The Supreme Court handed the cable industry and the Federal Communications Commission a big victory June 27 in upholding the commission's 2002 ruling that cable operators are not required to open up t

(The Hollywood Reporter) -- The Supreme Court handed the cable industry and the Federal Communications Commission a big victory June 27 in upholding the commission's 2002 ruling that cable operators are not required to open up their broadband pipelines to networks to rival Internet service providers.

In a 6-3 decision, the court held that the FCC properly decided to categorize cable operators as "information service" providers when it comes to offering Internet access rather than "telecommunications service" providers. The Brand X case, named after the indie Internet service provider that challenged the FCC ruling in the Ninth Circuit Court of Appeals, largely hinged on that distinction because under federal law, telecommunications service providers are subject to stricter FCC regulation and must open up their networks to rivals.

In the majority opinion penned by Justice Clarence Thomas, the court reasoned that cable operators' broadband connection services were only one component of a package of services that consumers rely on when accessing the Internet, the Usenet, the World Wide Web and other services requiring a high-speed online connection. As such, the cable operators' broadband services cannot be classified as a full-blown telecommunications service unto itself, and the courts should defer to the FCC's expertise in determining when and how to regulate such services, Thomas wrote.

"The service that Internet access providers offer the public is Internet access, not a transparent ability (from the end-user's perspective) to transmit information," Thomas wrote. "A consumer cannot purchase Internet service without also purchasing a connection to the Internet, and the transmission always occurs in connection with information processing."

The Supreme Court decision trumped the Ninth Circuit ruling that reversed the FCC's initial decision. The appellate court wrote that cable operators should be considered telecommunications providers and submit to the law's open-access provisions. But lawyers and advocates on both sides of the issue predicted that the debate over open access for cable broadband providers would continue to be fought in legislative arenas as well as at the FCC.

The FCC in its initial ruling reasoned that cable operators should be shielded from the stricter regulations imposed on telco providers because broadband remains a developing technology and thus cable operators should have every incentive to invest in the necessary equipment upgrades to offer high-speed services to their subscribers. MCI and other telco giants argued in favor of open access, noting that the FCC forced them to open up their lines to rival ISPs when telcos began offering high-speed DSL services on their networks.

Not surprisingly, the Supreme Court's endorsement of the FCC's view was applauded by the cable industry's lobbying group, the National Cable & Telecommunications Assn., and FCC chairman Kevin Martin. The Bush administration also supported the FCC's initial ruling.

"Classifying cable modem service as an interstate information service, as the FCC did, keeps this innovative service on the right deregulatory path," NCTA president/CEO Kyle McSlarrow said.

Martin, the newly appointed FCC chairman, said the decision "provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers" and will allow the commission "quickly to finalize regulations that will spur the deployment of broadband services for all Americans."

But Brand X, EarthLink and other independent ISPs and consumer advocates maintained that consumers would face fewer choices and higher prices for high-speed Internet access services unless the major cable players such as Comcast Corp. and Time Warner Cable were forced to open their pipelines to outside competitors.

That view was echoed by FCC commissioner Michael Copps, who voted against the majority in the initial 2002 ruling.

"In the wake of this decision, the FCC confronts the challenge of protecting consumers, maintaining universal service and ensuring public safety in uncertain legal terrain," Copps said. "Today's decision makes the climb much steeper."

Joining Thomas in the majority were Chief Justice William Rehnquist and Justices John Paul Stevens, Sandra Day O'Connor, Anthony Kennedy and Stephen Breyer. In his dissent, Justice Antonin Scalia argued that consumers don't make the distinction between cable broadband being only a means to an end of getting on the Internet. Scalia illustrated his point with a lengthy analogy comparing the cable industry's argument to that of a pizza parlor employee telling a prospective customer that it doesn't offer delivery as a distinct service per se but only as an add-on item for consumers who purchase a pizza as well.

"Any reasonable customer would conclude at that point that his interlocutor was either crazy or following some too-clever-by-half legal advice," Scalia wrote in his dissent, which was joined in part by Justices David Souter and Ruth Bader Ginsburg.