FCC Moves Closer to Regulating the Internet

(September 8, 1998)  The Federal Communications Commission released a lengthy report on Thursday, September 4, which suggests that the FCC ought to regulate Internet access provided by cable operators such as @Home, Road Runner, Cablevision, and MediaOne.  This is the second major policy statement by the FCC this year that seeks to expand its regulatory reach from telecommunications services into computer and Internet services.

The Congress, courts, and until recently, the FCC, have held to a distinction between "telecommunication services" and "information services" (also referred to as "basic" and "enhanced," respectively).  The former are subject to FCC regulation -- the latter are not.  The FCC maintains in this Report that it still adheres to this dichotomy.  However, it seeks to redefine certain information services as telecommunications services.

The Report argues too that with technological convergence "it will become increasingly difficult to maintain that particular facilities are 'cable' as opposed to 'telecommunications'."  And because of this, existing "regulatory categories," claims the Report, "must necessarily collapse of their own weight in the digital communications world of tomorrow."

"Internet Over Cable" is 129 pages long.  It can be viewed in the FCC website in PDF format. This requires Adobe's Acrobat Reader.

The paper released last week is entitled "Internet Over Cable: Defining the Future in Terms of the Past: FCC Staff Working Paper on Regulatory Categories and the Internet."  It was written by Barbara Esbin, Associate Bureau Chief of the Cable Services Bureau, in conjunction with FCC's Office of Plans and Policy (OPP).

The Report asserts that its purpose is to start a debate: "This working paper is intended to stimulate discussion and critical comment on these significant issues and their consequences."

"The issue of the regulatory status of Internet-based services provided by cable operators over their cable systems arises as a result of revisions to the definition of 'cable services' contained in the 1996 Act," states the Report.

The argument that the FCC has authority to regulate Internet access provided by cable operators rests largely on a very minor two word amendment to the definition of "cable service" contained in the 1996 Telecommunications Act.

1984 Cable Act defined cable service as "the one-way transmission to subscribers of video programming or other programming service, and subscriber interaction, if any, which is required for the selection of such video programming or other programming service."

The words "one-way transmission" have long been understood to mean that Internet access, which involves interactive two-way communication, is not covered by the 1984 Cable Act.

Moreover, the definition of "video programming" as "programming provided by, or generally considered comparable to programming provided by, a television station" would seemingly exclude Internet content from the 1984 Cable Act.

However, the 1996 Telecom Act modified the definition of "cable service" by inserting the words "or use," so that the definition now reads, "the one-way transmission to subscribers of video programming or other programming service, and subscriber interaction, if any, which is required for the selection or use of such video programming or other programming service."  (Emphasis added.)

These addition of these two words, the report contends, changes everything!

The Report also contends that the changing nature of the Internet, particularly its assertion that it is becoming increasingly like TV, warrants regulating cable based Internet access like old fashioned cable TV monopolies.

Report to Congress on Universal Service and Internet Telephony

The cable report is similar to another recent FCC report.  On April 10 the FCC's Common Carrier Bureau released a Report to Congress which advocated that some forms on Internet telephony be regulated by the FCC.

The lengthy April Report to Congress argued that "phone-to-phone" Internet telephony services constitute "telecommunications services" and should therefore be taxed to subsidize phone services in rural and low income areas, and other "universal service" programs.  The FCC Report also argued that self providers of Internet backbone are "telecommunications services."

Neither report is legally binding.  Each is a trial balloon floated by the FCC.  Both deal with areas of technological convergence.  Both deal with unregulated Internet services which bear some similarity to regulated telecommunications services.  And in both reports, the FCC asserts that there should be some FCC authority over the Internet services.

Section 230 of the Telecom Act

Section 230 of the 1996 Act would seem to foreclose the FCC's argument.  It reads, in relevant part, that:

(b) POLICY- It is the policy of the United States--

(1) to promote the continued development of the Internet and other interactive computer services and other interactive media;

(2) to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation;

Similarly, the 1996 Act, at 47 USC 230(a)(4) contains a finding that "The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation."

The Report in several places mentions, but glosses over, Section 230.

Politics of FCC Regulation

The FCC is a Byzantine bureaucracy which was created to oversee certain monopolies, including what was once "the phone company," and limited access industries, such as analog broadcast TV and radio, for which there is very limited spectrum.  The 1984 Cable Act extended FCC authority to one-way cable transmission of TV programming.

While the Congress has recently been intent upon deregulating many of the industries regulated by the FCC, as evidenced by passage of the 1996 Telecommunications Act, the FCC has been delaying or evading implementation of many elements 1996 Act.  In contrast, the FCC, as evidenced by the April 10 Report to Congress, and this Report on cable based Internet access, is attempting to extend its regulatory reach into competitive industries.

While FCC many personnel would like to preserve and extent their power, the FCC is not acting in isolation.  Many telecommunications monopolies which have long been regulated are quite comfortable with the old arrangements.  One of their responses to new and unregulated technologies which threaten their position is to prod and lobby the FCC to extend its regulatory reach over these new competitors.  The purpose is to restrain or burden them, to make them less competitive.

The National Cable Television Association, which represents old media one-way cable monopolies, urged the FCC to regulate cable based Internet services provided over cable systems by cable operators.

Similarly, old line analog telephone companies, which rely heavily on public switched telephone networks, have long urged the FCC to regulate the packet switched Internet Protocol telephony service providers.

Also, those who benefit from FCC regulation have generally lobbied the FCC to expand its authority.  For example, recipients of universal service subsidies want to see the pool of contributors to the universal service fund grow.

The FCC's cable report is 129 pages long.  As is typical of FCC reports, it is full of legalese, and is massively footnoted.¹  Many sections are redundant of other FCC reports.  And, many sections are unnecessary and irrelevant.   For example, this Report takes 20 pages just to explain what the Internet is.²

However, no space in the Report is devoted to examining how FCC fees, rules, and regulatory burdens would impede the development, or use, of the Internet.

Footnotes

1.  "Internet Over Cable: Defining the Future in Terms of the Past: FCC Staff Working Paper on Regulatory Categories and the Internet," September 3, 1998, Federal Communications Commission, by Barbara Esbin, Associate Bureau Chief of the Cable Services Bureau, in conjunction with the Office of Plans and Policy, contains 497 footnotes.

2.  The Report (PDF version posted in the Federal Communications Commission website) is further obfuscated by the page numbering in the Table of Contents not matching the page numbering in the body of the document.

FCC Press Release.
Re: Report on Internet Access Over Cable.
Date: September 3, 1998.
Source: FCC.

September 3, 1998

INTERNET OVER CABLE: DEFINING THE FUTURE IN TERMS OF THE PAST
FCC Staff Working Paper on Regulatory Categories and the Internet

The FCC's Office of Plans and Policy (OPP) today released a staff working paper analyzing the policy issues raised by the delivery of Internet-based services over cable television systems. OPP Working Paper No. 30, "Internet Over Cable: Defining the Future in Terms of the Past," was written by Barbara Esbin, Associate Bureau Chief of the Cable Services Bureau, in conjunction with OPP. Periodically, OPP issues working papers on emerging areas in communications; these papers represent individual views and are not an official statement by the FCC or any FCC commissioner.

"Internet Over Cable" represents the first comprehensive assessment of the regulatory status of Internet-based services delivered over cable systems. While the FCC has already begun to address the issues "integrated" or "converged" broadband digital services pose in terms of the regulatory categories of "telecommunications" and "information" services, the question of how to treat Internet-based services delivered over cable systems has yet to be directly addressed by the FCC.

After describing features and functions of the Internet and the communications capabilities it makes possible, the paper addresses the existing regulatory framework for wireline communications services under Titles I, II and VI of the Communications Act. The paper concludes that the FCC could find that certain cable-provided Internet services come within the revised definition of cable services under Title VI the Act, while Internet access services provided by telecommunications carriers over common carrier facilities are treated differently under existing statutory and FCC requirements. It concludes with a discussion of the broader policy issues arising from this new communications medium, and identifies some potential regulatory alternatives for addressing these issues.

Ms. Esbin states that the "discussion of the regulatory classification issue for Internet over cable systems, and the related common carrier issues, is intended to map the contours of the legal and policy issues surrounding the clash of new, advanced capabilities such as the Internet with the old regulatory framework." The goal of this mapping exercise "is to facilitate informed discussion and decision-making in this very important area by identifying the correct coordinates and posing the relevant questions."

The paper is available on the FCC World Wide Web site, http://www.fcc.gov. The file is available for online viewing in PDF (Adobe Acrobat) at: http://www.fcc.gov/Bureaus/OPP/working_papers/oppwp30.pdf

Copies may also be purchased from International Transcription Service, Inc., 1231 20th Street, NW, Washington, DC 20036, (202) 857-3800.

- FCC -

News media contacts: Morgan Broman at (202) 418-2358
and Maureen Peratino at (202) 418-0500
Cable Services Bureau contact: Barbara Esbin at (202) 418-7200.
Office of Plans and Policy contact: Robert Pepper at (202) 418-2030
TTY: (202) 418-7172