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Cable wins right to bar Net rivals

The Supreme Court rules, 6-3, that cable companies don't have to share their lines with rival Internet providers.

By wire services
Published June 28, 2005

The U.S. Supreme Court said Monday that cable companies don't have to share their lines with rival providers of high-speed Internet service, which consumer advocates argue will hurt competition and slow the development of such services.

The 6-3 decision upholds an earlier Federal Communications Commission ruling that said cable companies were exempt from the same regulations requiring phone companies to offer access to independent providers.

Bright House Networks, the Tampa Bay area's dominant cable company, is one of the few major cable operators in the country that offers its customers a choice of high-speed Internet, or broadband, service providers other than its own. That flexibility is a legacy of the 2001 merger of America Online and Time Warner Inc., which is a major shareholder in Bright House.

One of the two rival Internet providers carried by Bright House is Internet Junction of Tampa. Internet Junction founder and president Eric Feinstein said Monday that he is concerned about the long-term implications of the ruling.

"This could absolutely mean the demise of our broadband business," Feinstein said.

The other rival that uses Bright House lines, Atlanta-based EarthLink, was likewise concerned.

"Today's Supreme Court ruling is a blow to consumers and competition," EarthLink vice president for law and public policy Dave Baker said in a statement.

In an opinion by Justice Clarence Thomas, the high court said judges should defer to the expertise of the FCC, which concluded in 2002 that limited access is best for the industry.

The FCC and cable companies cheered the ruling. The cable industry said it would promote investment, growth and competition in the broadband market.

"It removes the regulatory uncertainty, and for all of us who want to offer high-speed Internet access, it gives us every incentive now to continue investing and continue innovating," said Kyle McSlarrow, president of the National Cable & Telecommunications Association, the main industry lobbying group.

But consumer advocates said it would lead to higher prices for consumers.

The court's ruling "threatens to cement the cozy duopoly of cable modem and DSL service that has made a mockery of competition in American broadband markets and prompted hundreds of communities across the country to build their own local networks," the Consumer Federation of America, Consumers Union and media-reform group the Free Press said in a joint statement.

What further worries consumer advocates is that the FCC is also considering petitions to regulate broadband service offered by phone companies via digital subscriber lines, or DSL, as an information service instead of a telecommunications service. Regulation as a telecom service requires the phone companies to offer access to independent providers.

About 22-million homes have cable broadband service, according to industry numbers.

Nationwide, 53 percent of home Internet users have a broadband connection, provided mostly by cable or DSL. About 44 percent of home users have a dial-up connection, according to the latest figures from the Pew Internet & American Life Project.

The FCC voted in March 2002 to exempt cable companies from the strict rules applied to telecommunications companies. The agency said high-speed Internet over cable was an "information service," making it different from phone service. But the 9th U.S. Circuit Court of Appeals overturned that decision in 2003, ruling that Internet providers should be allowed to sell their services over the cable companies' lines. Monday's Supreme Court ruling upheld the FCC decision.

Most major cable companies only offer their own broadband service provider. Bright House is a rare exception, stemming from a 2001 Federal Trade Commission order that was part of the agency's approval of the AOL-Time Warner merger. In addition to the newly merged company's own RoadRunner and AOL Broadband high-speed Internet services, the FTC required Time Warner to offer its customers the choice of at least two other nonaffiliated broadband providers for five years. (Time Warner's cable properties, which were part of a joint venture with Advance/Newhouse Communications, were restructured in 2002. The restructuring led to the renaming of some of the partnership's operations, including those in the Tampa Bay area, as Bright House Networks.)

Internet Junction serves about 16,000 customers, about 20 percent of whom subscribe to broadband services that are delivered via cable lines or a phone company's DSL network, president Feinstein said.

Feinstein said his company has a multiyear contract with Bright House that gives it "some breathing room," but he declined to disclose when the pact will expire. If federal regulators also allow phone companies to block access to their DSL lines from rival companies, Internet Junction may consider branching out into other related services, such as Web hosting or consulting work, he said.

Bright House spokeswoman Kena Lewis said the company had no immediate plans to change its broadband service offerings, although she said it is too early to determine what the company will do once its contracts with Internet Junction and EarthLink expire.

Lewis acknowledged that offering a variety of broadband services helps keep customers from defecting to a phone company's DSL service.

"We were very pleased to hear about the (Supreme Court) decision," she said. "Not only is it good for the industry, it provides the impetus to keep pushing the technology envelope. We've invested significant resources into our broadband networks."

--Times staff writer Louis Hau contributed to this report, which contains information from the Associated Press.

[Last modified June 28, 2005, 01:47:08]

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