Appeals court upholds ruling that cable modems are telecom

The Ninth Circuit Court of Appeals today denied the FCC’s petition for an en banc rehearing in the “Brand X” case, meaning cable-modem offerings will be classified as telecommunications services that are subject to common-carrier regulations.

“The full court has been advised of the petitions for rehearing en banc and no active judge requested a vote on whether to hear the matters en banc,” according to the court. “The petitions for rehearing and suggestions for rehearing en banc are therefore denied.”

With this decision, last October’s ruling by a three-judge Ninth Circuit panel that declared cable-modem access to be a telecommunications service will become effective in seven days, assuming the order is not stayed, according to a report issued by Legg Mason analysts Rebecca Arbogast and David Kaut. The FCC’s position that cable-modem offerings are interstate information services will remain in effect until then.

At least one cable official said the case will be appealed to the Supreme Court.

“While we are disappointed with the Ninth Circuit ruling, we will urge the FCC to seek U.S. Supreme Court review,” said Dan Brenner, senior vice president of law and regulatory policy for the National Cable & Telecommunications Association, in a prepared statement. “We believe that, if and when the Ninth Circuit’s decision is given a full substantive review by the Supreme Court, it will be reversed.”

FCC Chairman Michael Powell also expressed disappointment with the Ninth Circuit, saying the court should have reviewed the merits of the agency’s policy instead of depending on previous case law. “This decision also prolongs uncertainty to the detriment of consumers,” Powell said in a prepared statement. “That is why we will study our options and explore how to continue to advance broadband deployment for all Americans.”

Legg Mason said it believes the FCC will join cable companies in appealing the decision, but getting the Supreme Court to take the case may be difficult. Getting the Solicitor General’s recommendation that the Supreme Court grant certiorari is critical, and law-enforcement’s desire to ensure wiretapping accessibility—something that is guaranteed in a telecommunications service—may make it hard for him to have the take such action, the report said.

However, an appeal to the Supreme Court likely will buy cable operators some time before having to deal with increased regulation.

“We believe that, even if the [Ninth Circuit] court’s decision goes into effect, there will not be immediate application of any common-carrier rules to the cable broadband services while the Supreme Court review decision is being made,” the Legg Mason report states.

Telecom carriers have long expressed a desire to have DSL declared an information service like cable-modem offerings, which are not subject to as much regulation, including the need to provide nondiscriminatory access to competitors. If the Supreme Court does not overturn the Ninth Circuit, there would be regulation-based parity between telecom and cable operators, but not the deregulatory environment sought by telecom carriers.