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IN THIS ISSUE NOVEMBER 2000

• Letter from the Chair
• Information Security Committee Meeting was No Secret
• London Session on Biotechnology Now Available on Internet
• NCLS Update
• San Diego 2001 ABA MidYear Meeting Section Schedule
• Technical Standardization Law Committee: What Is It All About?
• Regulatory Status of Cable Internet Access
• Special Insert:Internet Taxes: congressional Efforts to Control States' Ability to Tax the World Wide Web

Regulatory Status of Cable Internet Access
by Bill Baker (1)

Convergence in the communications industry challenges communications law's traditional regulatory categories. A good example is the legal classification of cable Internet access service. While the Communi-cations Act contemplates different regulatory regimes for "cable service," "telecommunications service," and "information service," neither Congress nor the Federal Communications Commission has decreed into which statutory category cable-based Internet access service falls. Yet, classifying the regulatory status of cable Internet service is a prerequisite to determining both what regulatory requirements apply to cable Internet access (if any) and the appropriate jurisdictional authority to apply them.

This uncertainty has not arisen by accident. Instead, due to a desire "not to regulate the Internet," the FCC has consistently avoided classifying cable Internet access service ever since the Telecommuni-cations Act of 1996. Local authorities and courts have filled the void caused by the FCC's silence.

Their efforts, however, have produced incon-sistent - and mutually exclusive - classifications in three different federal circuits. These conflicting interpretations of the fundamental jurisdictional classification of cable Internet access undermine business certainty and promote fruitless litigation. Although the FCC now appears willing to address this issue directly, how it eventually resolves the question could shape the cable Internet regulatory landscape for years to come.

The Interpretive Void Left by the FCC

Despite several opportunities to classify cable Internet access for regulatory purposes, the FCC has repeatedly declined to do so. After passage of the 1996 Act, the FCC recognized that "Internet service does not meet the statutory definition of a 'telecommunications service.'"(2) The FCC later confirmed in its 1998 Universal Service Report to Congress that wireline Internet access is an information, rather than tele-communications, service. (3) Neither determination, however, directly addressed the status of Internet access services provided through cable systems. Indeed, when presented with that question in its contemporaneous proceeding on pole attachments, the FCC simply declined to classify cable Internet access, stating only that cable operators were not providing a telecommunications service by virtue of offering cable Internet access.(4)

The issue next arose in the FCC's review of the AT&T-TCI (5) and AT&T-MediaOne(6) mergers. There, the FCC was asked by parties challenging the merger to require AT&T to provide "open access" to its cable systems for unaffiliated Internet access service providers. However, the FCC, preferring as a matter of policy not to impose any open access requirement, continued to refrain from adopting a cable Internet service classification and relied instead on market forces.

Efforts to Fill the Void

Local cable franchise authorities implicitly made the first classifications of cable Internet access by imposing cable Internet open access requirements pursuant to their authority to review transfers of control of their franchised cable systems in the course of the AT&T mergers. The issue next moved to the federal courts, as they reviewed challenges to local authorities' open access requirements and the FCC's pole attachment decision. This process has produced dramatically different classification decisions in the federal circuits.

Gulf Power Company v. FCC: Information Service

In the Eleventh Circuit's Gulf Power Company v. FCC(7) decision, the court concluded that cable Internet service is an information service. The Gulf Power court did so in evaluating the FCC's authority to regulate the pole attachments of wire used for cable Internet service, which hinged on the classification of cable Internet access as either a "cable service" or "telecommunications service." (8) The Eleventh Circuit first rejected the broad reading of the definition of "cable service" that it believed would be necessary to incorporate a service such as cable Internet access.(9) Next, the court concluded that cable Internet service was also not a "telecommunications service," based on two FCC decisions holding that wireline Internet access service is not a "telecommunications service." (10) Although these determinations adequately resolved the issue before the court, the Eleventh Circuit proceeded to conclude that cable Internet access is an information service, based solely on the FCC's statement in In re Federal-State Joint Board on Universal Service that wireline "Internet service providers themselves provide information services." (11)

In view of a long line of FCC precedent essentially disclaiming regulation of most information services, the Eleventh Circuit's "information service" classification largely takes cable Internet access service out of the FCC's regulatory jurisdiction.(12)

The agency historically has not regulated information services offered by entities that are not regulated telephone carriers, and has at least implied it lacks the necessary jurisdictional authority.(13)

AT&T v. Portland: Telecommunications Service

The Ninth Circuit, in AT&T v. City of Portland,(14) determined that cable Internet access was a "telecommunications service," and thus overturned a local open access ordinance pursuant to the city's local cable franchising authority. Initially, a federal district court in Oregon accepted the local authorities' "cable service" classification, upholding the jurisdiction of local franchise bodies to regulate cable Internet service.(15) On appeal, however, the Ninth Circuit reversed the district court, declaring cable Internet access to be a "telecommunications service." The Court of Appeals found that the interactivity possible with cable Internet access exceeded the scope of "subscriber interaction" encompassed in the statutory definition of a "cable service."(16) Instead, the Ninth Circuit placed decisive significance on its view that the cable operator's ISP "controls" the cable broadband network between the subscriber and the Internet, and thus provides a "telecommunications service" when it makes its Internet access service available to customers.(17)

The Ninth Circuit's "telecommunications service" classification took cable Internet regulation out of the hands of local franchise authorities, but otherwise left many issues unresolved. For one, the decision did little to resolve the dispute over open access to cable Internet service. If cable Internet transmission service is a "telecommunications service," competing ISPs may be able to obtain access through existing nondiscrimination and resale requirements of Title II.

Furthermore, while local franchise bodies have no jurisdiction over telecommunications service, state utility commissions may exercise authority over "intrastate" telecommunications service. The FCC had previously characterized Internet service as "interstate,"(18) and thus within its sole regulatory jurisdiction. However, this interpretation was recently struck down by the D.C. Circuit as inadequately supported.(19) Thus, in the Ninth Circuit the possibility exists of joint federal and state regulation of cable Internet service.

MediaOne Group v. County of Henrico,Virginia: Cable Service

In MediaOne Group v. County of Henrico, Virginia (20) the federal District Court for the Eastern District of Virginia adopted a "cable service" classification for cable Internet access, but nonetheless overturned Henrico County's open access ordinance. The district court reasoned that, because the Road Runner cable Internet service includes news, commentary and other proprietary content with which subscribers interact, it fell within the definition of a "cable service."(21) This case is now on appeal to the Fourth Circuit, with the potential for a federal appellate court classification of cable Internet service that differs from both the AT&T v. Portland and Gulf Power.(22)

Although the district court held that the Communications Act preempted Henrico County's open access ordinance, the "cable service" classification preserves some regulatory authority for local governments. Thus, under the Eastern District of Virginia's approach, even though the particular regulatory measures taken by Henrico County were preempted, local franchise authorities may remain free otherwise to regulate cable Internet access consistent with the Communications Act.

A Potential FCC Action

Even though market forces may well resolve, through business decisions, the controversy over cable Internet access service, the legal questions remain open. Spurred by these conflicting court decisions, the FCC now appears finally ready to address the classification of cable Internet access service. In its recent report to Congress on the status of deployment of advanced telecommunications capability to U.S. consumers, the agency stated that it would initiate a proceeding aimed specifically at establishing a national cable open access policy. The FCC hopes that this will "bring certainty to the marketplace" for cable Internet service.(23)

The promised FCC proceeding is now expected to begin in early fall. Although market forces may resolve the business disputes, the legal and policy framework may require regulatory attention. Parties having an interest in the legal and regulatory classification of cable-based Internet access service may wish to follow attentively the FCC's upcoming proceeding.

Endnotes

1. By William B. Baker, Wiley, Rein & Fielding (Washington, D.C.) and Chair, Communications Law Division. Mr. Baker gratefully acknowledge the assistance in the preparation of this article of Marcus E. Maher, an associate of Wiley, Rein & Fielding.
2. In re Federal-State Joint Board on Universal Service, 12 FCC Rcd 87, 123-24 (1996).
3. Universal Service Report to Congress, 13 FCC Rcd 11501, 11540 (1998).
4. In re Implementation of Section 703(e) of the Telecommunications Act of 1996, Report and Order, 13 FCC Rcd. 6777, 6794-96 (1998).
5. See Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations from Tele-Communications, Inc., Transferor To AT&T Corp., Transferee, Memorandum Opinion and Order, 14 FCC Rcd 3160, 3200-02, 3205-07 (1999).
6. Applications for Consent to the Transfer of Control of Licenses and Section 214 Authorizations from; MediaOne Group, Inc., Transferor, To AT&T Corp. Transferee, Memorandum Opinion and Order, 15 FCC Rcd 9816, 9872-73 (2000).
   
7. 208 F.3d 1263 (11th Cir. 2000).
8. 47 U.S.C. § 224.
9. 208 F.3d at 1276-77.
10. 208 F.3d at 1277 (citing Universal Service Report to Congress, 13 FCC Rcd 11501, 11540 (1998) (FCC finding that, in the context of universal service, "Internet access services are appropriately classed as information, rather than telecommunications, services").
11. Id. at 1277.
12. The FCC has previously exercised limited authority over only those aspects of information services offered by Title II common carriers over their telephone networks pursuant to its Title I and Title II authority. Computer II on Reconsideration, 84 F.C.C.2d 50, 93 (1980) ("We now assert jurisdiction over the terms and conditions of a common carrier or its affiliate's provision of enhanced services but only insofar as such offerings affect our traditional Title II concerns that there be no unjust or unreasonable discrimination in the offering of Title II services or otherwise negatively affect communications ratepayers.").
13. Id. ("Whether a given activity falls within or outside Section 2(a) of the Act is a factual determination which cannot be divorced from the concrete matter in dispute or from consideration of the relevant statutory purpose to be served by any assertion of jurisdiction. Moreover, assuming the statutory jurisdictional nexus exists, the exercise of such jurisdiction through specific agency action must be predicated on the need to satisfy an overall statutory purpose or objective.").
14. 216 F.3d 871 (9th Cir. 2000).
15. AT&T v. City of Portland, 43 F. Supp. 2d 1146 (1999).
16. Id. at 876.
17. Id. at 878-80.
18. In the Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, Intercarrier Compensation for ISP-bound Traffic, 14 FCC Rcd 3689, 3690 (1999).
19. Bell Atlantic v. FCC, 206 F.3d 1, 9 (D.C. Cir. 2000).
20. 97 F. Supp. 2d 712 (E.D. Va. 2000).
21. Id. at 715.
22. However, the Henrico court relied upon several bases for overturning the ordinance, some of which did not depend upon the classification of cable Internet service. Thus, the Fourth Circuit could avoid the classification question by affirming the district court on one of these alternative grounds.
23. Deployment of Advanced Telecommunications Capability: Second Report at 101 (Aug. 2000).

Technical Standardization Law Committee: What Is It All About?
by Ollie Smoot

As we more frequently encounter situations involving a high degree of interaction between people, institutions, and technology, proposed and achieved solutions increasingly rely on technical standards in addition to or as a substitute for legal standards or regulation. The Committee will develop principles and practical guides towards better solutions generally. These may include policy approaches to finding the right balance or changes in the law applicable to standards development and use to support more effective solutions.

This is our formal description. What is this all about? For decades in major aspects of U.S. society, public health, safety, and environmental needs have been met by combining private sector developed technical standards with laws either encouraging reliance on those standards or incorporating them by reference. Although most Americans are likely un-aware of it, the Underwriters Laboratories is a private corporation and its third party certification programs are private denotations of safety. Similarly, the National Electrical Code is developed and revised privately and then incorporated into numerous local codes.

How does this relate to Electronic Commerce or the Web or the Internet? Similar trends are apparent, with the added dimensions that E-commerce, the Web, and the Internet depend much more on technology for their existence and operation and are also inherently global activities. The Digital Millennium Copyright Act, Implementing the New WIPO Copyright Treaty, 17USC1202-5, provides the legal framework against "anticircumvention devices" and for "copyright man-agement systems." The details have been left to the private sector. We see how this is working out in the MP3 and DVD copyright controversies. Behind these are efforts to construct private systems that provide copyright holders and product providers with solutions that support the copyright holders' interests, allow for distribution, and prevent unauthorized reproduction. See the Secure Digital Music Initiative at http://www.sdmi.org/. A common characteristic appears to be creation of a licensing entity that controls and updates the technology used and authorizes its use by others on a global basis. See the Digital Transmission Licensing Administrator at http://www.dtcp.com/.

In another area of E-commerce are the various business-to-business and business-to-consumer developments. Many think that their success depends on use of XML, the Extensible Markup Language that gives meaning to semantic values in messages. See the World Wide Web consortium at http://www.w3.org/. The initiatives in these areas are, however, largely either enterprise driven or industry segment driven. Much attention has focused on the security attributes of E-commerce, the Web, and the Internet. Standards exist to validate security, see http://www.din.de/ni/sc27/doc7.html for examples. Encryption technologies strongly affect the trustworthiness of private electronic communication and transactions. These technologies change. Currently, the National Institute of Standards and Technology is considering a replacement for the Data Encryption Standard (DES) called the Advanced Encryption Standard (AES). See http://csrc.nist.gov/encryption/aes/. In fact, there are numerous technical standards being developed for the Web, E-commerce, and the Internet. How does The T.J. Hooper, 60 F.2d 737 (2d Cir 1932), decision play in this environment?

A significant characteristic of IT, and increasingly telecommunications, standardization is reliance on consortia in addition to formal standards organizations to develop technical specifications. Consortia arose as a result of the Cooperative Research and Development Act provision encouraging joint precompetitive research and development, see 15USC4301. XML, cited above, is a consortium document. The Internet Corporation for Assigned Names and Numbers, http://www.icann.org/, not only is a private sector solution for what, in many countries, would be a public function, its activities rest on the Internet Engineering Task Force "Request For Comments (RFC)" documents. They are developed under IETF procedures, see http://www.ietf.org/rfc/rfc2026.txt. ICANN does not control IETF; yet we all rely on the alphanumeric tags covering the Uniform Resource Locator (URL), that at bottom is a numeric string. Where are these developments taking us legally?

As with all new Section committees, we do not yet know where the interesting issues will lie. We invite interested Section members to sign up for our ListservT. We will begin by defining the range of issues of interest to members. As substantive ones are identified, we anticipate holding committee meetings to define and approve projects intended to explain the legal issues or to propose creation of new policies to better support the development of E-commerce, the Web, and the Internet through reliance on technical standards.