Brand X has two distinct elements– the internet/telecom aspects and the administrative law aspects. I will focus on the internet/telecom aspects of the ruling and leave the administrative law aspects to the experts.
>National Cable & Telecommunications Assoc. v. Brand X Internet Services
Opinion (Thomas), Concurrence (Stevens), Concurrence (Breyer).
Dissent (Scalia):
Brand X and Administrative Law
As far as the administrative law aspects, the Court ruled that Chevron deference should be applied to the Commission’s decision classifying cable modem service as an “information service.” Prior inconsistency with past practice does not render an agency rule unreasonable. Such an inconsistency may be an arbitrary and capricious change only if the agency fails to explain the change. Where the statute is ambiguous, the agency’s interpretation of the statute will trump a court’s prior judicial interpretation unless “the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.”
The information service & telecommunications service distinction
The distinction between an information service and telecommunications service is important in determining the authority which the FCC may exercise over a service provider and how the services are regulated under the Telecommunications Act.
Let’s start by looking at the text of the statute, in particular the 47 USC §153 definitions of telecommunications service and information service.
(46) Telecommunications service
The term “telecommunications service” means the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.
(43) Telecommunications
The term “telecommunications” means the transmission, between or among points specified by the user, of information of the user’s choosing, without change in the form or content of the information as sent and received.
(20) Information service
The term “information service” means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.
So, an information service is primarily concerned with transmitting information from a centralized source or sources to individuals, while a telecommunications service conveys unaltered information between individuals on the edge of the network.
Seen from the consumer’s point of view, the Commission concluded, cable modem service is not a telecommunications offering because the consumer uses the high-speed wire always in connection with the information-processing capabilities provided by Internet access, and because the transmission is a necessary component of Internet access: “As provided to the end user the telecommunications is part and parcel of cable modem service and is integral to its other capabilities.” Declaratory Ruling 4823, ¶39. The wire is used, in other words, to access the World Wide Web, newsgroups, and so forth, rather than “transparently” to transmit and receive ordinary-language messages without computer processing or storage of the message. See supra, at 4 (noting the Computer II notion of “transparent” transmission). The integrated character of this offering led the Commission to conclude that cable modem service is not a “stand-alone,” transparent offering of telecommunications. Declaratory Ruling 4823—4825, ¶¶41—43.
From the consumer’s point of view, cable modem access is different from DSL access? Even though many cable subscribers are paying for “information services,” such as email, web page and newsgroup servers, we do not use these services and only use the cable connection as a dumb way to access information services on the internet. The cable modem connection is just a dumb pipe. Well, except that the cable ISP (like any other ISP) provides DNS service which translates domain names that people understand (e.g. www.iptablog.org) into the IP addresses that computers understand (66.39.34.162).
The Court finds that because cable modem service provides the necessary capabilities to access information services, it is itself an information service.
The question, then, is whether the transmission component of cable modem service is sufficiently integrated with the finished service to make it reasonable to describe the two as a single, integrated offering. See ibid. We think that they are sufficiently integrated, because “[a] consumer uses the high-speed wire always in connection with the information-processing capabilities provided by Internet access, and because the transmission is a necessary component of Internet access.” Supra, at 16. In the telecommunications context, it is at least reasonable to describe companies as not “offering” to consumers each discrete input that is necessary to providing, and is always used in connection with, a finished service. We think it no misuse of language, for example, to say that cable companies providing Internet service do not “offer” consumers DNS, even though DNS is essential to providing Internet access.
In his dissent, Justice Scalia uses some unfortunate analogies to demonstrate why the provision of information services can be separated from the provision of internet access:
Thus, I agree (to adapt the Court’s example, ante, at 18) that it would be odd to say that a car dealer is in the business of selling steel or carpets because the cars he sells include both steel frames and carpeting. Nor does the water company sell hydrogen, nor the pet store water (though dogs and cats are largely water at the molecular level). But what is sometimes true is not, as the Court seems to assume, always true. There are instances in which it is ridiculous to deny that one part of a joint offering is being offered merely because it is not offered on a “ ‘stand-alone’ ” basis, ante, at 17.
If, for example, I call up a pizzeria and ask whether they offer delivery, both common sense and common “usage,” ante, at 18, would prevent them from answering: “No, we do not offer delivery–but if you order a pizza from us, we’ll bake it for you and then bring it to your house.” The logical response to this would be something on the order of, “so, you do offer delivery.” But our pizza-man may continue to deny the obvious and explain, paraphrasing the FCC and the Court: “No, even though we bring the pizza to your house, we are not actually ‘offering’ you delivery, because the delivery that we provide to our end users is ‘part and parcel’ of our pizzeria-pizza-at-home service and is ‘integral to its other capabilities.’ ” Cf. Declaratory Ruling 4823, ¶39; ante, at 16, 26.1 Any reasonable customer would conclude at that point that his interlocutor was either crazy or following some too-clever-by-half legal advice.
While the law recognizes a de minimis exception for information services provided as part of telecommunications services, Justice Thomas finds that the DNS services offered by cable ISPs classify as a service that offers a capability for “generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.”
This construction does not leave all information service offerings exempt from mandatory Title II regulation. “It is plain,” for example, that a local telephone company “cannot escape Title II regulation of its residential local exchange service simply by packaging that service with voice mail.” Universal Service Report 11530, ¶60. That is because a telephone company that packages voice mail with telephone service offers a transparent transmission path–telephone service–that transmits information independent of the information-storage capabilities provided by voice mail. For instance, when a person makes a telephone call, his ability to convey and receive information using the call is only trivially affected by the additional voice-mail capability. Equally, were a telephone company to add a time-of-day announcement that played every time the user picked up his telephone, the “transparent” information transmitted in the ensuing call would be only trivially dependent on the information service the announcement provides. By contrast, the high-speed transmission used to provide cable modem service is a functionally integrated component of that service because it transmits data only in connection with the further processing of information and is necessary to provide Internet service. The Commission’s construction therefore was more limited than respondents assume.
The Court’s opinion allows the FCC to classify cable broadband internet service as an information service, rather than a telecommunications service. The benefit of this classification for cable internet users is avoiding the regulatory requirements of a telecommunications service, including universal service fees. The detriment is that cable providers do not have to open up their networks, insulating cable operators from competition. In contrast, incumbent DSL providers have to provide open access to the local networks, because DSL is a telecommunications service. Cable access is not quite a monopoly service, since it does compete in DSL, except in those areas where only one flavor of broadband access is available.
Another potential problem with this classification is that it may allow cable operators to create non-neutral networks. Generally, internet access works as a common carrier– once you are on the network, you can access services provided by third parties. If cable internet access is an information service, in the absence of more rules, the cable ISP can restrict access to third party services. Want to use a different email server? Too bad. Want to access streaming video content? Only if comes from a “partner” of the cable ISP. If the cable operators do not have to act as common carriers, the internet may no longer be a true end-to-end network, but a collection of “walled garden” services.
All in all, the decision does little to clarify telecommunications law and regulations. Perhaps Congress does need to step in and update the Telecom Act. After all, in internet time, 1996 is positively ancient. In addition, the US is lagging behind other states in promoting broadband.
In the May/June issue of Foreign Affairs, Thomas Bleha notes that the US no longer leads the world in deploying broadband connectivity: Down to the Wire : “In the first three years of the Bush administration, the United States dropped from 4th to 13th place in global rankings of broadband Internet usage. Today, most U.S. homes can access only “basic” broadband, among the slowest, most expensive, and least reliable in the developed world…. In fact, the United States is the only industrialized state without an explicit national policy for promoting broadband.”
Discussion, Links, Notes and Commentary
FCC Chairman Kevin J. Martin: “I am pleased that the U.S. Supreme Court has affirmed the FCC’s ruling. This decision provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers. We can now move forward quickly to finalize regulations that will spur the deployment of broadband services for all Americans.”
Susan Crawford: It’s More Important Than Grokster: “The consequences of BrandX (also decided today) are more important than those of Grokster. Grokster keeps the status quo in place. BrandX opens up a whole new world of regulatory power… In BrandX, Justice Thomas gets very confused about the internet and ends up essentially announcing that everything a user does online is an ‘information service’ being offered by the access provider. DNS, email (even if some other provider is making it available), applications, you name it — they’re all included in this package. And the FCC can make rules about these information services under its broad ‘ancillary jurisdiction.'”
Susan Crawford: If Someone Asks You About BrandX… “The problem with this classification by the FCC is that the statutory definition of “information service” doesn’t fit with what internet access actually is. Information services are supposed to be things that generate, acquire, store, transform, process, retrieve, or make available information across telecommunications connections. The FCC reasoned that cable modem service is an information service because it gives people the ability to manipulate information using the internet across high-speed telecommunications. But that’s not really right. Cable modem service allows people to reach online information, but doesn’t necessarily allow them to manipulate it.”
Tim Wu: Brand X & Network Neutrality: “Hopefully Brand X is good news: it gives the FCC room to try and ignite all-out warfare between cable, DSL, and whatever else. The battles with independent ISPs at some point had become a distraction and a sideshow that may have slowed deployment. Some will disagree with me, but I have long thought Title II or open access requirements for broadband as just a form of protection for a declining industry.”
News.com: Cable wins Supreme Court battle: “The cable industry can breathe a sigh of relief, as the U.S. Supreme Court has ruled that cable companies will not have to share their infrastructure with competing Internet service providers.”
AP: Cable Companies Don’t Need to Share Lines: “The Supreme Court ruled on Monday that cable companies may keep rival Internet providers from using their lines, a decision that will limit competition and consumers’ choices.”
