Broadband Regulation at the Demise of the 1934 Act: the Challenge of Muddling Through

BROADBAND REGULATION AT THE DEMISE OF THE 1934 ACT: THE CHALLENGE OF MUDDLING THROUGH

John T. Nakahata*

As we approach the 70th anniversary of the public policy-and some degree of regulatory cer- Communications Act of 1934 ("the Act" or "the tainty-in a statutory environment that will be Communications Act"),' this familiar grand dame fraught with artificial, legacy statutory distinc- is afflicted with a terminal condition-Internet tions. The Commission has floated the idea of us- Protocol ("IP"). This condition is not one of sud- ing its ancillary jurisdiction under Title I to fash- den onset, and is reallyjust the late stage manifes- ion a new regulatory regime for broadband ser- tation of its precursor, digitalization. Broad- vices. But this approach, if adopted by the Com- band-and IP-based services more generally-at- mission, is sure to be tested in the courts. So, the tack the fundamental skeleton of the Communi- Commission (and the courts and industry) will cations Act itself, eroding the framework around end up confronting at least three questions: (1) which the Act's regulations are built. Although how should the Commission best muddle through legislative surgery has saved our grand dame to address broadband IP services in the absence of before by adding the cable provisions of Title VI new legislation; (2) does the Commission really 2 ("the 1984 Act") and the local competition provi- have authority to create a new affirmative regula- 3 sions of Title II ("the 1996 Act"), the cure for tory framework; and (3) what happens if the Com- broadband IP is a long way off-and may not even mission is wrong about the scope of its authority be effective without killing the patient and replac- given the existing statutory framework. ing her with something entirely new. To help frame these issues further, this article The difficulty facing the Federal Communica- first delineates what is generally meant by "broad- tions Commission ("FCC"), of course, is that the band;" discusses some of the ways in which broad- FCC itself is a creature of the Act. The Communi- band services challenge the technological assump- cations Act created the Commission, 4 established tions underlying the Act's core statutory classifica- its powers and set limits on the Commission's au- tions; contrasts the legal underpinnings of the 5 thority. The Commission is not the Congress-it Commission's articulated Title I approach to cannot enact new laws outside of the Act's delega- broadband with the "telecommunications ser- tions of rulemaking authority. And the Commu- vices" approach adopted by the Ninth Circuit; and nications Act will not simply expire to be suc- reviews two examples of policy issues embedded ceeded by the next generation. in this debate. If the technological assumptions underlying the Act's core statutory framework are indeed collaps- I. WHAT IS BROADBAND? ing, then the challenge for the Commission is how to muddle through to best achieve sound For clarity of discussion, we need to have a com-

* John Nakahata is a partner in the law firm of Harris, 2 Cable Communications Policy Act of 1984, 47 U.S.C. Wiltshire & Grannis, LLP. He was Chief of Staff to former §§522-73 (2000). Chairman William Kennard of the Federal Communications 3 47 U.S.C. §§251-76 (2000), which were added to the Act Commission, and Senior Legal Advisor to former Chairman by the Telecommunications Act of 1996, Pub. L. No. 104-104, Reed Hundt of the Federal Communications Commission. 110 Stat. 153 (1996). The views expressed in this article are his own and do not 4 47 U.S.C. §151 (2000). necessarily reflect those of Harris, Wiltshire & Grannis, LLP 5 See, e.g., 47 U.S.C. §§154-55 (2000) (authorizing the or its clients. number of commissioners, their qualifications, their duties, 1 47 U.S.C. §§160-714 (2000). References to the Act in- and overall organization). clude all amendments thereto, except as specifically noted. COMMLAW CONSPECTUS [Vol. 12 mon working understanding of what we are talk- It is also useful analytically to separate the trans- ing about when we refer to "broadband." The mission function from the Internet access applica- FCC itself has not defined this term. 6 In its Wire- tion provided over that transmission facility. The line Broadband Internet Access NPRM,7 the FCC ap- question of whether and how to regulate broad- pears to be referring to services, such as Digital band then splits into two sets of issues: (1) do you Subscriber Lines ("DSL") and cable modem ser- regulate the high capacity, always-on last-mile IP vices, that have at least the following characteris- transmission service, and if so, how do you do so tics: they are offerings of last-mile IP transmission and whom do you regulate; and (2) do you regu- capability; that transmission capability is not late the retail application that allows a user to switched, but is "always on;" and they combine transmit and receive information (including pack- with the IP transmission capability other functions etized voice transmissions) from different points that enable the customer to access and use the In- on the Internet or other IP networks, or to distant ternet to retrieve information and communicate points interconnected with the end user's IP net- with others, whether that communication is re- works, and if so, how do you do so and whom do produced as voice or data. These services today you regulate. are generally sold on a flat-rate basis, and tiered for maximum transmission capacity. The FCC has II. BROADBAND AND THE EROSION OF not distinguished "broadband" from traditional THE ACT'S CURRENT REGULATORY high capacity telecommunications services that a FRAMEWORK business user might purchase in conjunction with Internet access, such as ISDN-PRI or T-1, which The current framework of the Communications have generally not been considered "broadband" Act is regulation by "pigeonhole," or as other 8 within the terms of current FCC policy debates. commenters have called it, silo regulation. The Notably, this "definition" of broadband is based hallmark of this framework is that each service is on an end user service application, Internet ac- classified as common carriage (also labeled "tele- cess, rather than purely a functional description. communications services"), private carriage, infor- That is, it combines physical transmission in IP mation (also labeled "enhanced") services, Com- format with the application-a service with the mercial Mobile Radio Service ("CMRS"), cable ability to send, retrieve and manipulate informa- services, or broadcasting. The pigeonholes are tion available over the Internet. As will be elabo- largely technology specific, and contemplate spe- rated in Section II, the FCC has been confronting cific applications and business models. CMRS, for the question of how this "definition" of broad- example, is statutorily defined as a for-profit radio band fits into the general framework of the Com- service, with equipment that is capable of being munications Act, which defines services and moved.9 Common carriage requires a transmis- places them in a regulatory "pigeonhole" accord- ing to the end user application. 6. 6 Initially, the FCC eschewed use of the term "broad- 8 See John T. Nakahata, Regulating Information Platforms: band" in favor of "advanced telecommunications," the term from the found in Section 706 of the 1996 Act, 47 U.S.C. §§251-76. See The Challenge of Rewriting Communications Regulation In re Inquiry Concerning the Deployment of Advanced Tele- Bottom Up, I J. TELECOMM. & HIGH TECH L. 95, 100 (2002) communications Capability to All Americans in a Reasonable [hereinafter Nakahata]; Douglas C. Sicker, FurtherDefining a 4, available at and Timely Fashion, and Possible Steps to Accelerate Such Layered Model for Telecommunications Policy, Deployment Pursuant to Section 706 of the Telecommunica- http://tprc.org/papers/2002/95/LayeredTelecomPolicy. tions Act of 1996, Third Report, 17 FCC Rcd. 2844, para. 9 pdf (Oct. 3, 2002) [hereinafter Sicker]; Richard S. Whitt, A A New Public Policy Frame- (2002). The FCC more recently has begun to use the term Horizontal Leap Forward: Formulating 2-3 (2003) (unpub- broadband. See, e.g., In re Appropriate Framework for Broad- work Based on the Network Layers Model, [here- band Access to the Internet over Wireline Facilities, Notice of lished MCI Public Policy Paper) (on file with author) Proposed Rulemaking, 17 FCC Rcd. 3019, 3021 (2002) [herein- inafter Whitt]. Kevin Werbach has called the current system after Wireline Broadband Internet Access NPRM]. In that "horizontal" regulation, making the same point. Kevin & NPRM, however, the Commission also failed to advance a Werbach, A Layered Model for Internet Policy, 1 J. TELECOMM. definition of "broadband," and it recognized that "broad- HIGH TECH L. 37, 39-40 (2002) [hereinafter Werbach]. (2000) (defin- band" and "broadband services . . . are elusive concepts, as 9 47 U.S.C. §§332(d)(1), 153(27), 153(28) specifying for profit, de- they have come to mean many different things to many dif- ing commercial mobile service and ferent people." Id. at n.2. fining "mobile service" and specifying a "radio communica- 7 Wireline Broadband Internet Access NPRM, supra note tion service," and defining "mobile station," specifying that 20041 Demise of the 1934 Act

sion by wire or radio."' A cable system requires cation with the fewest regulatory restrictions-or the one-way transmission of video programming at least the regulatory restrictions that are easiest over a system that has "closed transmission paths for them to accommodate-and the most oner- and associated signal generation, reception and ous classification for their competitors. Govern- control equipment."'' Broadcasting is specifically mental entities with jurisdiction over a part of a defined as the dissemination of "radio communi- provider's service almost never want to yield juris- cations intended to be received by the public, di- diction over that same provider's new service, and 2 rectly or by the intermediary of relay stations."'1 therefore seek the classification that maximizes Each pigeonhole has its own regulatory scheme their own authority. and set of institutional arrangements. Common The debate over the proper regulatory classifi- carriers, for example, are regulated by the FCC cation of wireline broadband Internet access ser- and state public utility commissions. 13 Private car- vices-both cable-based and traditional common riers are largely free of regulation, with some ex- carrier-based-illustrates the importance of regu- ceptions, but also lack some of the significant latory classification and some of the stakes in- rights of common carriers. 14 Information service volved. Cable modem services were developed by providers have been covered by the FCC's Title I cable operators, which historically had not been jurisdiction, and again are largely free of the regu- treated as common carriers. Cable modem ser- latory requirements placed on common carriers, vice, therefore, developed as a unified consumer as well as many of the rights. 15 CMRS providers offering of a combination of high-speed data are licensed by the FCC, and can be subjected to transmission and the Internet access application. certain types of state regulation, but not regula- Moreover, it was a proprietary offering, and high- tion of rates or entry. 16 Broadcasters are licensed speed transmission generally was not offered sepa- under Title III of the Communications Act and rately on a wholesale basis to entities other than subject to extensive federal regulation, but gener- the cable operator's ISP partner. 19 Local franchis- ally not state regulation. 17 Cable operators are ing authorities, which have always played a central franchised at the local or state level, and are sub- role in regulating cable television, quickly as- ject to regulation by franchising authorities, as serted the right to receive a share of cable modem well as by the FCC under Title VI of the Commu- revenues as part of their statutorily-permitted 20 nications Act. 18 franchise fee. Thus, under the Communications Act it be- When offered by entities that historically had comes a critical regulatory exercise to determine been common carriers, however, high-speed the "classification" of any new service, for exam- broadband Internet access service, and the under- ple, the regulatory pigeonhole to which the ser- lying transmission facilities, evolved in a different vice is assigned. These debates become long and regulatory environment. Under the FCC's long- protracted legal battles. The classification carries standing Computer H rules, when a facilities-based with it a bundle of rights and responsibilities, not common carrier offers an information service, it only for the new service offeror, its competitors must also make the underlying basic telecommu- and consumers, but also for different local, state nications service available to other information and federal governmental entities. Service provid- service providers. 2 1 The Computer II separate offer- ers seek for themselves the most favorable classifi- ing requirement was developed expressly to sepa-

radio communications equipment must be "capable of being 19 Cable has been subject only to very limited, statutorily- moved and which ordinarily does move," respectively). delineated mandatory carriage requirements. See 47 U.S.C. 10 47 U.S.C. §153(10) (2000). §§531, 532, 534, 535 (2000) (dealing with PEG access, leased 11 47 U.S.C. §522(7) (2000). access, commercial broadcast "must-carry," and non-commer- 12 47 U.S.C. §153(6) (2000). cial broadcast "must-carry," respectively). See also FCC v. Mid- 13 Nakahata, supra note 8, at 104. west Video Corp., 440 U.S. 689, 691-694 (1979) (overturning 14 Id. at 106-07. pre-1984 Act mandatory access rules). 15 Id. at 108-10. 20 47 U.S.C. §542 (2000). 16 47 U.S.C. §332 (2000); see Nakahata, supra note 8, at 21 Amendment of Section 64.702 of the Commission's 110-11. Rules and Regulations (Second Computer Inquiry), Final De- 17 47 U.S.C. §§301-339 (2000). cision, 77 F.C.C. 2d. 384, 475 (1980) [hereinafter Computer 18 47 U.S.C. §§521-549 (2000). See Nakahata, supra note II]. 8, at 111-13. COMMLAW CONSPECTUS [Vol. 12 rate market power in the underlying facilities A second example of a regulatory classification from the ability to provide an information service. battle affecting broadband is Voice-over-Internet As the Commission explained: Protocol ("VolP"). Specifically, consider the fol- Because enhanced services are dependent upon the lowing example: Vonage Holdings Corp. common carrier offering of basic services, a basic ser- ("Vonage") provides a service in which it allows its vide is the building block upon which enhanced ser- subscribers to use the broadband connection the vices are offered. Thus those carriers that own common carrier transmission facilities and provide enhanced subscriber purchases from a cable operator or services, but are not subject to the separate subsidiary DSL-provider to place voice calls to and receive requirement, must acquire transmission capacity pursu- voice calls from the Public Switched Telephone ant to the same prices, terms, and conditions reflected Public Utili- in their tariffs when their own facilities are utilized. Network ("PSTN").27 The Minnesota Other offerors of enhanced services would likewise be ties Commission ("Minnesota PUC") reviewed under the same able to use such a carrier's22 facilities Vonage's offering, and, notwithstanding the fact terms and conditions. that Vonage reached its customer over that cus- Accordingly, when Incumbent Local Exchange tomer's broadband Internet access facilities and Carriers ("ILECs") introduced their own DSL- connected to the PSTN via a competitive local ex- based information services, they were required to change carrier, the Minnesota PUC concluded make standalone offerings of DSL transmission that Vonage was offering telephone service as de- capacity as a common carrier service. 23 Internet fined by Minnesota law.28 Vonage filed a petition Service Providers ("ISPs") competing with the for declaratory ruling at the FCC seeking a decla- ILEC were then able to purchase DSL transmis- ration that Vonage's service is an interstate "infor- sion services from the ILEC, and combine it with mation service," and thus beyond state commis- their own Internet applications and services in or- sion jurisdiction. 29 Again, as a direct result of the der to offer their own Internet access product to Communications Act's structure, the Commis- 24 end users. sion's classification decision will not only affect The differences in regulatory treatment of the the regulatory burden on Vonage, but also rights parent led to additional regulatory disparities. of third parties and the institutional power of For example, because cable modem services have state and local governments. not been considered "telecommunications ser- These classification battles develop because, as 25 vices"-at least prior to the Brand X decision - high tech commentator (and former FCC staffer) cable modem transmission has not been subject Kevin Werbach observed, regulation by pigeon- to universal service assessments, nor has it been hole "presumes that regulators can assign every subject to the requirements of the Communica- service to a specific category."30 Werbach noted, tions Assistance to Law Enforcement Act "In the era of analog networks, this model was rel- ("CALEA").26 In contrast, DSL transmission ser- atively easy to implement, as each service had dis- vices are subject to federal universal service assess- crete physical plant and outputs. For example, ments and to CALEA.

22 Id. at 475. This obligation today still applies even to peting carriers are not impaired without access to that por- facilities-based non-dominant common carriers that compete tion of the loop, and thus is phasing out "line sharing." See with several other carriers along the same routes, and thus generally In re Review of the Section 251 Unbundling Obliga- lack market power. tions of Incumbent Local Exchange Carriers, Report and Order 23 See In re Deployment of Wireline Servs. Offering Ad- and Order on Remand and FurtherNotice of Proposed Rulemaking, vanced Telecomm. Capability, Various Petitions, Memoran- 18 FCC Rcd. 19020 (2003). 25 F.3d 1120, 1132 dum Opinion and Order and Notice of Proposed Rulemaking, 13 Brand X Internet Servs. v. FCC, 345 FCC Rcd. 24012, 24028-30 (1998) (finding that advanced ser- (9th Cir. 2003). vices, such as DSL, are "telecommunications services" when 26 47 U.S.C. §§1001-1021 (2000). offered to the public directly or on a stand-alone basis). 27 See Vonage, How It Works, at http://www.vonage-pro 24 Initially, the Commission also required ILECs to un- motion.com/product howitworks.php (last visited Aug. 21, bundle the high frequency portion of the loop, also known as 2004). "line sharing." See generally In re Deployment of Wireline 28 Vonage Holdings Corp. v. Minn. Pub. Utils. Comm'n, Servs. Offering Advanced Telecomm. Capability and Imple- 290 F. Supp. 2d 993, 995-996 (D. Minn. 2003). mentation of the Local Competition Provisions of the 29 Id. at 1003 (explaining that Vonage also filed suit in Telecomm. Act of 1996, Third Report and Order and Fourth Re- federal district court to enjoin the Minnesota PUC's decision port and Order, 14 FCC Rcd. 20912 (1999), rev'd and remanded on the same grounds. The court agreed with Vonage and sub. nom., U.S. Telecom. Ass'n v. FCC, 290 F.3d 415 (D.C. Cir. enjoined the Minnesota PUC from enforcing its decision). 2002). The Commission has now determined that such com- 30 Werbach, supra note 8, at 40. 2004] Demise of the 1934 Act telephone networks carried voice, while over-the- The inherent flexibility of IP-based transmis- air television networks carried broadcast video."3 1 sion to deliver multiple services has led several The challenge that broadband-and IP technolo- commentators to call for what has come to be gies more generally-pose is that they test this as- called a "layered" approach to analysis of regula- sumption that "the Internet is going to swallow tion. 36 Although different commentators have telecommunications." 32 In short, it is all becom- used varying numbers of layers, one of the most ing data.3 3 common is a four-layered model of content, appli- As Werbach explains, this is inevitable from the cation, code/logic, and physical. 7 These com- concept of the Internet (and Internet Protocol) mentators advocate analyzing and developing reg- itself: ulation as appropriate in order to address com- Its designers set out not to deliver content, but to inter- petitive and other public policy issues at or be- connect networks (hence the name Inter-net). Neither tween each layer, rather than applying regulation services offered nor physical infrastructure nor geo- graphic location determine whether something is part to a service as delivered by a particular technol- 38 of the Internet .... The developers of IP deliberately ogy. The layers approach is meant to cut across made it a lowest common denominator, so that a ser- the traditional boundaries of service and technol- vice such as the World Wide Web can run over every- thing from Sun workstations on corporate networks to ogy. As one commentator argues, the layered model approach: smart mobile phone handsets3 4 to television sets using set-top boxes. digital cable removes the assumption that service boundaries are By its design, therefore, the Internet-and IP- clear and are tied to physical network boundaries; im- run directly counter to two sets of assumptions plies a more granular analysis within each layer; brings to the forefront the issue of interconnection between underlying the pigeonhole-based framework of networks, and between functional layers within those the Communications Act. First, IP breaks the link networks; and recognizes the significance of network architecture as a determining factor in shaping busi- between the delivery technology and the service 39 ness dynamics. application. VoIP is just that-and not voice over twisted pair, voice over hybrid fiber coax or voice However, the difficulty with immediately imple- over wireless device. It could be all three. Sec- menting a layered approach-whatever its ond, IP also breaks underlying assumptions about merit-is that the Communications Act itself is industry structure. In an IP era, it cannot simply not layered. Instead, as has been discussed, it is be asserted that voice service-or the underlying comprised of service and technology-based silos. ILEC twisted pair wire-is a monopoly (or has With no imminent statutory reform, the Commis- market power). What is required to make this de- sion itself faces difficult choices. One alternative termination is a rigorous, market analysis of the is to fashion a new regulatory scheme out of the kind used by federal antitrust authorities. 35 Broad- Commission's Title I authority-the approach band may be a monopoly, but on the other hand, suggested by Chairman Michael K. Powell, in the it may not. In many residential areas, it is appar- Commission's Wireline Broadband Internet Access ent that broadband is already offered in at least a NPRM and Cable Modem Declaratory Ruling.40 An- duopoly structure of competing DSL and cable other alternative is to begin with the Commis- modem services. sion's Title II authority and pare back these obli-

31 Id. Sicker/Mindel]; Sicker, supra note 8, at 9-13; and Whitt, 32 Id. at 45. supra note 8, at 23-26. 33 See Kevin Werbach, Voice in a Digital Broadband 37 See Werbach, supra note 8, at 59-60; Whitt, supra note World, 4, at http://www.werbach.com/docs/FCC-_VOIP.ppt 8, at 26 (subdividing further the physical network layer into (Dec. 1, 2003) (providing the text of Werbach's slide presen- access and transport). Sicker/Mindel suggest four layers of tation at the FCC VoIP Forum). content, applications, transport and access. Sicker/Mindel, 34 Werbach, supra note 8, at 47. supra note 36, at 88-89. 35 See Department of Justice and Federal Trade Commis- 38 See Werbach, supra note 8, at 54; Sicker, supra note 8, sion Horizontal Merger Guidelines, 57 Fed. Reg. 41,552 at 6-9; Whitt, supra note 8, at 18-23. (1992), revised, 4 Trade Reg. Rep. (CCH) para. 13,104 (Apr. "'9 Whitt, supra note 8, at 20, citing Werbach, supra note 8,1997). 8. 36 See Werbach, supra note 8, at 58-64 (describing a 40 See In re Inquiry Concerning High-Speed Access to the layered model for analyzing telecommunications and In- Internet Over Cable and Other Facilities, Declaratory Ruling ternet regulation); Douglas Sicker andJoshua Mindel, Refine- and Notice of Proposed Rulemaking, 17 FCC Rcd. 4798 (2002) ments of a Layered Model for Telecommunications Policy, I J. [hereinafter Cable Modem Declaratory Ruling], affd in part TELECOMM. & HIGH TECH L. 69, 86-88 (2002) [hereinafter and revd in part sub nom., Brand X Internet Servs. v. FCC, 345 COMMLAW CONSPECTUS [Vol. 12 gations-the approach implicated by the Ninth and the customer uses her telephone service for 4 1 Circuit's recent Brand X decision. transmission. Second, although the approach is profoundly deregulatory in nature, it is not necessarily en- III. TITLE I VERSUS BRAND X tirely deregulatory. In the Cable Modem Declaratory A. The FCC's Title I Approach Ruling, although the FCC concluded that cable modem service was an information service, it then 42 In its Wireline Broadband Internet Access NPRM issued a NPRM seeking comment, inter alia, on and Cable Modem Declaratory Ruling,43 the FCC whether it should impose a multiple ISP require- started down the path of declaring that broad- ment on cable modem system operators. 4 In the band services, including broadband transmission, debates over VoIP, it is even clearer that the Com- fall within the Act's "information services" pigeon- mission may seek not just to deregulate Title I in- hole. Chairman Powell has explained that his ap- formation services, but also to impose affirmative proach to Internet services is to start with "the cle- regulatory obligations-and perhaps even rights. anest slate possible"44 and "build from a blank One of the core assumptions of the Title I ap- slate up as opposed to from the myriad of tele- proach appears to be that in broadband markets communications regulations down." 45 This ap- that are often (but not always) at least a duopoly, proach attempts to combat the problems created there is no longer a significant concern that a by the Act's other regulatory categories by using transmission provider could use its control of ba- the information services category to create a more sic transmission facilities to reduce competition in appropriate regulatory structure for broadband the provision of enhanced, transmission facilities 46 services. that ride over those basic facilities-the competi- 49 There are a couple of notable features of this tion policy basis for the Computer II rules. To this approach. First, this approach considers the end, the Commission has sought comment on product sold to the consumer as an integrated of- whether it should eliminate the requirement that fering to the public, not a bundle of two separate facilities-based common carriers make available products-an information service and a telecom- basic transmission facilities that underlie their 50 munications service. 47 The FCC adopted this posi- own information services. This assumption is tion notwithstanding the fact that the cable opera- further discussed in Section IV(A). tor-and the ILEC DSL provider-is providing its A second assumption apparently being made by broadband customer both with the underlying the Commission is that it has the legal authority to broadband transmission as well as computer promulgate any regulations that it deems neces- processing and access to databases. This is in con- sary for Title I information services. In addition trast to dial-up Internet access in which the ISP to competition policy issues, Title I of the Com- provides only the processing/access to databases,

F.3d 1120, 1132 (9th Cir. 2003). 4823-24; Wireline Broadband Internet Access NPRM, supra 41 Id. note 6, at 3028-31. 42 Wireline Broadband Internet Access NPRM, supra 48 See Cable Modem Declaratory Ruling, supra note 40, at note 6. 4839. 43 Cable Modem Declaratory Ruling, supra note 40. 49 See Wireline Broadband Internet Access NPRM, supra 44 Michael Feazel, Powell Says Internet Regulation Should note 6, at 3040. Startfrom Blank Slate, COMM. DAILY, Oct. 15, 2003, at 4 (citing Michael K_ Powell, Address to the United States Telecommu- Because the rules adopted in the Computer Inquiries were nications Association (Oct. 14, 2003)). based on assumptions shaped largely by certain service 45 Michael K. Powell, Remarks at the Meeting of the and market characteristics prevalent at the time, we seek Technology Advisory Council On Voice over IP (Oct. 20, comment on whether those assumptions, and the result- 2003) at 2. ing rules, should be modified in the context of wireline 46 Another example of the approach of creating a new broadband Internet access to account for such changes. classification within the Communications Act was the Clinton For example, we seek comment on what significance we Administration's proposal for a new Title VII for broadband should place on the extent to which broadband Internet access services. See generally THE WHITE HOUSE, ADMINISTRATION services can be or are provided over a variety of WHITE PAPER ON COMMUNICATIONS Acr REFORMS 7, at http:// differentiated network platforms, such as cable, wireless, clinton6. nara.gov/1994/01 / 1994-01-25-white-paper-on-com and satellite. munications-act-reforms.html (Jan. 25, 1994). Id. 47 See Cable Modem Declaratory Ruling, supra note 40, at 50 Id. at 3042. 2004] Demise of the 1934 Act munications Act implements a number of social the Commission jurisdiction over cable televi- 57 policies, including universal service, access for sion. The Court expressly rejected arguments persons with disabilities, compliance with the re- that Section 2 (a) "[did] not independently confer quirements of CALEA, customer proprietary net- regulatory authority upon the Commission, but work information, consumer protections for pay- instead merely prescribe[d] the forms of commu- per-call services and protections against slam- nication to which the Act's other provisions may ming.5' It is unlikely that the Commission will separately be made applicable."58 The Court em- abandon these social/consumer protection objec- phasized, however, "that the authority which we tions for broadband services simply because it may recognize today under [§2(a) of the Communica- consider broadband-based services to be Title I in- tions Act] is restricted to that reasonably ancillary formation services, and it may even have lingering to the effective performance of the Commission's competition-based concerns. various responsibilities for the regulation of televi- 59 The assumption of affirmative regulatory power sion broadcasting." under Title I begs for closer examination. It is Four years later, the Supreme Court again con- true that the FCC has previously asserted broad sidered the validity of an FCC rule governing jurisdiction to regulate interstate information ser- cable television. In that case, Midwest Video I, the vices, and has been upheld in doing. 52 It is also Court upheld an FCC rule that required cable sys- true, however, that with respect to information tems of 3,500 or more subscribers that retransmit- services, the Commission has rarely-and only re- ted broadcast television stations to "operate [ ] to cently-sought to impose affirmative regulatory a significant extent as a local outlet by cablecast- 53 obligations using its Title I authority. ing and [to have] available facilities for local pro- 60 The FCC previously attempted to fashion a reg- duction and presentation of programming." ulatory scheme out of whole cloth using its Title I The plurality upheld the rule as reasonably ancil- authority when it adopted its pre-1984 cable regu- lary to the Commission's broadcast regulation be- 61 lations. 54 On three different occasions, the U.S. cause it served the same broadcasting policies. Supreme Court considered the question of the The plurality turned back objections that the local Commission's authority to issue these regulations. programming mandated by the FCC would not be 55 In the first case, U.S. v. Southwestern Cable Co., transmitted over the broadcast spectrum, stating the Supreme Court upheld an FCC enforcement that "[t]he effect of the regulation, after all, is to action against a cable operator that had extended assure that in the retransmission of broadcast sig- the carriage of a television signal outside its au- nals viewers are provided suitably diversified pro- 62 thorized Grade B contour without prior FCC au- gramming." ChiefJustice Burger concurred sep- thorization. 56 The Court ruled that Section 2(a) arately, tipping judgment in favor of the FCC. of the Communications Act, which states that the While Chief Justice Burger stated that "[c] andor Act applies "to all interstate and foreign commu- requires acknowledgement, for me at least, that nications by wire or radio," was sufficient to give the Commission's position strains the outer limits

51 See 47 U.S.C. §§222, 228, 229, 254, 255, 258 (2000) menu services be accessible to people with disabilities. See (dealing with pay-per call services, CALEA, universal service, Implementation of Sections 255 and 251(a)(2) of the Com- access for persons with disabilities and anti-slamming, respec- munications Act of 1934, as Enacted by the Telecomm. Act of tively). 1996, Report and Order and Further Notice of Inquiry, 16 FCC 52 See Computer and Communications Indus. Ass'n v. Rcd. 6417 (1999). Neither of these assertions of Title I juris- FCC, 693 F. 2d 198, 214-16 (D.C. Cir. 1982); Computer II, diction was tested on appeal. supra note 21, at 432-33. The Commission was later reversed 54 Cable Communications Policy Act of 1984, 47 U.S.C. to the extent that it attempted to assert jurisdiction over in- §522-73 (2000) (enacted by Congress in 1984, it added Title trastate information services. See California v. FCC, 905 F.2d VI of the Communications Act). 1217, 123942 (9th Cir. 1990). 55 U.S. v. Southwestern Cable Co., 392 U.S. 157 (1968). 53 In the AOL-Time Warner merger, the FCC used its Ti- 56 Id. at 160. tle I authority to justify imposing merger conditions regard- 57 Id. at 167. ing Instant Messaging and Advanced IM-based high-speed 58 Id. at 171-72. services. Applications for Consent to the Transfer of Control 59 Id. at 178. of Licenses and Section 214 Authorizations by Time Warner 60 United States v. Midwest Video Corp., 406 U.S. 649, Inc. and America Online, Inc., Transferors, to AOL Time 653 (1972) (Justice Brennan writing for the plurality, joined Warner Inc., Transferee, Memorandum Opinion and Order, 16 by Justices White, Marshall and Blackmun). FCC Rcd. 6547, para. 148 (2001). The FCC has also used its 61 Id. at 669. Title I jurisdiction to require that voicemail and interactive 62 Id. COMMLAW CONSPECTUS [Vol. 12 of even the open-ended and pervasive jurisdiction ators, which it viewed as inconsistent with the edi- that has evolved by decisions of the Commission torial discretion given to broadcasters under the and the courts," and that he was "not fully per- Act. 7 ' In Midwest Video II, the Court acknowledged suaded that the Commission has made the correct that it had relied on a restriction that did not ex- decision in this case," he ultimately deferred to plicitly limit cable regulation. 72 But it turned to the Commission's judgment in the absence of this provision of the Act in search of a limit on the 63 73 congressional guidance. Commission's ancillary authority. Four justices (a number equal to those joining If anything, recent experience shows an even the plurality) dissented vigorously, concluding more skeptical view of the Commission's Title I that the FCC had gone beyond the powers dele- authority. When the FCC attempted to use its Ti- gated to it by the Congress. They concluded, tle I jurisdiction to require video description for "Congress is the agency to make the decision and television programs, the D.C. Circuit Court of Ap- Congress has not acted,"64 and "[t] here is not the peals struck down those rules as outside the Com- slightest clue in the Act that CATV carriers can be mission's authority.74 Notwithstanding Midwest compulsorily converted into broadcasters." 65 The Video l's origins in a rule mandating local content, dissenters observed, "[t]he upshot of today's deci- the Court of Appeals held that Title I could not sion is to make the Commission's authority over be a source ofjurisdiction where the rules "signifi- 75 activities 'ancillary' to its responsibilities greater cantly implicate program content." '66 than its authority over any broadcast licensee. While not definitive, these cases show that a de- The last shoe dropped seven years later in Mid- gree of caution is warranted in assuming-in the west Video I1.67 This time, the Court made clear event the Commission relieves facilities-based that Midwest Video I was the high-water mark for common carriers of Computer II requirements to the Commission's use of Title Ijurisdiction to cre- offer a separate, basic, common carrier transmis- ate affirmative regulations. Following Midwest sion service-that the Commission has the au- Video I, the Commission had adopted regulations thority to "backfill" affirmative regulations on en- for cable systems with 3,500 or more subscribers tities that would now only be offering a Title I in- by setting a minimum capacity of twenty channels formation service. Once broadband transmission and mandating that cable operators set aside four is taken out of the "telecommunications service" channels for public, educational, governmental pigeonhole, it may not be easy to impose new, af- and leased access. 68 The rules also governed the firmative obligations, even when the public inter- cable system's permissible charges for such access. est may be compelling. On appeal, citing Midwest Video I, the Commission argued that these rules promoted "long-estab- B. Brand X and City of Portland lished regulatory goals of maximization of outlets for local expression and diversification of pro- In contrast to the path apparently being gramming-the objectives promoted by the rule charted by the FCC, in two successive decisions, sustained in Midwest Video [] ."69 the Ninth Circuit held that cable modem services 70 In Midwest Video II, a majority of the Court are not just information services, but are also held that the FCC had gone too far. Latching on "telecommunications services," for example, the to a portion of the Communications Act's defini- offering of telecommunications to the public for a tion of "common carriers" that excluded broad- fee. In the first case, AT&T v. City of Portland,76 casters, the Court concluded that the FCC had im- the Ninth Circuit rejected Portland's attempt to posed common carrier obligations on cable oper- impose a multiple ISP carriage requirement on

63 Id. at 676 (Burger, C.J., concurring in result). Justice Burger and all of the Midwest Video I dissenters). 64 Id. at 677 Uustice Douglas, dissenting, joined by Jus- 71 Id. at 699-706. tices Stewart, Powell and Rehnquist). 72 Id. at 706. 65 Id. at 680. 73 66 Id. at 681. Id. 67 FCC v. Midwest Video Corp., 440 U.S. 689 (1979). 74 Motion Picture Ass'n of America, Inc. v. FCC, 309 F.3d 68 Id. at 691-94. 796 (D.C. Cir. 2002). 69 Id. at 699. 75 Id. at 799. 70 See id. (Writing for the majority, Justice White, who 76 AT&T Corp. v. City of Portland, 216 F.3d 871 (9th Cir. had joined the Midwest Video I plurality, was joined by Chief 2000). 20041 Demise of the 1934 Act

AT&T Broadband as a condition of the transfer of mission component was a telecommunications 8 2 the Portland cable franchise from TCI to AT&T. service. The Ninth Circuit's analysis began rather un- While neither Portlandnor the per curium opin- remarkably by observing that cable modem ser- ion in Brand X shed any light on why the Ninth vice "consists of two elements: a 'pipeline' (cable Circuit initially concluded that cable modem broadband instead of telephone lines) and the In- transmission was a "telecommunications service," ternet service transmitted through that pipe- Judge Thomas, who was a member of both the line."'77 After observing that the cable modem ser- Portland and Brand X panels, filed a lengthy con- vice provider "controls all of the transmission fa- currence in Brand X that provides some insight. cilities between its subscribers and the Internet," Judge Thomas rejected the core assertion of the the Ninth Circuit leapt to the conclusion that "to FCC's cable modem declaratory ruling, that the extent that [the cable modem service] pro- "cable modem service is a single, integrated ser- vides its subscribers Internet transmission over its vice that enables the subscriber to utilize Internet cable broadband facility, it is providing a telecom- access service through a cable provider's facilities munications service as defined by the Communi- and to realize the benefits of a comprehensive ser- cations Act."78 On this basis, the Ninth Circuit vice offering. '8 3 Drawing on Computer H and the held that Portland's multiple ISP access condition dial-up structure, Judge Thomas could not accept was an impermissible attempt to use the transfer the FCC's argument that by embedding transmis- of a cable franchise to condition the provision of sion within an information service, a facilities pro- a telecommunications service, and to require the vider could sell its service to the public without provision of a telecommunications service being characterized as a telecommunications ser- 79 through a cable franchise. vice .84 Three years later, the question of the proper If the Brand X decision stands-and it may statutory classification of cable-provided broad- not-cable-based broadband likely would be clas- band services was again before the Ninth Circuit sified as a telecommunications service. As such, in Brand X v. FCC.s 0 In Brand X, even though the cable operators offering cable modem service FCC in the interim since the City of Portland deci- would be telecommunications carriers, subject to sion, had ruled that cable-provided broadband all of Title II's regulatory requirements, including services were an offering of an information service the Computer II requirement that facilities-based that used a private carriage telecommunication, common carriers offer basic transmission services rather than an offering of a telecommunications separately from their information service, which service, the Ninth Circuit nonetheless reversed. would mean that competitors could purchase the As the concurring opinion made abundantly transmission service. Whether or not tariffing ap- clear, however, the Ninth Circuit was not render- plied to cable modem services would depend on ing a judgment on the reasonableness of the whether the FCC decided to classify cable opera- FCC's classification of cable-based broadband ser- tors as dominant carriers, or as non-dominant vices,' but was applying, under stare decisis, its providers. prior holding from City of Portland that the trans- These regulatory consequences under Title II

77 Id. at 878. 82 See Brand X, 345 F.3d at 1131. 78 Id. 83 Cable Modem Declaratory Ruling, supra note 40, at 79 See id; see also 47 U.S.C. §541 (b) (3) (B) (2000) (prohib- 4823. See also Brand X, 345 F.3d. at 1136 (Thomas, J., con- iting a franchising authority from "imposting] any require- curring). ment under [Title VI of the Communications Act] that has 84 Brand X, 345 F.3d at 1138-40 (Thomas,J., concurring) the purpose or effect of prohibiting, limiting, restricting, or ("[S]omeone still has to provide telecommunications service, conditioning the provision of a telecommunications service even though the ISP's resale of this service to the public does by a cable operator or an affiliate thereof"); 47 U.S.C. not transform the ISP into a telecommunications service pro- §541(b) (3) (D) (2000) (stating that "a franchise authority vider. In the integrated cable modem context, the same may not require a cable operator to provide any telecommu- company provides these two, entirely separate services."). nications service or facilities, other than institutional net- Other commentators have found the FCC's reasoning hard works, as a condition of the initial grant of a franchise, a to swallow. See Rob Frieden, Adjusting the Horizontal and Verti- franchise renewal, or a transfer of a franchise"). cal in Telecommunications Regulation: A Comparison of the Tradi- 80 Brand X Internet Services v. FCC, 345 F.3d 1120 (9th tional and a New Layered Approach, 55 FED. COMM. L. J. 207, Cir. 2003). 232-33 (2003) (calling the FCC's Title I approach "disingenu- 81 Id. at 1132-34 (O'ScannlainJ., concurring). ous"). COMMLAW CONSPECTUS [Vol. 12 would not necessarily be permanent. At the fed- marketplace to provide a disruptive force. Dr. eral level, the FCC has the authority under Sec- Newman concluded that "any new technology tion 10 of the Communications Act to forbear platform will be quite challenged in most markets 8 5 from enforcement of any Title II requirements. to compete with the cable operators and incum- However, in contrast to the Title I approach, in bent telephone companies for the delivery of which regulatory requirements would not exist high-speed Internet access either on a stand-alone until added, under the Brand X classification, reg- basis or in conjunction with other services."88 ulations exist until forborne. Moreover, unless Even for terrestrial wireless using either licensed the Commission were to conclude that all broad- spectrum below 5 GHz or unlicensed spectrum- band facilities and services provided over broad- which he considered the best possibility for an al- band are interstate, state regulatory requirements ternative to cable and DSL-he noted: with respect to any intrastate services would re- [S]ervice providers using these technologies will be main in place unless they violated Section 253's challenged to compete broadly for high speed 8 6 Internet ban on state barriers to entry. access. Customer acquisition and service and other non-technology costs are considerably greater than technology costs. Therefore scale and the availability to IV. BROADBAND SERVICES - DUOPOLY offer new service on an incremental basis to existing to incumbents. 89 AND INTERCONNECTION. services confer a distinct advantage In the first instance, of course, the Commission A. The Regulatory Implications of Stable properly does not appear to be content to assume Duopoly the permanence of, or worse, enshrine a techno- One of the more intriguing competition policy logical duopoly. Even if near to medium term issues that carries through the debate over broad- prospects are for duopoly, the Commission has band regulation is whether broadband-particu- continued to make spectrum available and to take larly broadband transmission-is a stable duopoly other actions to enable new technological alterna- for residential and small business customers, and tives to develop with lower costs. This path by the if so, what is the proper regulatory prescription, if Commission is apparent in its spectrum deci- 90 any. Although DSL and cable modem are the cur- sions, as well as in its decision to open a Notice rent marketplace broadband transmission tech- of Inquiry into broadband over power lines.9 1 nologies (with some satellite-based service), Dr. But if duopoly of the underlying broadband fa- Stagg Newman, the Chair of the FCC's Technol- cilities is persistent for some significant, non-tran- ogy Advisory Council's Broadband Working sitory period, is this a matter for concern warrant- Group, has listed nine other technology platforms ing regulation? On the one hand, in the Commis- that "are capable now, or will be capable in the sion's Echostar-Hughes Merger Order,9 2 the Commis- '8 7 near future, of delivering most of the services. sion raised significant concerns regarding a trans- Although potential substitute technologies ex- action that in many areas resulted in a merger to ist, their mere existence does not answer the ques- duopoly for multi-channel video programming. 93 tion of whether they will be viable enough in the On the other hand, the Commission has (prop-

85 See generally 47 U.S.C. §160 (2000). 88 Id. at 1. 86 47 U.S.C. §253(a) (2000) (barring states and local gov- 89 Id. ernments from enacting laws or regulations that "prohibit or 90 In re Revision of Parts 2 and 15 of the Commission's have the effect of prohibiting the ability of any entity from Rules to Permit Unlicensed National Information Infrastruc- providing any interstate or intrastate telecommunications ture (U-NIl) devices in the 5 GHz band, Notice of Proposed service"). Rulemaking, 18 FCC Rcd. 11581 (2003); Allocations and Ser- 87 OPTICAL WORKING GROUP, FCC TECHNICAL ADVISORY vice Rules for the 71-76 GHz, 81-86 GHz and 92-95 GHz COUNCIL, BROADBAND ACCESS PLAToRMS FOR THE MASS MAR- Bands, 69 Fed. Reg. 3257 (Nov. 4, 2003) (to be codified at 47 KET: AN ASSESSMENT, 1, at http://www.fcc.gov/oet/tac/Broad C.F.R. pts. 1, 2, 15, 97 and 101). bandAccessSupportingMaterials 12 -402.pdf (Dec. 4, 91 In re Inquiry Regarding Carrier Current Systems, in- 2002). The nine enumerated technologies were Very High cluding Broadband over Power Line Systems, Notice of Inquiy, Speed Digital Subscriber Lines (VDSL), Fiber to the Premise 19 FCC Rcd. 8498 (2003). (FTFP), Broadband Powerline Communications, Satellite, 92 In re Application of Echostar Communications Corpo- Local Multi-point Distribution Systems (LMDS), Low GHz Li- ration, General Motors Corporation, and Hughes Electronics censed Wireless Systems (below 6 GHz), unlicensed wireless Corporation, Hearing Designation Order, 17 FCC Rcd. 20559 systems (e.g. WiFi), Stratospheric Platforms and Third Gen- (2002). eration Cellular Systems. Id. at 2. 93 Id. at 20625. The Commission noted, 2004] Demise of the 1934 Act erly) been reluctant to use its traditional rate reg- raised concerns that broadband transmission ulation authority to police alleged coordinated in- providers can control applications and content 94 teractions among a small number of providers. running over their networks. In the FCC's Wire- It is not at all clear whether rate regulation line Broadband Internet Access NPRA49 7 and Cable through tariffing in a duopoly market would not Modem NPRM 8 rulemaking proceedings, a coali- do more harm than good-with respect to con- tion of software applications and equipment prov- cerns of coordinated effects-because of the po- iders has asked the FCC to ensure that consumers tential for the tariff mechanism itself to facilitate have a right to attach non-harmful customer price coordination. premises equipment to broadband networks, and A core question would appear to be whether to preclude broadband transmission providers, one believes that the owners of the two predomi- and their affiliated ISPs, from discriminating nant facilities-cable and the ILEC-can use against content or applications riding over those their ownership of broadband transmission facili- facilities, subject to content/application neutral ties to limit the applications and content that ride limits on capacity.9 9 In general, cable and tele- over those facilities, and the devices that attach to phone equipment regulation has placed strict lim- those facilities. The debate of whether Computer its on cable operators' and telecommunications II-type separate offering requirements should con- carriers' ability to constrain the equipment that tinue to be applied to ILEC DSL providers and can be attached to the network. 01 ' A Title I classi- should be extended-in the form of a multiple fication for broadband network facilities could, ISP requirement-to cable operators turns on this however, put non-cable broadband facilities question. As Werbach explained, this debate "can outside of these requirements. thus be understood as a debate over whether Moreover, the expressed concerns about trans- [broadband transmission] operators can use their mission layer operators impairing competing ap- control of the physical layer ([broadband] distri- plications and content are not entirely hypotheti- bution plant) to restrict choice and competition cal. With respect to analog television signals, for at the three higher levels [(logical, applications, example, the FCC was presented with a complaint 9 content)] ." 5 Indeed, those who favor preserving in which Gemstar claimed that Time Warner Computer II requirements for ILECs providing Cable had been stripping information from the DSL-based Internet access expressly make this ar- vertical blanking interval that enabled use of gument.96 Gemstar's electronic programming guide. 10 1 In Some applications providers themselves have that case, control of the physical layer was ex-

Economists have identified several factors, which tend to note 6. increase the possibility of collusion. Collusion appears 98 Cable Modem Declaratory Ruling, supra note 40. more likely, other things being equal, when: (1) there 99 See Letter from Gerald Waldron to Marlene H. Dortch, are few firms in the market; (2) there are high barriers Secretary, FCC (Oct. 1, 2003) (filed in FCC CC Dockets No. to entry; (3) products are relatively homogeneous; (4) 02-33, 98-10, 95-20 and GN Docket No. 00-185, on behalf of contracts are for relatively short periods, and the prices the Coalition of Broadband Users and Innovators). The and terms are observable by other sellers; and (5) mar- members of the Coalition of Broadband Users and Innova- ket conditions are relatively stable," and then it con- tors are: American Electronic Ass'n, Alliance for Community cluded, "basic economic principles and the characteris- Media, Amazon.com, Inc., Apple Computer, Inc., Association tics of the market suggest that the proposed merger may for Competitive Technology, Ass'n for Independent Video increase the likelihood of collusion among [Multichan- and Filmmakers, Ass'n for Local Telecommunications Ser- nel Video Programming Distributor] providers. vices, Competitive Telecommunications Ass'n, Computing Id. Technology Industry Ass'n, Consumer Electronics Ass'n, 94 See In re Motion of AT&T Corp. to be Reclassified as a eBay Inc., Information Technology Ass'n of America, Media Non-Dominant Carrier, Order, 11 FCC Rcd. 3271 (1995); In re Access Project, Microsoft Corp., National Ass'n of Manufac- Policy and Rules Concerning the Interstate, Interexchange turers, Radio Shack Corp., The Walt Disney Co., Yahoo! Inc. Marketplace, Second Report and Order, 11 FCC Rcd. 20730, Letter from Coalition of Broadband Users and Innovators to 20750-53 (1996). Chairman Michael K. Powell, Commissioner Kathleen Q Ab- 95 Werbach, supra note 8, at 66. ernathy, Commissioner Michael J. Copps and Commissioner 96 See Whitt, supra note 8, at 53 ("[T]he failure to appro- Kevin Martin (Nov. 18, 2002) (filed in CC Dockets No. 02-33, priately regulate last-mile broadband facilities will allow those 98-10 & 95-20, CS Docket No. 02-52 and GN Docket No. 00- providers to extend their market power into the higher lay- 185). ers, including applications and content; this form of vertical 100 47 U.S.C. §§544 (a), 549 (2000); 47 C.F.R. pt. 68 integration would cause undue harm to the Internet."). (2003). 97 Wireline Broadband Internet Access NPRM, supra 101 See In re Gemstar Int'l Group, Ltd. and Gemstar Dev. COMMLAW CONSPECTUS [Vol. 12 tended to the application layer when the operator is interconnection requirements. This will be an of the physical layer filtered content. Those that issue that needs to be addressed, particularly with are seeking a "net neutrality" rule to be applied to respect to VoIP services, which will in many in- applications and content transmitted over broad- stances seek to interconnect with the Public band transmission facilities seek protection Switched Telephone Network ("PSTN"). And, it against just this type of behavior by facilities-based could become a concern issue with respect to ISPs that may seek to advantage their own applica- broadband network providers themselves. tions and content. 10 2 Again, if broadband trans- It is important to recognize that market power mission is classified as a private telecommunica- from interconnection is not the same as market tions component of a Title I information service, power from control of limited underlying facili- rather than as a telecommunications service, then ties. As was reflected in the Department of Jus- Section 202's protections against unjust or unrea- tice's and European Union's consideration of the sonable discrimination 103 would not be applica- proposed Worldcom/Sprint and MCI/Worldcom ble, and no non-discrimination requirement mergers, as well as the Department ofJustice's dis- would apply in the absence of a new, affirmative position of WorldCom's acquisition of In- Title I-based rule. termedia, competition policy issues can be raised As it resolves issues of multiple ISP access on when one network is, or threatens to become, cable systems, whether to continue the Computer H large enough that it has an incentive to deny in- separate offering requirements, and requests for terconnection to other networks in order to drive "net neutrality" rules, the Commission will have to the other networks' subscribers to the larger net- reach a judgment about the likely ability of duop- work.10 4 Significantly, the levels of market share at oly technologies to leverage control of transmis- which network "tipping" became a significant con- sion facilities to affect competition in applications cern to antitrust authorities was much lower than and content. And, even if it does conclude that current incumbent LEC market shares of tradi- there is the potential for such competitive harm, tional circuit switched lines. the Commission also will have to make a judg- Using VoIP as an example, these cases suggest ment regarding how long the transmission provid- the possibility that an ILEC could have the incen- ers may continue to have such an ability, and tive and ability to deny interconnection to a VoIP whether the benefits of addressing any potential provider, absent regulation. By refusing intercon- anticompetitive conduct outweigh the costs. nection, the ILEC would not allow VoIP users to reach, or be reached by callers on the PSTN, B. Interconnection and Network Effects thereby dramatically diminishing the value of VoIP services. Alternatively, such interconnection A second set of issues affecting broadband net- could be priced in a manner that could severely works and services provided over those networks limit the development of VoIP.

Corp., Memorandum Opinion and Order, 16 FCC Rcd. 21531 broadband service, or attach nonharmful devices to the net- (2001). Gemstar operated an electronic programming work." Id. guide. The Gemstar guides used information provided in 103 47 U.S.C. §202 (2000). the vertical blanking interval of the television signal, which is 104 See Complaint of United States at 14-15, United States an area between picture images. Time Warner stripped the v. WorldCom Inc. and Sprint Corp., Civil Action No. 1:00 CV Gemstar information from the broadcast television signal 01526 (D.D.C., filed June 27, 2000) (alleging that a com- into which it had been embedded by the broadcaster. When bined 53% share of Internet traffic sent to or from customers Gemstar complained to the FCC, Time Warner argued that it of the fifteen largest Internet backbones in the United States was not compelled to transmit this information under the would be anticompetitive); Commission Decision Declaring a "must-carry" rules, and therefore had the ability to strip out Concentration to be Compatible with the Common Market the information in the absence of a carriage agreement with and the Functioning of the EEA Agreement, 1999 O.J. (L Gemstar. The FCC agreed with Time Warner. Id. 116) 1, at http://europa.eu.int/eur-lex/en/archive/2004/l_ 102 Letter from Gerald Waldron to Marlene H. Dortch, 09220040330en.html (last visited Aug. 21, 2004); Complaint supra note 99, at 11. As described in a recent ex parte, the of United States at 11, United States v. WorldCom Inc. and Coalition of Business Users and Innovators urges the Com- Intermedia Communications Inc., No. 1:00 CV 02789 mission to adopt "a simple safeguard to prohibit a broadband (D.D.C. filed Nov. 17, 2000) (alleging that the combination service provider from, on a discriminatory or unreasonable of the WorldCom and Intermedia backbones, which was less basis, interfering with or impairing subscribers' ability to use than the proposed WorldCom/Sprint combination, could their broadband service to access lawful Internet content or have led to anticompetitive harms due to "tipping"). services, use applications or services in connection with their 2004] Demise of the 1934 Act

Title II's interconnection requirements, as em- V. CONCLUSION bodied in Sections 251 and 252, however, only ap- The rise of broadband, and IP services more ply to "telecommunications carriers."' 0 5 Thus, if generally, creates real challenges in applying the VoIP is an information service, the ILEC could ar- 1934 Act's regulatory framework. It is a case of gue that a VoIP provider is not entitled to inter- round pegs and square holes. But until Congress connection under the Act. While VoIP providers gets around to revising the Act, round pegs may could then contract or affiliate with a Competitive be the only alternative. In this environment, it Local Exchange Carrier ("CLEC") to provide in- will be critical for the Commission to recognize terconnection services (in essence becoming a that once it embarks down a particular classifica- customer of a CLEC so that the CLEC can use its tion, it may not be easy to turn back. The courts interconnection rights to connect the VoIP pro- will have a substantial role in affirming or revers- vider to the PSTN), there is little doubt that these ing classification choices, and also in reviewing arrangements will also engender litigation and any attempts by the Commission to write new reg- confusion, particularly where the CLEC and VoIP ulations under Title I. Where, as a policy matter, provider are affiliates. There may be no other al- the wisdom of selecting a Title I classification ternative, however, unless the Commission uses its turns upon the Commission's ability to write regu- Title I authority to require ILECs to interconnect lations to address public interest regulations with information service providers. under Title I, the Commission must consider the public interest consequences should the courts re- ject its jurisdiction to impose new regulations.

105 47 U.S.C. §§251, 252 (2000).