Intellectual Property Law

Plain-language explanation - part I

By Susan Crawford

Last week’s letter to the FCC from the network provider industry has a lot of people talking.

For lots of reasons, the US government for a hundred years required basic general-purpose interactive networks - you can lable them “telephone” and “telegraph” - not to discriminate.  There’s also been a requirement to interconnect with other networks.

Over the last forty years or so, the US government also made strenuous efforts to require those basic general-purpose interactive networks to be subject to competition.  The government removed barriers the network-owners had created to both non-network-owner equipment (modems, handsets) and non-network-owner transport facilities (microwave networks).  Indeed, the US government went pretty far, breaking up the AT&T monopoly in 1984 and passing the 1996 Act to introduce and support competition.  We had the idea that competitive access to natural-monopoly communications networks could catalyze entry, investment, and innovation. And so the 1996 Act required incumbent local telephone companies to make their lines into peoples? homes and businesses available to their competitors, to unbundle their services and sell elements separately to competitors, and to allow competitors to co-locate their equipment in the offices of the incumbents.

And, again, we assumed that basic general-purpose communications networks would be subject to nondiscrimination and interconnection obligations.  We eventually allowed providers of general-purpose communications networks into the business of providing “enhanced” services (sometimes now called “information” services, but that’s inside baseball), but only if basic services continued to be provided separately in a nondiscriminatory fashion.

When the commercial Internet took off in the mid/late-1990s, the government wanted to shield the new Internet access providers that were being dialed into by subscribers from heavy universal service charges.  (At that point, Internet access providers were businesses that were separate from the network providers.  They were taking advantage of the carriers’ nondiscrimination and interconnection obligations in order to provide connections to the Internet.)

To protect these Internet access providers from having to pay into the universal service fund, the FCC decided that Internet access was an enhanced, not basic, service.  This determination was based on two assumptions:  (1) that there would continue to be basic service providers that would be providing pure transport to customers, and (2) that ISPs would be providing other services like mail servers, hosting web pages, and operating caches.

At the time the 1996 Act was passed, telephone companies were treated like providers of basic general-purpose networks - common carriers. When they started providing high-speed DSL access to the Internet over their own copper lines (using electronics to enhance the speed of communications), they were still treated like common carriers and required to unbundle this high-speed service for sale to competitors who wanted to resell it.

By contrast, the FCC had never regulated cable operators like common carriers. Instead, they were subject to a very light-touch regulatory regime ? they were viewed essentially as entertainment broadcasters who were not broadcasting using public airwaves and thus were not subject to the full range of broadcaster ?public trustee? obligations.  Cable system operators (initially) were also not providers of general-purpose two-way communications networks and thus were not subject to common carriage non-discrimination requirements drawn from telegraphy and telephony.

When cable operators got into the business of providing Internet access via cable modems, these regulatory wires (or traditions) crossed. The FCC was initially unwilling to say how this service would be treated as a regulatory matter. From the ?level playing field? perspective, what cable operators were doing was exactly like what DSL providers were doing: providing physical transport for high-speed connections to the Internet over the ?last mile? between their offices and the user?s home or business. This perspective would argue for treating cable operators just like telephone companies with respect to their Internet access function.

But the FCC decided in 2002 that because telephone companies had been required to offer pure transmission (general-purpose, basic transport) historically, they were telecommunications (basic) providers even when what they were selling was DSL access to the Internet. But because cable operators had never been subject to the pure transmission requirement, they could avoid regulation by continuing to refuse to provide pure transmission services ? effectively deregulating themselves.  Cable got treated differently as a result.

Make sense?  We’re not even halfway through this story.  More tomorrow.

Full post as published by Susan Crawford Blog on March 02, 2010 (boomark / email).