent history omitted). In Computer utes costs incurred in the provision of unregulated services to II, the Commission found that although AT&T remained the provision of regulated services. See Id. at para. 445. Be- subject to the 1956 Decree, that decree did not bar AT&T from cause rates for regulated services are based partially upon the the offering of customer premises equipment and enhanced cost of providing those services, mis-attribution of costs re- services on a separated basis insofar as those offerings were sults in the carrier's monopoly ratepayers' bearing a part of "subject to regulation" by the Commission. See id. the cost of unregulated services. See id. 209 "[T]hose carriers that own common carrier transmis- 205 Id. at 466-75. However, the Commission noted that it sion facilities and provide enhanced services, but are not sub- was not concerned with non-telephone carriers, which do not ject to the separate subsidiary requirement, must acquire have the monopoly power it was concerned with. See id. at transmission capacity pursuant to the same prices, terms, and para. 221. Such "specialized carriers such as MCI and SPCC, conditions reflected in their tariffs when their own facilities lack local distribution facilities entirely, and have no reser- are utilized. Other offerors of enhanced services would like- voir of monopoly ratepayers from which to extract the excess wise be able to use such a carrier's facilities under the same profits necessary to cross-subsidize other services." Id. The terms and conditions." ComputerII Final Order, 77 F.C.C. 2d at Commission concluded that "[s]uch carriers would be in a 384, para. 231. In Computer II, the Commission also pre- position to deny access only to a limited number of inter- empted state regulation of the sale of both customer prem- exchange transmission systems." Id. ises equipment ("CPE") and enhanced services. See id. at 206 See 47 U.S.C. § 202. para. 125. 207 See 47 U.S.C. § 203. 210 See United States v. Western Elec. Co., 552 F. Supp. 208 See In re Policy and Rules Concerning the Furnishing 131, 226-32 (D.D.C. 1982) (citing terms of the original MFJ), of Customer Premises Equipment, Enhanced Services and aff'd sub nom. Maryland v. United States, 460 U.S. 1001 COMMLAW CONSPECTUS [Vol. 7 change telecommunications services. However, general, these safeguards were developed to (1) because of their control of the local exchange prevent cross-subsidization through cost account- bottleneck, they were prohibited from providing ing measures; (2) prevent discriminatory network information services, interLATA services, manu- access or interconnection practices; and (3) regu- facturing and selling telecommunications equip- late joint marketing practices through protection ment, and manufacturing CPE. The interLATA of customer proprietary network information information services restriction was modified in (CPNI). The Commission also preempted nearly 1987 to allow BOCs to provide voice messaging all state regulation of the sale of enhanced serv- 214 services and to transmit information services gen- ices by communications common carriers. erated by others. 211 The MFJ's category of "infor- The nonstructural safeguards featured imple- mation services" was very similar, although not mentation of a concept known as "open network identical, to the Commission's "enhanced serv- architecture" or "ONA," which was designed to ices" category. The MFJ's definition of informa- ensure non-discriminatory access to network facil- tion services was the basis for the 1996 Act's use of ities and functions for all ESPs. 215 As originally 12 that term. 2 envisioned in Computer Il, ONA was to provide all ESPs "equal access to the components of the Computer III BOCs' telephone network, as well as the ability to select network service elements not used by the In the Computer III proceeding, the Commission BOCs in providing their own enhanced serv- reviewed both its customer premises and en- ices." 2 16 In implementing Computer III, the Com- hanced service safeguards, and replaced the struc- mission permitted the BOCs as a first step, pend- tural separation requirement for the provision of ing full structural relief, "to offer individual enhanced computerized data services with a set of enhanced services on an integrated basis (i.e., di- phased-in non-structural safeguards. 213 Thus, the rectly by the operating company, rather than BOCs and AT&T would be permitted to provide through a separate affiliate) following approval of enhanced services on an "integrated" basis (i.e., service-specific comparably efficient interconnec- through the regulated telephone company), sub- tion (CEI) plans."2 17 Computer III included the ject to certain "non-structural" safeguards. In following other non-structural safeguards: "ac-
(1983); see also United States v. Western Elec. Co., 569 F. 213 See Computer III Phase I Order, 104 F.C.C. 2d at 958, Supp. 1057 (D.D.C. 1983) (Plan of Reorganization), affd sub para. 3. nom. California v. United States, 464 U.S. 1013 (1983); see also 214 See Computer III Phase I Order, 104 F.C.C. 2d at 958, United States v. Western Elec. Co., No. 82-0192 (D. D.C. Apr. paras. 345-48; see also In re Separation of Costs and Regulated 11, 1996) (vacating the MFJ). Telephone Service from Costs of Nonregulated Activities & 211 See United States v. Western Elec. Co., 673 F. Supp. Amendment of Part 31, the Uniform System of Accounts for 525 (D. D.C. 1987); see also United States v. Western Elec. Class A and Class B Telephone Companies to Provide for Co., 714 F. Supp. I (D. D.C. 1988). In 1991, the restriction Nonregulated Activities and to Provide for Transactions Be- on BOC ownership of content-based information services was tween Telephone Companies and Their Affiliates, Report and lifted. See United States v. Western Elec. Co., 767 F. Supp. Order, 2 FCC Rcd. 1298 (1987) [hereinafter Joint Cost Order], 308 (D. D.C. 1991), stay vacated, United States v. Western recon, 2 FCC Rcd. 6283 (1987), further recon, 3 FCC Rcd. 6701 Elec. Co., 1991-2 Trade Cases (CCH) 69,610 (D.C. Cir. (1988), affd sub nom. Southwestern Bell Corporation v. FCC, 1991). 896 F.2d 1378 (D.C. Cir. 1990). The Joint Cost Orderadopted 212 The MFJ defines "information service" as the "offer- (1) cost allocation standards and, for certain carriers, a re- ing of a capability for generating, acquiring, storing, trans- quirement that a cost allocation manual ("CAM") be filed forming, processing, retrieving, utilizing, or making available with the Commission; (2) rules for recording transactions be- information which may be conveyed via telecommunica- tween regulated telephone companies and their corporate af- tions..." U.S. v. Western Electric Co., Inc., 552 F. Supp. at filiates; and (3) accounting procedures, audit requirements, 229. "Information" is defined as "knowledge or intelligence and other implementation and enforcement mechanisms. represented by any form of writing, signs, pictures, sounds, See id. at 1380. or other symbols." See id; see also H.R. REP. No. 204, pt 1, at 215 See In re Amendment of the Commission's Rules to 125 (1995) ("Information service" and "telecommunications" Establish Competitive Safeguards for Local Exchange Carrier are defined based on the definitions used in the MFJ.). In Provision of Commercial Mobile Radio Services, et al., Notice the House-Senate conference on the 1996 Act, the Senate re- of Proposed Rulemaking, Order on Remand, and Waiver Order, 11 ceded to the House on the definition of information service. FCC Rcd. 16639, at para. 95 [hereinafter Wireless Safeguards The House receded to the Senate on the definition of tele- Notice]. communications, but the House and Senate bills contained 216 Id. similar definitions of this term. H.R. CONF. REP. No. 458, at 217 Id. By the term "integrated," the Commission re- 116 (1996). ferred to the provision of enhanced services and basic serv- 1999] Internet Over Cable counting safeguards; timely disclosure to compet- cluding the independent telephone companies, ing ESPs of network information, including tech- were capable of engaging "in the discriminatory nical interfaces; access to and use of CPNI; and practices against enhanced service providers that quarterly reporting to help ensure that BOC pro- CEI is designed to prevent."' 222 Later, these re- vision of basic services to competing ESPs was quirements were extended to the GTE local ex- 223 non-discriminatory in terms of quality, installa- change companies. ' 218 tion, and maintenance." In addition, the Computer 111 decisions subject The CEI requirement for BOCs was based upon certain carriers to further unbundling require- a finding that the BOCs possessed local network ments in offering an enhanced service.2 24 Under facilities that continued to possess significant mar- the ONA model, ESPs may obtain access to vari- ket power regarding the provision of network ac- ous unbundled ONA services, termed "Basic Ser- cess to the majority of end users and other large vice Elements," through access links described as companies, despite being increasingly subject to "Basic Serving Arrangements."' 2 25 Non-carrier replacement by alternative local access technolo- ESPs are not subject to Title II regulation, even if gies.2 19 Similarly, the Commission found that their enhanced service offering contains en- although AT&T was increasingly subject to com- hanced protocol processing service in conjunc- petition in the markets for its regulated offerings, tion with basic transmission service under the 226 AT&T's position in interexchange basic service Commission's "contamination" theory. markets remained sufficiently strong, and there- In Computer III, the Commission reaffirmed ear- fore warranted the imposition of CEI require- lier decisions concluding that three types of pro- ments on its enhanced service offerings. 220 The tocol processing are not enhanced services within Commission further concluded that it would limit the meaning of its rules. First, the enhanced serv- the CEI and ONA requirements to AT&T and the ices definition applies only to end-to-end commu- BOCs. 221 It reached this conclusion despite find- nications between or among subscribers.22 7 Thus, ing that other "dominant" carriers that possessed communications between a subscriber and the market power in the provision of basic services, in- network itself (e.g., for call setup, call routing and ices in a manner inconsistent with the Computer II separation guards to GTE to safeguard continued competitive develop- requirements. Under structural integration, BOCs have ment of enhanced services markets). been able to offer enhanced services without establishing 224 See, e.g., Computer III Phase 11 Order, 2 FCC Rcd. at separate subsidiary companies, hiring separate personnel, or 3072; see also In re Filing and Review of Open Network Archi- using separate computer equipment and other facilities. tecture Plans, Memorandum Opinion and Order, 4 FCC Rcd. BOCs are still permitted to offer their enhanced services 2449, paras. 30-41 (1988) (approving AT&T's plan involving through subsidiaries, but those subsidiaries can share person- a basic packet switching service underlying an enhanced pro- nel and resources with the parent company. In their CEI tocol processing service); see also In re American Telephone plans, BOCs were required to describe: (1) the enhanced ser- and Telegraph Company Comparably Efficient Plan for Pro- vice or services to be offered, (2) how the underlying basic tocol Conversion and Storage Services with Packet Switching services would be made available for use by competing en- Services, Memorandum Opinion and Order, 5 FCC Rcd. 651 hanced service providers (ESPs), and (3) how the BOC (1990). would comply with the other non-structural safeguards Com- 225 See In re Filing and Review of Open Network Architec- puter III imposed. ture Plans, Memorandum Opinion and Order, 4 FCC Rcd. 1, 218 Wireless Safeguards Notice, 11 FCC Rcd. at 16639, para. (1988) [hereinafter BOC ONA Order], recon., Memorandum 95. "CPNI" was defined as "all the information about a cus- Opinion and Order on Reconsideration, 5 FCC Rcd. 3084, para. 3 tomer's network services and a customer's use of those serv- (1990) [hereinafter BOC ONA Reconsideration Order], Memo- ices that a BOC possesses by virtue of its provision of network randum of Opinion and Order, 5 FCC Rcd. 3103 (1990) [here- services." See In re Filing and Review of Open Network Archi- inafter BOC ONA Amendment Order] (subsequent history omit- tecture Plans, Phase 1, Memorandum Opinion and Order, 4 FCC ted). Other ONA elements included unbundled basic Rcd. 1, at para. 411 (1988). service features an end user could obtain from a BOC in or- 219 See Computer III Phase I Order, 104 F.C.C. 2d at 958, der to receive or use an enhanced service, and non-Title II para. 129. services, such as billing and collection that may be useful to 220 See id. at para. 130. enhanced service providers. See BOC ONA Amendment Order, 5 221 See id. at para. 132. FCC Rcd. 3103, para. 4. 222 Id. 226 See In re Amendment of Section 64.702 of the Com- 223 See In re Application of Open Network Architecture mission's Rules and Regulations (Third Computer Inquiry), and Nondiscrimination Safeguards to GTE Corporation, Re- Supplemental Notice, FCC 86-253, para. 43 n.52 (rel. June 16, port and Order, 9 FCC Rcd. 4922 (1994) (scope of GTE's ex- 1986), 51 Fed. Reg. 24410 (July 3, 1986). panded local exchange operations sufficiently similar to 227 See Computer III Phase H Order, 2 FCC Rcd. 3072, at BOCs to justify imposing ONA and nondiscrimination safe- para. 64 (1987). COMMLAW CONSPECTUS [Vol. 7
call cessation) are not considered enhanced serv- Act's unbundling and structural separations re- ices. Second, protocol conversions necessitated quirements on the Commission's current non- by the introduction of new technology (requiring structural safeguards framework; on the question protocol conversion to maintain compatibility of whether certain ISPs should have the same type with existing customer premises equipment) are of access to unbundled elements of BOC net- also outside the ambit of the enhanced services works as is granted to telecommunications carri- definition. 228 Third, inter-networking protocol ers under section 251 of the 1996 Act; and on cer- conversions-those taking place solely within the tain specific proposals to streamline requirements 233 network that result in no net conversion between for BOC provision of enhanced services. users-are treated as basic services. 229 In early 1998, the Commission issued a Further C. BOC Provision of Internet Access Under Notice of Proposed Rulemaking in the Computer Computer III III docket, that is also part of its 1998 Biennial Regulatory Review. 230 The Commission believed Consistent with Computer III, BOCs wishing to it necessary to not only respond to the issues re- provide intraLATA Internet access service to con- manded by the Ninth Circuit Court of Appeals re- nect end users to the Internet currently must file, garding Computer III unbundling requirements for and receive approval of, CEI plans that demon- BOC intraLATA enhanced services, but also to re- strate that the underlying basic services are avail- examine its non-structural safeguards regime gov- able on an equivalent, unbundled basis to unaffili- erning the provision of information services by ated ESPs. 23 4 For example, Bell Atlantic received the BOCs in light of the 1996 Act.23 1 Comment such approval from the Common Carrier Bureau was sought, inter alia, on whether the Commis- in June 1996, for its "Internet Access Service" sion's "definition of basic service and the 1996 ("IAS"). 235 Bell Atlantic's service description indi- Act's definition of 'telecommunications service' cated that, in addition to access to the Internet, should be interpreted to extend to the same func- the carrier would offer users supporting services, 23 2 tions, even though the two definitions differ." including access to the World Wide Web and Comment was also sought on the impact of the Usenet, electronic mail, and "chat" services. 236 As
228 See id. at para. 65. inafter Bell Atlantic Internet Access CEI Plan Order], reconsidera- 229 See id. at para. 66. tion pending. In that order, the Common Carrier Bureau 230 In re Computer III Further Remand Proceedings: Bell determined that Bell Atlantic's provision of Internet access Operating Company Provision of Enhanced Services, CC service did not constitute an interLATA information service. Dkt. No. 95-20, 1998 Biennial Regulatory Review-Review of See id. On July 19, 1996, MFS Communications Co. filed a Computer III and ONA Safeguards and Requirements, CC petition for reconsideration of the Bell Atlantic Internet Access Dkt. No. 98-10, Further Notice of Proposed Rulemaking, FCC 98-8 CEI Plan Order, arguing, inter alia, that Bell Atlantic's Internet (rel. Jan. 30, 1998) [hereinafter, Computer III Further Remand access service offering is an interLATA service that Bell Atlan- Proceedings]. See also 47 U.S.C. § 161 (establishing the prac- tic may provide only through a section 272 separate affiliate tice of a biennial review of regulations issued under the Com- after obtaining section 271 authorization from the Commis- munications Act). sion, and that Bell Atlantic cannot simply rely on compliance 231 See id. Pending the conclusion of the Computer III Fur- with the Commission's Computer II, Computer III and ONA re- ther Remand Proceedings, the Commission's Computer II, Com- quirements. At about the same time, Southwestern Bell Tele- puter III, and ONA rules are the only regulatory means by phone Company (SWBT) filed a CEI plan for Internet Sup- which certain independent ISPs are guaranteed nondiscrimi- port Services. See Pleading Cycle Established for Comments natory access to BOC local exchange services used in the pro- on SWBT's Comparably Efficient Interconnection Plan for vision of intraLATA information services. Internet Support Services, CC Docket Nos. 85-229, 90-623 & 232 Computer III Further Remand Proceedings, supra note 95-20, Public Notice, DA 96-1031 (rel.June 26, 1996). Thereaf- 230, at para. 41. ter, MFS filed a petition to consolidate the Bell Atlantic, 233 See id. at para. 7. SWBT and a rulemaking proceeding to implement section 234 See Computer III Phase II Order, 2 FCC Rcd. at 3072 272 on the grounds that all three proceedings raise similar (1987). Although AT&T remains subject to certain Computer novel, policy, factual and legal arguments. See Petition to IIl and ONA requirements, its burdens have been substan- Consolidate Proceedings filed by MFS Communications tially lessened vis-a-vis those of the BOCs. See, eg, Competi- Company, Inc. (filed July 25, 1996). The rulemaking pro- tion in the Interstate Interexchange Marketplace, Memoran- ceeding implementing sections 271 and 272 non-accounting dum Opinion and Order on Reconsideration, 10 FCC Rcd. 4562 safeguard requirements will be discussed below in Section (1995). IV.C. 235 See In re Bell Atlantic Telephone Companies Offer of 236 See Bell Atlantic Internet Access CEI Plan Order, 11 FCC Comparably Efficient Interconnection to Providers of In- Rcd. 6919, at para. 7 (1996). ternet Access Services, Order, 11 FCC Rcd. 6919 (1996) [here- 19991 Internet Over Cable described in the Bell Atlantic Internet Access CEI the hosting services will provide ESPs with the Plan Order, Bell Atlantic's IAS uses several tariffed ability to store Internet information, such as services, including Switched Multi-Megabit Data home pages, databases, bulletin boards, and other Service (SMDS), Frame Relay Service and Inte- data on Bell Atlantic's processor, from which con- 242 grated Services Digital Network (ISDN) .237 It also nection is provided to the Internet." utilizes a new service, "Internet Protocol Routing Service" ("IPRS"), which "consists of network D. Frame Relay Order routers located at LATA hub sites that... collect the customer's end user traffic and concentrate it The Common Carrier Bureau's Frame Relay Or- for connection and transport over a Bell Atlantic ' 23 8 der applied to common carrier frame relay serv- SMDS interface." ices. It dealt with the Computer 11 requirement The Bell Atlantic Internet Access CEIPlan Order re- that all carriers that own common carrier trans- cites the following service characteristics de- mission facilities and also provide enhanced serv- scribed by Bell Atlantic: ices, must unbundle basic from enhanced services [E]nd user customers will be able to dial into AS using a standard seven or ten-digit telephone number, or may and offer transmission capacity to other enhanced obtain direct connection through special access ser- service providers under the same tariffed terms vice... [I]n either case, the end user customer will sub- and conditions under which they provide such service connecting 243 scribe to the telecommunications enhanced operations. the end user to US ... [E] nd users using switched access services to their own will be connected to a digital modem or ISDN port at This ruling came in response to a petition for de- Bell Atlantic's premises... [M]odems and ports provide claratory ruling that AT&T's InterSpan Frame Re- Af- the customer with connection to a terminal router. lay Service is a basic transmission service, subject ter the customer has entered a valid identifying pass- word, Bell Atlantic's processor will connect the call to to tariffing and other requirements of Title II. the Internet... Once connected, [switched access cus- The petitioner argued that AT&T possessed suffi- tomers] will be able to navigate the Internet through cient market power in the provision of frame relay 'browser' software and an Internet gateway service to be 244 by Bell Atlantic on an unregulated, unbun- service to warrant regulation. AT&T, in turn, provided 2 39 died basis. sought a ruling that the decision regarding Inter- Dedicated access subscribers, in contrast, are Span should apply to all other interexchange car- continuously connected to the AS and are not re- riers (IXCs). AT&T maintained that its InterSpan quired to enter a password to access the Internet. frame relay service was an enhanced service be- Such subscribers also have the option of acquiring cause protocol conversion was an integral part its browser software and Internet gateway functional- service; other parties commenting, including sev- 2 40 ity from Bell Atlantic. eral BOCs, countered that they provide basic 243 Finally, the service includes design and hosting frame relay service under tariff. services for database providers.241 The Bell Atlan- The 1995 Frame Relay Order described frame re- tic Internet Access CEI Plan Order notes that the "de- lay technology "as a relatively new, high-speed sign services will aid information providers in de- packet-switching technology used to communi- veloping home pages and databases [and that] cate digital data between, among other things, ge-
237 See id. at para. 8. that AT&T's Interspan Frame Relay Service is a Basic Service; 238 Id. (internal quotations omitted). The SMDS, Frame and American Telephone and Telegraph Company Petition Relay Service, ISDN and IPRS basic services are all provided for Declaratory Ruling That All IXCs be Subject to the Com- by Bell Atlantic, separately from each other and unbundled mission's Decision on the IDCMA Petition, Memorandum from the proposed enhanced service, at the same rates, Opinion and Order, 10 FCC Rcd. 13717, at para. 1 (1995) terms, and conditions they are available to Bell Atlantic's en- [hereinafter Frame Relay Order], recon. pending. AT&T's Inter- hanced service operations. See id. at para. 14. All are re- Span Service's "core aspects" are: "(1) provision of bidirec- quired to be provided under both state and federal tariffs for tional frame transfer; (2) maintaining the frames across the basic ONA services and services underlying the CEI Plan. See network in the same sequence in which they were delivered id. at para. 13. to the network; (3) detection of errors; (4) transportation of 239 See Bell Atlantic Internet Access CEI Plan Order, 11 FCC user data transparently; and (5) no acknowledgement of Rcd. 6919, at para. 9. frames (in contrast to X.25 protocol)." Id. at para. 9. Inter- 240 See id. at 6923 n.25. Span also "provides protocol conversion for CPE that does 241 See id. at para. 11. not have a frame relay interface." Id. 242 Id. 244 See Frame Relay Order, 10 FCC Rcd. 13717, at para. 243 See In re Independent Data Communications Manu- 13720. facturers Association, Inc. Petition for Declaratory Ruling 245 See id. at para. 13721. COMMLAW CONSPECTUS [Vol. 7 ographically dispersed local area networks (CPE) to note the omission and take corrective 25 6 (LANs), [which] often serves as the intermediary action." format for data traveling between different com- The Frame Relay Order stated: puter systems employing different communica- 246 Protocol refers to the ensemble of operating disciplines tions protocols." The Frame Relay Order also re- and technical parameters that must be observed and cited that, in contrast to voice communications, agreed upon by subscribers and carriers in order to per- data communications between computers is gen- mit the exchange of information among terminals in- 2 47 terconnected in a particular communications network. erally considered "bursty" traffic. Packet- A subscriber's digital transmission necessarily consists switched networks, the Commission explained, of two components: information-bearing symbols and were developed to take advantage of the "bursty" protocol-related symbols. The information-bearing sym- nature of data communications. 248 bols constitute a subscriber's message. The protocol-re- Through the lated symbols initiate various transmission control func- use of packet-switched data transmission, multiple tions and also define the format in which the users can share a single digital transmission chan- information-bearing2 5 7symbols appear within the com- data stream. nel. 249 Each "packet contains a header with ad- posite dress information that enable the network to "Protocol processing" was identified as "a ge- ' 50 route the packet to the proper destination. 2 neric term, which subsumes 'protocol conversion' Packets belonging to one user may be sent sepa- and refers to the use of computers to interpret 25 rately and reassembled at their destination. ' and react to the protocol symbols as the informa- Packets from several users may be interspersed tion contained in a subscriber's message is routed during transmission, allowing more efficient to its destination." 258 Protocol conversion is nec- 252 channel usage. essary to permit communications between dispa- 2 59 The Frame Relay Order explained that "protocol rate terminals or networks. conversion" is employed to permit existing cus- The Frame Relay Order noted that, prior to its di- tomer terminal equipment to originate and termi- vestiture, AT&T offered neither packet switching 2 53 nate data sent by packet networks. Frame relay services nor protocol conversion. 260 Independent networks communicate digital data contained in vendors of packet switched communications serv- 254 "frames." Frame relay switches are faster than ices, known as "value-added-network" service prov- packet switches because they do not store frames iders ("VANs"), purchased common carrier trans- until positive acknowledgment is received from mission facilities (lines linking switches together) 255 the destination switch. Rather, the destination from AT&T and "added 'value' by reselling the switch, if it receives frames with errors, "simply underlying transport services in conjunction with discards the frame, relying on higher-layer proto- their own packet switched information serv- ' cols of intelligent customer premises equipment ices. 261 By 1995, "AT&T, the BOCs and many
Id. at para. 6. sions to Tariff F.C.C. No. 2, Facilities For Other Common See id at para. 3. Carriers, Memorandum Opinion and Order, 91 F.C.C. 2d 1 See id. (1982) (case was decided on other grounds; Commission did See Frame Relay Order, 10 FCC Rcd. 13717, at para 3. not reach the specific question whether BPSS was basic or Id. enhanced, but directed AT&T to supplement the record on See id. this issue when it filed for its section 214 facilities authoriza- See id. tion). See id. at 13717-18, para. 4. 261 Frame Relay Order, 10 FCC Rcd. at 13718, para. 5. See See Frame Relay Order, 10 FCC Rcd. 13717, at para 7. also In re Petitions for Waiver of Section 64.702 of the Com- See id. mission's Rules (Computer II), 100 F.C.C. 2d 1057 (1985) Id. [hereinafter Asynch/X.25 Order]. Communications over Id. at 13717 n.5. packet switched networks have traditionally used the synchro- nous X.25 interface protocol. Id. See Frame Relay Order, 10 FCC Rcd. at 13717, para. 4. Most of the existing terminal equip- 259 See Frame Relay Order, 10 FCC Rcd. at 13717-18 n.5. ment used by customers 260 See id. at para. 5. See also In re American Telephone to originate and terminate data com- munications between their computers and other computers and Telegraph Company Tariff F.C.C. No. 270, Rates and does not support the X.25 protocol, but rather, uses an asyn- Regulations for Bell Packet Switching, Service; Tariff F.C.C. chronous protocol. See id. at 13717-18, para. 4. Data commu- No. 267, Revisions to Dataphone Digital Service, Tariff F.C.C. nicated under asynchronous protocols thus "must be con- No. 268, Revisions to Provide Digital Central Office Connect- verted to data employing synchronous X.25 protocol in order ing Facilities, Bell Telephone Company of Pennsylvania, Re- to be transmitted over a packet-switched network." Id. visions to Tariff F.C.C. No. 38, Facilities for Other Common Carriers, Chesapeake & Potomac Telephone Company, Revi- 1999] Internet Over Cable other service providers (both facilities-based carri- vice must file tariffs for the underlying frame relay ers and VANs) offered packet switched and proto- service and acquire that tariffed service in the col conversion services, such as asynchronous-to- same manner as resale carriers. '269 This require- 26 2 X.25 conversion." ment was found to apply independently of any ad- The Frame Relay Order found that, despite some ditional requirements under the Computer III pro- interim changes to the information transported ceedings. 270 The Bureau's order did not over AT&T's packet switched data network, distinguish dominant from non-dominant com- AT&T's frame relay service offered a transmission mon carriers for purposes of this unbundling re- capability that is virtually transparent in terms of quirement. its interaction with customer-supplied data, and thus constitutes a basic service under the Commis- 263 IV. TELECOMMUNICATIONS AND sion's rules. InterSpan provided protocol con- INFORMATION SERVICES UNDER THE version for CPE that did not have a frame relay 1996 ACT interface. The "core" of InterSpan service was de- termined to be "the provision of frame transmis- Following enactment of the 1996 Act, the Com- sion in the frame relay format between the point mission initiated what it termed a "trilogy" of ac- where a customer's data enters the public tions focused on achieving Congress' goal of es- switched network and the point where it leaves tablishing a "pro-competitive, de-regulatory the network.2 64 Treating frame relay, and basic national policy framework designed to accelerate digital services in general, as basic common car- rapidly private sector deployment of advanced rier services was determined to be in the public telecommunications and information technolo- interest because such a classification provides gies and services to all Americans by opening up competitors with access to the underlying basic all telecommunications markets to competi- service of facilities-based carriers that are better tion."' 27 1 The trilogy consists of the Local Competi- able to implement new communications technol- tion Order, the Universal Service Order, and the Access ogies. 265 This treatment, in turn, permits compet- Charge Reform Order. In addition to the local com- itive ESPs to enter and compete in the market for petition trilogy, the Commission launched several such technologies, thus promoting the public in- proceedings to implement various provisions of terest by accelerating the development of emerg- the Act (sections 271, 272, and 274) governing 6 ing digital technologies. 26 BOC entry and/or continued provision of specific AT&T was directed to unbundle its basic frame services in competitive markets, such as interstate relay service from any enhancements, and offer it interexchange and information services, telemes- pursuant to tariff.26 7 AT&T retained the ability to saging, electronic publishing and alarm monitor- 72 package CPE and enhanced protocol processing ing.2 with the basic frame relay service, so long as the While not initiated expressly to determine the underlying basic service is also separately offered appropriate regulatory treatment of Internet- under tariff.268 Significantly, the Frame Relay Order based services, each proceeding addressed issues concluded that, pursuant to Computer II, "all facili- that inevitably arise where Internet-based commu- ties-based common carriers providing enhanced nications services are provided by Title II telecom- services in conjunction with basic frame relay ser- munications common carriers. The key underly-
262 Frame Relay Order, 10 FCC Rcd. at 13718, para. 5. trict of Texas, Wichita Falls Division, granted the plaintiffs', 263 See id. at 13721, 13722, at paras. 33, 34, 40. (SBC Communications, Inc. and U.S. West Communications, 264 Id. at 13718, para. 10. The Commission also noted Inc.) motion for summary judgment attacking the constitu- that six BOCs treat frame relay as a basic transport service. tionality of Subtitle B of Title I of the 1996 Act (sections 271- See id. at 13722, para. 40. 275). 981 F. Supp. 996 (N.D. Tex. 1997), rev'd, 154 F.3d 226 265 See id. at 13722, para. 35. (5"' Cir. 1998). The Court found that these "Special Provi- 266 See id. sions" concerning the Bell Operating companies amounted 267 See Frame Relay Order, 10 FCC Rcd. at 13724. to an unconstitutional "bill of attainder" in violation of Arti- 268 See id. at 13724 n.84. cle I, § 9, Clause 3, of the Constitution. See SBC Communica- 269 Id. at 13725, para. 59. tions Inc. v. FCC, 981 F. Supp. at 1008. This holding was 270 See id. later reversed by the 5 ' Circuit. See SBC Communications, 154 271 Joint Explanatory Statement, supra note 12, at 1. F.3d at 226. Proceedings implementing these provisions are 272 On December 31, 1997, in SBC CommunicationsInc. v. discussed herein solely in terms of their treatment of the In- FCC, the United States District Court for the Northern Dis- ternet classification issue. COMMLAW CONSPECTUS [Vol. 7 ing questions raised in the "trilogy" are (1) posed on telecommunications carriers under sec- whether Internet-based communications are "tele- tion 251. communications" or "information services" under The 1996 Act defines a "telecommunications the 1996 Act and (2) the related question of carrier" as "any provider of telecommunications whether ISPs are telecommunications carriers, en- services, except that such term does not include titled to interconnection rights under section 251 aggregators of telecommunications services (as and subject to universal service fund contribution defined in section 226.. .)."276 A telecommunica- obligations, or are access service end users, ex- tions carrier shall be treated as a common carrier empt from paying access charges for their local under the Act "only to the extent that it is en- exchange connections and from contributing to gaged in providing telecommunications serv- 273 the universal service fund. The BOC entry pro- ices. .. 277 A "telecommunications service" is de- ceedings necessitated decisions on whether BOG- fined as the "offering of telecommunications for a provided enhanced services fell into the category fee directly to the public, or to such classes of of "information services" under the 1996 Act and, users as to be effectively available directly to the if so, the consequences for their existing and fu- public, regardless of the facilities used. '2 78 "Tele- ture intra- and interLATA information service of- communications" is defined in the Act as "the ferings, including Internet access services. transmission, between or among points specified by the user, of information of the user's choosing, A. Interconnection Rights and Obligations without change in the form or content of the in- received."2 79 Under Section 251; Who is a formation as sent and "Telecommunications Carrier"? The Local Competition Order concluded that, "to the extent a carrier is engaged in providing for a Section 251 requires all telecommunications fee domestic or international telecommunica- carriers to interconnect directly or indirectly with tions, directly to the public or to such classes of other telecommunications carriers,274 thus facili- users as to be effectively available directly to the tating the creation of a network of networks. Sec- public, the carrier falls within the definition of ' 0 tion 251(a) specifically requires all telecommuni- 'telecommunications carrier. "' 2 In addition, cations carriers: (1) "to interconnect directly or "telecommunications carriers that compete with indirectly with the facilities and equipment of each other should be treated alike regardless of other telecommunications carriers;" and (2) "not the technology used unless there is a compelling to install network features, functions, or capabili- reason to do otherwise."281 Companies that pro- ties that do not comply with the guidelines and vide both telecommunications and information or standards established pursuant to sections 255 or enhanced services will be classified as telecommu- 282 256. . .,275 The issue presented vis-a-vis the In- nications carriers for section 251 purposes. ternet was whether enhanced and information They will be subject to the obligations under sec- service providers would be subject to the recipro- tion 251 (a) to the extent that such companies are cal interconnection rights and obligations im- acting as telecommunications carriers. 283 Infor-
273 See generally Sean M. Foley, The Brewing Controversy 279 47 U.S.C. § 153 (43). Over Internet Service Providers and the Universal Service Fund: A 280 In re Implementation of the Local Competition Provi- Third Generation Interpretationof Section 254, 6 CommLaw 245 sions of the Telecommunications Act of 1996, Interconnec- (1998). tion between Local Exchange Carriers and Commercial Mo- 274 See 47 U.S.C. § 251 (a) (1). bile Radio Service Providers, First Report and Order, 11 FCC 275 47 U.S.C. § 251(a). Rcd. 15499, 5989 at para. 992 (1996) [hereinafter Local Com- 276 47 U.S.C. § 153 (44). The term "aggregator" is de- petition Order], reconsidered, Order on Reconsideration, 11 FCC fined as "any person that, in the ordinary course of its opera- Rcd. 13042 (1996) [hereinafter Local Competition Reconsidera- tions, makes telephones available to the public or to transient tion Order], vacated in part on other grounds, Iowa Util. Bd. v. FCC, 120 F.3d 753 (8th Cir. 1997), cert. granted, 118 S. Ct. 879 users of its premises, for interstate telephone calls using a provider of operator services." 47 U.S.C. § 226 (a) (2). (U.S. Jan. 26, 1998) (No. 97-830). 281 Local Competition Order, 11 FCC Rcd. at 15989,'para. 277 47 U.S.C. § 153 (44). The Provision goes on to state, 993. ... except that the Commission shall determine whether the 2182 See id. at 15990, para. 995. provision of fixed and mobile satellite service shall be treated 2831 See id. at para. 994. as common carriage." Id. 278 47 U.S.C. § 153 (46). 1999] Internet Over Cable marion and enhanced service providers who are vances in telecommunications and information not telecommunications carriers within the mean- technologies and services." 28s8 In making this de- ing of the Act because they do not provide domes- termination, the definition of the services that are tic or international telecommunications, do not supported by Federal universal service support obtain interconnection rights under section mechanisms are to take into account specific stat- 251.284 utory characteristics, including whether the serv- ices have, "through the operation of market choices by customers, been subscribed to by a sub- B. Universal Service; Status of Internet Services 9 stantial majority of residential customers."28 and Service Providers Under Section 254 Section 254 explicitly designates elementary The Report to Congress states that "[t] he universal and secondary schools and libraries among the service system is designed to ensure that low-in- entities eligible to receive the benefits of universal 29 come consumers can have access to local phone service support. 0 Section 254 describes the serv- service at reasonable rates" and "ensures that con- ices that are to be supported for schools and li- sumers in all parts of the country, even those in braries in terms of "telecommunications services," remote and sparsely populated rural areas, are "special" or "additional" services, and access to not forced to pay prohibitively high rates for their "advanced telecommunications and information phone service." 28 5 The Report further explains services."' 29 1 Section 254(c) (3), "Special services," that before passage of the 1996 Act "universal ser- provides that, in addition to the telecommunica- vice was promoted through a patchwork quilt of tions services designated for support under sec- implicit and explicit subsidies at both the state tion 254(c) (1), the Commission may designate "additional and federal levels." 286 The 1996 Act directed the services" for universal support for restructuring of universal support mechanisms so schools, libraries and health care providers for that support would be explicit and that "every purposes of subsection (h). 2 9 2 Section 254(d) telecommunications carrier that provides inter- mandates that universal service support should be state telecommunications service shall contribute, explicit and that, with respect to federal universal on an equitable and non-discriminatory basis, to support, "every telecommunications carrier that the specific, predictable, and sufficient mecha- provides interstate telecommunications services nisms established by the Commission to preserve shall contribute, on an equitable and non-discrim- ' 287 and advance universal service." inatory basis, to the specific, predictable, and suf- ficient mechanisms established by the Commis- 293 sion to preserve and advance universal service. ' 1. Requirements of Section 254 Implementation of section 254 required: (1) Section 254 directs the States and the Commis- examination of whether the telecommunications sion to establish support mechanisms to ensure services supportable by universal service funds the delivery of affordable telecommunications ser- could be defined to cover information and en- vice to all Americans, including low-income con- hanced services, including Internet access serv- sumers, eligible schools and libraries, and rural ices; (2) examination of whether the access to "ad- health care providers. Section 254(c) (1) defines vanced telecommunications and information universal service as "an evolving level of telecom- services," and the "additional" services supporta- munications services that the Commission shall es- ble for schools, libraries and health care provid- tablish periodically. . .taking into account ad- ers includes Internet access services; and (3) de-
284 See id. at para. 995. vanced telecommunications and information services" as 285 Report to Congress, I1 Comm. Reg. (P & F) at 1314, those terms are used in section 254. But see 47 U.S.C. § 157 para. 6. (c) (1) (citing Pub. L. No. 104-104, § 706, 110 Stat. 153 286 Id. at para. 7. (1996) defining "advanced telecommunications capability," 287 Id. at para. 8, (citing 47 U.S.C. § 254 (d)-(e)). "without regard to any transmission media or technology, as 288 47 U.S.C. § 254 (c). high-speed, switched, broadband telecommunications capa- 289 Id. at § 254 (c) (1) (B). bility that enables users to originate and receive high-quality 290 Id. at § 254 (b) (6). voice, data, graphics, and video communications using any 291 Id. at § 254 (c) (1), (c) (3), (h) (2) (A). technology."). 292 See id. at § 254 (c) (3). The 1996 Act contains no ex- 293 47 U.S.C. § 254 (d). press definition of "special" or "additional" services or "ad- COMMLAW CONSPECTUS [Vol. 7 termination of the status of Internet service 3. Supportable Services for Schools and Libraries providers with respect to the statutory obligation Include "Basic Conduit Access to the Internet" to contribute to universal support mechanisms, and the statutory right to benefit from such sup- The Universal Service Order adopted the Joint 294 port. Board's recommendation that "all eligible schools and libraries should receive discounts of between 20 and 90 percent on all telecommunications 2. Section 254(c)(1) "Core" Telecommunications services, Internet access, and internal connections Services Do Not Include Internet Access provided by telecommunications carriers, subject to an annual cap." 299 However, the Commission took this action pursuant to section 254(c) (3) and The Universal Service Order defines the "core" or section 254(h) (1) (B), whereas the Joint Board "designated" telecommunications services that had relied on section 254(h) (2) .300 The Commis- will be supported by universal service support sion concluded that, in the context of the broad mechanisms as: "single party service; voice grade policies set forth in section 254(h) (2), sections access to the public switched network; [dial tone 254(c) (3) and 254(h) (1) authorized it to "permit multi-frequency] signaling or its functional schools and libraries to receive the telecommuni- equivalent; access to emergency services; access to cations and information services needed to use operator services; access to interexchange service; the Internet at discounted rates provided by tele- access to directory assistance; and toll limitation communications carriers."30 The Commission services for qualifying low-income consumers."29 5 reasoned that section 254(c) (3) grants it author- The Universal Service Order addressed the ques- ity to "designate additional services for support," tion of whether Internet access should be in- while section 254(h)(1)(B) allows it to fund any cluded in the category of core 30 2 telecommunica- section 254(c) (3) services. tions services supported by universal service The Commission noted that "sections mechanisms. It recognized that Internet access 254(a) (1) and (a) (2) mandate that it define the consists of more than one element. The Universal services that are supported by the Federal univer- Service Orderstated that "Internet access includes a sal service support mechanism but does not limit network transmission component, which is the support to telecommunications services." 30 3 The connection over a LEC network from a subscriber Commission concluded that "use of the broader to an Internet Service Provider, in addition to the term 'services' in section 254(a) provides further underlying 2 96 information service." Voice-grade validation for the inclusion of services in addition access to the public switched network usually al- to telecommunications services in sections lows customers to attain access to an ISP, and thus 254(c)(3) and 254(h) (1) (B)."304 Accordingly, to the Internet. 29 7 The Commission concluded the Commission held that (1) schools and librar- that "the information service component of In- ies may receive rate discounts from telecommuni- ternet access cannot be supported under section cations carriers for the basic "conduit" access to 254(c) (1), which describes universal service as 'an evolving level of telecommunications services.' "2981
294 In November 1996, the Federal-State Universal Ser- Universal Service, Errata, in CC Dkt. No. 96-45, FCC 97-157 vice Joint Board issued recommendations to the Commission (June 4, 1997) [hereinafter Universal Service Order]. for reforming its system of universal service so that universal 295 Universal Service Order, 12 FCC Rcd. at 8809, para. 61. service was in accordance with section 254 of the Act. In re 296 Id. at 8822, para. 83. Federal-State Joint Board on Universal Service, Recommended 297 See id. Decision, 12 FCC Rcd. 87 (1996) [hereinafter Joint Board Rec- 298 Id. (quoting 47 U.S.C. § 254 (c) (1) (emphasis ad- ommended Decision]. On May 8, 1997, the Commission re- ded)). leased the Report and Order in the Universal Service proceed- 299 UniversalService Order, 12 FCC Rcd. at 9002, para. 425. ing, reflecting virtually all of the Joint Board's 90() See id. recommendations on the establishment of universal support 301 Id. at 9009, para. 436. mechanisms that will fulfill the specific universal service goals 302 Id. at para. 437 (quoting 47 U.S.C. § 254 (c) (3) and established in the 1996 Act. See In re Federal-State Joint citing § 254 (h) (1) (B)). Board on Universal Service, Report and Order, 12 FCC Rcd. 303 Id. (quoting 47 U.S.C. § 254 (a) (2)). 8776 (1997), modified by In re Federal-State Joint Board on 304 UniversalService Order, 12 FCC Rcd. at 9009, para. 437. 1999] Internet Over Cable the Internet 3°5 and (2) it could "include the 'in- ing management, introductory information content, and navigational systems that enable users to access in- formation services,' e.g., protocol conversion and formation services that do not affect the presentation of the such information services to users; and (iii) electronic information storage, that are needed to access 3 1 2 Internet, as well as internal connections, as 'addi- mail services [e-mail]. tional services' that section 254(h) (1) (B),through section 254(c) (3), authorizes [the Commission] 30 6 4. Non-Telecommunications Carriers May Receive to support." Support for Internet Access Services Provided to The Commission clarified that there are two Schools and Libraries types of "information" services at issue, and that its holding did not grant discounts on the cost of The Commission determined that sections 30 7 Rather; it au- purchasing information content. 254(c)(3) and 254(h)(1)(B) authorized support thorized the provision of discounts on the data for telecommunications, Internet access and in- links and associated services that are necessary for ternal connections provided by telecommunica- the provision of classrooms with access to such ed- tions carriers, and relied upon sections ucational materials, despite the fact that these 254(h) (2)(A) and 4(i) to authorize support for functions meet the statutory definition of "infor- discounts for Internet access and internal connec- mation services" because they include protocol tions provided by non-telecommunications carri- 308 conversion and information storage. Without ers. 313 Thus, the same non-telecommunications the use of these "information service" data links, services eligible for discounts if provided by tele- the Commission concluded, schools and libraries communications carriers under section would be unable to gain access to the research in- 254(h) (1) (B) are eligible for discounts if pro- formation and statistics available free of charge on vided by non-telecommunications carriers, such 30 9 the Internet. Such information services, which as cable operators, under section 254(h) are not provided by information publishers, were (2) (A) .314 deemed "essential for effective transmission ser- vice, i.e., 'conduit' service." 310 The Commission also offered a more precise 5. Telecommunications CarriersAlone Must definition of what "information services" will be Contribute to Universal Service Support eligible for discounts under this program by cross- referencing the category of services excluded Section 254(d) directs that all telecommunica- from the definition of "electronic publishing" in tions carriers that provide interstate telecommuni- section 274 of the Act.31' The Commission speci- cations services must contribute to the support 3 15 fied that eligible schools and libraries will be per- mechanisms. It also states that the Commission mitted to use support to obtain discounted infor- may require "[a]ny other provider of interstate mation services consisting of: telecommunications. . . to contribute to the pres- (i) the transmission of information as a common car- ervation and enhancement of universal service if rier; (ii) the transmission of information as part of a the public interest so requires."3 16 The Commis- gateway to an information service, where that transmis- sion held that to be considered a mandatory con- sion does not involve the generation or alteration of the content of information but may include data trans- tributor to universal service under section 254(d): mission, address translation, protocol conversion, bill- "(1) a telecommunications carrier must offer in-
305 See id. at 9008-09, para. 436 & 9011, para. 440. 254(h) (2) (A), unlike section 254(h)(1)(A), is not limited to 306 Id. at 9010-9011, para. 439. extending support to services provided by telecommunica- 307 See id. at 9011, para. 441. tions carriers, but rather supplements the Commission's au- 308 See id. at 9011-9012, para. 441. thority to enhance access to advanced telecommunications 309 See id. at 9012, para. 441. and information services free of limitations based upon the 310 Universal Service Order, 12 FCC Rcd. at 9012, para. 441. identity of the service provider. See id. at 9086, para. 592. Ac- 311 See id. at 9013, para. 444. cordingly, the Commission determined that pursuant to au- 312 Id. The Commission added a new "Part 54" to its thority in sections 254(h) (2) (A) and 4(i) of the Act, non-tele- Rules, codified at 47 C.F.R. § 54.1, et seq., in which it included communications carriers will be eligible to provide these three information services under the definition of "In- supported non-telecommunications services to schools and li- ternet access." See 47 C.F.R. § 54.5 (1997). braries at a discount. Id. at 9085, para. 590. 313 See Universal Service Order, 12 FCC Rcd. at 9084-9085, 315 See 47 U.S.C. § 254 (d). paras. 589-90. 316 Id. See also Universal Service Order, 12 FCC Rcd. at 314 The Commission observed that section 9182. Para. 793. COMMLAW CONSPECTUS [Vol. 7 terstate telecommunications; (2) those interstate definition of telecommunications only includes telecommunications must be offered for a fee; transmissions that do not alter the form or con- and (3) those interstate telecommunications must tent of the information sent. 323 Telecommunica- be offered directly to the public, or to such classes tions services, by definition, do not involve a of users as to be effectively available to the pub- change in the form or content of the user's infor- lic."'3 17 The Commission concluded that only mation as sent or received, whereas information common carriers should be considered services, although provided via telecommunica- mandatory contributors to the support mecha- tions, by definition involve "generating, acquiring, nisms, but that "any entity that provides interstate storing, transforming, processing, retrieving, telecommunications to users other than signifi- utilizing, or making available, information.."324 Fi- cantly restricted classes should be required to con- nally, the Commission recognized that the classifi- tribute under the Commission's permissive au- cation of information services, and especially In- thority."3 18 Entities in this latter category may ternet-based services, raises many complicated include private network operators that lease ex- and overlapping issues, with implications far be- cess capacity on a non-common carrier basis as yond section 254. The Commission indicated that "other providers of interstate telecommunica- it would review the status of ISPs under the 1996 3 19 tions." Act in a comprehensive manner in the Internet Us- 3 2 5 Conversely, the Commission held that, to the age Notice of Inquiy. As discussed infra, the extent they provide interstate telecommunica- Commission addressed many of these classifica- tions services, information and enhanced service tion issues in its April 10, 1998 Report to Congress. providers are not required to contribute to sup- 320 port mechanisms. The Commission rejected C. BOC Safeguards Under Sections 271 and the argument that information services are "in- 272 for InterLATA Information Services herently" telecommunications services because in- formation services are provided "via telecommuni- The 1996 Act ended the prohibition against cations." 3 2 1 The Commission stated that provision of interLATA services by BOCs that was information services are not inherently telecom- imposed by the MFJ. 3 2 6 The 1996 Act conditions munications services under section 254(h) be- the BOCs' entry into certain in-region interLATA cause that section directs the Commission to en- services on their compliance with the require- hance access to advanced telecommunications ments of section 271. Under section 271, the and information services. The Commission rea- Commission must determine, among other soned that if they were the same thing, the lan- things, whether the BOC has complied with the guage "and information services" would be super- safeguards imposed by section 272. Section 272 fluous. 3 2 2 established certain structural safeguards for BOC The Commission observed that ISPs alter the entry into interLATA telecommunications services format of information through computer process- originating in states in which they provide local ing applications such as protocol conversion and exchange and exchange access services, in- interaction with stored data, while the statutory terLATA information services, 327 and BOC manu-
317 Universal Service Order, 12 FCC Rcd. at 9173, para. 777. of the MFJ's "plan of reorganization" under which the BOCs 318 Id. at 9178-79, para. 786. were divested from AT&T. See United States v. Western Elec. 319 Id. at 9178, para. 786. Co., 552 F. Supp. 131; see also United States v. Western Elec. 320 See id. at 9179, paras. 787-88. Co., No. 82-0192 (D. D.C. Apr. 11, 1996) (vacating the MFJ). 321 Id. Pursuant to the MFJ, "all BOC territory in the continental 322 See id. United States [was] divided into LATAs, generally centering 323 See id. at 9180, para. 789. upon a city or other identifiable community of interest." 324 47 U.S.C. § 153 (20); see also Universal Service Order, United States v. Western Elec. Co., 569 F. Supp. 990, 993 (D. 12 FCC Rcd. at 9180 n.2023 (citing In re Amendment of Sec- D.C. 1983). tion 64.702 of the Commission's Rules and Regulations, Re- 327 The 1996 Act excludes electronic publishing (as de- port and Order, 2 FCC Rcd. 3072, 3080 (1987). fined in section 274(h)) and alarm monitoring (as defined in 325 See Universal Service Order, 12 FCC Rcd. at 9181. section 275(e)) from the separate affiliate requirement for 326 Section 3(21) of the 1996 Act defines interLATA serv- interLATA information services. See 47 U.S.C. § 272 (a) (2) ices as "telecommunications between a point located in a lo- (C). BOCs may participate in electronic publishing by cal access and transport area and a point located outside means of a separated affiliate or electronic publishing joint such area." 47 U.S.C. § 153 (21). LATAs were created as part venture in accordance with section 274. See 47 U.S.C. § 274. 19991 Internet Over Cable facturing activities. With enumerated exceptions, carrier transmission facilities used in interstate section 272 generally requires that such services communications. In contrast, "information serv- be provided through one or more structurally sep- ices" under the 1996 Act may be provided, more arate affiliates. The Commission's proceeding to broadly, "via telecommunications." Further, live implement what it termed the "non-accounting" operator telemessaging services that do not in- (i.e., structural safeguards) in section 272, ad- volve computer processing applications are con- dressed the relationship between its category of sidered information services, even though they do "enhanced services" and the statutory definition not fall within the definition of "enhanced serv- 333 of "information service" for purposes of determin- ices." ing which services must be provided through sep- 328 arate affiliates. 2. Protocol Processing Services are Information Services 1. Enhanced Services are Information Services The Commission concluded that, subject to cer- The Non-Accounting Safeguards Order concluded tain exceptions, "protocol processing services con- that all of the services that the Commission has stitute information services under the 1996 previously considered to be "enhanced services" Act."3 34 It rejected arguments that "information are "information services." 329 The Commission services" include only services that alter the con- 335 stated that "interpreting 'information services' to tent of information transmitted by an end-user. include all 'enhanced services' provides a mea- The Commission acknowledged that "the statu- sure of regulatory stability for telecommunica- tory definition makes no reference to the term tions carriers and ISPs alike, by preserving the def- 'content,' but requires only that an information initional scheme under which the Commission service transform or process information."' 336 It exempted certain services from Title II regula- also determined that an end-to-end protocol con- tion."330 It found "no basis to conclude that by version service "transforms" the end-user's infor- using the MFJ term 'information services,' Con- mation when it sends it to a network in one proto- gress intended a significant departure from the col and has it exit the network in a different 33 Commission's usage of 'enhanced services." 1 protocol.3 37 The Commission found that other However, the Commission also found that the types of protocol processing services that interpret "information services" category includes services and react to protocol information associated with that are not classified as enhanced services under the transmission of end-user content clearly "pro- the Commission's rules. That is, "while all en- cess" such information. 333 It concluded that hanced services are information services, not all "both protocol conversion and protocol process- 3 32 information services are enhanced services." ing services are information services under the Under Commission precedent, "enhanced serv- 1996 Act." 339 Such an interpretation, the Com- ices" are limited to services offered over common mission asserted, "is consistent with the Commis-
With certain exceptions for existing activities, BOCs are pro- 272(e)(4) non-discrimination and cost allocation require- hibited from providing alarm monitoring services for five ment applies to interLATA services that the BOC is otherwise years after enactment of the 1996 Act. See 47 U.S.C. § 275. authorized to provide and is not an affirmative grant of au- 328 See Implementation of the Non-Accounting Safe- thority to provide integrated interLATA services on a whole- guards of Sections 271 and 272 of the Communications Act sale basis). of 1934, as amended, FirstReport and Order and FurtherNotice of 329 See Non-Accounting Safeguards Order, 11 FCC Rcd. at Proposed Rulemaking, 11 FCC Rcd. 21905 (1996) [hereinafter 21955. Non-Accounting Safeguards Order], recon. pending, petition for 330 Id. at 21956. summary review in part denied and motion for voluntary remand 331 Id. granted sub nom. Bell Atlantic v. FCC, No. 97-1067 (D.C. Cir. 332 Id. filed Mar. 31, 1997), petition for review pending sub nom. SBC 333 See id. Communications v. FCC, No. 97-1118 (D.C. Cir. filed Mar. 6, 334 Non-Accounting Safeguards Order, II FCC Rcd. at 1997) (held in abeyance pursuant to court order filed May 7, 21956, para. 104. 1997), Order on Reconsideration, 12 FCC Rcd. 229 (1997) 335 See id. (clarifying that categories of protocol processing services that 336 Id. the Commission has previously treated as basic services will 337 See id. now be treated as telecommunications services), Second Order 338 See id. on Reconsideration, FCC 97-222 (rel. Jun. 24, 1997) (section 339 Id. COMMLAW CONSPECTUS [Vol. 7
sion's existing practice of treating end-to-end pro- example, conversions taking place solely within 341 tocol processing services as enhanced services.." the carrier's network in order to facilitate the pro- The Commission rejected arguments made by vision of a basic network service which result in no the Bell Operating Companies that it should treat net conversion to the end-user. 347 The Commis- protocol processing services as telecommunica- sion again found that these categories of "no net" tions services, noting that it had previously re- protocol processing services should receive simi- jected similar arguments in its Computer III PhaseII lar treatment under the statutory regime.348 How- Order.341 Although the Commission observed that ever, because "no net" protocol processing serv- theoretically it would be possible to treat protocol ices are information service capabilities used "for processing services as telecommunications serv- the management, control, or operation of a tele- ices, that treatment would subject them to Title II communications system or the management of a regulation. 342 Such theoretical possibilities were telecommunications service," they are exempt outweighed by other de-regulatory policy consid- from the statutory definition of information ser- erations supporting the conclusion that end-to- vice. 349 Thus, under the 1996 Act, "no net" proto- end protocol processing services should be col conversion services were held to constitute 343 treated as information services. telecommunications services, rather than infor- 0 The rules promulgated by the Commission in mation services. 35 Computer II and Computer III treated three types of Finally, the Commission found that services protocol processing services as basic services, previously classified as "adjunct-to-basic" should rather than enhanced services, because they result be classified as telecommunications services, 3 44 in no net protocol conversion to the end-user. rather than information services. 351 In the NATA The first type involves communications between Centrex order, the Commission held that the en- an end-user and the network itself (e.g., for initia- hanced services definition did not encompass ad- tion, routing, and termination of calls) rather junct-to-basic services. 35 2 Despite falling within than between or among users. 345 The second the definition of enhanced services, adjunct-to-ba- type encompasses services in connection with the sic services facilitate the establishment of a basic introduction of a new basic network technology transmission path over which a telephone call (which requires protocol conversion to maintain may be completed, without altering the funda- compatibility with existing CPE). 3 4 6 The third mental character of the telephone service. 353 The type involves inter-networking which includes, for Commission concluded that adjunct-to-basic serv-
340 Id. at 21957, para. 105; see, e.g., In re Bell Operating Phase II Order, 2 FCC Rcd. at 3081-3082. Companies Joint Petition for Waiver of Computer II Rules, 348 See Non-Accounting Safeguards Order, 11 FCC Rcd. at Reprt and Order, 10 FCC Rcd. 13758, para. 51 and 13770- 21958, para. 106. 13774, app. A (1995) [hereinafter BOC CEI Plan Approval Or- 3'49 Id. der] (approving PacTel CEI plan for provision of enhanced 350 See id; see also 47 U.S.C. § 153 (20). protocol processing services, as well as CEI plan amendments 351 See Non-Accounting Safeguards Order, 11 FCC Rcd. at by Bell Atlantic, BellSouth, SWBT, and U S West). 21958, para. 106. 341 See Non-Accounting Safeguards Order, 11 FCC Rcd. at 352 See id. at 21958, para. 107. Such treatment of "ad- 21957. junct-to-basic" services would correspond to the statutory def- 342 See id. at 21957, para. 105. inition of information services, which "does not include any 343 See id. The Commission also stated that it had previ- use of any such capability for the management, control, or ously rejected treating protocol processing services as tele- operation of a telecommunications system or the manage- communications services in favor of treating them as en- ment of a telecommunications service." 47 U.S.C. § 153(20); hanced services in the Computer III Phase II Orderon the basis see also 47 C.F.R. § 64.702 (a); see also North American Tele- that protocol services were being effectively provided on a communications Association Petition for Declaratory Ruling competitive, unregulated basis, and that reclassifying such under Section 64.702 of the Commission's Rules Regarding services as basic services could cloud the regulatory boundary the Integration of Centrex, Enhanced Services, and Cus- between basic and enhanced services. See id. at n.239. tomer Premises Equipment, Memorandum Opinion & Order, 344 See Frame Relay Order, 10 FCC Rcd. at 13719, paras. 14- 101 F.C.C. 2d 349, 359-361(1985) [hereinafter NATA Centrex 16. Order], reconsidered, 3 FCC Rcd. 4385 (1988) [hereinafter 345 See id. NATA Centrex Reconsideration Order]; 47 U.S.C. § 153 (20). Ad- 346 See id. junct-to-basic services include, inter alia, speed dialing, call 347 See id. An example of the third type of protocol con- forwarding, computer-provided directory assistance, call version occurs when a carrier converts from X.25 to X.75 monitoring, caller i.d., call tracing, call blocking, call return, formatted data at the originating end within the network, repeat dialing, and call tracking, as well as certain Centrex transports the data in X.75 format, and then converts the features. data back to X.25 format at the terminating end. Computer II 353 See Non-Accounting Safeguards Order, 11 FCC Rcd. at 1999] Internet Over Cable ices are to be treated as telecommunications serv- publishing joint venture" that meets the separa- ices under the 1996 Act because they are covered tion, joint marketing, and nondiscrimination re- 359 by the "telecommunications management excep- quirements in that section. tion" to the statutory definition of information "Electronic publishing" is defined in Section 3 54 services. 274(h) (1) as: Applying these definitions to BOC-provided In- [T]he dissemination, provision, publication, or sale to ternet access services, the Commission concluded an unaffiliated entity or person, of any one or more of that, if a BOC's provision of an Internet or In- the following: news (including sports); entertainment ternet access service, or any information service, (other than interactive games); business, financial, legal, consumer, or credit materials; editorials, col- incorporates a bundled, in-region, interLATA umns, or features; advertising; photos or images; archi- transmission component provided by a BOC over val or research material; legal notices or public records; its own facilities or through resale, the service may scientific, educational, instructional, technical, profes- sional, trade, or other literary materials; or other like or 360 only be provided through a section 272 separate similar information. affiliate following the receipt of in-region in- terLATA authority under section 271.355 For pur- Section 274(h) (2) excludes from the definition poses of this decision, the Internet was described of electronic publishing, inter alia, common car- as "an interconnected global network of rier provision of telecommunications service, in- thousands of interoperable packet-switched net- formation access service, information gateway ser- works that use a standard protocol, Transmission vice, voice storage and retrieval, electronic mail, Control Protocol/Internet Protocol (TCP/IP), to certain data and transaction processing services, enable information exchange. '356 The Commis- electronic billing or advertising of a BOC's regu- sion recognized that access to the Internet can be lated telecommunications services, language obtained by end users from Internet providers by translation or data format conversion, "white dialing up or using dedicated access to "connect pages" directory assistance, caller identification to an Internet backbone provider that carries traf- services, repair and provisioning databases, credit '35 7 fic to and from other Internet host sites." card and billing validation for telephone com- pany operations, E-911 and other emergency assistance databases, and both video program- D. BOC Safeguards Under Section 274 for ming and full motion video entertainment on de- Electronic Publishing mand.361 The Telemessaging/Electronic Publishing Order The Commission addressed the non-accounting found that services provided through the Internet requirements of sections 260, 274 and 275 of the or through proprietary data networks may be in- Communications Act, which cover telemessaging, cluded in the definition of electronic publishing electronic publishing, and alarm monitoring serv- 362 358 services. The Commission also clarified the ices, respectively, in a separate proceeding. scope of the "gateway" exception of section Although "electronic publishing" is included in 274(h) (2) (C) by excluding from electronic pub- the definition of "information service" in section lishing: 3, section 2 7 4(g) (1) specifically allows a BOC to provide electronic publishing service dissemi- the transmission of information as part of a gateway to an information service that does not involve the genera- nated by means of its basic telephone service only tion or alteration of the content of information, includ- through a "separated affiliate" or an "electronic ing data transmission, address translation, protocol
21958, para. 107. context of the separate CEI plan proceedings regarding each 354 See id. service. See id. 355 See id. at 21967, para. 127. 358 See In re Implementation of the Telecommunications 356 Id. at 21967 n.291. Act of 1996: Telemessaging, Electronic Publishing, and 357 Id. In denying an MFS request to consolidate issues Alarm Monitoring Services, First Report and Order and Further relating to Bell Atlantic and Southwestern Bell Telephone's Notice of Proposed Rulemaking, 12 FCC Rcd. 5361 (1997) [here- provision of Internet access services, the Commission also inafter Telemessaging/ElectronicPublishing Order]. noted that the rulemaking was not the appropriate forum for 359 See 47 U.S.C. §§ 274 (g) (1), (h) (1). considering whether the various specific Internet services 360 47 U.S.C. § 274 (h) (1). provided by BOCs are "interLATA information services." See 361 47 U.S.C. § 274 (h) (2). id. at 21967, para. 127. Rather, the Commission held such 362 See Telemessaging/Electronic Publishing Order, 12 FCC determinations must be made on a case-by-case basis in the Rcd. at 5380, para. 46. COMMLAW CONSPECTUS [Vol. 7
conversion, billing management, introductory informa- terexchange carriers ("IXCs") use local telephone tion content, and navigational systems that enable users originate and terminate to access electronic publishing services, which do not company facilities to calls. The use of local telephone company facili- affect the presentation3 63 of such electronic publishing services to users. ties to originate and terminate long-distance calls The Commission concluded that provision of is referred to as "access service." Under Part 69 of access to introductory Web home pages, other the Commission's rules, LECs receive access types of introductory information, and software charges for providing IXCs with connections to (such as browsers) by BOC's does not constitute the LEC's customers.3 68 The rules were designed the provision of electronic publishing services to promote competition in the interstate inter- under section 274(h) (2) (C). 364 If access is lim- exchange market by ensuring that all IXCs would ited to a home page or an initial screen that does be able to originate and terminate their traffic not include any of the enumerated content types over incumbent LEC networks at just, reasonable, 369 in section 274(h) (1), the BOC is engaged in the and non-discriminatory rates. provision of "gateway" services that section In 1983, the Commission determined that ESPs 274(h) (2) (C) excludes from the definition of would be exempt from the access charge require- electronic publishing services.36 5 The Commis- ments, even though ESPs typically use the local sion stated that "end user software products, such exchange network to originate and terminate in- as World Wide Web browsers, to the extent they terstate communications. 7 0 ESPs were classified enable users 'to access electronic publishing serv- as non-carrier "end users," exempt from Title II ices' and do not themselves incorporate the con- regulation. To obtain connections, ESPs gener- tent types listed in section 274(h) (1), also consti- ally pay local business rates and interstate sub- tute "navigational systems" that are excepted from scriber line charges for their switched access con- 66 the definition of electronic publishing."' 3 Simi- nections to LEC central offices. ESPs also pay larly, hypertext "links," and other "pointers, from interstate special access surcharges under the 371 any gateway or navigational system to electronic Commission's rules. publishing content are similarly "navigational" sys- tems and thus are not electronic publishing serv- ices under section 274(h) (1)."367 2. Access Reform Order; Internet Service Providers Will Continue to be Treated as Access Service End Users E. Access Reform Order/Internet Usage NOI The Commission released its FirstReport and Or- 1. Access Charges der in the Access Charge Reform proceeding on May In providing interstate long-distance service, in- 16, 1997.372 The Access Reform Order concluded
363 Id. at 5380-81, para. 46. change or "PBX" scenario); see also In re Amendments of Part 364 See id. 69 of the Commission's Rules Relating to Enhanced Service 365 See id. Providers, Report and Order, 3 FCC Rcd. 2631 (1988) [herein- 366 Id. after ESP Exemption Order]. 367 Id. The Commission defined a "hypertext link" as a 371 See ESP Exemption Order, 3 FCC Rcd. at 2631 n.2 reference from one document to another. On the World (1988); see also Access ChargeReconsideration Order, 97 F.C.C. 2d Wide Web, a user can select a link on one page and 'jump" at 684, para. 4; 47 C.F.R. § 69.2(m) (1997) (stating that "end to a second page referenced by that link. See id. at 5380-81, user" means any customer of an interstate or foreign tele- n.114. (citing WIRED STYE: PRINCIPLES OF ENGLISH USAGE IN communications service that is not a carrier). THE DIGITAL AGE at 49-50 (1996). 372 See In re Access Charge Reform; Price Cap Perform- 368 47 C.F.R. § 69.1 (a) (1997). ance Review for Local Exchange Carriers; Transport Rate 369 See id. §§ 69.1 et seq. (Part 69). The Part 69 rules are Structure and Pricing; Usage of the Public Switched Network designed to be consistent with the Commission's jurisdic- by Information Service and Internet Access Providers, Notice tional separations rules that govern the allocation of incum- of Proposed Rulemaking; Third Report and Order and Notice of In- bent LECs' expenses and investment between the interstate quiry, 11 FCC Rcd. 21354 (1996) [hereinafter Access Reform and state jurisdictions. See Part 36 of the Commission's Notice and Internet Usage NOI - collectively Access Reform proceed- Rules; see also 47 C.F.R. §§ 36.1 et seq. (1997). ing]; see also In re Access Charge Reform; Price Cap Perform- 370 See In re MTS and WATS Market Structure, Memoran- ance Review for Local Exchange Carriers; Transport Rate dum Opinion and Order, 97 F.C.C. 2d 682, paras. 75-90 (1983) Structure and Pricing; End User Common Line Charges, First [hereinafter Access Charge Reconsideration Order] (referring to Report and Order, 12 FCC Rcd. 15982 (1997) [hereinafter Ac- origination and termination of interstate communications by cess Reform Order], affirmed, Southwestern Bell Telephone Co., enhanced service providers as "leaky" private branch ex- et al. v. FCC, 153 F. 3d 523 (8th Cir. 1998). 1999] Internet Over Cable
1 that "the existing pricing structure for ISPs should cess services. 38 remain in place, and that incumbent LECs will Finally, the Commission rejected incumbent not be permitted to assess interstate per-minute LEC arguments that network congestion war- access charges on ISPs." 373 In other words, ISPs ranted imposition of interstate access charges on would continue to be treated as access service end ISPs.382 Rather, it observed that network conges- users, not as IXCs (i.e., telecommunications carri- tion depends on the ways in which incumbent ers), and would thus not be required to pay the LECs provision their networks, and ISPs use those 383 carrier-to-carrier interconnection charges im- networks. posed under Part 69 of the Commission's Rules. Incumbent LECs and ISPs agree that technolo- Maintaining the existing pricing structure for ISP gies exist to reduce or eliminate whatever conges- services was found to avoid disrupting the still- tion exists; they disagree on what pricing structure evolving information services industry and to ad- would provide incentives for deployment of the vance the goals of the 1996 Act that the Internet most efficient technologies. 38 4 The Commission 3 7 4 remain free from regulation. found that the public interest would best be In support, the Access Reform Order noted that served by policies that foster such technological the access charge system still contains non-cost- evolution of the network. The access charge sys- based rates and inefficient rate structures, and tem was designed for basic voice telephony pro- that the reforms instituted therein only go part of vided over a circuit-switched network, and even the way to remove rate inefficiencies.3 7 5 Since the when stripped of its current inefficiencies it may Commission's establishment of access charges in not be the most appropriate pricing structure for 38 5 the early 1980s, and given the evolution in ISP Internet access and other information services. technologies and markets, it has not been clear As reflected below, the Commission pledged to whether ISPs use the public switched network in a consider solutions other than the imposition of 37 6 manner analogous to interexchange carriers. access charges to solve any Internet-related net- Fore example, when access charges were estab- work congestion. 386 In the meantime, ISPs would lished, commercial Internet access did not even remain classified as end users for purposes of the exist.3 77 The Commission further noted that access charge system. 387 The Access Reform Order many of the characteristics of ISP traffic, such as was affirmed on review by the United States Court 388 the high volume of incoming calls to Internet ser- of Appeals for the Eighth Circuit. vice providers, may also be shared by other classes 37 of business customers. In addition, the Com- 3. Internet Usage NOI; Inquiry Begun on Broader mission was not convinced that LECs were subject Issues to the imposition of uncompensated costs by ISPs 3 79 as a result of the non-assessment of access fees. The focus of the Internet Usage NOI was whether The Access Reform Order noted that ISPs pay to con- the Commission should consider additional ac- nect to LEC networks by purchasing services tarif- tions relating to interstate information services fed by states. 3 0 Other Internet usage income and the Internet.3 89 The Commission acknowl- sources for incumbent LECs include increased edged that it must consider the broader question consumer demand for second lines, ISP dedicated of how its rules can provide incentives for invest- data line usage and subscriptions to Internet ac- ment and innovation in the underlying networks
373 Access Reform Order, 12 FCC Rcd. at 16133, para. 344. 382 See id. at 16134 para 347. 374 See id. 383 See id. 375 See id. at 16133, para. 345. 384 See id. 376 See Access Reform Order, 12 FCC Rcd. at 16133, para. 385 Id. 344. 386 See Access Reform Order, 12 FCC Rcd. at 16134, para 377 See id at 16133, para 245. 348. 378 See id. 387 See id. at 16134-16135. 379 See id. at 16133-34, para. 346. 388 See id. at 16133, para. 345. 380 See id. at 16133-34, para. 346. 389 In re Access Charge Reform, Price Cap Performace 381 See id. The Commission observed that when incum- Review for Local Exchange Carriers, Transport Rate Struc- bent LECs are not sufficiently reimbursed through intrastate ture and Pricing: Usage fo the Public Switched Network by rate systems for their service to customers with high volumes Information Service and Internet Access Providers, Notice of of incoming calls, they may seek relief from state regulators. Proposed Rulemaking, Third Report and Order and Notice of In- See id. at 16134, para. 346. quiry; 11 FCC Rcd. 21354 [herinafter Internet Usage NO1]. COMMLAW CONSPECTUS [Vol. 7 that support the Internet and other information may have different usage patterns and effects on services. 390 The Commission found that several the network, and sought comment on whether to critical issues, beyond the interstate access system, differentiate types of information services since arise in the context of the development of the In- different services impact the networks in varied 39 1 3 9 9 ternet and other information services. "Ulti- ways. The Commission also sought comment mately, these questions concern no less than the on how new services such as Internet telephony, future of the public switched telephone network as well as real-time streaming audio and video in a world of digitalization and growing impor- services over the Internet, should effect its analy- 4 tance of data technologies. Our existing rules sis. 00 It observed that another new service, "In- have been designed for traditional circuit- ternet telephony" (also referred to as "IP teleph- switched voice networks, and thus may hinder the ony") offers voice transmission normally thought development of emerging packet-switched data of as a basic service, over a packet-switched data networks." 39 2 To avoid this result, the Commis- network traditionally considered to be an en- sion sought to identify policies which best facili- hanced service. 40 1 This proceeding remains tate the development of future high-bandwidth pending before the Commission. data networks, while at the same time preserving incentives for investment and innovation in the F. Report to Congress (Universal Service) underlying voice network.393 The Internet Usage NOI recognized that switch In the Appropriations Act of November 26, congestion issues would arise due to virtually all 1997, the Commission was directed to report to residential users today connecting to the In- Congress on its implementation of certain provi- ternet-a packet-switched data network-through sions of the 1996 Act regarding the universal ser- the switching facilities of the incumbent LEC vice system. 40 2 Among other things, the Appro- 394 which are designed for circuit-switched voice. priations Act directed the Commission to review It also noted that end-to-end dedicated channels the definitions of 'information service,' 'local ex- created by circuit switches are an unnecessary and change carrier,' 'telecommunications,' 'telecom- inefficient way to connect an end user to an munications service,' 'telecommunications car- 395 ISP. The Commission therefore sought com- rier,' and 'telephone exchange service.' 40 3 It also ment on what policies might create incentives to required the Commission to review "the applica- 396 restructure the mechanics of this connection. tion of those definitions to mixed or hybrid serv- Additionally, the Commission requested com- ices and the impact of such application on univer- ment on the existence of state or federal regula- sal service definitions and support, and the tory barriers to the provision of alternate network consistency of the Commission's application of 3 97 access arrangements for information services. those definitions, including with respect to In- The Commission recognized that the current ternet access under section 254(h).."40 4 In addi- division in its rules between basic and enhanced tion, it had to review its decisions regarding who is services may not accurately reflect the different required to contribute to universal service under types of information service providers today, and section 254(d) as well as who is eligible to receive the manner these companies use incumbent LEC support under sections 254(e), 254(h) (1), and 40 5 facilities.3 98 It noted that information services 254(h) (2) of the Act.
390 See id. at 21490-91, para. 311. the legal questions concerning Internet telephony, and 391 See id. broader issues about the continued viability of the basic/en- 392 Id. hanced dichotomy in separate proceedings. See id. 393 See id. 402 See Departments of Commerce,Justice, and State, the 394 See id. at 21491, para.313. Judiciary, and Related Agencies Appropriations Act, 1998, 395 See Internet Usage NOI, 11 FCC Rcd. at 21491, para. Pub. L. No. 105-119, § 6239(a), 111 Stat. 2440, 251 (1997). 313. Specifically, the Appropriations Act required the Commis- 396 See id. sion to submit a report to Congress, no later than April 10, 397 See id. 1998. See id. 398 See d. at 21492, para. 316. 403 See Report to Congress, 11 Comm. Reg. (P&F) at 1316, 399 See id. para. 13. 400 See id. 404 Id. at 1317, para. 14. 401 See Internet Usage NOI,11 FCC Rcd. at 21491, para. 405 See id. at 1317, paras. 16, 17. 313. The Commission also stated that it planned to address 19991 Internet Over Cable
The April 10, 1998 Report to Congress focused on described as "phone-to-phone IP [Internet Proto- the Commission's implementation of the defini- col] telephony," the Report to Congress tentatively tions relevant to universal service. 4° 6 It revisited found that some of the services are not informa- many of the Commission's major decisions re- tion services within the meaning of the statute but 4 1 lated to implementing the 1996 Act, with particu- are instead 'telecommunications services.' lar regard to the manner in which the regulatory The Report to Congress also noted that "mixed or classification of Internet and "information" serv- hybrid services," as referred to in the Appropria- ices vis-a-vis "telecommunications" services impact tions Act, do not appear in the text of the 1996 on the current and future provision of universal Act. It was understood that these terms refer to 40 7 "services service. in which a provider offers a capability for At the outset, the Commission reiterated that generating, acquiring, storing, transforming, the 1996 Act carried forward the basic/enhanced processing, retrieving, utilizing or making avail- framework established under Computer II and re- able information via telecommunications and, as flected in the MFJ: an inseparable part of that service, transmits infor- by the user."412 [Tihe categories of "telecommunications service" and mation supplied or requested "information service" in the 1996 Act are mutually ex- By reference to its Computer II decision, the clusive... Congress intended these new terms to build Commission concluded that, despite the inclusion established prior to the passage of upon frameworks of a "telecommunications" component, hybrid the 1996 Act. Specifically, we find that Congress in- 413 tended the categories of "telecommunications service" services are not telecommunications services. and "information service" to be mutually exclusive, like "An offering that constitutes a single service from the definitions of "basic service" and "enhanced ser- user's standpoint is not subject to carrier vice" developed in our Computer H proceeding, and the the end definitions of "telecommunications" and "information regulation simply by virtue of the fact that it in- 41 4 service" developed in the Modification of Final Judg- volves telecommunications components." ment that divested the Bell Operating Companies from Characterizing this as a "functional approach," AT&T. We recognize that the 1996 Act's explicit en- dorsement of the goals of competition and deregula- the Commission stated that it is consistent with tion represents a significant break from the prior regu- Congress' desire not to classify providers depend- latory framework. We find generally, however, that ing on the types used. 415 Thus, in the difficult Congress intended to maintain a regime in which infor- mation service providers are not subject to regulation case of classification of the services offered by fa- they provide their providers, the question becomes, as common carriers merely because40 8 cilities-based services "via telecommunications." "'functionally, [is] the consumer receiving two 416 With respect to the application of these defini- separate and distinct services."' tions to "mixed or hybrid services," the Report to The Report to Congress stated that 'mixed or hy- Congress concluded that pure transmission capac- brid services' are internet-based offerings. 417 As ity to Internet access or backbone providers qual- described in the Report, the Internet Protocol (IP) ify as interstate 'telecommunications' and gener- is used by thousands of networks to communicate ally Internet service providers do not provide and loosely interconnect. 418 For purposes of the telecommunications themselves. 40 9 If an Internet Report to Congress, the Commission divided the rel- service provider owns transmission facilities that it evant group into five categories: (1) end users; uses to transport data in providing an information (2) access providers; (3) application providers; service, the Commission exacts no universal ser- (4) content providers; and (5) backbone provid- vice contribution, though it stated that it might at a future time. 4 10 Finally, with respect to what it
406 See id. at 1317, para. 6. 415 See Report to Congress, 11 Comm. Reg. (P&F) at 1329, 407 See id. para. 59. 408 Id. at 1316-17, para. 13 (footnotes omitted). 416 Id. at 1330, para. 60 (quoting Federal-State Joint 409 See Report to Congress, 11 Comm. Reg. (P&F) at 1316- Board on Universal Service, Access Charge Reform, Price 17, para. 55. Cap Performance Review for Local Exchange Carriers, Trans- 410 See id. port Rate Structure and Pricing, End User Common Line 411 See id. Charge, Fourth Order on Reconsideration, 13 FCC Rcd. 5318, 412 Id. at 1329, para. 56. para.282 [hereinafter Fourth Order on Reconsideration]). 413 See id. at 1329, para. 57. 417 See Report to Congress, 11 Comm. Reg. (P&F) at 1330, 414 Id. at 1329, para 58 (citing Computer H Final Decision, para. 61. 77 F.C.C. 2d at 420-28). 418 See id. at 1330, para. 62. COMMLAW CONSPECTUS [Vol. 7
ers. 4 1 9 The Commission explained that "Internet services obtained by means of dial-up connections access providers" and "Internet service providers" over the public switched telephone network, the were interchangeable terms and that "access serv- Commission has stated that it would be incorrect ices," as described therein, are like "conduit serv- to conclude that Internet access providers offered ices," as the Commission defined them in the Uni- subscribers separate activities (e.g., e-mail, web versal Service Order.420 "Application providers" are browsing, etc.) that should be deemed to have those who promote a closed end-to-end service in- separate legal status so that, for example, e-mail stead of a wide-ranging connection to the In- might be treated as a "telecommunications ser- ternet. Examples include IP telephony and e-mail vice," but web hosting treated as an "information service providers. 42 1 "Content providers," make service." information available to end users by connecting Internet access providers offer public Internet servers to the Internet.42 2 The Commission also access.429 Through the use of applications in- recognized that there is a substantial overlap of stalled on their own computers in combination 42 3 services provided by companies. with access to the Internet, users gain a variety of 43 The Report to Congress notes that ISPs use a wider advanced capabilities. ) The Internet service range of telecommunications inputs, including provider often will not know which applications a purchases of analog and digital lines from LECs user has installed or is using.43' Nonetheless, sub- to connect their dial-in subscribers, and leased scribers are able to run those applications pre- lines (TIs, T3s and OC-3s) from telecommunica- cisely because of the enhanced functionality that 432 tions carriers (e.g., IXCs) and also interconnec- Internet access services gives to them. tion arrangements with one or more Internet The Report to Congress notes that an Internet ac- backbone providers. 42 4 According to the Report to cess provider, in essential aspect, looks much like Congress, ISPs do not offer telecommunications other enhanced or information service providers services, but instead offer information services. If in that an Internet access provider typically owns 433 their underlying inputs are found to involve inter- no telecommunications facilities of its own. It state telecommunications, the Commission is em- "conjoin[s] data transport with data processing, powered by the 1996 Act to order the ISPs to con- information provision, and other computer-medi- tribute to the universal service mechanisms. 425 In tated offerings" and thereby creates an informa- the context of its discussion of the issues regard- tion service provided to the end user.4 34 The ing a facilities-based ISP's "furnishing of raw trans- Commission stated that its findings with respect mission capacity to itself," which would arguably this regulatory classification "are reinforced by constitute the provision of "telecommunications," the negative policy consequences of a conclusion the Commission stated that it expressed no view that Internet access services should be classed as on the applicability of this analysis to cable opera- 'telecommunications"' in light of the "significant tors providing Internet access service. 426 The Re- consequences for the global development of the port to Congress specifically declined to establish Internet."' 4 35 Significantly, the Commission the regulatory classification of Internet services stated: "[W]e recognize the unique qualities of 4 27 provided over cable television facilities. the Internet, and do not presume that legacy reg- The Report to Congress recognized that Internet ulatory frameworks are appropriately applied to access service has data transport elements; infor- it."436 mation processing elements; and information Nonetheless, the Commission recognized that, content elements. 4 28 In the context of Internet despite its conclusions, Internet access providers
419 See id. para. 80. 420 See id. at 1330 para. 63 & n.125. 429 See id. at 1335, para. 79. 421 See id. at 1330, para. 63. 430 See id. 422 See id. 431 See id. 423 See Report toCongress, 11 Comm. Reg. (P&F) at 1330, 432 See id. para. 6 3. 43- See 424 See id. at 1331, para. 66. Report to Congress, 11 Comm. Reg. (P&F) at 1335, 425 See id. para. 81. 426 See id. at 1332, para. 69 & n. 140. 434 Id. at 1335, para. 82. 427 See id. 435 Id. at 1335-36, para. 82. 428 See Report to Congress, 11 Comm. Reg. (P&F) at 1335, 436 Id. 1999] Internet Over Cable do not offer a "telecommunications service" sim- hardware at their premises to place calls between ply by furnishing Internet access to their custom- two computers connected to the Internet, did not ers.4 3 7 It must also consider whether certain other constitute the provision of "telecommunications" Internet-based services might fall within the statu- under the Act.44 4 The Commission observed that tory definition of "telecommunications." 4 3 The "Internet service providers over whose networks Commission stated that IP telephony services "en- the information passes may not even be aware able real-time voice transmission using Internet that particular customers are using IP telephony protocols," 43 9 but that it had not yet considered software, because IP packets carrying voice com- the legal status of IP telephony.440 The Commis- munications are indistinguishable from other sion clarified that when it uses the term "phone- types of packets." 445 In that case, the "Internet to-phone" IP telephony, it tentatively intends to service provider does not appear to be refer to services in which the provider meets the 'provid[ing]' telecommunications to its subscrib- 44 6 following conditions: ers." (1) [the provider] holds itself out as providing voice te- The Report to Congress also examined the policy lephony or facsimile transmission service; (2) it does implications of the foregoing scheme of regula- not require the customer to use CPE different from that CPE necessary to place an ordinary touch-tone call tory classification and concluded that the rapid (or facsimile transmission) over the public switched tel- growth of the Internet and the other enhanced ephone network; (3) it allows the customer to call tele- services was attributable to the Commission's de- phone numbers assigned in accordance with the North termination that they were not common carriers American Numbering Plan, and associated interna- 447 infor- within the meaning of the Act. This policy of tional agreements; and (4) it transmits customer4 4 1 mation without net change in form or content. distinguishing competitive technologies from reg- The Commission 'found that certain services ulated services not yet subject to full competition ' 448 provided over the Internet, such as "phone-to- remains viable. The Commission further phone" IP telephony, may be offered to the pub- found that Congress endorsed this general ap- lic in a manner that makes them functionally in- proach "by distinguishing 'telecommunications distinguishable from traditional voice telephone service' from 'information service,' and by stating it stated that it may be ap- a policy goal of preventing the Internet from be- services. In the future, ' 449 propriate to classify such services as "telecommu- ing fettered by state or federal regulation." nications" rather than "information" services, and At the same time, the Commission recognized subject them to certain Title II regulatory require- that it is critical to make sure that its interpreta- ments. 44 2 The Commission deferred making tion of the statute will continue to sustain univer- more definitive conclusions in the absence of a sal service in the future. It acknowledged argu- more complete record focused on particular ments that as new communications services such cases. 443 as Internet access and IP telephony grow, traffic In contrast, the Commission found that the will shift away from conventional telecommunica- provision of "computer-to-computer" IP teleph- tions services, thus draining the support base for ony, through which individuals use software and universal service.450 The Commission stated that,
437 Id. at 1335-36, para. 83. stated that it would be considering the petition directly in a 438 See id. at 1336, para. 83. separate order. See id. at 1336, n.172, (citing Common Carrier 439 Id. at 1336, para. 84. IP telephony services can be Bureau Clarifies and Extends Request for Comment on A CTA Peti- provided either through software and hardware at the cus- tion Relating to "Internet Phone" Software and Hardware, Report tomer's premises or through "gateways" that permit applica- No. CC 96-10 (March 25, 1996). tions originating and/or terminating on the PSTN. "Gate- 441 See Report to Congress, 11 Comm. Reg. (P&F) at 1338, ways are computers that transform the circuit-switched voice para. 88. signal into IP packets, and vice versa, and perform associated 442 See id. at 1335, paras. 88-91. signalling, control, and address translation functions. The 443 See id. voice communications can be transmitted along with other 444 See id. at 1337, para. 87. data networks for... improved performance." Id. (footnotes 445 Id. omitted). 446 Id. at 1337, para. 87. 440 See id. at 1336, para. 83. The Commission noted that 447 See Report to Congress, 11 Comm. Reg. (P&F) at 1339, many of the issues addressed in the Report to Congress regard- para. 95. ing IP telephony were also raised in the pending ACTA peti- 448 See id. tion seeking a declaration that IP telephony software and 449 See id.; see also 47 U.S.C. § 230 (b) (1)-(2). hardware providers be classified as common carriers, and 450 See id. at 1340, para. 98. COMMLAW CONSPECTUS [Vol. 7
in order to promote equity and efficiency, it functionality it provides the end user/subscriber, should avoid creating regulatory distinctions but also upon how the service is positioned in the based purely on technology. 451 Additionally, it re- marketplace. The Commission's main focus is iterated its view that "Congress did not limit 'tele- clearly upon whether, functionally, the subscriber communications' to circuit-switched wireline is receiving two separate and distinct services, or is transmission, but instead defined that term on the receiving one service consisting of integrated basis of the essential functionality provided to communications components. Traditionally, the 2 users."45 Commission's answers to such questions have In the Report to Congress, the Commission con- been influenced by the policy implications that cluded that Internet providers using pure trans- classification as a regulated versus non-regulated mission capacity meet the legal definition of "tele- service would entail. 453 communications services." In addition, to the With the exception of the analytical approach extent the Commission were to conclude that cer- initiated in the Report to Congress on universal ser- tain forms of phone-to-phone IP telephony are vice issues, all of the 1996 Act proceedings dis- "telecommunications," and to the extent that cussed above largely assume the answers to funda- providers of such services are offering those serv- mental questions about the nature of Internet ices directly to the public for a fee, those provid- access and Internet-based content and informa- ers would be "telecommunications carriers." Ac- tion services by concluding that they are synony- cordingly, those providers would fall within mous with the more familiar category of en- section 254(d)'s mandatory requirement to con- hanced services. The initiation of its other recent tribute to universal service mechanisms.4 54 The proceedings, including the Internet NOI, and the Report to Congress finds that, if such providers are expansion of the Computer III proceeding, should exempt from universal service contribution re- provide the Commission a much needed opportu- quirements, users and carriers might have an in- nity to review, in a more holistic fashion, its ex- centive to modify networks to shift traffic to In- isting rules and policies with respect to the In- ternet protocol and thereby avoid paying into the ternet. Significantly, the important question that 455 universal service fund. In the near term, they none of these, or other Commission proceedings, might avoid payment of the universal service con- have directly addressed is whether cable Internet- tributions embedded in interstate access charges. based services may receive significantly different The avoidance of such payments "could increase regulatory treatment as Title VI services. the burden on the more limited set of companies still required to contribute, which, in turn, could well undermine universal service." 4 56 However, V. EVOLUTION OF CABLE SERVICE the Report to Congress found that there is no evi- dence to suggest an immediate threat to the suffi- A. Definition of "Cable Service" Under the ciency of universal service support.457 1984 Cable Act
When cable television service began in the G. Summary 1950's (known at the time as community antenna television or "CATV"), the Commission initially Regulatory classification of any service provided determined that it did not have jurisdiction to over the Internet that is functionally similar to regulate the new service under the Communica- more traditional services provided over conven- tions Act, as it was neither clearly a wire common tional networks may depend not only upon the carriage service governed by Title II (wire com-
451 See id. and Authorization, 94 F.C.C. 2d 48 (1983) [hereinafter BPSS) 452 Id.; see also 47 U.S.C. § 153 (46) ("The term 'telecom- (classifying pure packet switching as a basic service). munications service' means the offering of telecommunica- 453 See Report to Congress, 11 Comm. Reg. (P&F) at 1340, tions for a fee directly to the public... regardless of thefacilities para. 98. used.") (emphasis added); see also In re American Telephone 454 See id. at 1341, para. 98. and Telegraph Company, For Authority under Section 214 of the Communications Act of 1934, as amended, to Install and 455 See id. Operate Packet Switches at Specified Telephone Company 456 Id. Locations in the United States, Memorandum Opinion, Order 457 See id. 1999] Internet Over Cable munications), nor a radio broadcast communica- One of the driving factors behind the 1984 Act tions service governed by Title III (radio/broad- was the recognition that cable systems were capa- cast communications).4 5 8 In 1966, the ble of delivering both traditional one-way, televi- Commission reconsidered and began to regulate sion-like programming and two-way data and the cable industry. 459 The Supreme Court ap- voice transmission services. 464 The definition of proved of the Commission's regulation to the ex- "cable service" was developed to prevent cable sys- tent that the Commission's regulations were "rea- tems delivering video programming from being sonably ancillary to the effective performance of treated as common carriers, while preserving ex- the Commission's responsibilities for the regula- isting federal and state authority to develop a reg- 460 tion of television broadcasting." ulatory scheme for the cable operators' expected In order to prevent telephone company abuse future provision of non-traditional broadband of control over local network facilities, and to pre- communications services. 4 65 Of particular con- serve a competitive environment for the develop- cern with respect to cable's increasing capacity for ment and use of broadband cable facilities and two-way transmission services was the effect of tele- services, the Commission adopted regulations phone subscriber by-pass of the regulated local prohibiting telephone companies from directly exchange networks in favor of the potentially un- 461 providing cable television to subscribers. regulated provision of competing voice and data In 1972, the Commission created a comprehen- services by the cable companies. 466 Such by-pass sive, dual regulatory regime whereby the state or might leave the phone companies to bear the bur- local government issued franchises, while the den of universal service obligations alone, ulti- Commission exercised "exclusive authority over mately resulting in local telephone service rate in- 467 all operational aspects of cable communication, creases. including technical standards and signal car- The 1984 Cable Act defined the term "cable riage. 462 In 1984, Congress enacted legislation ex- service" as "the one-way transmission to subscrib- pressly designed to (de)regulate cable television, ers of video programming or other programming establish the boundaries of federal, state and local service, and subscriber interaction, if any, which is authority over cable systems, and establish required for the selection of such program- franchise procedures and standards to encourage ming."468 The term "video programming" was de- the growth and development of cable systems. fined as "programming provided by, or generally The 1984 Cable Act exempted cable television op- considered comparable to programming pro- erators from common carrier regulation insofar vided by, a television broadcast station."469 The as they provide "cable service." It also preserved term "other programming service" was defined as the local franchising system and codified the tele- "information that a cable operator makes avail- 463 47 phone-cable cross-ownership restrictions. able to all subscribers generally." 0 Further elab-
458 See Frontier Broadcasting Co. v. Collier, 24 F.C.C. 251 463 See 47 U.S.C. §§ 541 (c), 541 (a) (2) and 533 (b) (1)- (1958), reconsideration denied, Report and Order, Docket No. (b) (4). 12443, 26 F.C.C. 403, 428 (1959); see also United States v. 464 See H.R. REP. No. 98-934, at 19-23 ("[L]ocal cable sys- Southwestern Cable Co., 392 U.S. 157,164 (1968) (according tems began to develop the capability to provide services to the FCC, cable systems are "neither common carriers nor other than those essentially resembling television broadcast. broadcasters, and therefore are within neither of the princi- This included two-way communications services through pal regulatory categories created by the Communications which subscribers could call up programming or communi- Act"). cate over the cable system, and institutional networks with 459 See Malrite T.V. of New York v. FCC, 652 F.2d 1140, the capacity to provide the full range of communications and 1143-44 (2d Cir. 1981). data transmission services to government and educational in- 460 Southwestern Cable. Co., 392 U.S. at 164. stitutions and private businesses"). 461 See In re Telephone Company-Cable Television Cross- 465 See id. at 29. Ownership Rules, Sections 63.54-63.58., Notice of Inquiry, 2 466 See id. at 27-29. The House Report cited several ongo- FCC Rcd. 5092 (1987); see also Applications of Telephone ing proceedings at the federal and state levels examining reg- Common Carriers for Section 214 Certificates for Channel ulatory approaches to alternative suppliers of local private Facilities Furnished to Affiliated Community Antenna Televi- line services, including cable operators, and the question of sion Systems, Final Report and Order, 21 F.C.C. 2d 307, reconsid- local exchange by-pass. See id. ered in part, 22 F.C.C. 2d 746 (1970); see also 47 C.F.R. 467 See id. at 29. §§ 63.54-63.58 (1997). 468 47 U.S.C. § 522 (6) (A). 462 See New York State Comm'n on Cable Television v. 469 Id. at § 522 (20). FCC, 749 F.2d 804, 809 (D.C. Cir. 1984). 470 Id. at § 522 (14). COMMLAW CONSPECTUS [Vol. 7
oration on the nature of cable services under the tions services as private line data transmission or statute comes from the definition of "basic cable voice communication over cable systems in such a service," also contained in section 602. Section way as to compete with services provided by tele- 602(3) defines "basic cable service" as "any service phone companies. 476 Thus, the definition of tier which includes the retransmission of local tel- "other programming services" requires that the evision broadcast signals[.] "471 information provided in a cable service not be The term "cable system" is defined as: "a facil- subscriber specific and be made available to all ity, consisting of a set of closed transmission paths subscribers generally. 477 If information transmit- and associated signal generation, reception, and ted over a cable system is made available only to control equipment that is designed to provide an individual subscriber or to a discrete group of cable service which includes video programming subscribers, the transmission of this information is 478 and which is provided to multiple subscribers not a cable service. within a community.. ." 4 72 The term "cable oper- In contrast, information of interest or use to ator" is defined to mean, "any person or group of only a particular class of customers may still be of- persons (A) who provides cable service over a fered as a cable service as long as it is made gener- cable system and directly or through one or more ally available to all subscribers. 4 79 The House Re- affiliates owns a significant interest in such cable port gives as an example of a "cable service" the system, or (B) who otherwise controls or is re- offering to all subscribers of transmission or sponsible for, through any arrangement, the man- downloading of computer software (such as com- ' 473 agement and operation of such a cable system." puter or video games or statistical packages) for The legislative history states that the Committee use on personal computers.480 The fact that such intended its definition of cable service "to mark service would only be of interest and use to those the boundary between those services provided cable customers who possess a personal com- over a cable system which would be exempted puter, and the fact that the downloaded software from common carrier regulation under section could be used for a wide variety of purposes (in- 621 (c) and all other communications services that cluding calculation and word processing) would could be provided over a cable system." 4 74 The not make the transmission or downloading of the 481 House Report explains that the Committee in- software a non-cable communications service. tended to exempt video programming from com- The House Report also cautions that the require- mon carrier regulation in accordance with the ment that cable operators "make available" the in- traditional conception that the one-way delivery formation in a cable service to all subscribers gen- of television programs, movies, sporting events erally is not intended as a requirement that the 482 and the like is not a common carrier activity. cable operator actually create the information. Other programming services that make non-video "Accordingly, the provision of information over a information generally available to all subscribers cable system by a channel lessee or by the cable are included as cable services because they are suf- operator through a joint venture or other com- ficiently like video programming to warrant a sim- mercial arrangement would be a cable service if it 48 3 ilar regulatory exemption.4 75 Further, the legisla- met all other criteria for being a cable service." tion did not affect existing regulatory authority The distinction between cable service and other over the provision of such non-cable communica- services offered over cable systems "is based upon
471 Id. at § 522 (4). 653 of this title; or (E) any facilities of any electric utility used 472 Id. at § 522 (7). The definition also specifically ex- solely for operating its electric utility systems." Id. cludes certain facilities, as follows: "(A) a facility that serves 473 47 U.S.C. § 522 (5). only to retransmit the television signals of I or more televi- 474 H.R. REP. No. 98-934, at 41. sion broadcast stations; (B) a facility that serves subscribers 475 Id. without using any public right-of-way; (C) a facility of a com- 476 See id. mon carrier which is subject, in whole or part, to the provi- 477 See id. sions of title II of this Act, except that such facility shall be 478 See id. at 41-42. considered a cable system (other than for purposes of section 479 See id. at 42. 621 (c)) to the extent such facility is used in the transmission 481 See H.R. REP. No. 98-934, at 42. of video programming directly to subscribers, unless the ex- 481 See id. tent of such use is solely to provide interaction on-demand 482 See id. services; (D) an open video system that complies with section 483 Id. 19991 Internet Over Cable the nature of the service provided, not upon a from the interaction that is excluded-the capac- ' 493 technological evaluation of the two-way transmis- ity to engage in "off premises data processing. sion capabilities of cable systems." 484 For exam- The Committee intends that the interaction permitted ple, any service that allows customers to purchase in a cable service shall be that required for the retrieval over cable facilities of information from among a specific number of op- a product by sending a signal tions or categories delineated by the cable operator or would not be a cable service regardless of the pre- programming service provider. Such options or 485 the cise mechanism used to transmit the signal. categories must themselves be created by the cable op- The House Report contains an extensive discus- erator or programming service provider and made gen- erally available to all subscribers. By contrast, interac- sion of what non-traditional cable services fall tion that would enable a particular subscriber to within the statutory definition of cable services, engage in the off premises creation and retrieval of a 48 6 category of information would not fall under the defini- and which services would be excluded. In gen- 49 4 tion of cable service. eral, all services offered by a cable system that "go beyond providing generally-available video pro- The House Report gives as an example of interac- gramming or other programming are not cable tion permitted in cable services, "simple menu se- services." 48 7 Thus, "services providing subscribers lection," and keyword information retrieval from with the capacity to engage in transactions or to pre-sorted data bases in accordance with a specific store, transform, forward, manipulate, or other- index of key words.49 5 Such subscriber requests wise process information or data would not be for information "would not activate a sorting pro- cable services."'48 8 For example, a cable service gram and would not produce a subset of data in- may not include "active" information services dividually tailored to the subscriber's request. such as at-home shopping or banking that would Rather the information would already be sorted allow transactions between subscribers and cable into a specific, limited number of options, all of operators or third parties. 48 9 Similarly, a cable which would themselves be generally available to service may not provide subscribers with the ca- all subscribers." 496 In contrast, unlimited keyword pacity to communicate instructions or commands searches of information stored in data bases to software programs such as computer or video would not be included as cable services because games or statistical packages that do not retrieve such unlimited interaction goes beyond informa- information and that are stored in facilities off the tion retrieval and becomes a variety of data 497 subscribers' premises. 490 Therefore, a service that processing. allows subscribers to calculate the Dow Jones aver- Using these criteria, specific examples of cable age using software located off the subscribers' services given were: premises would not be a cable service, even video programming, pay-per-view, voter preference though a service that makes the Dow Jones aver- polls in the context of a video program, video rating age available to all subscribers would be a cable services, teletext, one-way transmission of any computer 49 1 software (including, for example, computer or video service. games) and one-way videotex[t] services such a[s] news However, the Committee intended to permit a services, stock market information, and on-line airline guides and catalog services that do not allow customer cable service to include interaction between the 498 subscriber and the cable operator or a third-party purchases. for the limited purpose of selecting information Specific examples of non-cable services given provided in other non-video programming serv- were: "shop-at-home and bank-at-home services, ices.49 2 The House Report further distinguishes the electronic mail, one-way and two-way transmission type of subscriber interaction permitted in a cable on [sic] non-video data and information not of- service-the capacity to retrieve information, fered to all subscribers, data processing, video-
484 Id. at 43. 494 Id. at 42-43. It appears that "other non-video pro- 485 See id. gramming services" in this context refers to services such as 486 See H.R. REP. No. 98-983, at 42-43. transmission and downloading of computer software and 487 Id. at 42. video games to the subscriber's personal computer, discussed 488 Id. previously. See id. 489 See id. 495 See id. at 43. 490 See id. 496 Id. at 43-44. 491 See id. 4197 See H.R. REP. No. 98-934 at 43. 492 See H.R. REP. No. 98-934, at 43. 498 Id. at 44. 493 See id. COMMLAW CONSPECTUS [Vol. 7
conferencing, and all voice communications."' 499 dressed a cable operator's claim that an electric The House Report observed that many contempo- utility unjustly and unreasonably imposed a sepa- rary commercial information services offer a pack- rate charge for the attachment of facilities em- age of services, some of which would be cable serv- ployed to provide non-video broadband commu- ices (e.g.. news and stock listings) and some of nications services (e.g., data transmission services) which would not be cable services (e.g. e-mail and in addition to the regulated rate that the utility data processing) .50° Nonetheless, while cable op- had assessed the cable operator and its predeces- erators would be permitted under the provisions sor.50 5 The Commission adopted an expansive of Title VI to provide any mixture of cable and definition of a "cable system" for purposes of de- non-cable services they chose, the manner in fining the scope of protection afforded cable sys- which a service was marketed would not alter its tem operators attaching their facilities to utility regulatory status as either a cable or non-cable poles under section 224 of the Act, as amended in 50 service. ' 1978.506 Consistent with the definition of cable services, For purposes of clarity, and consistent with the the House Report explained that the definition of 1984 Cable Act, the Commission defined the "cable system" in section 602 would apply by its terms "conventional" or "traditional" cable service terms regardless of the fact that the system was uti- as used in Heritageto refer to "the delivery of tele- lized to provide both cable and non-cable com- vision broadcast signals, cablecast or access pro- munications services. 50 2 The Commission ex- gramming, or other video programming by cable plained that: television systems to subscribers. ' 50 7 Excluded The term 'cable system' is not limited to a facility that from this category were non-video and other serv- provides only cable service which includes video pro- ices not associated with the provision or selection gramming. Quite to the contrary, many cable systems provide a wide variety of cable services and other com- of conventional or traditional cable services, such munications services as well. A facility would be a cable as electronic mail delivery, facsimile transmissions system if it were designed to include the provision of and other data transmission services. 508 The cable services (including video programming) along with communications services other than cable ser- Commission rejected TU Electric's challenge to 50 3 vice. the Commission's jurisdiction to resolve the dis- pute under section 224 on the grounds that Con- gress had not intended section 224 to reach only B. "Cable Service" and "Cable System" Under those pole attachments supporting equipment Heritage employed exclusively to distribute television broadcast signals and other video program- 50 9 Prior to the 1996 Act, Section 224 empowered ming. the Commission to adjudicate disputes between The Commission found that nothing in the leg- cable television system operators and telephone islative history of section 224 supported a conclu- and electric utilities concerning alleged unjust sion that protection for traditional cable televi- and unreasonable pole attachment rates, terms sion service was Congress' exclusive concern.510 5 4 and conditions. 0 In the Heritage pole attach- Although there was no explicit discussion of the ment complaint proceeding, the Commission ad-
499 Id. Supreme Court has found that Congress enacted this legisla- 500 See id. tion "as a solution to a perceived danger of anticompetitive 501 See id. practices by utilities in connection with cable television ser- 502 See id. vice." FCC v. Florida Power Corp., 480 U.S. 245, 247 (1987). 503 See H.R. REP No. 98-934, at 44. By conferring jurisdiction on the Commission to regulate 504 See id. pole attachments, Congress sought to constrain the ability of 505 See Heritage Cablevision Assoc. of Dallas, L.P., and telephone and electric utilities to extract monopoly profits Texas Cable TV Ass'n, Inc. v. Texas Utils. Elec. Co., Memoran- from cable television system operators in need of pole space. dum Opinion and Order, 6 FCC Rcd. 7099 (1991), recon. dis- See id. at 247-48; see also Alabama Power Co. v. FCC, 773 F.2d missed, 7 FCC Rcd. 4192 (1992), affirmed, Texas Utils. Elec. 363, 364 (D.C. Cir. 1985). Co. v. FCC, 997 F.2d 925 (D.C. Cir. 1993) [hereinafter Heri- 5017 Heritage, 6 FCC Rcd. at 7099 n.2. tage]. 508 See Id. 506 See Pub. L. No. 95-234, § 6, 92 Stat. 33, 35 (codified as 509 See id. at 7102, para. 16. amended at 47 U.S.C. § 224) [hereinafter Pole Attachments 510 See id. Act]. See Heritage, 6 FCC Rcd. at 7101-02, paras. 11-12. The 1999] Internet Over Cable issue in the House Report, the Senate Report had and retrieval, and visual, facsimile and telemetry 51 5 specifically referenced testimony "that the intro- transmissions of all kinds." duction of broadband cable services may pose a com- The Commission reiterated its earlier concern petitive threat to telephone companies, and that for the orderly development of cable within the the pole attachment practices of telephone com- structure of the existing nationwide communica- panies could, if unchecked, present realistic dan- tions system, in which it noted that cable televi- gers of competitive restraint in the future."51' sion "presumably will become a major and inte- The Commission further found that the term grally vital element of what many see as the "broadband cable services," to which Congress broadband communications system of the fu- was referring, has commonly been understood ture."5 16 Recognition that cable could provide throughout the years to include non-video serv- "these broader functions" had previously led the ices, for example, business data transmission and Commission to substitute use of the more inclu- video services. 512 As early as 1972, the Commis- sive term, "cable television systems," for sion had identified the following services among "CATV." 5 17 Similarly, in an antitrust action those possible over cable's multichannel or broad- against telephone utilities for an alleged conspir- band capacity: acy to restrain trade in denying a cable company's [F]acsimile reproduction of newspapers, magazines, request to attach cables to telephone poles, the documents, etc.; electronic mail delivery; merchandis- ing; business concern links to branch offices, primary court interpreted the term "broadband" as apply- customers or suppliers; access to computers; e.g., man ing to "a wide range of communications services to computer communications in the nature of inquiry including meter reading, stock market quotations, and response (credit checks, airlines reservations, burglar and fire alarm services, at-home shopping branch banking, etc.), information retrieval (library 518 and other reference material, etc.), and computer to services, data service, and two-way television." computer communications .... 513 The Commission concluded that, given the Heritage cited earlier orders in which the Com- commonly understood meaning ascribed to the mission explicitly adopted restrictions on tele- term "broadband cable services," both prior to phone common carriers' ownership and opera- and contemporaneous with the passage of section tion of CATV facilities in order to ensure that 224, Congress was aware of the Commission's cable television development into a broadband longstanding view of cable as a provider of video communications system would not be inhibited by and non-video broadband services, and did not in- telephone companies. 5 14 The Commission stated tend its pole attachment authority to exclude that "CATV service represents the initial practical non-video broadband services. 519 It rejected TU application of broadband cable technology" and Electric's arguments that section 224 should be that "there is a substantial expectation that broad- interpreted in light of the Cable Act definitions of band cables, in addition to CATV services, will "cable service" and "cable television system," and make economically and technically possible a that these definitions did not encompass data wide variety of new and different services, involv- transmission services, but were limited to video 52 0 ing the distribution of data, information storage entertainment services.
511 Id. (quoting S. REP. No. 95-580, at 13, 1978 Federal Standards, Clarificationof the Cable Television Rules and U.S.C.C.A.N. at 121 (emphasis added)). Notice of Proposed Rulemaking And Inquiry, 46 F.C.C. 2d 175, 512 See id. at 7102, para. 17. 176 (1974) (emphasis added)). 513 Id. (quoting In re Amendment Of Part 74, Subpart K 517 See id. at 7102, para. 17. of the Commission's Rules and Regulations Relative to Com- 518 Id. at 7102-03, (quoting TV Signal Co. of Aberdeen v. munity Antenna Televisions Systems, Report and Order, 36 AT&T, 617 F.2d 1302, 1304 n.1 (8th Cir. 1980)). F.C.C. 2d 143, 144 n.10 (1972)). 519 See id. at 7103, para. 18. 514 See Heritage, 6 FCC Rcd. at 7102 n.28. 520 See Heritage,6 FCC Rcd. at 7104, para. 22. At the time 515 Id. ( quoting In re Applications of Telephone Com- of Heritage, section 602(6) defined "cable system" as "a facil- panies for Section 214 Certificates for Channel Facilities Fur- ity.., designed to provide cable service which includes video nished to Affiliated Community Antenna Television Systems, programming and which is provided to multiple subscribers Final Report and Order, 21 F.C.C. 2d 307, 324-25 (1970) (em- within a community..." 47 U.S.C. § 522 (6) (1991); see also phasis added)). Heritage, 6 FCC Rcd. at 7103, para. 20. "Cable service"was 516 Id. at 7103 n.28 (quoting In reAmendment of Part 76 then defined as "(A) the one-way transmission to subscribers of the Commission's Rules and Regulations Relative to the of (i) video programming, or (ii) other programming ser- Advisability of Federal Preemption of Cable Television Tech- vice, and (B) subscriber interaction, if any, which is required nical Standards or the Imposition of a Moratorium on Non- for the selection of such video programming or other pro- COMMIAW CONSPECTUS [Vol. 7
The Commission first noted that the statute "traditional" or "conventional" cable video pro- specifies that the Cable Act definitions apply only gramming services and "non-video" or "broad- "for purposes of this title [Title VI],"521 and that band" services that is not unlike the distinction "[n] othing in the language or legislative history of between "basic" and "enhanced" common carrier the Cable Act suggests its definitions were in- communications services established in the Com- tended to limit the Commission's pole attach- mission's Computer Inquiry decisions. In each case, ment jurisdiction. 522 Even when section 224 is the "nontraditional" or unconventional service read in conjunction with the Cable Act, cable fa- utilizes the facilities of the traditional system with- cilities carrying both video and non-video broad- out thereby effecting a change in the classification band services are not excluded from section of the underlying facilities for regulatory pur- 224.523 Several provisions of the Cable Act ex- poses. And, in each case, the nontraditional or pressly contemplated that cable systems would enhanced service was defined principally as any- carry both traditional cable services and non-cable thing beyond the basic or traditional service of- communications services without the operators' fered by the respective provider. In each in- facilities ceasing to be "cable systems" under Title stance, this distinction was primarily drawn to 5 VI. 24 Section 621 (then, as now) specifically exclude such "enhanced" services from the Title reserves the authority of any State to regulate any II or Title VI regulation otherwise mandated for cable operator to the extent that such operator the "basic" or "traditional" service. Carriers would provides any communications service other than not be prohibited from providing such non-tradi- cable service, whether offered on a common car- tional services, but the regulations applicable to rier basis or private contract basis. 525 The Com- their basic service would not necessarily apply. mission concluded that the facilities at issue, It appears that, prior to the 1996 Act's revision which were designed to include the provision of to the definition of "cable service," it would not cable services (including video programming) have been possible for the Commission to have in- along with communications services other than terpreted the section 602(6) definition of "cable cable service, met the definition of "cable system" service" to include Internet-based cable services. within the meaning of the Cable Act, even though As discussed above, the 1984 Cable Act's legisla- the operator also provides data transmission over tive history makes it clear that such interactive in- 2 6 its system. 5 formation and enhanced services as are provided Thus, the 1984 Cable Act established a funda- over the Internet could not come within the origi- mental distinction between a service that is pro- nal definition of cable services insofar as they gen- vided over a cable system that is "cable service," erally provide the subscriber with a two-way capac- and a service provided over such a system that is ity to engage in transactions, or to store, not within the statutory definition. The excluded transform, manipulate, or otherwise process infor- category clearly included two-way communica- mation or data. Critical to the classification of tions services such as e-mail, facsimile transmis- "cable services" is the limitation that the program- sions and data processing, services which are iden- ming provided be made available to all subscrib- tical to those long defined by the Commission as ers generally and that it arrive by one-way trans- "enhanced services" under the Computer Inquiry mission from the cable headend. The following decisions, as well as basic voice communications section examines technological advances in cable services. In other words, cable regulation under architectures and services that demonstrate how Title VI contemplated a distinction between cable systems have changed since 1984. gramming service." 47 U.S.C. § 522 (5) (1994); see also Heri- 525 See id.; 47 U.S.C § 541 (d) (2). tage, 6 FCC Rcd. at 7103, para. 20. The only relevant differ- 526 See Heritage, 6 FCC Rcd. at 7104, para. 24. On ap- ence between these definitions and the definitions under the peal, the D.C. Circuit Court affirmed the Commission's deci- 1996 Act is the addition of the words "or use" in subsection sion. The court held that although section 224 was ambigu- (B), discussed below. ous as to whether the Commission's regulatory authority 521 See Heritage,6 FCC Rcd. at 7104, para. 22 (quoting 47 extended to cables used to transmit non-video communica- U.S.C § 522). tions, the Commission had reasonably interpreted the Act to 522 Id. conclude that its authority extended to cables transmitting 523 See id. at 7104, para. 23; 47 U.S.C. § 541 (d) (2) non-video communications. See Texas Utils. Elec. Co., 997 F.2d (1991). at 932-35. 524 See Heritage, 6 FCC Rcd. at 7104, para. 23. 1999] Internet Over Cable
C. Features of Internet Services Provided Over transmission over cable lines. [It] also contains Cable Systems electronic equipment for inserting advertising at
527 the local level, encrypting signals for security pur- 1. Advanced Cable Architecture poses, and playing or producing public access/lo- cal origination programming. "532 The cable industry is in the midst of a transfor- Trunk lines are high-capacity fiber or coaxial mation from self-contained, coaxial distribution cables that carry signals from the headend to systems that feature one-way delivery of analog tel- 533 feeder cables serving local neighborhoods. evision signals, to two-way, interactive broadband Many cable operators are currently deploying fi- systems involving a hybrid of traditional coaxial ber optic transmission lines to replace much of and modern fiber optic technologies. 528 These new hybrid fiber-coaxial ("HFC") networks are the coaxial cable present in trunk lines. The use often linked by fiber into regional hubs, which en- of fiber optic cable in the system reduces noise by requiring less electronic equipment (e.g., able the industry to deliver a wide range of tele- fewer making the system "passive. '534 communications and information services-in- amplifiers) and cluding Internet access, telephony, and digital Such "passive" architectures support newer, more 9 television. 52 reliable technologies by providing the "cleaner" The traditional cable network was optimized for transmission paths necessary for two-way interac- the delivery of traditional cable video program- tivity, telephony, and other new services. The ex- ming service through one-way transmission of sig- isting feeder and drop lines compose the cable in- nals to subscribers. The basic cable system, opti- dustry's "last mile" of plant into the consumer's mized for one-way transmission, has been a "tree- home. These lines are high bandwidth coaxial cable, which is capable of delivering broadband and-branch" full coaxial, 350 MHz system, capable 535 of providing approximately 50 channels of analog applications at very high data rates. video service. The architecture is simple, with The HFC architecture extends fiber from the larger "trunks" leaving the cable "headend," and headend to the feeder lines, increasing splitting into smaller trunks or "feeder" or "distri- bandwidth and signal quality while placing fiber bution" lines into the neighborhoods served. optics closer to the customer premises. 536 The fi- Along the way, the signal is amplified many times ber terminates in neighborhood nodes, from to maintain its integrity.530 A "drop" line con- which feeder and drop lines branch out to sub- nects the feeder line to the terminal equipment scribers' premises. This network can utilize the or network interface units at the subscriber's tree-and-branch form, and can offer a number of home.5 31 The headend is the center of the sys- capacities, most commonly 550 MHz and 750 tem, where many programming operations and MHz. With 750 MHz, a cable operator can offer functions are processed, such as the reception of 118 analog channels with extra capacity usable for satellite delivered programming and broadcast telephone or other services. HFC networks offer signals. The headend includes "facilities for improved reliability, increased capacity, and descrambling incoming signals from satellite and clearer signal transmission. The HFC design ef- broadcast programming networks, assigning them fectively transforms a single cable system into a se- channel numbers, and processing them for re- ries of smaller cable systems serving as few as 200
527 Information in this section is drawn primarily from: ADVANCED SERVICES PAMPHLET, supra note 527, at 4. NAT'L CABLE TELEVISION ASS'N ("NCTA"), TELECOMMUNICA- 532 Id. TIONS AND ADVANCED SERVICES PROVIDED BY THE CABLE TELEVI 533 See id; see also ADVANCED SERVICES PAMPHLET, supra SION INDUSTRY 3-26 (April 1996) [hereinafter ADVANCED SERV- note 527, at 4. ICES PAMPHLET] and NCTA, THE CABLE TELEVISION 534 364K See id. HANDBOOK section 3 (January 1997) [hereinafter CABLE at 3-A-3 (citing Richard R. Green, High Speed - HANDBOOK]. Information Access A Cable Television Perspective, National 528 See CABLE HANDBOOK, supra, note 527, at 3-A-i; see also Research Council (June 15, 1995)). ADVANCED SERVICES PAMPHLET, supra note 527, at 3. 535 Cable plant is capable of transferring data at rates as 529 See CABLE HANDBOOK, supra, note 527, at 3-A-i; see also high as 43 million bits per second in each 6 MHz television ADVANCED SERVICES PAMPHLET, supra note 527, at 10. channel allocated for data transmission. See CABLE HAND- 530 See ADVANCED SERVICES PAMPHLET, supra note 527, at BOOK, supra note 527, at 3-A-4. 8. 536 See ADVANCED SERVICES PAMPHLET, supra note 527, at 531 See CABLE HANDBOOK, supra,note 527, at 3-A-2; see also COMMLAW CONSPECTUS [Vol. 7 to 500 homes. 537 These "mini" systems are con- ternet access.. The connection to the Internet is nected to the headend by fiber links to increase persistent, rather than obtained on a "dial-up" ba- 538 bandwidth and facilitate two-way transmission. sis. Modulators and computer servers are located Advanced cable architectures generally incor- at the cable system headend, where the cable sys- porate fiber backbone, fiber redundancy and re- tem interconnects with the Internet or outside in- gional hub interconnection to increase network formation service provider. 543 From the headend, reliability and interoperability, which are essential laser nodes send signals to nodes located in the to two-way services such as voice transmission. neighborhood, where the signals are transformed "Increasingly, multiple system operators are de- to travel over coaxial cable plant to the customer ploying 'regional hubs' to interconnect system premises. 539 headends using high capacity fiber optic rings." A technical problem for most existing cable sys- Regional hubs speed the deployment of teleph- tems' provision of two-way interactive data services ony services and interactive two-way services by al- is return path transmission interference. This lowing cable companies to interconnect with problem arises for several reasons. Cable's tradi- other telecommunications networks upon deploy- tional tree-and-branch or "bus" architecture per- ment of telephony switching and two-way signal- mits a degree of noise ingress that can cause inter- ing capability. Once these improvements are ference with return-path transmissions. made, cable's fiber-based platform will enable the Subscribers share the capacity of the coaxial cable industry to transport personal communication infrastructure, potentially making it more vulnera- services, competitive access for businesses to con- ble to interference or other forms of degradation nect to long distance companies and, eventually, caused by subscribers' equipment.544 In addition, 540 local residential voice service. cable systems have a "low split" (at about 50 MHz) The cable industry's broadband platform makes for their return path signals (at 5 MHz - 40 MHz), cable an optimal medium for transmitting large which can interfere with signals on the lower amounts of digital information-data, graphics, channels, such as channel 2, which start at 54 and video-at high speeds. Upgraded cable sys- MHz. 545 Several solutions are available, including tems can, depending upon usage conditions, utilization of different portions of the transmis- carry data up to 1000 times faster than transmis- sion path for return transmissions at a "high split" sion using dial-up modems over ordinary copper above 550 MHz. 546 Other techniques such as acti- twisted-pair phone lines, and 100 times faster than vating "dark fibers" (a second, unused transmis- ISDN (integrated services digital network) phone sion line) and reducing the size of neighborhood 54 1 lines. As fiber upgrades to accommodate digi- nodes can lessen traffic and interference and cre- tal services are completed, cable networks will be- ate more bandwidth for return path transmis- 547 come more "passive," thus increasing the capabil- sions. ity of cable lines to carry two-way data Yet another solution, being used by several 542 transmissions. Cable companies can operate as cable operators, is using cable architecture for "pipeline" or "conduit" services, or become full- transmitting downstream data transmissions, and service providers of Internet access and other telephone lines for the upstream or "return" path, value-added services. which requires far less capacity. This solution, Cable plant utilizing an HFC cable architecture which provides Internet access and content by can transmit both upstream and downstream In- transmission to the home downstream over cable
537 See CABLE HANDBOOK, supra, note 527, at 3-A-4; see also 26. ADVANCED SERVICES PAMPHLET, supra note 527, at 9. 544 See Implementation of Section 304 of the Telecom- 538 See ADVANCED SERVICES PAMPHLET, supra note 527, at munications Act of 1996, Commercial Availability of Naviga- 9. tion Devices, Report and Order, 12 Comm. Reg. (P& F) 541, 539 See CABLE HANDBOOK, supra, note 527, at 3-A-5; see also 561, at para. 122 (1998). ADVANCED SERVICES PAMPHLET, supra note 527, at 10. 545 See CABLE HANDBOOK, supra,note 527, at 3-A-3; see also 540 See CABLE HANDBOOK, supra, note 527, at 3-C-1; see also ADVANCED SERVICES PAMPHLET, supra note 527, at 26. ADVANCED SERVICES PAMPHLET, supra note 527, at 12. 546 See CABLE HANDBOOK, supra,note 527, at 3-A-3; see also 541 See CABLE HANDBOOK, supra, note 527, at 3-C-1; see also ADVANCED SERVICES PAMPHLET, supra note 527, at 26. ADVANCED SERVICES PAMPHLET, supra note 527, at 24. 547 See CABLE HANDBOOK, supra, note 527, at 3-A-3; see also 542 See id. at 25. ADVANCED SERVICES PAMPHLET, supra note 527, at 26. 543 See ADVANCED SERVICES PAMPHLET, supra note 527, at 1999] Internet Over Cable plant, with transmissions back from the home up- traditional cable offerings, with significant opera- stream to the Internet over the analog phone line, tor-provided content and browsing capability, would permit the vast majority of cable plant that than the Internet-based services provided by the is one-way (80% or more) to be immediately capa- telephone carriers, which consist of little more ble of supporting Internet services. The effect of than a telecommunications transmission facility 5 0 this service configuration on the question of in- and a browser.5 cluding Internet-based services under the revised The @Home Network was originally ajoint ven- statutory definition of cable services will be dis- ture of Tele-Communications, Inc. (TCI), Com- cussed below. cast Corp., Cox Communications, Inc., and Kleiner, Caufield & Byers.55 1 Since its founding 2. Current Cable Internet Services in May 1995, the @Home Network has negotiated affiliate agreements with fifteen leading cable The high-speed data, interactive computer and companies in North America, including TCI, other Internet-based services offered by cable op- Comcast, Cox, InterMedia Partners, Marcus erators are also referred to as "cable modem ser- Cable, Rogers Cablesystems, Shaw Communica- vice." The cable modem is the piece of equip- tions and Cablevision Systems Corp.552 The ment that converts the data transmissions for use @Home service comprises a private broadband in the subscriber's premises. In the home, a cable network and interactive on-line service distributed modem connects to the cable television coaxial in part though existing cable infrastructure, using wiring and also usually attaches to the user's com- the @Home Network's high-speed national back- puter via a standard Ethernet connection. 548 The bone and a cable modem. 553 The "@Home ser- speed of cable modems offers significant advan- vice," @Home's primary offering, permits residen- tages in terms of speed of connection and data tial subscribers to connect their personal transmission over other equipment currently computers via cable modems to @Home's In- available to connect end users to online services, ternet backbone. 5 5 4 According to @Home, the Internet and the World Wide Web. Cable "[t]his service enables subscribers to receive the modems generally fall into three categories: (1) '@Home Experience,' which includes Internet modems for personal computers, (2) modems for service," an "always on" connection, and rich mul- local area network ("LAN")-to-LAN network timedia programming through an intuitive graph- bridges, and (3) modems for LAN-to-LAN rout- ical user interface. The content foundation of the ing.549 @Home Experience is provided by the Company's @Media group, which aggregates content, sells ParticularServices advertising to businesses and will provide pre- mium services to @Home subscribers. '555 Members of the cable industry maintain that The @Home Network also offers a business ver- the primary Internet-based services the industry sion of its service, known as "@Work." The may provide, such as the @Home Network's @Work service offers businesses "end-to-end man- "@Home" service, Time Warner's "Road Runner," aged connectivity for Internet, intranet and ex- Cablevision's "Optimum Online,"and MediaOne's tranet solutions over a variety of transport media "MediaOne Express" will be closer in nature to including the cable infrastructure and leased digi-
548 See ADVANCED SERVICES PAMPHLET, supra note 527, at @Home for the delivery of broadband cable modem service 26. and will receive warrants allowing it to buy shares on the 549 See id. same terms as the other owners. See CABLEFAX DAILY, Oct. 3, 550 These services are discussed for illustrative purposes 1997, at 1. only. The pace of change as the cable industry rolls out its 553 See @Home Network, Company Background (visited Oct. Internet-based services and forms alliances among operators 17, 1998).
556 Id. 564 See id. 557 See id; see also @Work on the @Home Network (visited 565 See id. Oct. 13, 1998)
569 See id. agreement is discussed because it is available in the Commis- 570 See id. sion's files for examination, and is summarized solely for pur- 571 See Jones Intenet Channel, About Jones Internet poses of illustrating the nature of one form of cable Internet Channel (visited Nov. 6, 1998)
586 Id. at 2, para. 11.2. 592 See id. 587 See id. 593 See id. 588 See id. at 2, para. 11.3. 594 See 589 Highway 1 Service Agreement, supra note 576, para. 12.1. id. 595 590 See Cable DevelopingInternet Protocol Telephony to Compete Id. with LECs, COMM. DAILY, March 27, 1998, at 3. 596 47 U.S.C. § 522 (6). 591 See id. 597 See generally H.R. REP. No. 98-934. 1999] Internet Over Cable words "or use" modifying "of such video program- cable services within the statutory concepts of ming or other programming service" in section either "video programming" or "other program- 602(6) (B). 598 To determine the effect of the ad- ming services," depending upon the nature and dition of the subscriber's ability to "use" the video manner in which the information is provided to or other programming service, one must first de- the subscriber. What then does the ability of the termine whether Internet-based services fall subscriber to "use" such programming signify? It within either the statutory definition of "video is arguable that the phrase "or use" was intended programming" or "other programming service." to cover the two-way, interactive nature of the As discussed above, the definition of "cable ser- types of communications that typically character- vice" in section 602 was created in 1984 to "mark ize interactive computer, enhanced and informa- the boundary between those services provided tion services and Internet access services, as re- over a cable system which would be exempted flected in the legislative history under the 1996 from common carrier regulation under section Act. However, this interpretation also creates an 621 (c) and all other communications services that apparent conflict between the later amendment could be provided over a cable system." 599 and the un-amended portions of the definition of Section 602(20) of the Act defines the term cable service in section 602(6) that rest upon "video programming" as "programming provided cable services continuing to be defined as "one- by, or generally considered comparable to pro- way transmission to subscribers of video program- ' 60 4 gramming provided by, a television broadcast sta- ming or other programming service. tion." 600 Whether cable Internet-based services One solution for this apparent conflict is to fo- would constitute video programming under Title cus on the cable operator's ability to transmit to VI will depend largely upon what content is pro- subscribers content and information available vided over the Internet and how that content is through the operator's computer connections to provided. For example, a basic Internet connec- the Internet as the fundamental "cable service." tion permitting a subscriber to visit Web sites put This service, under the revised definition, in- up by third parties may not be comparable to pro- cludes the both the subscribers "selection" and gramming provided by a television broadcast sta- "use" of such programming. These latter con- tion. In contrast, live video images transmitted cepts could be said to cover the subscriber's across the Internet by the technique known as "mouseclicks" sending messages upstream to the ''streaming" video might appear much closer to Internet server located at the cable headend, indi- traditional broadcasting, particularly from the cating which site on the Internet or Web the sub- point of view of the subscriber. scriber wishes to visit, and what information the Section 602(14) defines "other programming subscriber wishes to receive and/or download. service" to mean "information that a cable opera- Under this view, the programming service offered '6 0 tor makes available to all subscribers generally." by the cable operator may be said to still be "one- It would appear that cable Internet-based services way," while the cable service as a whole now con- that are made available to all subscribers generally tains a full two-way capability permitting interac- and that do not include information that is "sub- tion between the subscriber and the cable system scriber specific" may be considered cable services for purposes of creation and retrieval of catego- under this prong of the definition. 60 2 The trans- ries of off-premises stored information. Such an mission and downloading of computer software, interpretation would not have been possible video games or statistical packages was cited as an under the 1984 Cable Act definition of "cable example of a cable communications service that services," but it is certainly feasible under the would fit under the "other programming services" 1996 Act amendments to that definition. 60 5 60 3 prong of the definition. Ultimately, the foregoing attempts to fit newly It is therefore possible to fit Internet-based developed concepts such as interactive computer
598 47 U.S.C. § 522 (6) (B). is made available only to an individual subscriber or to a dis- 599 H.R. REp. No. 98-934 at 41. crete group of subscribers, the transmission of this informa- 600 47 U.S.C. § 522 (20). tion is not a cable service. See H.R. REP. No. 98-934, at 41-42. 601 Id. at § 522 (14). 603 See id. 602 However, the legislative history of that provision also 604 47 U.S.C. § 522 (6). indicates that if information transmitted over a cable system 605 See id. at 43. COMMLAW CONSPECTUS [Vol. 7
services, and Internet-based services into what is The Commission's rules define "enhanced serv- still largely a 1984 definition of cable services. It ices" as "services, offered over common carrier attempts to address the question of what did Con- transmission facilities used in interstate communi- gress intended to do with its inclusion of the cations, which employ computer processing appli- words "or use" in the cable services definition. cations that act on the format, content, code, pro- With the 1984 Cable Act, it was important that tocol or similar aspects of the subscriber's cable services be defined in a manner that permit- transmitted information. . .or involve subscriber 608 ted them to escape common carrier regulation interaction with stored information." through two basic attributes: (1) cable service Arguably, the change in the statutory definition would involve only one-way transmission, and (2) of cable services may have been intended to in- its content would be similar to that provided by clude exactly the types of interactive cable broad- broadcast television stations in over-the-air trans- band services previously excluded under section missions. This approach does not easily lend itself 602. This is also suggested by statements on the to a world of digital transmission of information House floor immediately prior to the passage of in which all communications services and their the 1996 Act by Representative Dingell, comment- characteristics "converge." Congress clearly in- ing on how the revised definition of cable services tended to augment the scope of cable services would affect local franchising authorities' reve- with its added language, but the significance of nues from cable franchise fees: that addition must take into account the un- [t]his conference agreement strengthens the ability of changed portions of the definition. Thus, it is local governments to collect fees for the use of public necessary to examine the legislative history rights-of-way. For example, the definition of the term ac- "cable service" has been expanded to include game companying the amendment. channels and other interactive services. This will result in additional revenues flowing to the cities in the form 60 9 of franchise fees. Legislative History Representative Dingell may have been referring to Internet access and like services with his refer- The legislative history of section 602 (6) states: ence to "other interactive services." If so, his state- The conferees intend the amendment to reflect the ment may be taken as further support for the ar- evolution of cable to include interactive services such as game channels and information services made available gument that Congress intended the revised cable to subscribers by the cable operator, as well as en- service definition to include cable-provided In- hanced services. This amendment is not intended to ternet access and other Internet-based services. 610 affect Federal or State regulation of telecommunica- tions service offered through cable facilities, or to cause On the other hand, references, to "information dial-up access to information services over telephone services" and "enhanced 6 0 6 services" as examples of lines to be classified as a cable service. the types of interactive services that would now be The definition expands the scope of cable of- included under the definition of cable services ferings, without drawing under Title VI the simi- could potentially raise a question as to whether lar information services offerings of telecommuni- Congress intended to import a "telecommunica- cations carriers, online service providers, or ISPs. tions" component into the definition of cable The 1996 Act defines "information services" as, services, and what the significance of such a the offering of a capability for generating, acquiring, change would be. In other words, what did the storing, transforming, processing, retrieving, utilizing, conferees intend by their references to "informa- or making available information via telecommunica- tions, and includes electronic publishing, but does not tion services," which by definition encompass include any use of any such capability for the manage- transmission "via telecommunications" 611 and en- ment, control, or operation of a telecommunications hanced services, which include a basic communi- system or the management of a telecommunications 607 service.
606 Joint Explanatory Statement, supra note 12, at 169. "any information service, system, or access software provider 607 47 U.S.C. § 153 (20). that provides or enables computer access by multiple users to 608 47 C.F.R. § 64.702 (a) (1997). a computer server, including specifically a service or system 609 142 CONG. REC. H1156 (daily ed. Feb. 1, 1996) (state- that provides access to the Internet and such systems oper- ment of Rep. Dingell). ated or services offered by libraries or educational institu- 610 This interpretation is supported by the definitions of tions." 47 U.S.C. § 230 (e) (2). "interactive computer service" contained in section 230(e): 611 See 47 U.S.C. § 153 (20). 1999] Internet Over Cable cations transmission component that, under the tions component into the definition of cable serv- Commission's rules, are provided over common ices, or otherwise blurring the distinction between carrier transmission facilities? What would hap- Tide II and Title VI services. 615 Moreover, based pen to the definition of "cable services" and upon the precedents discussed above, it does not "cable systems" and their distinct Title VI regula- appear that the addition of non-traditional cable tory regime if cable services are interpreted to in- services to a cable operator's offerings would clude a "telecommunications" component? Is it cause the cable operator to lose its identity as a essential to the concept of "enhanced services" cable operator, or necessarily turn cable systems 616 that the underlying facility be regulated as a "com- into :common carrier transmission facilities. mon carrier transmission" facility? In the alterna- The question becomes whether the non-tradi- tive, did the conferees intend to reference an "en- tional service would be regulated as a cable or hanced" cable service as opposed to referencing non-cable service and, consequently, whether the the Commission's Computer Inquiry category of cable operator would be treated as a cable opera- telecommunications services? tor or as an Internet service or on-line service pro- vider for such purposes. Analysis Both categories, cable services as well as en- hanced services, were created in large part to iso- In the Universal Service Order, the Commission late cable operators and enhanced service provid- rejected the argument that information services ers from Title II regulation. 617 Enhanced and are "inherently" telecommunications services be- information services share with the category of cause they are provided "via telecommunications" cable services the common point of origin in hav- for section 254 purposes.6 12 Rather, the Commis- ing been established to foster the development of sion found that, "information services" differ from competitive broadband and advanced communi- "telecommunications services" under the Act be- cations by isolating such services from regulation cause telecommunications services by definition as common carriage under Title II when provided do not involve a change in the form or content of by companies other than the major telephone car- the user's information as sent or received, riers.6181 Major telephone carrier offerings of en- whereas information services by definition involve hanced services were regulated under the Com- "generating, acquiring, storing, transforming, mission's ancillary Title I jurisdiction only to the processing, retrieving, utilizing, or making avail- extent necessary to ensure the nondiscriminatory able information."' 613 In addition, all services that provision to competing enhanced service provid- the Commission previously considered to be "en- ers of the basic transmission services necessary to hanced services" are now to be treated as "infor- carry the enhanced service to the end user. 619 614 mation services." Thus, there is nothing inherent in the nature of Under this approach, the reference in the 1996 enhanced and information services that places Act's legislative history of section 602(6) to infor- them outside the potential scope of cable services mation services and enhanced services need not for regulatory purposes.620 This is reflected in the be interpreted as importing a telecommunica- Joint Explanatry Statement's acknowledgment that
612 See Universal Service Order, 12 FCC Rcd. at 9180, para. ices. See Local Competition Order, 11 FCC Rcd. at 15988-89, pa- 789; see also Report to Congress, 11 Comm. Reg. (P&F) at 1312, ras. 92-93. paras. 39-48. 617 See, e.g., 47 U.S.C. § 541 (c) (exempting cable opera- 613 See Universal Service Order, 12 FCC Rcd. at 9180, para. tors from common carrier regulation insofar as they provide 789. "cable service"); see also ComputerI FinalDecision, 28 F.C.C. 2d 614 See Non-Accounting Safeguards Order, 11 FCC Rcd. at at 277-81, paras. 31-37 (imposing procedural requirements 21955-56, para. 102. only on hybrid communications services offered by a com- 615 Of course, the inclusion of the term "via telecommu- mon carrier); 47 C.F.R. § 64.702 (1997) (regulating the fur- nications" in the statutory definition of "information serv- nishing of advanced services). ices" remains nettlesome. See 47 U.S.C. § 153 (2). One could 618 See Computer I Final Decision, 28 F.C.C. 2d at 277-81, argue that it precludes an interpretation of cable Internet paras. 31-37. services as falling within the definition of cable services, be- 619 See In re Telephone Company - Cable Telephone cause such services are not delivered "via telecommunica- Cross-Ownership Rules, Sections 63.54-63.58, Memorandum tions." Opinion and Order on Reconsideration, 7 FCC Rcd. 5060, para. 616 However, it is possible for a carrier to be considered a 16 (1992). telecommunications carrier for some, but not all, of its serv- 620 See Joint Explanatory Statement, supra note 12, at 169. COMMLAW CONSPECTUS [Vol. 7 cable service now includes an information and en- the 1996 Act as permitting the creation of "paral- hanced service component. 62 ' It might also sup- lel universes" for cable and telephony Internet- port an interpretation of the reference to "en- based services. There is no indication in either hanced" services as a category of cable, as the Act itself, or in the legislative history, that opposed to common carrier, services. such an interpretation would necessarily violate The Commission could reasonably conclude legislative intent. The question remaining would that such Internet access services as @Home and be whether this interpretation would otherwise be Road Runner, when provided by a cable operator inconsistent with such fundamental communica- over its cable system, come within the revised defi- tions policy goals as competitive and technologi- 23 nition of "cable services" under Title VI. This in- cal neutrality. 6 terpretation finds support both in the revised def- The case becomes more attenuated for cable- inition itself, which suggests that subscriber use of based Internet services that may offer the sub- (as opposed to the more passive "interaction" scriber nothing more than basic conduit access to with) other programming services falls within the the Internet. The regulatory status of such a ser- terms of the definition, and in the conferees's vice may best be resolved on a case-by-case basis. statement with respect to "interactive services So too, the case of cable systems that provide such as game channels and information services cable modem service by utilizing cable plant for made available to subscribers by the cable opera- downstream transmissions, and the subscriber's tor."622 In the case of these Internet-based serv- telephone lines for up-stream or return path ices, in which the cable operator supplies signifi- transmissions, may present a somewhat different cant amounts of its own content and local interpretative problem, as the service itself would programming and information along with open- not readily fall under the plain language of the ended Internet connectivity, inclusion under the statute. On the other hand, if the foregoing anal- definition of cable services is relatively easy be- ysis of why cable services may include Internet ac- cause such Internet-based services share many of cess and other Internet-based services is not the features of traditional cable programming adopted, and the statutory definition of cable services. Moreover, if cable services now include services as "one-way transmission" of video and information and enhanced services, and Internet- other programming were interpreted to preclude based services such as those provided by the typi- inclusion of two-way cable transmission services, cal ISP are enhanced/information services, then then the cable down/telephone return path hy- cable services may include Internet-based services brid service might be the only cable-provided In- by definition. ternet-based service that could fit the statutory Such an interpretation would leave Internet ac- definition.624 As discussed above, however, a post- cess services provided by a LEC or BOC as both 1996 Act reading of the phrase "one-way transmis- enhanced services under Commission rules, and sion" as a term of limitation on the service pro- information services under the Act, while recog- vided does not appear to be consistent with Con- nizing such Internet-based services as @Home or gressional intent in revising the definition of Road Runner as cable services when provided by cable services to be more, rather than less, inclu- cable operators over cable systems. Put another sive. way, the Commission could reasonably interpret In the alternative, the Commission could find
The possible inclusion of cable television services within the disadvantage one provider over another, and neither unfairly category of content-based information services that the BOCs favor nor disfavor one technology over another); see also In- were prohibited from providing under the MFJ has been rec- quiry Concerning the Deployment of Advanced Telecommu- ognized. See Robert M. Pepper, "Through the Looking Glass: In- nications Capability to All Americans in 'a Reasonable and tegrated Broadband Networks, Regulatory Policy and Institutional Timely Fashion, and Possible Steps to Accelerate Such De- Change," OPP Working Paper Series No. 24, at 25-26, para. 32 ployment Pursuant to Section 706 of the Telecommunica- & n.46 (Nov. 1988). tions Act of 1996, Notice of Inquiry, CC Dkt No. 98-146, FCC 621 See Joint Explanatory Statement, supra note 12, at 169. 98-187, at para. 77 (rel. Aug. 7, 1998) [hereinafter Section 706 622 Id. NOI]. 623 See Joint Board Recommended Decision, 12 FCC Rcd. at 624 The cable down/telephone return path configura- 101, para. 23 (in a universal service context, the principle of tion raises a service definition issue as well as the potential competitive neutrality should include technological neutral- for a reciprocal compensation issue in the case of a cable op- ity; competitive neutrality in this context means that support erator that is also certified to operate as a competitive LEC mechanisms and rules should neither unfairly advantage nor for purposes of receiving upstream communications. 1999] Internet Over Cable
that, using a "functional" approach to the service, B. Selected Cable Regulatory Issues cable operators offering Internet access services are simply "Internet access providers" offering 1. Pole Attachments members of the public "a variety of advanced ca- pabilities" or "enhanced functionality" to exploit The 1996 Act granted telecommunications and on the subscriber's own computers. 625 Under cable operators a mandatory right of access to such an interpretation, the Internet access offer- utility poles, and extended Pole Attachment Act ings of a cable operator would simply be treated protections to telecommunications carriers. Sec- as a separate Internet access or on-line "informa- tion 224(b) (1) directs the Commission to ensure tion" services governed not by Title VI, but subject that pole attachment "rates, terms and conditions only to the Commission's ancillary jurisdiction are just and reasonable," and section 224(a) (4) over "wire communications" under Title I of the provides that a "pole attachment" includes "any Act. attachments by a cable television system or pro- As noted in the previous section, the provision vider of telecommunications service" to a pole of "phone-to-phone" IP telephony over cable sys- owned or controlled by a utility.628 Section 224 tems by cable operators raises a host a difficult (d) (3) reserves the current regulated cable rate to "any regulatory questions. Under the approach indi- pole attachment used by a cable television cated by the Commission in the Report to Congress, system solely to provide cable service." 629 Section a cable operator offering IP telephony may, in the 224 (e) (1) directs the Commission to establish future, be classified as offering a "telecommunica- the rate for pole attachments by telecommunica- tions service," depending on how the service is tions carriers to provide telecommunications serv- 630 configured, offered to the public, and operates ices. 626 with customer-supplied information. Under revised section 224, cable operators pro- In summary, certain cable Internet-based serv- viding "pure" cable services, will pay lower pole at- ices, particularly cable-enabled Internet access tachment rates than cable operators providing services, may be found to fall within the Commis- commingled cable and telecommunications serv- sion's Title VI jurisdiction when viewed against ices. The classification of Internet services as the change to the definition of "cable services" in cable services would entitle cable operators to re- section 602(6). Alternatively, they may be treated tain the "pure" cable rate under section the same as any other Internet access or on-line 224(d) (3). Classification of Internet services as service provider's "information service" offerings, "telecommunications" for section 224(e) pur- and not be subjected to Commission regulation poses would not be consistent with the Commis- under either Title I or Title VI of the Act. sion's prior decisions under the 1996 Act. In con- Whether the Commission should so classify these trast, a determination that Internet services were services is a policy question that can only be an- neither cable nor telecommunications services ar- swered in light of an evaluation that persuasive guably leaves the proper section 224 pole attach- policy goals exist in support of concluding such ment rate uncertain, as the statutory language services to be cable service under the Act.62 7 The does not expressly make provision for other ser- ultimate significance of a regulatory classification, vice categories. of course, lies in the particular regulatory conse- The Commission's Pole Attachments Notice sought quences that result. The following section will comment on "whether, and to what extent, briefly discuss several of the more significant ques- overlashing facilitates the provision of services tions that the classification of Internet access serv- other than cable services by cable operators, such '631 ices as cable services may present under Title VI. as Internet access and local telephone service."
625 See Report to Congress, 11 Comm. Reg. (P&F) at 1335, F.C.C. 2d at 430-33. para. 79. 628 See 47 U.S.C. § 224(a) (4). 626 Id. at 1338, paras. 88-89. 629 Id. at (d)(3). 627 The Commission has, in the past, refrained from in- 630 See id.at (e)(1). terpreting the Act so inflexibly as to bring within the Com- 631 Implementation of Section 703(e) of the Telecom- mission's regulatory jurisdiction services which arguably fit munications Act of 1996, Amendment of the Commission's within one of its recognized regulatory categories, absent a Rules and Policies Governing Pole Attachments, Notice of Pro- strong policy reason to do so. See Computer H FinalDecision, 77 posed Rulemaking, CS Dkt. No. 97-151, FCC 97-234, at para. 15 COMMLAW CONSPECTUS [VoL 7
Cable entities responded that the Commission's able rate for cable pole attachments. Application reference to Internet access as a service other of the lower cable-only rate, the Commission rea- than cable services should not be interpreted to soned, is consistent with the purposes of the Pole mean that the Commission intended to classify In- Attachment Act, would serve pro-competitive pur- ternet access as a telecommunications service. poses, would encourage greater competition in Rather, they argued, under the 1996 Act, Internet the provision of Internet service, and provide access over cable is clearly treated as a cable ser- greater benefits to consumers. The Commission vice, and treating it otherwise would disserve the found it unnecessary to determine the precise cat- purposes of the amendment to section 602(6) egory into which Internet services fit, stating that, and erect a barrier-in the form of higher pole "[r]egardless of whether such commingled serv- rents-to the deployment of such an enhanced ices constitute 'solely cable services' under section cable service. Electric utilities disagreed, arguing 224(d) (3), we believe the subsection (d) rate that broadband services such as data transmission should apply." The Commission noted it would and Internet services are neither telecommunica- continue to examine definitional issues relating to tions nor cable services, but rather are informa- Internet services in its forthcoming Report to Con- tion services not entitled to a regulated pole at- gress on universal service implementation, and tachment rate tinder section 224.632 that it did not wish to foreclose any aspect of that The Pole Attachments Order, applying a Heritage- examination. Thus, while the ruling settles the like analysis, concluded that the section pole attachment rate issue, its significance in 224(d) (3) cable rate applies to cable television terms of Internet classification for broader regula- system pole attachments that are used to provide tory purposes remains to be seen. Internet service and traditional cable services 633 commingled on a single facility. Citing the Uni- 2. Scope of Local Cable Franchises versal Service Order, the Commission declined to apply the section 224(e) telecommunications rate Section 621 has requirements concerning the to cable Internet service. The Commission rea- provision of cable and telecommunications serv- soned that the definition of "pole attachment" ices by cable operators. Generally, pursuant to does not turn on the type of service the attach- section 621 (b)(1), a cable operator may not pro- 634 ment is used to provide. Accordingly, the Com- vide cable service without a local franchise. mission determined that the statutory definition The 1996 Act added section 621(b) (3), which ex- of "pole attachment" includes any attachment by empts the provision of telecommunications serv- a cable television system and therefore section ices by cable operators from Title VI regulation, 224 applies to the rates, terms and conditions for while preserving state and local authority over any all cable system pole attachments. intrastate communications service provided by a The Commission relied upon its authority cable system, other than cable service. 635 The leg- under section 224(b) (1) to set a just and reason- islative history of subsection (b) (3) confirms that,
(rel. Aug. 12, 1997) (hereinafter Pole Attachments Notice). No. 97-151, at 8. 632 See Comments of the National Cable Television Asso- 633 See In re Implementation of Section 703(e) of the ciation, CS Dkt. No. 97-151, at 6-7 n.9 (Sept. 26, 1997) ; see Telecommunications Act of 1996, Amendment of the Com- also Comments of Comcast, et al., CS Dkt. No. 97-151, at 18- mission's Rules and Policies Governing Pole Attachments, Re- 19 (arguing that given the explicit legislative intent to in- port and Order and Further Notice of Proposed Rulemaking, CS clude cable-delivered Internet services squarely within the Dkt. No. 97-151, FCC 98-20, at paras. 30-34 (rel. Feb. 6, 1998) definition of cable services, it defies logic to argue that Con- (hereinafter Pole Attachments Order), recon. pending,petitions for gress intended that such intent would be advanced by trigger- review pending. ing a higher telecommunications pole attachment rate); see 634 47 U.S.C. § 541 (b) (1). also Comments of New York Cable Television Assn. CS Dkt. 6_95 47 U.S.C. § 541 (b) (3). Section 621(c) provides that No. 97-151, at 8 (high-speed Internet access services supplied any cable system shall not be subject to regulation as a com- over a cable system are defined as cable services tinder sec- mon carrier or utility by reason of providing any cable ser- tion 602(6) and (14)); see also US West Reply Comments CS vice. Section 621(d) (1) provides, in pertinent part, that a Dkt. No. 96-151, at 2-3 (stating that the Act's definition of "State or the Commission may require the filing of informa- cable service is broad enough to include interactive video tional tariffs for any communications service.. .that would be services in addition to traditional cable TV service); see also subject to regulation by the Commission or any State if of- Comments of American Electric, et al., CS Dkt. No. 97-151, at fered by a common carrier subject in whole or in part, to title 10; see also Edison Electric/UTC Reply Comments, CS Dkt. II of this Act." 1999] Internet Over Cable
"to the extent permissible under State and local To the extent the Commission has already classi- law, telecommunications services, including those fied Internet-based services as information or en- provided by a cable company, shall be subject to hanced services, and not telecommunications the authority of a local government to, in a non- services, a local government's ability to require a discriminatory and competitively neutral way, separate franchise for such Internet-based services manage its public rights-of-way and charge fair would depend on its state law authorization. Even '63 6 and reasonable fees. if a state were to permit local franchising authori- Similarly, section 621 (d) (2) states: "[n] othing ties to regulate, in any manner, the provision of in this title shall be construed to affect the author- Internet-based services, regardless of the identity ity of any State to regulate any cable operator to of the provider, a further question would arise as the extent that such operator provides any com- to whether such regulation would be consistent munication service other than cable service, with Congressional intent, as expressed in section whether offered on a common carrier or private 230(b) of the Act, that the competitive free mar- contract basis." 637 Taken together, these provi- ket that presently exists for the Internet and other sions of the Act indicate a clear congressional in- interactive computer services, continue "unfet- 64 tent to separate cable franchising from other tered by Federal or State regulation.." 0 forms of state and local regulation of any other communication services provided by cable opera- 638 3. Franchise Fees tors over their cable systems. A Commission determination that Internet- Section 622 now provides that, for any twelve- based services offered by cable operators fall month period, "the franchise fees paid by a cable within the statutory definition of cable services operator with respect to any cable system shall not would mean that such services must be provided exceed 5 percent of such cable operator's gross under franchise pursuant to section 621. Such a revenues derived in such period from the opera- determination would offer local franchising au- tion of the cable system to provide cable serv- thorities a degree of certainty as to the application ices." 641 Consistent with other changes recogniz- of their own cable and telecommunications ordi- ing the expansion of service offerings by cable nances to this valuable service. Conversely, if such operators, the 1996 Act amended prior section Internet services were not treated as cable services 622(b) by inserting "to provide cable services" im- under Title VI, a question may arise as to whether mediately before the period at the end of the first cable operators could provide Internet services sentence, thus limiting the scope of the services 63 9 under the terms of their cable franchises. on which cable operators must pay franchise fees. The amendments to section 621 indicate a con- Under revised section 622(b), if Internet-based gressional intent to not subject the telecommuni- services offered by cable operators over their sys- cations offerings of cable operators to Title VI tems are treated as cable services, they would be- franchising requirements, while permitting local come subject to any franchise fees imposed for authorities to exercise whatever independent reg- cable services under the relevant franchise agree- ulatory authority, if any, they may possess over ment. This interpretation is supported by the such service offerings. In the case of Internet- floor statements of Representative Dingell, indi- based services, the result is somewhat less clear. cating that one of the purposes of the revised defi-
636 Joint Explanatry Statement, supra note 12, at 180. may require any Internet service providers to obtain a 637 47 U.S.C. § 541 (c), (d). franchise. See id. 638 See In re TCI Cablevision of Oakland County, Inc., Pe- 640 47 U.S.C. § 230 (b). tition for Declaratory Ruling, Preemption and Other Relief 641 47 U.S.C. § 542. Section 303(b) of the 1996 Act Pursuant to 47 U.S.C. § 541, 544(e), and 253, Memorandum amended section 622(b) by inserting "to provide cable serv- Opinion and Order, CSR-4790, FCC 97-331, at paras. 62-66 (rel. ices" immediately before the period at the end of the first Sept. 19, 1997) , recon. pending (hereinafter Troy Decision). sentence. This amendment was part of Congress' revisions to 6-39 The scope of the amendments to section 621 (b) with the Cable Act that were intended to draw a bright line be- respect to local government authority to regulate non-cable tween the spheres of cable regulation under Title VI and tele- (telecommunications) services provided by cable operators communications regulatory authority that derives from over cable facilities is one of the issues raised in the Troy pro- sources other than Title VI. See, generally, Troy Decision at ceeding. The Troy proceeding did not raise the issue of paras. 62-78. whether either the City of Troy, or any other local authority, COMMLAW CONSPECTUS [Vol. 7 nition of cable services under section 602(6) was and access to cable's high speed data platform to to enlarge the base of revenues upon which cities competing Internet access and on-line service could assess and receive franchise fees. 642 The providers, a result fundamentally at odds with the view that the changed definition of "cable serv- Title VI regulatory regime. ices" was intended to expand the base upon which AT&T's acquisition of the nations's second larg- franchise fees may be assessed is reflected by Mc- est cable operator, TCI, has brought this issue Quillin's treatise on the law of municipal corpora- into sharp relief. TCI owns 42% of @Home, tions in the section dealing with compensation for which is reported to have exclusive contractual ar- the use of public rights-of-way by cable franchis- rangements until 2002 to provide Internet access 6 4 3 ees. for TCI and its other cable affiliates, including The National Cable Television Association Cox Communications Inc., Comcast Corp., ("NCTA") has advocated that cable Internet- Cablevision Systems Corp., and Rogers Cablesys- based services are not telecommunications serv- tems Ltd.6 45 Although @Home presently has only ices, and that the revenues gained through such 100,000 Internet access customers, these cable op- services should be subject to the cable franchise 644 erators together serve more than 55 million cable fees authorized under section 622 of the Act. customers. 646 It is reported that @Home's con- In contrast, if these Internet-based services were tracts "[do not] include rights to offer Internet- not treated as cable services, then cable Internet- based telephone service or full-motion video seg- based services certainly would not be subject to ments longer than 10 minutes; those services are 647 cable franchising fees under section 622. reserved for the cable operators." Whether a local governmental authority could as- At the time of the announcement, AOL was re- sess franchise fees on Internet-based services on ported to be seeking an arrangement with the some other basis would be dependent on the na- proposed AT&T-TCI combination to "purchase ture and existence of both state and federal law broadband connections on a wholesale basis for governing the regulation of such services. resale to AOL's customers."' 64 Under such an ar- rangement, "AOL could offer a broadband ver- 4. Unbundling/Competitive Neutrality sion of its on-line service to its 12 million custom- ers, using the cable industry's underlying A significant cable industry concern prompting infrastructure but not competing consumer serv- the desire to classify cable Internet services as Ti- ices such as @Home's." 6 4 9 Later, AOL indicated tle VI services arises from the potential applica- that cable operators should be obligated to per- tion of the Common Carrier Bureau's FrameRelay mit competitors to interconnect with cable net- ° Order to any bundled services they may offer, com- works, much like local telephone companies.65 bining common carriage telephony, cable video In other words, AOL suggested that cable opera- programming and cable modem Internet services. tors unbundle their high-speed data platforms Adoption of such an interpretation the cable in- and offer access to competing providers on a dustry fears, would require the unbundling of wholesale basis. @Home has not reacted favora- cable's basic transmission capability from the en- bly to such suggestions, stating that "[n]obody hanced portion of their offerings, and the offer- wants to become a dumb pipe in this equa- 6 5 ing of basic frame relay transmission capability tion." 1 More recently, long distance provider
642 See 142 CONG. REC. H1156 (daily ed. Feb. 1, 1996) taxation of revenues derived from the provision of Internet (statement of Rep. Dingell). services and e-commerce transactions. See H.R. 1054, 105th 643 See 12 Eugene McQuillin, The Law of Municipal Corpo- Cong. (1997). rations, § 34.37.20. (1995 & Supp. 1996). (the Telecommuni- 645 David Bank, AT&T Gets At Home Stake in TCI Deal, cations Act "expanded the definition of cable services to in- THE WALL ST. J., June 25, 1998, at A16. clude interactive information and enhanced services made 646 See id. available to subscribers by the cable operator. Consequently, 647 Id. some municipalities may be in a position to require fee pay- 648 Id. ments on a broader revenue base then that which is defined by a cable operator."). 649 Id. 644 See Wyden Sees Net Bill Progress, COMM.DAILY, Oct. 9, 650 See Mike Mills, Cable Internet Access Coming to Alexan- 1997, at 2. This position was advocated in the context of dria, The WASH. PosT, July 1, 1998, at CII. Congressional action regarding a proposed moratorium on 651 Id. 1999] Internet Over Cable
Sprint Corporation has echoed AOL's position. cess market is highly competitive. 656 The Com- Sprint has expressed the desire to gain network puter II approach to common carrier resale and access through cable companies generally, and unbundling was crafted to answer the fundamen- particularly from TCI as a condition for regula- tal question: how can the Commission permit mo- 52 tory approval of its acquisition by AT&T. 6 nopoly telephone providers to compete in the Consistent with Computer II, the Frame Relay Or- competitive computer services and data process- der requires each facilities-based common carrier ing markets without (1) unduly advantaging their that provides a combination of enhanced services own enhanced services and (2) engaging in an- and basic frame relay service to file a tariff for ticompetitive conduct vis-a-vis their enhanced ser- "the underlying frame relay service and to acquire vice competitors? that tariffed service in the same manner as resale Arguably, the unbundling requirements of the carriers."653 The first question is whether the ad- Frame Relay Order should not be imposed on cable dition of frame relay transmission underlying the operators unless the provision of Internet-based cable Internet-based services would cause cable services over their integrated cable facilities pos- system facilities to lose their Title VI "cable sys- sess some competitive threat to the ability of other tem" identity and be classified as "common car- ISPs to reach end users. Most ISPs currently offer rier facilities" under Computer II and the FrameRe- Internet access to their subscribers through dial- lay Order. In the context of its open video system up connections, whereby the subscriber places a implementation, the Commission found that the local (or in some cases, a toll call) to the ISP, and addition of nontraditional services to cable opera- the ISP routes the call to the Internet. Short of tor service offerings did not cause the operator to record evidence to the effect that the cable In- lose its identity as a cable operator. 654 Similarly, ternet platform currently stands as an essential fa- the legislative history of the 1984 Cable Act dem- cility to ISPs reaching their customers, the better onstrates a clear intent to separate the nature of approach would be to forbear from imposing the the facilities from that of the services provided Computer II regime on cable provided-Internet ac- over them for regulatory purposes. 6 55 This logic cess services, even if a literal reading of the rule can also be applied to cable Internet offerings. might arguably suggest otherwise. The addition The addition of such services does not automati- of telephone service to a bundled package of cally change the nature of cable system facilities cable Internet-based services and traditional cable into common carrier facilities, subject to Title II video programming services makes it a closer regulation. case. This, however, should not alter the require- A second question would be whether it can be ment that a sufficient policy goal must be articu- said that cable operators in this situation are offer- lated before requiring cable operators to offer ac- ing frame relay services or, like other ESPs or cess to their high-speed Internet service platforms ISPs, using basic transmission services, adding to competing ISPs on an unbundled basis. The value to them, and offering the value-added pack- Commission has traditionally forborne from im- age or "enhanced" service to the subscriber? It is posing certain Title II common carrier obliga- difficult to see how the traditional competitive tions on carriers that do not exercise market goals of the Computer Inquiry proceedings would power through a position of dominance in a par- be advanced by such an application of Computer IL ticular market.65 7 This approach could be ap- The Commission has found that the Internet ac- plied to the question of the cable Internet plat-
652 See BROADCASTING & CABLE, July 16, 1998 at 2; Fred cable operator's provision of telecommunications services); Dawson, Sprint Suggests Cable Strategy, MULTICHANNEL NEWS, see also 47 U.S.C. § 541 (c) ("Any cable system shall not be July 20, 1998 at 43. subject to regulation as a common carrier or utility by reason 653 Frame Relay Order, 10 FCC Rcd. at 13725, para. 59. of providing any cable service"). 654 See In re Implementation of Section 302 of the Tele- 656 See Access Reform Notice, 11 FCC Rcd. at paras. 284-85. communications Act of 1996; Open Video Systems, Second Re- 657 See In re Policy and Rules Concerning Rates for Com- port and Order and First Order on Reconsideration, 11 FCC Rcd. petitive Common Carrier Services and Facilities Authoriza- 18223, 18234, para. 15 (1996) (subsequent history omitted) tions Therefor, Fifth Report and Order, 98 F.C.C. 2d 1191, 1191- [hereinafter Second OVS Order]. 92, paras. 1-2 (1984) [hereinafter Competitive CarrierFifth Re- 655 See H.R. REP. No. 98-934, pt. 1, at 4144 (1984); see port and Order]; see also In re Regulatory Treatment of LEC also 47 U.S.C. § 621 (b) (3) (A) (prohibiting local franchis- Provision of Interexchange Services Originating in the LEC's ing authorities from applying requirements of Title VI to a Local Exchange Area and Policy and Rules Concerning the COMMLAW CONSPECTUS [Vol. 7 form today. If, in the future, cable becomes the ates, Inc. ("MAI"). 65 9 The Notice describes the re- dominant means of high-speed, broadband access lief sought by MAI as follows: "[MAI] filed a peti- to data networks and the Internet, application of tion seeking an 'interim order by authority of 47 the traditional dominant/non-dominant analysis U.S.C. § 203(b) (2) to the effect that: No tariff or may warrant a different regulatory response. customer subscription agreement of a telecom- The next question may be whether the general munications carrier may prohibit redistribution policy of competitive neutrality, as expressed in or resale of Internet service."' 660 numerous provisions of the 1996 Act, requires a The petition was directed against Continental 658 different result. With respect to unbundled ac- Cablevision (now US West Media One), and the cess to services and facilities, this is a somewhat terms and conditions of its "Highway 1 Cable In- more difficult issue to resolve, as the concept of a ternet Access Service." The Highway 1 service "level playing field" for all providers of similar agreement describes the service provided as "a services is such a central concept. In that case, cable programming service for personal use," and however, if the argument can be made that classi- stipulates that the subscriber must "not to resell fying Internet-based services as cable services will or redistribute access to the service in any man- speed deployment of this valuable new broadband ner."661 The prohibition on resale or redistribu- service to end users; and further, if encourage- tion of access includes, but is not limited to the ment of cable efforts to upgrade their plants to provision of e-mail, FTP and Telnet access." MAI, provide high-speed broadband data access capa- a non-profit, scientific research corporation, bilities will foster efforts to develop the "informa- sought permission from Continental to establish tion superhighway;" then such concerns may out- service enabling MAI to provide a demonstration weigh the goal of competitive neutrality. On the project for Internet use at the Dedham, MA 'His- other hand, if evidence were to indicate that cable torical Society. 6 6 2 The operating program MAI high-speed data communications platforms them- planned to use is a bulletin board system that is selves occupied a "bottleneck" or an "essential fa- designed to serve up to 100 subscribers (any His- cilities" position vis-a-vis ISP or on-line service pro- torical Society member) dialing in on up to 8 tele- 66 3 vider access to end users, and there were some phone lines. evidence of market failure warranting regulatory Continental Cablevision has no established intervention, then the policy of competitive neu- business Internet access service, only a residential trality might well counsel a different result. service, and MAI was unable to secure the service arrangements it sought from Continental. 664 MAI 5. Resale/Interconnection of Cable Internet Access requested that the Commission require the cable operator to connect its cable system to local tele- The question of whether Internet-based cable phone lines so that MAI may make a "combined, services are cable services under Title VI was efficient use of the long-distance, incoming cable raised in a petition filed with the Commission's and local outgoing telephone lines" as part of its Common Carrier Bureau by Microscope Associ- plan to deliver a low-cost service in competition
Interstate, Interexchange Market Place, Second Report In CC pleading cycle to close on November 4, 1997); see also Errata Dkt. No. 96-149 and Third Rpt. and Order in CC Dkt. No. 96-61, for Petition Filed by Microscope Associates, Inc., PublicNotice, 12 FCC Rcd. 15756, 15806-08, paras. 88-90; Order on Reconsid- 13 FCC Rcd. 5937 (clarifying that the petition will be treated eration, 12 FCC Rcd. 8730, 8731-33, paras. 2-4 (1997); Order, as a petition for declaratory ruling pursuant to the Commis- CC Dkt. Nos. 96-149; 96-61, DA 98-556, para. 2 (rel. March sion's Rules, as codified at 47 C.F.R. § 1.2 (1997)). 24, 1998) (further reconsideration pending) [hereinafter 660 Id. LEC Classification Order]. 661 Id. 658 See, e.g,, 47 U.S.C. § 254 (b) (4), (d), (f) (mandating 662 See Petitionfor Interim Order of Microscope Associates, equitable, nondiscriminatory and/or or competitively neu- Inc., CCB/CPD 97-51 (June 7, 1997) [hereinafter MA Peti- tral rules regarding universal support mechanisms and con- tion]. tributions); see also 47 U.S.C. § 253 (b), (c) (requiring state 663 See id. and local requirements for telecommunications providers to 664 See id. MAI filed the petition as a "stop-gap" measure be "competitively neutral" and nondiscriminatory). while the Commission continues to examine similar issues in 659 The petition was treated as a petition for rulemaking, the Internet Usage NOI proceeding. See id. MAI was facing a and was put out for public comment in a Public Notice re- deadline for its application for an NSF grant for the concept leased on September 18, 1997. See Petition for Rulemaking of July 31, 1997, and sought expedited relief from the Com- Filed, Public Notice, 13 FCC Rcd. 5937 (1997) (establishing a mission in the hopes of making the deadline. See id. 1999] Internet Over Cable with the traditional dial-up Internet access mar- mechanisms to ensure just and reasonable basic ket.665 MAI averred that it had demonstrated that cable rates is sufficient to protect against such "delivery of two-way signals using long-distance cross-subsidization, without the need to create ad- service by cable combined with local distribution ditional joint and common cost allocations rules. by telephone is a new technology and service to The rates for certain categories of cable services the public, which is to be encouraged by the pol- are subject to regulation by local and federal au- icy of the United States as expressed at [section] thorities under Title VI of the Act.6 69 The goal of ' 157."666 Furthermore, MAI maintained that such cable television rate regulation is to ensure "prohibitions of redistribution or resale prevent that rates of the basic service tier are reasonable the prohibiting telecommunications carrier from and do not exceed the rates that would be fulfilling its duty of interconnection under [sec- charged for the basic service tier if such cable sys- tion] 251" and "prohibitions of redistribution or tem were subject to effective competition. The resale impede the proper development of the In- statute requires the Commission to establish a ternet, which is encouraged by the policy of the formula for the maximum price of the basic ser- United States as expressed at [section] 230."667 vice, taking into account the need to properly al- The MAI Petition raises a number of interesting locate the joint and common costs associated with and difficult questions relating to the provision of signal carriage between the regulated and non- Internet access service as both a common carrier regulated service tiers.670 The legislative history telecommunications service, and as a cable ser- of this provision clearly states that although lan- vice. Although the petition is less than clear on guage in this section is similar to that used in the many particulars, the resale and interconnection regulation of telephone common carriers, "[i] t is issues arguably raised may be viewed as variants of not the Committee's intention to replicate Title II the unbundling issue motivating some cable oper- regulation. The FCC should create a formula that ators to seek inclusion of their cable Internet- is uncomplicated to implement, administer and based services under the "cable" umbrella. enforce, and should avoid creating the cable equivalent of a common carrier 'cost allocation manual.' "671 6. Cross-Subsidy Thus, it is unlikely that the Commission would Anticompetitive cost-shifting or "cross-subsidiza- have authority to institute some Computer III-type tion" of competitive services by basic telephone cost allocation safeguards with respect to poten- service ratepayers through improper joint and tial cross-subsidization between basic cable televi- common cost allocation was one of the two explic- sion services and unregulated Internet-based itly recognized evils the Commission sought to cable offerings in order to protect basic cable tele- avoid with its Computer Inquiry regimes of struc- vision ratepayers from improperly cross-subsi- tural separation, and its later regime of nonstruc- dizing cable competitive ventures. Rather, the tural accounting safeguards. 668 The question Commission could rely on its existing cable cost arises, if BOC-provided Internet access services accounting requirements for non-competitive 67 2 are subject to a cumbersome cost-allocation pro- cable operators. cess, including the filing of CAM changes, aimed at protecting basic service ratepayers, shouldn't 7. Other Title VI Issues similar requirements also apply to cable-offered competitive services such as Internet access? The The scope of cable franchises and the applica- short answer may be that reliance upon existing bility of the cable rate for pole attachments are
665 See id. § 521 et seq. [hereinafter 1992 Cable Act] (adding Title VI to 666 Id.; see also 47 U.S.C. § 157. the Communications Communications Act of 1934, as 667 MAI Petition, supra note 662, at 5, 8. amended). 668 See, e.g., Computer III Phase I Order, 104 F.C.C. 2d at 670 See 47 U.S.C. § 543 (b) (2) (C) (iii). 963; see alsoJoint Cost Order, 2 FCC Rcd. at 1299 (establishing, 671 H.R. REP. No. 102-628, at 83 (1992). inter alia, cost allocation standards and requiring the filing of 672 See generally Allocation to Service Cost Categories, 47 detailed "cost allocation manuals" by LECs over a certain C.F.R. § 76.924 (establishing requirements applicable for size). purposes of rate adjustments on account of external costs 669 See Cable Television and Consumer Protection Act of and for cost-of-service showings). 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), 47 U.S.C. COMMLAW CONSPECTUS [Vol. 7 two of the broader and more obvious cable regu- their transmission facilities to the new Internet- lation issues that arise where cable operators pro- based services. For example, inclusion of cable vide Internet-based services over their cable sys- Internet-based services in the definition of cable tems. While Congress has amended the services governed by provisions addressing definition of cable services in section 602(6) ,673 franchising requirements, 676 regulation of serv- and limited some other relevant provisions to ap- ices, facilities, and equipment,677 and the modifi- ply only to "cable services, '6 74 it has not amended cation of franchise obligations, 67 does not pres- the vast majority of Title VI's operative regulatory ent any obvious conceptual difficulties. provisions. Those remaining Title VI provisions were not drafted with the Internet in mind, and, Equipment Compatibility in many cases, do not lend themselves to seamless application to Internet-based services. This sec- In contrast, the equipment compatibility provi- tion is intended as a brief and non-exhaustive ex- sion (section 624A), amended by the 1996 Act, re- amination of the consequences, under Title VI, of quires the Commission to adopt regulations to en- including Internet-based cable services within the 6 75 sure compatibility between cable service and statutory definition of cable services. consumer electronics equipment (TV receivers Title VI is comprised of five separate parts. Part and VCRs), but limits the scope of the Commis- 679 I, the general provisions, contains mostly defini- sion's authority to establish interface standards. tions of the terms appearing in the other parts. Under existing Commission rules, in order to be Part II governs use of cable channels and cable marketed as "cable ready" or "cable compatible," ownership restrictions. Part III governs franchis- consumer electronics must meet certain require- ing and regulation. Part IV contains miscellane- ments. 680 If cable Internet-based services are cate- ous provisions, including such topics as protec- gorized as cable services, what effect would this tion of subscriber privacy, consumer protection have on the rules describing "cable ready" and and scrambling requirements. Part V governs the "cable compatible" equipment? provision of video programming services provided by telephone companies, and establishes the open video systems rules. With some important excep- Navigation Devices tions, Part II contains most of the rules directed at Section 629, entitled "Competitive Availability cable content and programming, and Part III con- of Navigation Devices," added by the 1996 Act, di- tains most of the rules directed at the cable's phys- rects the Commission to "adopt regulations to as- ical facilities. The central problem presented by sure the commercial availability, to consumers all of these provisions is one of "fit." How do old of. . .equipment used. . . to access multichannel statutory categories and rules written for the type video programming and other services offered of cable services (essentially those that are similar over multichannel video programming systems, to broadcast television services), that have been from manufacturers, retailers, and other vendors provided in substantially the same manner for at not affiliated with any multichannel video pro- least 20 years, mesh with a fundamentally new and gramming distributor. '68 1 Such rules are not to different forms of communication? jeopardize the security of services offered over multichannel video programming systems, or im- a. Regulation of Cable Facilities and Equipment pede the legal rights of a provider of such services to prevent theft of service. 68 2 In terms of the It is not especially difficult to apply require- equipment covered, section 629(a) specifically in- ments directed at traditional cable systems and cludes "converter boxes, interactive communica-
673 See 1992 Cable Act, 47 U.S.C. § 522 (6) (1996). 677 See id. § 544. 674 See, e.g., id. § 542 (b). 678 See id. § 545. 675 In addition, other Title VI issues such as cable owner- 679 See id. § 544 (a). ship restrictions (section 533) regulation of carriage agree- 680 See FCC Cable Ready Consumer Electronics Equip- ments (section 536), program blocking and scrambling regu- lation (section 544) would have to be examined in terms of ment Rule, 47 C.F.R. 15.118 (1998). their applicability to cable Internet-based services. 681 47 U.S.C. § 549 (a), (b). 676 See 47 U.S.C. § 541. 682 See id. § 549 (a), (b). 19991 Internet Over Cable tions equipment, and other equipment used by where the anti-subsidy rules apply. 689 In addition, consumers to access multichannel video program- it sought comment on whether the language of ''6 8 ming and other services. 3 section 629 (a) precludes MVPDs from selling nav- In early 1997, the Commission issued a Notice igation devices below cost, and whether the lan- of Proposed Rulemaking regarding navigation de- guage of that section prevents MVPDs from "bun- service. 690 vices, identifying section 629's "core requirement" dling" equipment with as the commercial availability of set-top boxes and On June 24, 1998, the Commission released its other customer premises equipment that is com- rules providing for the commercial availability of set top boxes and other consumer equipment bined with multichannel video programming dis- 691 '68 4 video signals and other services. tribution through unaffiliated "outlets. The used to receive commission found that section 629 is applicable The Navigation Devices Order concludes: its terms to equipment used to access services [T]he statutory language of Section 629 indicates that by its reach is to be expansive and that Section 629 neither offered over multichannel video programming exempts nor limits any category of equipment used to systems. 685 Noting the breadth of the potential access multichannel video programming or other serv- coverage of equipment and entities in section ices offered over such systems from its coverage. Equip- ment used to access video programming and other serv- 629, the Commission sought comment on the dis- ices offered over multichannel video programming cretion the Commission may have to differentiate systems include televisions, VCRs, cable set-top boxes, personal computers, program guide equipment and between the types of systems covered, and on is- 6 9 2 cable modems. sues associated with the coverage of equipment, and identified various types of equipment that As reflected in the Navigation Devices Order, the may be covered, including "modems (modula- applicability of the navigation devices' commer- tors/demodulators) or digital or data receiv- cial availability requirements to particular types of 6 ers." 68 equipment and service providers does not rest upon an interpretation of the definition of "cable Section 629 does not prohibit multichannel service" under Title VI. Rather, the statute is video programming distributors ("MVPDs") from broader, and is directed to equipment used to "ac- offering equipment to their subscribers, but it re- cess multichannel video programming and other quires that the system operator's charges to con- services offered over multichannel video program- for such devices and equipment are sepa- sumers ming systems." 693 The Navigation Devices Order rately stated and not subsidized by charges for does not indicate whether cable modems are cov- multichannel video programming and other serv- ered by the requirements of section 629 because 68 7 For cable systems facing effective competi- ices. the services provided over cable modems falls tion, the Commission tentatively concluded that within the category of "multichannel video pro- no anti-subsidy rules, beyond a possible separate gramming" service, or that of an "other ser- itemization, should apply.688 The Navigation De- vice. "694 vices Notice sought comment on how the term "subsidy" should be defined in those instances
683 Id. § 549 (c). (June 24, 1998) [hereinafter Navigation Devices Order]. 684 See In re Implementation of Section 304 of the Tele- 692 See id. at 10, para. 25 (citations omitted) communications Act of 1996, Commercial Availability of Nav- 693 See id. at 5642, para. 4. igation Devices, Notice of Proposed Rulemaking, 12 FCC Rcd. 694 Compare 47 U.S.C. § 522 (14) (defining the term 5639, 5641 at para. 13 (1997) [hereinafter Navigation Devices "other programming service" as information that a cable op- Notice]. erator makes available to all subscribers generally) with Navi- 685 See id. at 5646, para. 14. gation Devices Order at 46, para. 116 (stating that an issue 686 See id. at 5648, para. 18. raised late in the proceeding was whether electronic program 687 47 U.S.C. § 549 (a). guide equipment and guide services are covered by the re- 688 See Navigation Devices Notice, 12 FCC Rcd. at 5658-59, quirements of section 629. Although it noted that the statu- para. 40. tory language of section 629 appears to cover such equip- 689 See id. at 5660, para. 44. ment, the Commission found the record was limited on this 690 See id. issue, and that it could not "adequately address at this time 691 In re Implementation of Section 304 of the Telecom- the extent of any obligation of multichannel video program- munications Act of 1996, Commercial Availability of Naviga- ming systems to make such services available pursuant to sec- tion Devices, Report and Order, CS Dkt. No. 97-80, FCC 98-116 tion 629 or otherwise."). COMMLAW CONSPECTUS [Vol. 7
b. Programming-BasedRegulation quire cable operators to set aside a portion of their programming capacity for use by specified Program Access third-party programmers. The applicability of How section 628, which governs development other forms of cable regulation, such as rate regu- lation, are also dependent on the provision of of competition and diversity in video program- channels of programming in either tiers or a pay- ming distribution (otherwise known as "program basis. access") would apply to Internet-based services is per-view The term "cable channel" or "channel" is de- another potentially difficult question. 695 The pro- fined as "a portion of the electromagnetic fre- gram access rules prohibit unfair and discrimina- quency spectrum which is used in a cable system tory practices in the sale of satellite cable and sat- and which is capable of delivering a television ellite broadcast programming and prohibit or channel (as television channel is defined by the limit the types of exclusive programming con- by regulation).698 "Activated chan- tracts that may be entered into between cable op- Commission nels" are defined as "those channels engineered erators and vertically-integrated programming at the headend of a cable system for the provision vendors. 696 The rules are directed at the provi- of services generally available to residential sub- sion of multichannel video programming. Pursu- scribers of the cable system, regardless of whether ant to section 602(20), "video programming" is such services actually are provided, including any programming broadcast by a television station or channel designated for public educational or gov- generally considered to be comparable to such 699 6 9 7 ernmental use." television broadcast programming. A fundamental determination would have to be As discussed above, it may be possible to catego- made as to whether cable Internet-based services rize some Internet-based "programming" pro- are being provided on a "channelized" basis (i.e., vided by cable operators as "video programming" as a channel of programming) before considering for purposes of the definition contained in sec- whether and how Title VI provisions such as PEG tion 602(6) (A) (i), but the fit is not a comfortable access, commercial leased access, and must carry, one. It is easier to conclude that Internet services would apply to cable Internet service. There does fall within the phrase "other programming ser- not appear to be anything in either of the defini- vice" in section 602(6)(A)(ii). An additional tions relating to channels that would preclude problem in determining whether and how this consideration of Internet-based cable services as rule would apply to Internet-based cable services being provided over a cable "channel," and it is is the limitation on the statute's scope of applica- likely that this is how system operators are cur- tion to satellite (as opposed to wireline) cable rently providing the service. Jones Communica- programming or satellite broadcast program- its 'Jones Internet ming. Some of the content provided by cable In- tions apparently provides this manner in the Alexan- ternet access may be transmitted by satellite, even Channel" service in Similarly, @Home reports that though it is received through wireline connec- dria, Virginia area. "[d]elivery of the @Home Network service to the tions at the cable headend. home occupies two or more 6 MHz channels out of the 750 MHz total coaxial capacity found in the '70 0 c. Regulation Based on System Capacity or "Use more advanced upgraded-cable systems. of Channels"
The application of several important provisions PEG Access of Title VI depend upon a determination of how many "cable channels" or "activated channels" are Section 611 (a) permits franchising authorities used in the cable system to deliver cable services. to establish requirements in a franchise for the Some of these provisions arguably represent a designation or use of channel capacity for public, form of service "unbundling," as they generally re- educational, or governmental use (otherwise
699 See id. § 522 (1). 695 See 47 U.S.C. § 548. 696 See id. 700 See Home Network, @Home Network Architecture (vis- 697 See 47 U.S.C. § 522 (20). ited Oct. 11, 1998)
701 See 47 U.S.C. § 531 (a). 707 See id. § 532 (c) (4). 702 ee id. § 531 (b). 708 Id. § 532 (a). 703 See id. § 531 (c). 709 See id. §§ 534, 535. 704 See id. § 531 (e). 710 See 47 U.S.C. § 534 (a), (h). 705 See 47 U.S.C. § 532 (1996). 711 See id. § 535 (1). 706 See id. § 532 (b) (1) (A). COMMLAW CONSPECTUS [Vol. 7 commercial television stations, up to one-third of Notice of Proposed Rulemaking that specifically the aggregate number of usable activated chan- addresses the carriage of DTV signals by cable sys- 718 nels of such systems. 712 In addition, cable systems tems. Among other issues raised by the DTV are obligated to carry qualified local noncommer- Must Carry Notice is the question of how capacity 719 cial educational television stations according to a should be defined in the digital environment. different formula based upon a cable system's The DTV Must Carry Notice identifies three possi- number of usable activated channels. 7 13 Again, ble options in determining capacity: "(1) each the question raised with respect to Internet-based programming service counts as one channel; (2) cable services is how their classification as cable each 6 MHz block of spectrum counts as one services would affect requirements like must carry, channel; or (3) the digital capacity should be de- which depend upon certain determinations re- termined by data 'throughput,' i.e., bits per sec- garding activated channels. ond of digital data. '72 0 This re-examination of Section 614(b) (4) (B) also requires that, at the the issue of channel capacity may address how the time the Commission prescribes modifications of addition of cable Internet-based services affects the standards for advanced television, it should the definition of a cable channel. commence a proceeding addressing the issues in- volved in mandatory carriage of a broadcaster's Rate Regulation digital television ("DTV") signal.7 14 The Com- mission has adopted new rules that anticipate the Cable rate regulation for systems not subject to transition of the existing television broadcasting effective competition is also dependent upon the system from an analog to a digital form of trans- offering of tiers of channels of programming to mission. Previously, in the Advance Televisions Sys- subscribers, as opposed to the offering of pro- tems proceeding, the Commission solicited initial gramming on a separate per channel or per pro- views on DTV signal carriage issues from industry gram basis. 721 With certain exceptions, section and consumer interests. 715 Included among those 623 provides that rates for the basic service tier issues was whether the Commission should rede- ("BST"), equipment (typically, converter boxes fine channel capacity to comport with any new and remote control devices) and installation are 716 DTV must-carry rules that it may develop. subject to regulation by a community's local Comment was specifically sought on how to de- franchising authority, if that entity chooses to reg- fine channel capacity in a digital environment, ulate BST and equipment rates. 722 Cable pro- i.e., in terms of channels, bandwidth, or bits of gramming service tier ("CPST") rates are regu- data per second. 717 Channel capacity could be lated by the Commission upon receipt of a 723 determined by counting individual channels on complaint by the local franchising authority. the cable operator's channel line-up card, as is Pay and premium services, which are offered on a now the case, or channel capacity may be ana- per program or per channel basis, are not subject lyzed in terms of bandwidth, where all of the ma- to rate regulation under section 623.724 Thus, sec- terial transmitted by a broadcaster, in any combi- tion 623, on its face, would seem to apply to cable nation, using 6 MHz, would count as one channel Internet services to the extent such services fall for capacity purposes. within the definition of "cable services." How- On July 10, 1998, the Commission released a ever, a further determination would have to be
712 See id § 534 (b) (1). No. 98-120, FCC 98-153 (1998) [hereinafter DTV Must Carry 713 See id § 535 (b). Notice]. 714 See id. § 534 (b) (4) (B). 719 See id. at 28-29, paras. 58-61. 715 In re Advanced Television Systems and Their Impact 720 See id. at 29, para. 60. Upon the Existing Television Broadcast Service, Fourth Fur- 721 See 47 U.S.C. § 543 (b) (1). ther Notice of Proposed Rule Making and Third Notice of Inquiry, 722 See id. § 543 (a). 10 FCC Rcd. 10540, 10552-53, para. 83 (1995) [hereinafter 723 See id. § 543 (a). Originally, individual subscribers Advanced Televisions Systems] (subsequent history omitted). could file complaints. In 1996, Congress restricted the com- 716 See id. at 10553, para. 81. plaint process so that only local franchising authorities could 717 See id. file a complaint against a CPST rate with the Commission. See 718 See in re Carriage of the Transmissions of Digital Tele- id. 724 See id. § 543 (b) (7), (b) (8) (A). vision Broadcast Stations, Amendments to Part 76 of the Commission's Rules, Notice of Proposed Rule Making, CS Dkt. 1999] Internet Over Cable made as to whether such service would be consid- the Internet, cable operators can hardly be said to ered part of the BST, the CPST, or as a pay or maintain monopoly control of either the Internet premium service. content or Internet access markets. Thus, there Section 623 mandates that cable operators fur- does not appear to be a market failure that would nish a separately-available basic service tier to require either the Commission or local franchis- which a customer must subscribe in order to ac- ing authorities to regulate the rates charged for cess any other tier of service. 725 Section 602(3) Internet-based cable services. Classifying Internet defines "basic cable service" as "any service tier services as pay or premium services would also which includes the retransmission of local televi- avoid the imposition of the uniform rate structure sion broadcast signals. '72 6 The minimum require- requirements contained in section 623(d) on In- ments of the BST include all must-carry signals, ternet-based cable services, as the uniform rate any PEG programming required by the local rules do not apply to video programming offered franchising authority, and any signal of any televi- on a "per channel or per program basis." sion broadcast station that is provided by the Cable operators are permitted to bundle offer- cable operator to any subscriber, except a signal ings of programming and equipment that sub- which is secondarily transmitted by a satellite car- scribers need to receive the cable basic service rier beyond the local service area of such sta- tier. Such equipment may include a converter tion. 727 Cable operators may add video program- box and a remote control unit, addressable con- ming signals or services to the basic tier, but such verter boxes or other equipment required to ac- additional service will be subject to rate regula- cess programming under certain circum- tion. 728 It does not seem plausible to include stances. 730 Under the Commission's rules, rate- cable Internet-based services as BST program- regulated cable systems must establish cost-based ming. However, it appears that if Internet-based rates for equipment which must be separately services are treated as cable services, section stated on customers' bills.7 3 1 Because the equip- 623(b) (7) (A) seemingly would permit cable oper- ment rate regulation rules apply only to equip- ators to require Internet subscribers to also sub- ment needed to receive the cable basic service scribe to the operator's basic cable service in or- tier, it does not appear that they would apply to der to be eligible to receive the Internet-based cable modems as separate pieces of equipment, services. even where offered by non-competitive cable sys- CPST programming, governed by section tems. Other issues relating to cable modem bun- 623(c), is not subject to similar statutorily deter- dling and cross-subsidy will be addressed in the mined minimum components, but is subject to Navigation Devices rulemaking. rate regulation by the Commission. 729 The terms of that provision refer to "cable programming d. Protection of Subscriber Privacy services," although the term is not separately de- fined. Viewed from a purely "plain language" per- Section 631 governs protection of subscriber spective, Internet-based cable services could be in- privacy.732 By its terms, the provision applies to cluded within that concept. Whether this would "any cable service or other service. '7 33 Section make sense from a policy perspective is an entirely 631 (a) (2) (B) defines "other service" to include different matter. "any wire or radio communications service pro- The most reasonable result may be to classify vided using any of the facilities of a cable operator Internet services as either pay or premium, so that that are used in the provision of cable service. ' 7 3 4 the rates would not be subject to unnecessary reg- Section 631 requires cable operators to provide a ulation. While it is generally acknowledged that separate, written statement to subscribers when cable Internet services offer superior transmission they enter into an agreement to provide the sub- speeds as compared to other means of accessing scriber with cable or other service. 735 Such notice
725 See id. §§ 543 (b) (7). 731 See id.; see also '47 C.F.R. § 76.923 (b), (c) (1996). 726 See id. § 522 (3). 732 See 47 U.S.C. § 551 (1998). 727 See 47U.S.C. § 543 (b) (7) (A). 733 Id. § 551 (a) (1). 728 See id. § 543 (b) (7) (B). 734 Id. § 551 (a) (2) (B). 729 See id. § 543 (c). 735 See id. § 551(a) (1). 730 See id. § 543 (b) (3) (A). COMMLAW CONSPECTUS [Vol. 7
must inform the subscriber of the nature of per- advertising agencies from Internet users in the sonally identifiable information collected with re- course of online sessions. spect to the subscriber and the nature and use of Persons "surfing" the Web through a browser such information, any disclosures of information, may receive an on-line prompt advising them that and limitations on the ability of cable operators to the server they have accessed wished to send a collect and disclose the information. 736 Section "cookie" that will last for a set period of time, and 631(b) (1) provides that, subject to certain excep- giving the user a choice of "yes" or "cancel" with tions, "a cable operator shall not use the cable sys- which to respond. The prompts usually do not tem to collect personally identifiable information define what a "cookie" is, what use the server concerning any subscriber without the prior writ- wishes to make of the cookie, or what will happen ten or electronic consent of the subscriber con- if the user declines to accept the cookie. Such '73 7 cerned. Exceptions include the ability of the cookies are actually small files that are stored on a cable operator to obtain information necessary to user's PC "to serve as unique identifiers for track- render service or detect unauthorized reception ing user movements across the Web. '742 738 These of cable communications. small data files are first sent to the user's Web Similarly, cable operators are prohibited from browser when a Web site is visited via the browser, disclosing personally identifiable information and are then saved on the end user's hard disk. concerning any subscriber without the prior writ- The next time the user visits the web site, his ten or electronic consent of the subscriber, and browser will send the cookie to the Web server. must take actions to prevent unauthorized access Originally, cookies were developed to be used to such information. 73 9 Exceptions to the disclo- within one Web site to, for example, automate the sure prohibition include information necessary to process of logging onto a membership-based site, conduct legitimate business activities related to a or fill a 'shopping basket' with online cable or other service provided to the subscriber purchases."' 743 Cookies are now used by several by the cable operator, to respond to certain court advertising agencies to monitor a user's move- orders, and to identify the names and addresses of ments among various sites. 744 "When a user visits subscribers under certain limited circum- AltaVista, for example, a cookie is sent along with 740 stances. that site's images and the information is stored in Thus, it appears that whether Section 631 a database on a remote server. The database en- would apply to the provision of Internet-based tries can be used to assemble user profiles for 745 cable services turns directly on the issue of targeted advertisements. whether these services were classified as cable The use of cookies and other executable appli- services. Indeed, the Highway 1 subscriber Ser- cations in conjunction with Web site visits raises vice Agreement states that the subscriber's cus- many issues for cable Internet-based services tomer information and privacy interests are "safe- under section 631. One issue will likely be guarded by the subscriber privacy provisions of whether section 631 applies to personally identifi- the 1984 Cable Act, as amended. ' 74 1 Application able information gathered with respect to cable of the subscriber privacy provisions of Title VI to Internet subscribers over cable systems by persons Internet-based cable services would not appear to other than the cable operator. If section 631 ap- present any additional problems of "fit." How- plies to the practice of setting cookies on the ever, cable operators may potentially run into user's hard drive and tracking their movements problems of compliance with section 631 by the across the Web, issues would arise with respect to way the information is being collected by some cable operator responsibility for personally identi-
736 See id. www.wired.com/news/news/technology/story/2196.html>. 737 Id. 743 Id. 738 See id. § 551 (b) (2). 744 Id. 739 Id. § 551 (c) (1). 745 Chris Jones, Shutting the Door on Cookies and Applets, 740 See id. § 551 (c) (2). WIRED NEWS, (visited Oct. 24, 1998, http://www.wired.com/ 741 MAI Petition, supra note 662, attachment at 2, Sec. 12, news/news/technology/story/7975.htmI; see also James "Customer Information and Privacy." Glave, Next Netscape Will Chew Cookies on Command, WIRED 742 James Glave, Next Netscape Will Chew Cookies on Com- NEWS (visited Oct. 24, 1998)
746 See Paul Taylor, Whirlwind of Change in the DigitalEra, puter users over the Internet, was widely discussed. FINANCIAL TIMES, Mar. 5, 1998 at p. 1 (quoting Mr. Eckhard Conceptually, push technology is not unlike newspapers or Pfeiffer, President and Chief Executive of Compaq Com- television broadcasting, but has been viewed by some as an puter). "important advance in Internet communications because it 747 Id. (quoting, Andrew Grove, Chief Executive of Intel automatically sends users news and other information they Corporation). select." Greg Miller, Netscape Makes a Pushfor Improved Internet 748 For example, in 1996, the Internet community an- System, L.A. TIMES, Apr. 15, 1997, at D2. Although push tech- nounced it would adopt open standards for the exchange of nology was a hot issue in the spring of 1997, it subsequently integrated voice, video and data communications via com- received little attention. Internet-related developments ap- puters, including real-time transmission of voice and video pear to have significantly compressed shelf-lives, as compared services, and that a number of proprietary software applica- to more traditional communications technologies. tions are already commercially available for full duplex voice 749 See Gerald W. Brock & Gregory L. Rosston, THE IN- communications between computers with direct IP connec- TERNET AND TELECOMMUNICATIONS POLICY, at 1-9 (1996) tions to the Internet. In the spring of 1997, "push" technol- [hereinafter BROCK AND ROSSTON]. ogy that automatically delivers specific information to com- 750 Id. at 2 COMMLAW CONSPECTUS [Vol. 7 serve as a model for future communications. In policies."758 Until such policies are developed, contrast, the telephone industry is still largely con- the Commission will likely be faced with the in- trolled by regulation and central planning. Inter- creasingly daunting task of re-evaluating the appli- connection and access regulation ensures that cability of its existing regulatory categories to the competitive service providers can access end users new integrated service offerings based around the through the local exchange "bottleneck monopo- Internet, and the equally daunting task of sifting lies.''75 1 "The future telecommunications network the claims of competing carriers that every other is likely to be made up of many different intercon- carrier should be regulated in a particular man- nected networks without any core monopoly as its ner. anchor.. .A significant policy problem is creating Third, Brock and Rosston state that, "the In- interconnection arrangements among multiple ternet and commercial networks connected to it competing networks that achieve efficiency and now integrate the provision of transmission capac- allow competition to flourish. '752 The Commis- ity to varying degrees with the provision of infor- sion's Local Competition and Access Reform proceed- mation. '759 Under past telecommunications poli- ings represent the initiation of the Commission's cies, which distinguished between providers of attempts to deal with interconnection policy communications capacity and providers of infor- under its existing rules and the new regulatory mation content, common carriers had to transmit structure of the 1996 Act. all information submitted to them in a non-dis- Second, Brock and Rosston assert that "the In- criminatory manner and, hence, without any edi- ternet includes integration of multiple types of torial authority over those transmissions. 760 Simi- services with substantially different technical char- larly, "broadcasters were required to operate 'in acteristics onto a single network." 753 Accordingly, the public interest' with regard to the material 76 the Internet can transfer short e-mail messages, they transmitted." 1 Accordingly, they have been graphics, large data files, and video files, which measured against "[varying] standards for appro- have varying bandwidth requirements and time priate material such as: indecency restrictions, sensitivities.7 5 4 Reflective of the networks of the public service and news programming, limitations past which were optimized to provide a particular on advertising time, [and] children's program- 7' 62 type of communications service over a single tech- ming requirements. nology, past telecommunications policy has as- Under the Title VI regulatory model, cable op- sumed (and sometimes mandated) separate facili- erators have escaped regulation as common carri- ties and policies for different kinds of ers and, for the most part, have been permitted transmissions. 755 "The telephone network and as- the editorial discretion to select or provide the sociated policies are built around the switched video programming transmitted on their systems. two-way voice grade circuit with an assumption At the same time, they have been required to "un- that the predominant use of that circuit is to carry bundle" or set aside system capacity for the use of the human voice. ' 756 Similarly, provision of one- PEG entities at the request of franchising authori- way, non-switched transmission of video signals is ties, as well as certain channels for leased com- the basis for cable-TV and broadcast networks and mercial access, and the transmission of local must- 7 57 their associated policies. carry broadcast stations. Brock and Rosston note that "technological ad- The communications and communications vances in fiber-optic transmission of signals and in services made possible by the Internet are funda- compression of digital video signals have created mentally unlike those provided in the past over the possibility of future integrated networks that the technologically-separate, public-switched tele- carry all kinds of signals as digital packets of infor- phone network, data networks, broadcast net- mation, breaking down the policy boundaries of works, and cable television systems, in that a sin- the past and creating the need for new integrated gle medium is capable of delivering nearly any
751 See id. 757 See id. 752 Id. 758 Id. 753 Id. 759 Id. at 3 754 See id. at 2. 760 See id. 755 See id. 761 Id. 756 BROCK AN) ROSSTON , supra note 749, at 2. 762 Id. 19991 Internet Over Cable type of communications service on an integrated regularly updated popular content made accessi- 766 basis. The Internet itself is a network of intercon- ble to local cable modem users can be housed. nected networks, comprising linked clients, hosts, These new "cable networks" may one day soon be routers and gateways, that communicate with providing interactive multicast IP video program- each other through use of common Internet pro- ming to subscribers. The fundamental question tocols. The Internet protocols separate the trans- for cable regulators is whether application of the mission of information from the applications and "legacy" cable regulatory frameworks under Title service levels. The Internet supports a wide range VI makes sense in the face of the rapidly evolving of applications, including e-mail, ftp, integrated worldwide packet-switched data network currently display of text and graphical data files on the known as "the Internet." World Wide Web. These attributes make applica- tion of existing regulatory categories to many B. Regulatory Alternatives forms of Internet-enabled communications excep- tionally difficult, if not impossible. Definitional categories are important, not in The next generation of Internet deployment is and of themselves, but because of the regulatory already under way, and it will only compound the consequences that flow from them. 767 From the regulatory and policy challenges described above. perspective of the regulatory agency, the impor- Some providers are beginning to go beyond the tant inquiries with respect to whether Internet- initial ISP provision of basic Internet connectivity, based cable services should be treated as Title VI and are including Web hosting and IP facsimile services are whether this is what Congress in- services. 763 Some speculate that the next genera- tended in amending the definition of cable serv- tion will likely shift perspective to "content distri- ices under Title VI, whether classifying these serv- bution services," and in particular to what is now ices as cable services comports with its regulatory called, "IP multicasting," a form of Internet scheme for Internet access provided by non-cable "broadcasting. '764 Infrastructure providers, who operators, and whether such an interpretation have recognized that such offerings require that would further important, identifiable regulatory they fundamentally change the way they transport goals. information, have begun to implement such Although it can be argued that Congress in- changes as "decentralization of content storage, tended to include Internet-based cable services experimentation with service classification and under the Title VI regime, Congress also has tiered service routing mechanisms, deployment of stated generally that "it is the policy of the United multicast router and access device software, and States... to promote the continued development creation of multimegabit residential connections of the Internet and other interactive computer and always-on residential Internet connec- services and other interactive media.' 7 68 Recon- 765 tions." ciling these positions under the Communications Cable Internet service providers such as Act presents the Commission with significant pol- @Home and Road Runner have been leading the icy challenges. At least with respect to Title II change to decentralized content storage on their telecommunications services, Congress may al- data networks by building (and possibly someday ready have provided a key to overcoming the chal- merging) their own Internet backbones linking lenges new technologies present for old regula- dozens of regional data centers where copies of tory frameworks. There does not appear to be a
763 See Peter Lambert, This Revolution Will Be Televised, tary lies at least one recipient on the list." Id. One venture, tele.com, Apr. 1988, at 57. between MCI Real Broadcast Network and media software 764 Id. (describing the views of Martin Hall, chief tech- provider Real Networks Inc., is using multicasting to dis- nology officer for Stardust Technologies Inc. Stardust man- tribute streaming media to local servers for on-demand, ages the IP Multicast Initiative (IPMI), a consortium of ven- rather than, live access. See id. dors and ISPs supporting the implementation of IP 765 Id. at 58. multicasting transmission standards). "IP multicasting" 766 See id. utilizes UDP/IP, instead of TCP/IP, to transmit a single file 767 See Report to Congress, CC Dkt. No. 96-45, FCC 98-67 at or stream to a list of subscribers' IP destinations. See id. at 60. para. 21 ("All of the specific mandates of the 1996 Act de- "Guided by a complete list of subscribers' IP destinations, the pend on application of the statutory categories established in single stream leaves a server, then splits itself repeatedly the definitions section."). wherever a router table confirms that down this or that tribu- 768 See 47 U.S.C. § 230 (b) (1). COMMLAW CONSPECTUS [Vol. 7 corresponding source of forbearance authority any transmission media or technology, as high- for resolving this dilemma with respect to Title VI speed, switched, broadband telecommunications cable services. capability that enables users to originate and re- Section 706 of the 1996 Act states: ceive high-quality voice, data, graphics and video '772 The Commission and each State commission with regu- telecommunications using any technology. latory jurisdiction over telecommunications services The Section 706 NOI seeks comment on the mean- shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability ing and scope of the terms contained within the to all Americans (including, in particular, elementary statutory definition of "advanced telecommunica- and secondary schools and classrooms) by utilizing, in a tions capability," including whether it encom- manner consistent with the public interest, conven- passes content, such as web pages, in addition to ience, and necessity, price cap regulation, regulatory 773 forbearance, measures that promote competition in the the ability to reach content. local telecommunications market, or other regulating methods that remove barriers to infrastructure invest- Section 10, added by the 1996 Act, expressly 7 6 9 ment. grants the Commission the authority to "forbear Section 706(b) directs the Commission and from applying any regulation or provision of this each appropriate State commission to periodically Act to a telecommunications carrier or telecom- initiate and complete inquiries concerning the munications service, or class of telecommunica- availability of advanced telecommunications capa- tions carriers or telecommunications services" if bility to all Americans. If the determination is the Commission determines that enforcement of that such capability is not being deployed in a rea- such regulation or provision is not necessary to sonable and timely fashion, the respective regula- ensure (1) just and reasonable and non-discrimi- tors are to "take immediate action to accelerate natory rates and practices with respect to telecom- deployment of such capability by removing barri- munications carriers and services, (2) that en- ers to infrastructure investment and by promoting forcement is not necessary to protect consumers, competition in the telecommunications mar- and (3) that forbearance is consistent with the 770 774 ket." public interest. Limitations on the Commis- As discussed in Section IV, "advanced telecom- sion's section 10 forbearance authority are con- munications and information services," as those tained in subsection (d). The Commission may terms are used in section 254(h), have been inter- not forebear from applying the requirements of preted to include Internet services.77 ' Internet section 251 (c) or 271 (except as provided in sec- services, regardless of the identity of the entity tion 251(f)) under subsection (a) of section 10 providing them, could also fall under the section until it determines that those requirements have 775 706 definition of "advanced telecommunications been fully implemented. capability," which is defined "without regard to The relationship between section 10 and 706
769 47 U.S.C. § 157 (a). forms of relief under section 706 for their provision of ad- 770 Id. § 157 (b). On August 7, 1998, the Commission vanced high-speed data services, arguing that regulatory for- began an inquiry concerning the deployment of advanced bearance from, inter alia, LATA boundary restrictions, un- telecommunications capability to all Americans. See In re In- bundling and resale obligations, would spur the rollout of quiry Concerning the Deployment of Advanced Telecommu- such advanced telecommunications offerings as xDSL (digi- nications Capability to All Americans in a Reasonable and tal subscriber line) services. The section 706 petitions were Timely Fashion, and Possible Steps to Accelerate Such De- filed by Bell Atlantic Corp., US WEST Communications, Inc., ployment Pursuant to Section 706 of the Telecommunica- Ameritech Corp. and Southwestern Bell Telephone Com- tions Act of 1996, Notice of Inquiry, CC Dkt. No. 98-146, FCC pany, Pacific Bell and Nevada Bell. Petitions for relief under 98-187 (rel. Aug. 7, 1998) [hereinafter Section 706 NO1]. section 706 were also filed by the Alliance for Public Tech- 771 See id. nology and by the Association for Local Telecommunications 772 47 U.S.C. § 157; see also Section 706 NOI, CC Dkt. 98- Services (ALTS). The petitions also raise issues regarding 146, FCC 98-187 at paras. 13-17. The fact that Congress here the relationship between the Commission's forbearance au- uses "telecommunications" capability without respect to any thority as expressed in sections 10 and 706. On August 7, transmission media or technology raises the question of 1998, the Commission addressed these petitions in a consoli- whether Congress has intentionally (or inadvertently) cre- dated memorandum opinion and order and notice of pro- ated a category of "broadband telecommunications" services posed rulemaking designed to create market conditions that that is different from either "telecommunications services" or will allow both the incumbent and new entrants to provide "cable services" under the Act. advanced telecommunications services to the public based 773 See id. on market risk and reward. See In re Deployment of Wireline 774 47 U.S.C. § 160 (a). Services Offering Advanced Telecommunications Capability, 775 In 1998, four BOCs filed petitions seeking various Memorandum Opinion and Order, and Notice of Proposed Rulemak- 1999] Internet Over Cable forbearance authority is discussed in the Section ternet services to be cable services, as discussed 706 MO&O. There, the Commission found that above, but forbear from applying Title VI require- section 706(a) does not constitute an independ- ments that would otherwise hinder the continued ent grant of forbearance authority or of authority development of an "unregulated" Internet. This to employ other regulating methods. Rather, it would permit the Commission to encourage the directs the Commission to use the authority deployment of advanced telecommunications ca- granted in other provisions, including the for- pabilities as directed by offering the cable opera- bearance authority under section 10(a), to en- tor the regulatory certainty, for example, that its 776 courage deployment of advanced services. cable franchise, in the ordinary case, covers the '777 There do not appear to be corresponding provi- provision of such services as "cable services. sions in Title VI that grant the Commission simi- Accordingly, it may be advisable for the Com- lar forbearance authority for cable services apart mission to seek legislative forbearance authority from the ability to forbear from rate regulation of under Title VI similar to that which it is given with systems facing effective MVPD competition. respect to Title II under sections 10 and 706. Thus, sections 10 and 706 do not appear to be Such forbearance authority could be limited to available as independent sources of forbearance "advanced" or "enhanced" cable services, such as authority for cable Internet services. two-way, interactive computer services and In- To reconcile the conflicting directives of plac- ternet access provided over cable systems. ing cable Internet services under a Title VI regula- Another approach may lie in the new statutory tory regime, and yet preserving the unregulated category of "advanced telecommunications capa- nature of the Internet, the Commission may need bility" itself. This new statutory category, which additional, express Title VI forbearance authority. speaks not in terms of services and service provid- If it had such authority, the Commission could ers, but of "capabilities," may arguably be utilized then fully effectuate congressional intent with re- to develop a new regulatory framework better spect to cable Internet services by combining such suited to the fluid types of communications capa- targeted regulatory actions as it finds are neces- bilities made possible by the Internet. Central to sary to promote infrastructure development and this question may be a determination of the rela- tionship between Title II "telecommunications" competition, with equally targeted regulatory "for- services and section 706 "advanced telecommuni- bearance" where application of the full panoply of cations capability. '778 These issues regulation would slow infrastructure development may be ad- or competition. dressed and resolved in the pending Section 706 proceedings or in later proceedings under that If forbearance authority were available in the provision. case of Internet-based cable services, the Commis- sion could reasonably find cable-provided In-
ing, CC Dkt.Nos. 98-147, 98-11, 98-26, 98-32, 98-15, RM 9244, 778 The Commission addressed the regulatory classifica- 98-78, 98-91, FCC 98-188 (rel. Aug. 7, 1998) [hereinafter Sec- tion of "advanced services" in the Section 706 MO&O. It de- tion 706 MO&O, Section 706 NPRM]. termined that advanced services offered by incumbent LECs, 776 See Section 706 MO&O, supra note 775, at paras. 69-78. such as xDSL and packet-switched services, are basic services 777 Another alternative identified by some members of under the Commission's rules and telecommunications serv- the cable industry would be use of a Computer Inquiry-like ap- ices under the 1996 Act. The Commission found that when proach to find all "information services" to be Title I "en- an incumbent LEC offers members of the public a transpar- hanced services" categorically exempt from both Title II and ent, unenhanced, transmission path for a fee, the incumbent Title VI regulation. This alternative would avoid many of the LEC is offering a "telecommunications service." In contrast, difficult questions of regulatory "fit" described above. How- when the end user utilizes a telecommunications service to- ever, cable operators, like the dominant LECs, potentially gether with an information service, as in the case of Internet would still be subject to a Commission-imposed unbundling access, the offering is treated as two separate services. The requirement, whereby they could be required to offer un- first is a telecommunication service (the xDSL-enabled trans- bundled access to their cable high-speed data communica- mission path) and the second service is an information ser- tions platforms to competing ISPs or on-line service provid- vice-in this case, Internet access. See Section 706 MO&O, ers to use in reaching their subscribers. There is reportedly supra note 775, at paras. 35-37 (citing Frame Relay Order, 10 some debate within the cable industry as to which course is FCC Rcd. 13717 at 13722-23. The Commission is seeking preferable for their Internet-based cable services, but the ma- comment on the meaning of the statutory term "advanced jority of providers take the position that these should be con- telecommunications capability" in the Section 706 NO. See sidered Title VI cable services. supra, note 770, at paras. 13-17. COMMLAW CONSPECTUS [Vol. 7
VIII. CONCLUSION These situations graphically illustrate the diffi- cult task of sorting out appropriate Articles describing the convergence of telecom- regulatory cat- egories in a world in which any carrier munications, computing and broadcasting indus- can offer any service over any transmission medium- tries as opening the way for seamless access to wired, wireless, multimedia information and entertainment any cable, voice, data or video. It is increasingly likely that the above-mentioned time, any place, anywhere are commonplace in regu- latory categories painstakingly the late 1990s. Digital technology has made it established over possible to convert text, sound, graphics and mov- many years to further particular policy goals must ing images into coded digital messages which can necessarily collapse of their own weight in the dig- be combined, stored, manipulated and transmit- ital communications world of tomorrow. The ted quickly, efficiently, and in large volumes over challenge for the regulator, at each step, is to ex- wired and wireless networks. Broadband fiber op- amine the underlying purposes and policy goals tic networks enable high-speed transmission of behind existing regulatory categories, and to ap- these digital signals. A single world wide web ply them only where those purposes and policy page available on the Internet could be delivered goals make sense. Any regulatory efforts in this to the subscriber (1) through the cable system arena should begin with an analysis of whether and over a cable modem, (2) via a broadcaster's the operator in question exercises undue market digital signal carried as a channel of television power over an essential service or facility neces- programming over cable systems, or (3) on a dial- sary to provide an essential service. up basis from a cable operator's competitive local Ultimately, however, the Commission (and per- exchange carrier offering. Under our current haps Congress) may need to develop a new regu- rules, each of these means of delivering the web latory paradigm and language that fits the new page are regulated differently. global communications medium known as the In- At some point in the not-too-distant future it ternet. The regulatory categories of "basic" and will become increasingly difficult to maintain that "enhanced" or "information" services are more particular facilities are "cable" as opposed to "tele- than twenty years old, whereas the technologies communications" if their utilization factor for the they are being applied to are new, and evolving different types of services is roughly equal. This rapidly in unforeseen and unforeseeable ways. problem will also be evident in the case of regula- Although the Commission has repeatedly found tory requirements written in terms of "cable oper- that the old regulatory categories are essentially ators" as opposed to "telecommunications carri- carried forward in the 1996 Act's new "telecom- ers" and "information service providers." When a munications" and "information" service catego- single provider offers all three types of services in ries, the 1996 Act also gives the Commission the digital format over primarily fiber optic broad- new and flexible regulatory category of "advanced band plant, how will these categories apply? The telecommunications capability" in section 706. same is true of regulatory requirements that are Rather than concentrate solely on trying to placed upon certain services when a single squeeze the Internet and Internet-based services software application, together with access to the into familiar categories, the Commission might Internet, makes it possible to provide voice, video better endeavor to give full meaning and effect to or data communications at the initiation of the this new regulatory category based on its own end user, rather than the "network" operator. unique attributes.