United States Court of Appeals,
Ninth Circuit.
BRAND X INTERNET SERVICES, Petitioner,
v.
FEDERAL COMMUNICATIONS COMMISSION, Respondent.
Earthlink, Inc., Petitioner,
SBC Communications, Inc., Intervenor,
v.
Federal Communications Commission, Respondent.
Verizon Telephone Companies, Verizon Internet Solutions d/b/a Verizon.Net,
Petitioner,
SBC Communications, Inc., Intervenor,
v.
Federal Communications Commission, Respondent.
Consumer Federation of America; Consumers Union; Center for Digital
Democracy, Petitioners,
v.
Federal Communications Commission, Respondent.
People of the State of California; Public Utilities Commission of the
State of California, Petitioners,
v.
Federal Communications Commission;
United States of America, Respondents.
National League of Cities;
National Association of Telecommunications Officers
and Advisors; United States
Conference of Mayors; National
Association of
Counties; Texas Coalition
of Cities for Utility Issues, Petitioners,
v.
Federal Communications Commission, Respondent.
Conestoga Township;
Providence Township; Martic
Township; Buckingham
Township; East Hempfield
Township, Petitioners,
v.
Federal Communications Commission, and United States of America,
Respondents.
Nos. 02-70518, 02-70684 to 02-70686, 02-70879, 02-71425 and
02-72251.
Argued and Submitted May 8, 2003.
Filed Oct. 6, 2003.
Petitions were filed seeking review of Federal
Communications Commission's (FCC) declaratory
ruling, 2002 WL 407567, that cable broadband
internet service was not "cable service," but was in part
"telecommunications service" within meaning of Telecommunications
Act. The Court of Appeals held that: (1) AT & T v. City of Portland's
construction of Telecommunications Act classifying
Internet service provided by cable companies exclusively as an interstate
"information service" remained binding precedent within the circuit,
even in light of FCC's contrary interpretation of the statute, and (2) cable
broadband internet service was not a "cable service" but instead was
part "telecommunications service" and part "information
service."
Affirmed in part, vacated in part, and
remanded.
O'Scannlain, Circuit Judge, filed concurring opinion.
Thomas, Circuit Judge, filed concurring opinion.
West Headnotes
[1] Courts 
90(2)
Three-judge
panels of federal courts of appeals are bound by the holdings of earlier
three-judge panels.
[2] Courts 90(2)
Precedent established by three-judge panel
of federal court of appeals can be disregarded in favor of a subsequent agency
interpretation only where the precedent constituted deferential review of
agency decisionmaking.
[3] Courts 90(2)
AT
& T v. City of Portland's
construction of Telecommunications Act classifying Internet service provided by
cable companies exclusively as an interstate "information service"
remained binding precedent within the circuit, even in light of Federal Communications
Commission's (FCC) contrary interpretation of the statute; Portland
court was not presented with a case involving potential deference to an
administrative agency's statutory construction pursuant to the Chevron
doctrine. Communications Act of 1934,
§ 3(20), as amended, 47
U.S.C.A. § 153(20).
[4] Telecommunications 1324
(Formerly 372k455(1))
Cable broadband internet service was not a
"cable service" but instead was part "telecommunications
service" and part "information service" within meaning of
Telecommunications Act. Communications
Act of 1934, § § 3(20, 46), 602(6), as
amended, 47
U.S.C.A. § § 153(20, 46), 522(6).
*1122
Harvey L. Reiter, Stinson Morrison Hecker LLP,
Washington, DC, argued the cause for petitioner Brand X Internet LLC and filed
briefs.
John
W. Butler, Sher & Blackwell, LLP, Washington,
DC, argued the cause for petitioner EarthLink and filed briefs, and David
N. Baker, EarthLink, Inc., Atlanta, GA. Earl
W. Comstock and Alison
Macdonald, Sher & Blackwell, also were on the
briefs.
Ellen
S. LeVine, California Public Utilities
Commission, San Francisco, CA, argued the cause for petitioner State of
California and submitted briefs. Gary
M. Cohen and Lionel B. Wilson also were on the
briefs.
Frederick
A. Polner, Rothman Gordon, P.C., Pittsburgh, PA,
argued the cause for petitioners Pennsylvania Townships and submitted briefs.
Tillman
L. Lay, Miller, Canfield, Paddock and Stone,
P.L.C., Washington, DC, argued the cause for petitioners National League of
Cities, National Association of Telecommunications Officers and Advisors,
United States Conference of Mayors, National Association of Counties, and Texas
Coalition of Cities for Utility Issues, and submitted briefs.
Andrew
J. McBride, Wiley Rein & Fielding,
Washington, DC, argued the cause for petitioner Verizon, and submitted
briefs. Eve
J. Klindera, Wiley Rein & Fielding, and William
P. Barr, Michael
E. Glover, Edward
Shakin, and John
P. Frantz, Verizon, Arlington, VA, also were on
the briefs.
Cheryl
A. Leanza and Andrew
Jay Schwartzman, Media Access Project,
Washington, DC, filed briefs for petitioners Consumer Federation of America,
Consumers Union, and Center for Digital Democracy.
John
A. Rogovin, Acting General Counsel, and James
M. Carr, Counsel,
Federal Communications Commission, Washington, DC, argued the cause for
respondents Federal Communications Commission and the United States. R.
Hewitt Pate, Acting Assistant Attorney General, Catherine
G. O'Sullivan and Nancy C. Garrison, Attorneys,
United States Department of Justice, Washington, DC, Daniel
M. Armstrong, Associate General Counsel, and
Harry M. Wingo, Counsel, Federal Communications Commission, also were on the
briefs.
Howard
J. Symons, Mintz, Levin, Cohn, Ferris, Glovsky,
and Popeo, P.C., Washington, DC, argued the cause for intervenors National
Cable & Telecommunications Association, AOL Time Warner, Inc., Time Warner
Cable, Charter Communications, Inc., and Cox Communications, Inc., and
submitted a brief. Tara
M. Corvo and Susan
S. Ferrel, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, Daniel
L. Brenner, Neal
M. Goldberg, and Michael
S. Schooler, National Cable &
Telecommunications Association, Washington, D.C., David
E. Mills and Todd
B. Klessman, Dow, Lohnes & Altbertson, PLLC,
Washington, D.C., Henk
Brands, Paul, Weiss, Rifkind, Wharton &
Garrison, Washington, D.C., and Paul Glist, John D. Seiver, Geoffrey
C. Cook, and Brian M. Joseph, Cole, Raywid &
Braverman, LLP, Washington, DC, also were on the brief.
William
H. Sorrell, Attorney General, filed a brief for
petitioners-intervenors State of Vermont, Vermont Public Service *1123
Board, and Department of Public Service.
Dixie Henry, David
B. Borsykowsky, and Peter
M. Bluhm also were on the brief.
Michael
K. Kellogg, Kellogg, Huber, Hansen, Todd &
Evans, P.L.L.C., Washington, DC, filed a brief for respondent-intervenors SBC
Communications Inc., BellSouth Corporation, and BellSouth Telecommunications,
Inc. Sean A. Lev and Colin S. Stretch, Kellogg, Huber, Hansen, Todd &
Evans, Gary L. Phillips and Jeffry A. Brueggeman, SBC Communications,
Washington, DC, James
D. Ellis and Paul
K. Mancini, SBC Communications, San Antonio,
Texas, and James
G. Harralson and William J. Ellenberg, BellSouth
Corporation, Atlanta, GA, also were on the brief.
Jennifer
M. Rubin, Sidley Austin Brown & Wood,
Washington, DC, filed a brief for intervenor AT & T Corp. David
L. Lawson, Virginia
A. Seitz, C.
and Frederick Beckner, Sidley Austin Brown & Wood, and Mark
C. Rosenblum, Lawrence
J. Lafaro, and Stephen
C. Garavito, AT & T Corp., Bedminster, NJ,
also were on the brief.
Robert
J. Aamoth, Kelley, Drye & Warren, Washington,
D.C., and Mark
D. Schneider, Jenner & Block, LLC,
Washington, DC, filed a brief for intervenors Counsel for Competitive
Telecommunications Association and WorldCom, Inc. Todd D. Daubert, Kelley, Drye
& Warren, Marc A. Goldman and Kali N. Bracey, Jenner & Block, and
William Single IV, WorldCom, also were on the brief.
Mark
C. Carver, Uddo, Milazzo & Beatmann, Metarie,
LA, filed a brief for nonaligned intervenor Utility, Cable &
Telecommunications Committee of the City Council of New Orleans urging
reversal. Frank U. Uddo, Uddo, Milazzo
& Beatmann, and William
D. Aaron, Jr., Goins Aaron, PLC, New Orleans, LA,
also were on the brief.
Elizabeth
H. Rader and Jennifer
Stisa Granick, Center for Internet & Society,
Stanford, CA, filed a brief for amicus curiae American Civil Liberties Union.
On Petition for Review of an Order of the
Federal Communications Commission.
Before: CUDAHY, [FN*] O'SCANNLAIN, and THOMAS, Circuit Judges.
FN* The Honorable Richard
D. Cudahy, Senior United States Circuit Judge for
the Seventh Circuit Court of Appeals, sitting by designation.
PER CURIAM Opinion; Judge O'SCANNLAIN and Judge THOMAS, concurring in separate opinions.
OPINION
PER CURIAM:
We must decide whether our prior
interpretation of the Telecommunications Act controls review of the Federal
Communications Commission's decision to classify Internet service provided by
cable companies exclusively as an interstate "information service."
I
Over half of the households in the United
States have Internet connections. See
U.S. Dept. of Commerce, A Nation Online:
How Americans Are Expanding Their Use of the Internet at 2
(Feb.2002), available at http://
www.ntia.doc.gov/ntiahome/dn/anationonline2.pdf (herein after "A Nation
Online "). [FN1] Approximately 80
percent of those connections are "dial-up" connections. Such connections use the wires owned by local
telephone companies to connect the user's
computer to an Internet Service Provider's ("ISP's") "point of *1124
presence," which in turn is connected to the Internet
"backbone." In addition to
providing a connection to the Internet, most ISPs also provide
services--including email, user support, and the ability to build web pages on
the ISP's servers--as well as proprietary content. Customers connecting to the
Internet via a traditional narrowband connection have many ISPs to choose from: There are thousands of such providers
nationwide. But because of the
limitations of the wires connecting the user's computer to the ISP's point of
presence, data transmission over them is quite slow and does not afford users
the capacity to access streaming video or audio content. [FN2]
FN1. The Commerce
Department's figures are as of September 2001. Given that the report notes that
the number of people using the Internet had increased by some 26 million in the
thirteen months prior to the initiation of the study, it is likely that there
has been a substantial increase between 2001 and today.
FN2. Dial-up allows
for transfer of data at a rate of 56 kilobits per second (kbps). See FCC AOL-Time
Warner Merger Order,
16 F.C.C.R. 6547, 6551 n. 11, 2001 WL 55636 (2001).
Cable modem service can transmit data at a
rate of up to 10 megabits per second (mbps).
Thus while dial-up moves thousands of bits per second, broadband moves
millions.
By contrast, residential high-speed (or
"broadband") Internet service allows for much faster and easier use
of the Internet, including streaming audio and video. As such, it has been called "the holy
grail of media companies." Mark A.
Lemley & Lawrence Lessig, The End
of End-To-End: Preserving the
Architecture of the Internet in the Broadband Era,
48 UCLA L.Rev. 925, 926 (2001). Currently, there are two principal
"pipelines" through which consumers can receive broadband
access: digital subscriber lines
("DSL") and cable lines. [FN3] DSL uses the same copper wires employed in
telephone service and dial-up access, [FN4] while cable
modem service uses the net work of coaxial cable employed to transmit
television signals. Because the copper
wires used for telephone service and coaxial cable used for cable television
are already installed in most Americans' homes, telephone and cable companies
have been able to deploy broadband Internet access relatively quickly and
cheaply. In the case of DSL, an ISP uses
equipment located at the telephone company to transmit Internet service to its
subscribers. In the case of cable modem
service, the connection to the Internet occurs at the "headend," or
the origination point for signals in the cable system. [FN5] In contrast to DSL
service, however, where multiple ISPs may compete in the provision of Internet service over the same DSL pipeline, most cable
operators either provide Internet service themselves or provide the service in
conjunction with ISPs specifically created and owned by the cable
operators. Thus, cable-owned or
cable-affiliated ISPs--unlike most dial-up *1125 and many DSL ISPs--
essentially own the "last mile" (i.e., the connection between the
headend and the subscriber's home), giving them the power to restrict other
ISPs' access to cable subscribers.
FN3. There are two
other types of high-speed Internet access available--satellite and fixed
wireless--but their deployment is very limited:
As of 2001, only 3 percent of residential broadband subscribers use
these alternative services.
FN4. For a
description of DSL technology, see WorldCom,
Inc. v. FCC,
246 F.3d 690, 692 (D.C.Cir.2001)
("Packet-switching and digital subscriber line technologies
("DSL") make it possible to send data at high speed over conventional
copper wire. Two DSL modems are attached
to a telephone loop, one at the subscriber's premises and one at the telephone
company's central office. If the line
carries both ordinary telephone service and high-speed data transmission, the
carrier must separate these streams at the company's central office, using a
digital subscriber line access
multiplexer. With this device the
carrier sends ordinary voice calls to the public, circuit-switched telephone
network (which keeps a phone line open during a voice call) and sends data
traffic to a packet-switched data network (which compresses data and can send
it in splitsecond bursts during gaps on a line), where it can then be routed to
a corporate local area network or Internet service provider ('ISP').")
FN5. Some cable
providers have "super headends" to house data servers, routers, and
other Internet-related equipment.
High-speed Internet service via DSL or cable
modem is available to approximately 75 percent of households. See Inquiry
Concerning High-Speed Access to the Internet Over
Cable
and Other Facilities,
17 F.C.C.R. 4798, 4803 (2002), available
at
2002 WL 407567 (hereinafter "Declaratory
Ruling"). And while only eleven
percent of all households subscribe to a broadband Internet service,
residential use of high-speed, broadband service is increasing. See A Nation Online at 2.
Approximately 70 percent of residential broadband subscribers receive their
broadband service via cable modem.
Declaratory Ruling at 4803.
Congress has addressed the burgeoning market
for advanced computer services in the Telecommunications Act of 1996, Pub.L.
104-104, 110 Stat. 56, through which it sought to provide a
"pro-competitive, de-regulatory national policy framework" designed
to promote the "deployment of advanced telecommunications and information
technologies to all Americans by opening all telecommunications markets to
competition." H.R.
Conf. Rep. No. 104-458, at 113 (1996). To that end, the statute maintained
significant common carrier obligations on providers of "telecommunications
services" but left providers of "information services" subject
to much less stringent regulation.
This distinction tracked a series of prior
administrative decisions by the FCC. Beginning in 1980, the FCC distinguished
"basic" telecommunications services from "enhanced"
information services in the belief that ensuring access to the former would
encourage competition in the latter and provide consumers with a wider variety
of information services. In
the Matter of Section 64.702 of the Comm'n's Rules & Regulations (Second
Computer Inquiry),
77 F.C.C.2d 384, 417, 0080 WL 233301 (1980). The 1996 law raised the question of whether
the new broadband internet technologies qualified as telecommunications
services, information services, or a combination of the two.
The FCC did not initially take a position on
the regulatory classification of cable modem service. A number of federal courts, however,
construed the statute in the context of challenges to other local or federal
regulatory decisions. In AT & T
v. City of Portland,
216 F.3d 871 (9th Cir.2000), we reviewed the open
access conditions a local franchise authority had placed on the sale of a cable franchise. As discussed in detail below, we held that
cable modem service did not qualify as a "cable service" and that it
contained both information service and telecommunications service
components. As a result, the local
franchise authority could not impose conditions on the sale. At approximately
the same time, a court in the Eastern District of Virginia invalidated a local
ordinance that imposed open access requirements on cable modem service,
concluding that cable modem involved a telecommunications component and that it
also qualified as cable service. MediaOne
Group, Inc. v. County of Henrico,
97 F.Supp.2d 712, 714-15 (E.D.Vir.2000), aff'd,
257
F.3d 356 (4th Cir.2001). See also Gulf
Power Co. v. FCC,
208 F.3d 1263, 1277 (11th Cir.2000), rev'd,
534
U.S. 327, 122 S.Ct. 782, 151 L.Ed.2d 794 (2002)
(holding that the FCC could not regulate pole attachments for internet services
because they did not qualify as telecommunications services).
In part as a response to these decisions, the
FCC on September 28, 2000 issued a notice of inquiry, In the *1126Matter
of Inquiry Concerning High-Speed Access to the Internet Over Cable and Other
Facilities,
15 F.C.C.R. 19287 (2000), available
at
2000 WL 1434689 (hereinafter "NOI"). In the NOI, the FCC announced its intention
"to determine what regulatory treatment, if any, should be accorded to
cable modem service and the cable modem platform used in providing this
service." Id.
at 19287.
Specifically, the FCC requested comment on whether it should classify
"the cable modem platform as a cable
service [FN6] subject to
Title VI [of the Communications Act]; as
a telecommunications service [FN7] under Title II; as
an information service [FN8] subject to Title I;
or some entirely different or hybrid service subject to multiple
provisions of the Act." Id.
at 19293.
In requesting comment, the FCC noted that "[i]t is particularly
important to develop a national legal and policy framework in light of recent
federal court opinions that have classified cable modem service in varying
manners." Id.
at 19288.
FN6. "Cable
service" is defined in the Act as:
(A) the one-way transmission to subscribers of (i) video
programming, or (ii) other programming service, and
(B) subscriber interaction, if any, which is required for
the selection or use of such video programming or other programming service.
FN7. The Act defines
"telecommunications service" as "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." 47
U.S.C. § 153(46).
FN8. "Information service" is defined as
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.
On March 15, 2002, after receiving some 250
comments and meeting with a variety of industry representatives, consumer
advocates, and state and local government officials regarding the NOI, the FCC
issued its Declaratory Ruling along with a notice of proposed rulemaking
("NPRM"). In the Ruling, the
Commission concluded that "cable modem service, as it is currently
offered, is properly classified as an interstate information service, not as a
cable service, and that there is no separate offering of telecommunications
service." Declaratory
Ruling, 17 F.C.C.R. at 4802. The FCC's classification of cable modem
service, if upheld, would mean that, to the extent they provide such service,
cable operators would be subject to regulation not as cable service providers
under Title VI of the Act, 47
U.S.C. § 521
et seq., nor as common carriers under Title II, § 201 et seq., but rather as providers of an information service
under the less stringent provisions of Title I, § 151 et seq. Accordingly, in the NPRM that accompanied the
NOI, the Commission sought to "address the regulatory implications of
[its] decision." 17
F.C.C.R. at 4839.
Specifically, FCC requested comments regarding (1) the implications of
the classification for the Commission's parallel rulemaking with respect to DSL
service; [FN9] (2) the scope of the Commission's
jurisdiction to regulate cable modem service, including whether there are any
constitutional limitations on the exercise of that jurisdiction; (3) the need, if any, to require cable
operators to provide access to competing ISPs;
(4) the effects of the regulatory classification on the marketplace for
and the continued deployment of broadband service; (5) "the role of state and local
franchising authorities *1127 in regulating cable modem
service"; and (6) "the
relationship between our classification determination and statutory or
regulatory provisions concerning pole attachments, universal service, and the
protection of subscriber policy." Id.
at 4839-40.
FN9. See Appropriate
Framework for Broadband Access to the Internet over Wireline Facilities,
17 F.C.C.R. 3019 (2002) available
at
2002 WL 252714.
Seven different petitions for review of the
Commission's ruling were filed in the Third, Ninth, and District of Columbia
Circuits. None of the petitioners
challenge the FCC's conclusion that cable modem service is an information
service. Rather, each contends that the
Commission should not have stopped there--that is, that the Commission should
have made an additional determination.
The first group of petitioners [FN10] argues
that cable modem service is both an information service and a
telecommunications service, and is therefore subject to regulation on a
common-carriage basis. [FN11] The second
group of petitioners [FN12] asserts that cable modem service is both an information
service and a cable service, and therefore is subject to regulation by local
authorities as provided in the Act. The final petitioner, Verizon, advances a
third variation on the "the FCC did not go far enough" theme, arguing
that the Commission was correct to classify cable modem service as solely an
information service, but should have taken the additional step of conferring
the same designation on the DSL service provided by telephone companies.
FN10. Advancing this
argument are Brand X, EarthLink, the State of California, and the Consumer
Federation of America.
FN11. The practical
result of such a classification is that cable broadband
providers would be required to open their lines to competing ISPs.
FN12. There are two
groups of petitioners advancing this argument. The first includes the National
League of Cities, the National Association of Tele-communications Officers and
Advisors, the United States Conference of Mayors, the National Association of
Counties, and the Texas Coalition of Cities for Utility Issues (hereinafter
"NLC"). The second group
comprises five Pennsylvania townships:
Conestoga, Providence, Martic, Buckingham, and East Hempfield
(hereinafter "Townships").
On April 1, 2002, the Judicial Panel on
Multidistrict Litigation transferred the related petitions for review to this
court for consolidation with Brand X's petition.
II
Normally, when we review an agency's
interpretation of the statute it is charged with administering, we apply the
two-step formula set forth by the Supreme Court in Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). The reviewing court must look first to the
language of the statute: "If the
intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed
intent of Congress." Id.
at 842-43, 104 S.Ct. 2778. If the statute is silent or ambiguous,
"the question for the court is whether the agency's answer is based on a
permissible construction of the statute."
Id.
at 843, 104 S.Ct. 2778. Where the agency's interpretation of the
statute is reasonable, the court must defer. Id.
That the FCC is the agency Congress has
charged with the administration of the Communications Act is beyond cavil. See 47
U.S.C. § 151
(establishing the FCC and giving it authority to "execute and enforce the
provisions of this chapter"). The
FCC, however, is not the only, nor even the first, authoritative body to have
interpreted the provisions of the Communications Act as applied to cable
broadband service. A prior three-judge
panel of this court did precisely that in Portland. Petitioners Brand *1128 X, EarthLink,
and the State of California argue that the panel is bound by our court's
interpretation of the statute, while the FCC, joined by two of the Petitioners,
contends that we are not.
Before we can address the substance of these
arguments, however, we must discuss our Portland decision in some
detail.
A
AT & T v. City of Portland arose
out of the merger between AT & T, then the nation's largest long-distance
provider, and Telecommunications, Inc. ("TCI"), one of the largest cable television operators
and also, in some areas of the country, a provider of cable broadband service.
In order to complete the merger, the two
companies had to secure the approval of three different governmental
bodies: the Justice Department, the FCC,
and the local cable franchising authorities in the City of Portland and
Multnomah County. While the federal
authorities ultimately assented to the merger, securing the approval of the local
authorities proved more difficult. The Communications Act gives local
franchising boards the right to approve any sale or transfer of a cable
franchise when such approval was required by the local franchising
agreement. See 47
U.S.C. § 537. TCI's franchise agreements with Portland and
Multnomah County gave the local franchising boards the power to "
'condition any Transfer upon such conditions, related to the technical, legal,
and financial qualifications of the prospective party to perform according to
the terms of the Franchise, as it deems appropriate.' " Portland,
216 F.3d at 875.
Concerned that AT & T might shut out competing ISPs by restricting
cable broadband access to its own proprietary ISP, Portland and Multnomah
County--pursuant to their authority under the franchise agreements--sought to
condition AT & T's acquisition of the cable franchises upon the provision of
open access to its cable broadband network for competing ISPs. AT & T filed
suit claiming that the local franchise authorities lacked the power to impose
such a condition. The district court
granted summary judgment to Portland and AT
& T appealed to this court.
"Because Portland premised its open
access condition on its position that
[cable modem service] is a 'cable service' governed by the
franchise," id.
at 876, we first looked to the statutory
definition of "cable service."
Noting that the "[t]he essence of cable service [as defined in the
Act] ... is one-way transmission of programming to subscribers generally,"
we concluded that "the definition does not fit" cable modem service,
whose salient characteristics are "not one-way and general, but interactive
and individual." Id. Because
cable modem service was not a cable service under the terms of the Act, we held
that "Portland may not directly regulate[it] through its franchising
authority." Id. at 877.
Having determined that "a cable operator
may provide cable broadband Internet access without a cable service
franchise," we then turned to the issue of "whether Portland may
condition AT & T's provision of standard cable service upon its opening
access to the cable broadband network for competing ISPs." Id. In
order to resolve this issue, we found it necessary to "determine how the
Communications Act defines [cable broadband service]." Id. We quote our analysis in full:
Under the statute, Internet access for most users consists
of two separate services. A conventional
dial-up ISP provides its subscribers access to the Internet at a "point of
presence" assigned a unique Internet address, to which the subscribers connect through telephone
lines. The telephone service linking the
user and the ISP is classic "telecommunications," which the
Communications *1129 Act defines as "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." 47
U.S.C. § 153(43). A provider of
telecommunications services is a "telecommunications carrier," which
the Act treats as a common carrier to the extent that it provides
telecommunications to the public, "regardless of the facilities
used." 47
U.S.C. § § 153(44) & (46).
By contrast the FCC considers the ISP as providing
"information services" under the Act, defined as "the offering
of a capability for generating, acquiring, storing, transforming, processing,
retrieving, utilizing, or making available information via
telecommunications." 47
U.S.C. § 153(20) (1996). As the definition
suggests, ISPs are themselves users of telecommunications when they lease lines
to transport data on their own networks and beyond on the Internet
backbone. However, in relation to their
subscribers, who are the "public" in terms of the statutory
definition of telecommunications service, they provide "information
services," and therefore are not subject to regulation as
telecommunications carriers.
...
Like other ISPs, [AT & T's cable broadband service]
consists of two elements: a "pipeline" (cable broadband
instead of telephone lines), and the Internet service transmitted through that
pipeline. However, unlike other ISPs,
[the cable broadband provider] controls all of the transmission facilities
between its subscribers and the Internet.
To the extent [a cable broadband provider] is a conventional ISP, its
activities are that of an information service.
However, to the extent that [a cable operator] provides its
subscribers Internet transmission over its cable broadband facility, it is
providing a telecommunications service as defined in the Communications Act.
Id. at 877-78. Cf. Nat'l
Cable & Telecomms. Ass'n v. Gulf Power Co.,
534 U.S. 327, 352 n. 4, 122 S.Ct. 782, 151 L.Ed.2d 794 (2002) (Thomas, J., concurring in part and dissenting in part)
(describing high-speed Internet access as requiring "two separate
steps," transmission from the consumer to the ISP's point of presence and
the connection between the ISP's point of presence and the Internet, and
recognizing that the FCC had not yet classified the first, transmission step in
the cable context.).
Because we found that the transmission element
of cable broadband service constitutes telecommunications service under the
terms of the Communications Act--and because the Act provides that "[a]
franchising authority may not impose any requirement under this title that has
the purpose or effect of prohibiting, limiting, restricting, or conditioning
the provision of a telecommunications
service by a cable operator," 47
U.S.C. § 541(b)(3)(B)-- we concluded that Portland and Multnomah county were
barred from conditioning the franchise transfer upon AT & T's provision of
open access to its broadband network. Portland,
216 F.3d at 878-79.
B
As an initial matter, we must reject the
implication--or, in the case of petitioner NLC the assertion--that we did not
have to confront the regulatory classification of cable modem service in Portland,
and that, as a result, our discussion of that issue is dicta. Such an assertion can be squared neither with
our holding in Portland nor with our own precedent. First, we note that in the course of
determining whether § 541(b)(3)
barred the imposition of any conditions on the sale there at issue, the *1130
Portland court explained that "we must determine how the
Communications Act defines [cable modem]."
Portland,
216 F.3d at 877 (emphasis added). And the concluding paragraph of our Portland
opinion begins: "We hold
that subsection 541(b)(3) prohibits a franchising authority from regulating
cable broadband Internet access, because the transmission of Internet
service to subscribers over cable broadband facilities is a telecommunications
service under the Communications Act." Id. at 880 (emphasis
added). In light of this rather
unequivocal language, it cannot be gainsaid that we considered the regulatory
classification of broadband service an essential element of our decision, and thus part of our holding. Our treatment of the issue, therefore, does
not meet the definition of dicta. See
Best
Life Assurance Co. v. Comm'r,
281 F.3d 828, 834 (9th Cir.2002) (defining dictum
as "a statement 'made during the course of delivering a judicial opinion,
but one that is unnecessary to the decision in the case and therefore not
precedential ...' ") (quoting Black's Law Dictionary 1100 (7th
ed.1999)).
Even were we to assume arguendo that
the FCC and petitioners are correct in asserting that we did not have to reach
the issue of cable broadband's classification under the Act, it is clear from
our holding that we did, in fact, reach the issue. "As we have noted before, where a panel
confronts an issue germane to the eventual resolution of the case, and resolves
it after reasoned consideration in a published opinion, that ruling becomes the
law of the circuit, regardless of whether doing so is necessary in some strict
logical sense." Miranda
B. v. Kitzhaber,
328 F.3d 1181, 1186 (9th Cir.2003) (per curiam)
(internal quotation marks omitted).
It remains for us to determine what effect, if
any, the FCC's subsequent interpretation of the Communications Act, as set
forth in its Declaratory Ruling, has upon the continuing vitality of our
holding in Portland.
C
[1] It is well established in this and other federal courts of
appeals that three-judge panels are bound by the holdings of earlier
three-judge panels. See United
States v. Camper,
66 F.3d 229, 232 (9th Cir.1995); Indus.
Turnaround Corp. v. NLRB,
115 F.3d 248, 254 (4th Cir.1997) ("A
decision of a panel of this court becomes the law of the circuit and is binding
on other panels unless it is overruled by a subsequent en banc opinion of this
court or a superseding contrary decision of the Supreme Court.") (internal
quotation marks omitted).
[2] In addition to the obvious exceptions to this rule, see,
e.g., In
re Watts,
298 F.3d 1077, 1084 (9th Cir.2002) (O'Scannlain,
J., concurring) ("We need not convene the en banc court when the Supreme
Court reverses us directly. Nor must we
do so when that Court, in reviewing a case from another circuit, knocks the
props out from under one of our decisions."), our circuit has provided for
an exception where our precedent conflicts with a subsequent agency
interpretation. In Mesa
Verde Construction Co. v. Northern California District Council of Laborers,
861 F.2d 1124 (9th Cir.1988) (en banc), we held
that "if a panel finds that an[agency] interpretation of [its statute] is
reasonable and consistent with the law[ ], the panel may adopt that
interpretation even if circuit precedent is to the contrary." Id.
at 1136. We immediately qualified this holding by
stating that the earlier panel decision may be disregarded in favor of the
agency interpretation "only where the precedent constituted deferential
review of [agency] decisionmaking." Id. "If the precedent held
either that the [agency] decision was *1131
unreasonable or the only possible interpretation of the statute," then the
prior court's construction trumps the agency's interpretation. Id.
The FCC argues that because we did not assert
in Portland that our construction of the statute was the "only possible
interpretation of the statute," we ought not be bound by it here, and
instead are free to review the agency's interpretation on a clean slate. The FCC, however, ignores Mesa Verde
's clear mandate that precedent can be disregarded in favor of a subsequent
agency interpretation "only where the precedent constituted deferential
review of [agency] decisionmaking."
Mesa
Verde,
861 F.2d at 1136.
In Portland, we took pains to "note at the outset that the
FCC has declined, both in its regulatory capacity and as amicus curiae, to
address the issue before us. Thus we are
not presented with a case involving potential deference to an administrative
agency's statutory construction pursuant to the Chevron
doctrine." Portland,
216 F.3d at 876.
[3] Furthermore, while we never explicitly stated in Portland
that our interpretation of the Act was the only one possible, we never said the
relevant provisions of the Act were ambiguous.
Thus, Mesa Verde 's requirements are not met in this instance and
Portland 's construction of the Communications Act remains binding
precedent within this circuit, even in light of the FCC's contrary
interpretation of the statute.
We find further support for this conclusion in
the Supreme Court's holding in Neal
v. United States,
516 U.S. 284, 116 S.Ct. 763, 133 L.Ed.2d 709 (1996).
There, the Court was presented with a challenge to a sentence imposed following
the appellant's conviction for possession of LSD (lysergic acid diethylamide).
Appellant contended that the district court erred in imposing a 10-year
sentence pursuant to the mandatory minimum set forth in the Anti-Drug Abuse Act
of 1986, Pub.L.
No. 99-570, 100 Stat. 3207, as construed by the Supreme
Court in Chapman
v. United States,
500 U.S. 453, 111 S.Ct. 1919, 114 L.Ed.2d 524 (1991) (holding that for sentencing purposes, under the terms of the mandatory
minimum statute, the actual weight of the LSD possessed by the defendant
included the blotter paper onto which the drug is placed). The appellant noted that, subsequent to Chapman,
the Sentencing Commission had revised the Guidelines to establish a
"presumptive weight" of 0.4 milligrams for each dose of LSD, and
argued that this revision effectively supplanted the rule announced in Chapman.
In essence, the appellant contended that the revision of the Guidelines by the
Commission was an interpretation of the statute the Court construed in Chapman
and, "because the Commission is the agency charged with interpretation of
penalty statutes and expert in sentencing matters," its construction had
to be given deference. Neal,
516 U.S. at 290, 116 S.Ct. 763.
The Court rejected petitioner's argument,
noting first that the Sentencing Commission's commentary was an attempt to
revise the Sentencing Guidelines and not an
attempt to interpret the penalty statute itself. It continued:
Were we, for argument's sake, to adopt petitioner's view
that the Commission intended the commentary as an interpretation of [the
statute] ... he still would not prevail.
The Commission's [interpretation] cannot be squared with Chapman. ... In these circumstances, we need not
decide what, if any, deference is owed the Commission in order to reject its
alleged contrary interpretation. Once we
have determined a statute's meaning, we adhere to our ruling under the doctrine
of stare decisis, and we assess an agency's later interpretation *1132
of the statute against that settled law.
Neal,
516 U.S. at 294-95, 116 S.Ct. 763. Notwithstanding the Supreme Court's use of
the term "we," there is nothing to suggest that Neal 's rule
should apply only when it is the Supreme Court (and not the courts of appeals)
construing the statute in question, and the Court itself has never asserted
that the power authoritatively to interpret statutes belongs to it alone. See, e.g., Rivers
v. Roadway Express, Inc.,
511 U.S. 298, 312-13, 114 S.Ct. 1510, 128 L.Ed.2d 274 (1994) ("[J]udicial construction of a statute is an
authoritative statement of what the statute meant before as well as after the
decision of the case giving rise to that construction.") (emphasis added);
accord United
States v. Mead Corp.,
533 U.S. 218, 248-49, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001) (Scalia, J., dissenting) ("I know of no case, in the
entire history of the federal courts, in which we have allowed a judicial interpretation of a statute to be set aside by
an agency--or have allowed a lower court to render an interpretation of a
statute subject to correction by an agency."). [FN13]
FN13. The Supreme
Court's recent decision in Nat'l
Cable & Telecomms. Ass'n, Inc. v. Gulf Power Co.,
534 U.S. 327, 122 S.Ct. 782, 151 L.Ed.2d 794 (2002)
("Gulf Power "), handed down after our Portland
decision but before the FCC's Declaratory Ruling, does not compel a different
result. There the Court was faced with
challenges to FCC orders determining the rents to be paid by cable and
telecommunications service providers for the attachment of their wires to
utility poles. The Court explicitly noted that the FCC had not yet categorized
cable modem service and "address[ed] only whether pole attachments that
carry commingled services are subject to FCC regulation at all." Id.
at 338, 122
S.Ct. 782.
III
[4] Our holding in Mesa Verde, along with that of the Supreme
Court in Neal, requires our adherence to the interpretation of the
Communications Act we announced in Portland. There, we concluded that cable broadband
service was not a "cable service" but instead was part
"telecommunications service" and
part "information service."
Because the Commission's Declaratory Ruling agreed with our conclusion
that cable broadband service is not "cable service," but disagreed
with our conclusion that it is in part "telecommunications service,"
we must
AFFIRM in part, VACATE in part, and REMAND for
further proceedings not inconsistent with this opinion. [FN14]
FN14. Because the
various petitioners' claims all revolve around the FCC's central classification
decision, which we have vacated, we decline here to consider their remaining
claims (including those directed at the validity of the FCC's determination
that AOL Time Warner offers cable transmission to unaffiliated ISPs on a
private carriage basis and its waiver of the Computer II requirements
for cable companies who also offer local exchange service), leaving them for
reconsideration by the FCC on remand.
O'SCANNLAIN, Circuit Judge, concurring:
I concur in the court's conclusion that, in
light of our holding in Mesa Verde, we are bound by our own
interpretation of the Telecommunications Act in Portland and must vacate
the FCC's Declaratory Ruling.
I
write separately to note that our adherence to stare decisis, even in
the face of a subsequent agency interpretation contrary to our Portland
decision, produces a result "strikingly inconsistent with Chevron
's underlying principles." Russell
L. Weaver, The Emperor
Has No Clothes:
Christensen, Mead and
Dual Deference Standards,
54 Admin. L.Rev. 173, 192 (2002); see also Richard L. Pierce, Jr., *1133Reconciling
Chevron and
Stare Decisis, 85 Georgetown L.J. 2225,
2260 (1997) (advocating a nuanced approach to
conflicts between stare decisis and subsequent agency interpretations,
and rejecting rigid adherence to precedent).
As Part I of the court's opinion makes clear,
the market for Internet services--what we called in Portland a
"quicksilver technological environment," Portland,
216 F.3d at 876--is evolving quite rapidly. Indeed, it is the desire to ensure the
continued development of this market--and to further Congress' oft-stated
desire that there be broad, nationwide access to broadband Internet
service--that drove the FCC to take the action we vacate today.
One can disagree--and indeed the seven
petitioners and numerous amici do disagree, vigorously--about whether
the FCC's regulatory classification of cable modem service would move us closer
to or farther away from achieving those important goals. Regardless of one's view of the wisdom of the
FCC's declaratory ruling, it cannot be
denied that our holding today effectively stops a vitally important policy
debate in its tracks, at least until the Supreme Court reverses us or Congress
decides to act. [FN1]
FN1. Our decision
could suffer a third, decidedly more drastic fate. Given the importance of the
regulatory classification of broadband internet service, one wonders whether
our decision today will prompt the FCC to follow the example of the Social
Security Administration, the National Labor Relations Board, and the Internal
Revenue Service, among other federal agencies, in adopting a policy of
"nonacquiescence" in the face of court rulings with which the agency
disagrees. See generally, Samuel
Estreicher & Richard L. Revesz, Nonacquiescence
by Federal Administrative Agencies,
98 Yale L.J. 679 (1989).
While my belief in the importance of stare
decisis as a check on judicial power is as staunch as anyone's, see Miller
v. Gammie,
335 F.3d 889, 901-02 (9th Cir.2003) (O'Scannlain,
J., concurring in part) (noting "the clear authority of the en banc court
to do what three-judge panels normally cannot-- namely, overrule prior
decisions of three-judge panels"), adherence to stare decisis in
the present case--coming as it does in a decision that determines the outcome of seven different petitions for
review from three different circuits consolidated and assigned randomly to this
court by the Judicial Panel on Multidistrict Litigation--appears to aggrandize,
rather than limit our power over an admittedly complicated and highly technical
area of telecommunications law. For,
strict adherence to the rule we reaffirm today [FN2]
"appends a subversive codicil to Chevron 's rule that Congress
gives agencies, rather than courts, 'whatever degree of discretion the
ambiguity [of a statute] allows,'--that is, unless courts take it
first." Kenneth A. Bamberger, Provisional
Precedent: Protecting Flexibility in
Administrative Policymaking,
77 N.Y.U. L.Rev. 1272, 1273 (2002) (quoting Smiley
v. Citibank (S.D.), N.A.,
517 U.S. 735, 741, 116 S.Ct. 1730, 135 L.Ed.2d 25 (1996)). [FN3] Our Portland decision, in essence,
beat the FCC to the punch, leading to the strange result we are compelled to
reach today: three judges telling an
agency acting within the area of *1134 its expertise that its
interpretation of the statute it is charged with administering cannot
stand--and that our interpretation of how the Act should be applied to a
"quicksilver technological environment," Portland,
216 F.3d at 876, is the correct, indeed the only,
interpretation. [FN4]
FN2. That is, that
three-judge panels can disregard precedent in favor
of a subsequent contrary agency interpretation only when the earlier
court (1) was proceeding in a deferential posture and (2) did not declare that
its interpretation of the statute was the only possible
interpretation. See Slip Op. at
1130-1131.
FN3. The
dangerousness of this "codicil to Chevron," is made all the
more clear in the wake of the Supreme Court's recent decision in United
States v. Mead,
533 U.S. 218, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001), which "limited the types of agency interpretations that are
binding on courts, thereby increasing significantly the frequency with which
courts will be able to resolve ambiguity preclusively before an agency can act
decisively." Bamberger, Provisional
Precedent, supra at 1275.
FN4. Aside from the
incongruity of the result in the instant case, the broader implications of the
rule we apply today are quite dramatic. Foremost among them, as Justice Scalia
noted in his dissent in Mead, is the potential for
the ossification of large portions of our statutory law....
Once the court has spoken, it becomes unlawful for the agency to take a
contradictory position; the statute now says
what the court has prescribed.... It will be
bad enough when this ossification occurs as a result of judicial determination
(under today's new principles) that there is no affirmative indication of
congressional intent to "delegate";
but it will be positively bizarre when it occurs simply because of an
agency's failure to act by rulemaking (rather than informal adjudication)
before the issue is presented to the courts.
Mead,
533 U.S. at 246, 121 S.Ct. 2164 (Scalia, J.,
dissenting). This case, it seems to me,
presents precisely the "positively bizarre" scenario envisioned by
Justice Scalia.
Strange as this result may seem, I concur in
the court's opinion only because I believe our court's precedent compels it.
THOMAS, Circuit Judge, concurring:
I agree that our prior decision in AT &
T
v. City of Portland,
216 F.3d 871 (9th Cir.2000), controls the
statutory interpretation question and requires a remand. I write separately to underscore my
conclusion that City of Portland was correctly decided. Considered in its entirety, the 1996
Telecommunications Act compels the conclusion that cable modem contains a
telecommunications service component.
This is not a case that implicates Chevron
deference, not only for the reasons noted in our unanimous opinion, but also
because it is a question of pure statutory interpretation. In reviewing an administrative agency's
construction of the statute it administers, we must consider first
"whether Congress has directly spoken to the precise question at
issue." Chevron,
U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 842, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). "If Congress
has done so, the inquiry is at an end;
the court 'must give effect to the unambiguously expressed intent of
Congress.' " Food
and Drug Administration v. Brown & Williamson Tobacco Corp.,
529 U.S. 120, 132, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000) (quoting Chevron,
467 U.S. at 843, 104 S.Ct. 2778). In making that assessment, we look not only
at the statutory section in question, but also analyze the provision in the
context of the governing statute as a whole, see id. at 132, 120
S.Ct. 1291, presuming congressional intent to
create a " 'symmetrical and coherent regulatory scheme.' " Id.
at 133, 120 S.Ct. 1291 (quoting Gustafson
v. Alloyd Co.,
513 U.S. 561, 569, 115 S.Ct. 1061, 131 L.Ed.2d 1 (1995)). If, after
conducting such an analysis, we conclude that Congress has not addressed the
issue, that is, that " 'the statute is silent or ambiguous'--we proceed to
the second step, where we decide whether the agency's interpretation 'is based on a permissible
construction of the statute.' " Pacheco-Camacho
v. Hood,
272 F.3d 1266, 1268 (9th Cir.2001) (quoting Chevron,
467 U.S. at 843, 104 S.Ct. 2778). In short, if our analysis indicates that the
statute is silent or ambiguous, we "must respect the agency's construction
of the statute so long as it is permissible." Brown
& Williamson,
529 U.S. at 134, 120 S.Ct. 1291 (citing INS
v. Aguirre-Aguirre,
526 U.S. 415, 424, 119 S.Ct. 1439, 143 L.Ed.2d 590 (1999)).
*1135 In City of Portland, we
engaged in this analytical exercise and concluded that Congress meant what it
said in defining "telecommunications." We did not discern any
ambiguity in the statutory meaning for the agency to interpret; thus, Chevron deference would have
been inappropriate even if the agency had interpreted the statute prior to City
of Portland. As the Supreme Court
stated in Barlow
v. Collins,
397 U.S. 159, 166, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970): "[When] the
only or principal dispute relates to the meaning of the statutory term, the
controversy must ultimately be resolved, not on the basis of matters within the
special competence of the [agency], but by judicial application of canons of
statutory construction." As the
Supreme Court has emphasized, "[t]he judiciary is the final authority on
issues of statutory construction." INS
v. Cardoza-Fonseca,
480 U.S. 421, 447, 107 S.Ct. 1207, 94 L.Ed.2d 434 (1987) (quoting Chevron,
467 U.S. at 843 n. 9, 104
S.Ct. 2778).
Our role in statutory interpretation is
necessarily different from that of an agency's.
As Judge Kozinski has explained:
But in performing their proper function, judges must listen
for the voice of the legislature, not to the sound of their own
heartbeats. Because courts are bound by
the best construction of the statute, they may alter their interpretation only
in response to a powerful new insight as to the law's meaning, not because a
different panel of judges prefers a different result.
Agencies, on the other hand, may turn on a dime: Their proper function is to fill in policy
gaps pursuant to an explicit or implicit delegation of authority from
Congress. See, e.g., Morton
v. Ruiz,
415 U.S. 199, 231, 94 S.Ct. 1055, 1072, 39 L.Ed.2d 270 (1974) ("[t]he power of an administrative agency to
administer a congressionally created ... program necessarily requires the
formulation of policy and the making of rules to fill any gap left, implicitly
or explicitly, by Congress"). Where
Congress has delegated such authority, the statute becomes a clear vessel which
changes its tint as it is filled and refilled by various policy pigments. Because the agency administering the statute
is not bound to a single formulation of statutory language, it may make changes
without considering whether the new approach more accurately reflects the
meaning of the statute.
Mesa
Verde Constr. Co. v. N. Cal. Dist. Council of Laborers,
861 F.2d 1124, 1146-47 (9th Cir.1988) (en banc)
(Kozinski, J., dissenting).
Thus, once we have fulfilled our judicial
function in interpreting an act of Congress and have determined the meaning is
clear, the subsequent action of an agency cannot and should not alter our
conclusion. If it did, then case law
would be in a constant state of uncertainty, awaiting a new interpretation by
an agency.
That being said, given the present context, it
is appropriate to explain why I believe the interpretation of City of
Portland was correct.
B
As noted in both City of Portland and
our opinion today, Internet access involves two separate services: an information service that provides e-mail,
web browsing, and other means of manipulating information, and a telecommunications
"pipeline" that transmits the actual data. The statute defines and regulates these two
components separately, in accordance with the historic distinction between
basic and enhanced services. 47
U.S.C. § 153(20), (46). Although this
differential is more apparent when two different companies are involved, the
same statutory framework applies when a single company provides the two services.
*1136 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." 47
U.S.C. § 153(43). Everyone agrees
that cable modem users will have the capacity to send and receive email and
download pre-existing content from websites.
These activities involve, at least in part, the transmission of
"information of the user's choosing" without any change in form or
content by the cable company. Naturally, integrated cable modem services also
offer subscribers the "capability" for "generating, acquiring,
storing, ... [and] retrieving" this information through email software,
web browsers, and the like, activity that clearly falls within the definition
of "information service." 47
U.S.C. § 153(20). However, under the
statutory definition, the "information service" includes only the
"capability" to generate, transmit, and receive email and information
"via telecommunications." The actual
transmission, that is, putting this capability into practice, falls
outside the definition and requires additional "telecommunications." [FN1]
FN1. The definition
of information service explicitly excludes "any use of such capability for
the management, control, or operation of a telecommunications system or the
management of a telecommunications service." 47
U.S.C. § 153(20).
The
FCC acknowledges that cable modem service must be provided "via
telecommunications" but insists that cable modem does not involve
"telecommunications service" because it does not involve the
"offering of telecommunications for a fee directly to the public." 47
U.S.C. § 153(46). Rather, the agency suggests, customers purchase an
integrated package of services that may include telecommunications but does not
include telecommunications service. In
other words, the agency places a great deal of weight on the distinction
between "telecommunications" and "telecommunications
service." However, the full
statutory definition, the overall legislative scheme, and the associated regulatory
history clearly indicate that cable modem provides not only telecommunications
but also telecommunications service.
Congress defined "telecommunications
service" as "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." 47
U.S.C. § 153(46). Cable modem subscribers
who use the cable company's own information services transmit that information
via the telecommunications pipeline offered by the cable company. As the FCC admits, other cable modem
subscribers may completely "bypass that company's web browser, proprietary
content, and e-mail" and "click through" to another service.
In the Matter
of Inquiry Concerning High-Speed Access to the Internet Over Cable and Other
Facilities,
17 F.C.C.R. 4798, 4815, 2002 WL 407567 (2002). Both classes of cable modem subscribers pay a
monthly "fee" "directly" to the cable company in order to
use "telecommunications."
Nothing in the definition suggests that the telecommunications component
must be priced or offered separately in order to qualify as a
telecommunications service. Under the FCC's approach, the general public would
be purchasing a service that nobody offered.
Prior to the decision in this case, the FCC
consistently recognized that Internet access implied the separate provision of
a telecommunications service by some entity.
In the conventional world of dial-up access over "plain old
telephone service," the agency classified the Internet Service Provider
(ISP) as an information service and *1137 the telephone service as a
telecommunications carrier. See,
e.g., In the Matter
of Federal-State Joint Bd. on Universal Serv.,
13 F.C.C.R. 11,501, 11,539-40, 1998 WL 166178 (1998). When a local telephone company simultaneously offered Internet access,
it was still required to offer the telecommunications services to other ISPs on
a common carrier basis. See, e.g., In
the Matter
of Bell Operating Cos. Joint Petition for Waiver of Computer II Rules,
10 F.C.C.R. 13,758, 13,767-68, 1995 WL 637904 (1995) (discussing Pacific Bell's offering of Internet access service and its compliance with unbundling
requirements).
Similarly, when the FCC first applied the 1996
law to integrated broadband services, the agency concluded that Internet access
via DSL contained both information service and telecommunications service
components:
An end-user may utilize a telecommunications service
together with an information service, as in the case of Internet access. In such a case, however, we treat the two
services separately: the first service
is a telecommunications service (e.g. the xDSL-enabled transmission path), and
the second service is an information service, in this case Internet access.
Deployment
of Wireline Servs. Offering Advanced Telecomms. Capability,
13 F.C.C.R. 24,012, 24,030, 1998 WL 458500 (1998). Thus, the decision by some of the Bell
Operating Companies (BOCs) to offer an "integrated" Internet access
package did not affect the regulatory classification. Instead, the FCC noted that "BOCs
offering information services to end users of their advanced service offerings,
such as xDSL, are under a continuing obligation to offer competing ISPs
non-discriminatory access to the telecommunications services utilized by the
BOC information services." Id.
at 24,031.
This position reflects a much more reasonable reading of the statute. [FN2]
FN2. The agency has
now decided to reconsider its treatment of DSL broad-band
service. In the Matter
of Appropriate Framework for Broadband Access to the Internet Over Wireline
Facilities,
17 F.C.C. Rcd. 3019, 2002 WL 252714 (2002).
Other provisions in the Telecommunications Act
buttress the idea that companies may offer telecommunications services even
when they also offer other services.
First, the Act extends common carrier requirements to every
telecommunications carrier (defined as "any provider of telecommunications
services"), but "only to the extent that it is engaged in providing
telecommunications services." 47
U.S.C. § 153(44). Thus, under the
statutory scheme, some "providers of telecommunications services" may
simultaneously provide other services, presumably including information
services, which would be subject to a separate regulatory regime. Second, as mentioned in City
of Portland,
216 F.3d at 879, the pole attachment provisions
at 47
U.S.C. § 224(d)(3) at least contemplate the possibility that a cable system
may provide tele-communications
service. See
also Nat'l Cable & Telecomms. Ass'n v. Gulf Power Co.,
534 U.S. 327, 353-54, 122 S.Ct. 782, 151 L.Ed.2d 794 (2002) (Thomas, J., concurring in part and dissenting in part)
(arguing that because the FCC had not yet classified cable modem service, it
could not yet regulate the pole attachment rates).
Third, Congress instructed the FCC and state
commissions "with regulatory jurisdiction over telecommunications
services" to use their regulatory powers in order to encourage the
deployment of "advanced telecommunications capability." Telecommunications Act of 1996, Pub.L.
No. 104-104, Title VII, § 706(a), 110 Stat. 56, 153 (1996).
The Act defined this "advanced telecommunications capability"
as "high speed, switched, broadband telecommunications *1138
capability that enables users to originate and receive high-quality voice,
data, graphics, and video telecommunications using any technology," Id.
at § 706(c)(1), an apt description of
cable modem service. Although this
section does not explicitly state that the "telecommunications
capability" inherent in cable modem must include a
"telecommunications service," the state and federal regulatory powers
referenced in this section have traditionally been applied to basic
transmission services rather than enhanced information services. See, e.g., In
the Matter of Section 64.702 of the Comm'n's Rules & Regulations (Second
Computer Inquiry),
77 F.C.C.2d. 384, 431-33, 0080 WL 233301 (1980)
(noting the FCC only had authority over enhanced services under the general
provisions of Title I and refraining from imposing regulations). [FN3] This suggests that
Congress intended some component of the "advanced telecommunications
capability" to be subject to the Title II powers governing
telecommunications services.
FN3. As discussed
below, Congress incorporated a similar distinction into the structure of the
1996 Act.
Turning to the law as a whole, the 1996 Act
was designed to accelerate the private sector deployment of advanced
telecommunications and information technologies "by opening all
telecommunications markets to competition." H.R.
Conf. Rep. No. 104-458 at 113; see also Stuart Minor Benjamin, et
al., Telecommunications Law and Policy 716 (2001) (noting that the 1996
Act was designed in part to increase competition in telecommunications markets
and promote increased access to advanced telecommunications services). As we recognized in City of Portland,
the Act mandates "a network architecture that prioritizes consumer choice,
demonstrated by vigorous competition among telecommunication
carriers." City
of Portland,
216 F.3d at 879.
In order to foster this competition, the 1996 Act applies the
traditional common carrier obligations of non-discrimination and
interconnectivity to telecommunications service providers "regardless of
the facilities used." 47
U.S.C. § 153(46). Application of
these principles to cable modem service would enhance independent ISP access to
telecommunications facilities, almost certainly increasing
consumer choice. Naturally, the FCC may
choose to forbear from enforcing these regulations if it determines they are
not necessary to promote competition or protect consumers. 47
U.S.C. § 160(a)-(b). [FN4] Nonetheless,
the Act creates a general presumption in favor of opening markets to
competition.
FN4. The FCC argued
in its brief that sufficient competition exists across broadband technologies,
though several petitioners argued vigorously that many subscribers, especially
in rural areas, do not have access to broad-band alternatives such as DSL.
The evolution of advanced telecommunications
regulation prior to the 1996 Act reflects the same underlying belief that
widespread access to "basic" transmission facilities would spur
competition in "enhanced services" and provide consumers with a wider
variety of more closely tailored products.
See, e.g., Second
Computer Inquiry,
77 F.C.C.2d at 417. Under this "Computer II "
framework, the FCC subjected basic transmission services to common carrier
regulations and left enhanced services largely unregulated. Companies that owned transmission facilities
and offered both basic and enhanced services were required to separate out the
basic transmission component and offer it to all providers of enhanced services, subject to the
interconnectivity and non-discrimination requirements of Title II. In the Matter
of Indep. Data Communications Mfrs. Ass'n,
10 F.C.C.R. 13,717, 13,719, 1995 WL 613619 (1995).
*1139 These decisions formed the
regulatory background for the 1996 Act, in which Congress created the new,
corresponding categories of "information services" and
"telecommunication services."
The FCC previously acknowledged that Congress intended the categories in
the 1996 Act to "parallel" those developed through the Computer II
decisions:
Reading the statute closely, with attention to the
legislative history, we conclude that Congress intended these new terms to
build upon frameworks established prior to the passage of the 1996 Act.
Specifically, we find that Congress intended the categories of
"telecommunications service" and "information service" to
parallel the definitions of "basic service" and "enhanced
service" developed in our Computer II proceedings....
Universal
Service,
13 F.C.C.R. at 11,511. Thus, the background regulatory regime
required that a bundled package of enhanced services and basic services be
separated out and subjected to different requirements. Given this context, the Congressional
decision to create "parallel" categories in the new statute creates a
presumption in favor of similar treatment for information and
telecommunications services.
The
specific legislative history of "telecommunications service" provides
additional support for the idea that cable modem incorporates a
telecommunications service. The House
report on its version of the bill implied that "telecommunications
service" was distinguished from "telecommunications" largely in
order to exclude internal, privately provided telecommunications networks. See H.R.Rep.
No. 104-204, at 126 ("By defining
'telecommunications service' as those services and facilities offered on a
'common carrier' basis, the Committee recognizes the distinction between common
carrier offerings that are provided indifferently to the public or to such classes
of users as to be effectively available to a substantial portion of the public,
and private services."). The Senate
report explained that its definition of "telecommunications" excluded
"services involving interaction with stored information, that are defined
as information services. The underlying
transport and switching capabilities on which these information services are
based, however, are included in the definition of 'telecommunications
services.' " S.Rep.
No. 104-23, at 18. The report also stated that "
'[t]elecommunications service' does not include information services, cable
services, or 'wireless' cable services, but does include the transmission,
without change in the form or content, of such services." Id. Thus, both Houses implied that
sale to the public of a service allowing the unaltered
transmission of information qualified as a telecommunications service. [FN5] Although Congress
intended information services and telecommunications services to be mutually
exclusive under both definitions, see Universal
Service,
13 F.C.C.R. at 11,522-23, nothing suggests that
telecommunications service ceased to be so when offered to the public along
with an information service.
FN5. In forging
compromise language, the conference committee adopted the general definition of
telecommunications service from the Senate bill but deleted the second
sentence, "[t]he term includes the transmission, without change in the
form or content, of information services of cable services, but does not
include the offering of those services."
The conference report does not specify why this sentence was deleted, H.R.
Conf. Rep. No. 104-458, at 117 (1996), though the
FCC later concluded that it had been deleted in order to avoid treating
broadcasters and cable systems as telecommunications carriers. Universal
Service,
13 F.C.C.R. at 11,523.
The FCC responds that it has already ruled
that the mere transmission of unaltered *1140 data does not imply that
an information service contains a telecommunications
service component. Universal
Service,
13 F.C.C.R at 11,538-39 (1998). According to this 1998 decision,
The provision of Internet access service involves data
transport elements: an Internet access provider must enable the movement of
information between customers' own computers and the distant computers with
which those customers seek to interact.
But the provision of Internet access service crucially involves
information-processing elements as well;
it offers end users information-service capabilities inextricably
intertwined with data transport. As such, we conclude that it is appropriately
classed as an "information service."
Id. at 11,539-40. Critically, however, the Internet service
providers at issue in the report "typically own no telecommunications
facilities. Rather, in order to provide
those components of Internet access services that involve information transport,
they lease lines, and otherwise acquire telecommunications, from
telecommunications providers...." Id. at 11,540. That is, someone still has to provide
telecommunications service, even though the ISP's resale of this service to the
public does not transform the ISP into a telecommunications service provider. [FN6] In the integrated cable modem context, the
same company provides these two, entirely separate services.
FN6. A telecommunications carrier selling broadband
transmission service to ISPs in effect offers telecommunications "to such
classes of users as to be effectively available directly to the public"
and thus provides "telecommunications service" under 47
U.S.C. § 153(46).
Finally, the FCC complains that the
interpretation required by City of Portland would require it to
"find a telecommunications service inside every information
service." However, as mentioned,
the agency never arrived at this result for dial-up ISPs who either purchased
telecommunications services from others or relied upon users to access the ISP
through conventional phone lines. Universal
Service,
13 F.C.C.R. at 11,539. Information services provided by ISPs who
purchased telecommunications services from cable companies should be subject to
the same regulatory regime. See,
e.g., Indep.
Data Communications,
10 F.C.C.R. at 13,719-20 (1995) (holding that
non-facilities-based carriers who offered both enhanced services and basic
transmission would be treated as if they only offered enhanced services). The FCC has not demonstrated that cable modem
differs in any way that would preclude similar treatment.
In my view, the statutory definitions,
combined with the overall regulatory and
legislative context, compel the result that cable modem service includes a
telecommunications service component.
Thus, even if we were writing on a clean slate, my conclusion would be the
same as the one we reached in City of Portland as to the meaning of the
statute.
345 F.3d 1120, 03 Cal. Daily Op. Serv. 8915,
2003 Daily Journal D.A.R. 11,249, 30 Communications Reg. (P&F) 637
END OF
DOCUMENT