Court gives cable big win in high-speed Internet market

WASHINGTON — In a decision hailed by the cable industry, the Supreme Court ruled yesterday that cable companies don't have to share their lines with rival providers of high-speed Internet service.

Consumer advocates and other groups, meanwhile, warned that the decision will limit competition and consumer choice, leaving customers with only two sources of broadband service: phone or cable companies.

The 6-3 decision in the so-called "Brand X" case upholds a Federal Communications Commission ruling that said cable companies were exempt from the same regulations requiring phone companies to offer independent providers access to phone-company lines.

The FCC said its action was designed to encourage cable companies to invest in building networks to offer broadband services.

In an opinion by Justice Clarence Thomas, the high court said judges should defer to the expertise of the FCC.

"The Commission is in a far better position to address these questions than we are," Thomas wrote.

The decision won't have much impact in the Puget Sound area, say cable companies and a government official. The area is already dominated by Comcast, which has roughly 400,000 high-speed Internet subscribers in the state.

Comcast allows Internet service provider EarthLink to use its lines in the Seattle area, a partnership that began in 2002. Comcast spokesman Steve Kipp said he couldn't comment on whether the relationship would be affected by the Supreme Court ruling.

The ruling has no direct impact on Seattle, said Bill Schrier, the city's chief technology officer. Seattle has cable franchise agreements with Comcast and Millennium Digital Media, and those will continue.

But the ruling's potential impact on competition is a concern, Schrier said, particularly at a time when the United States has fallen out of the top 10 countries in the world for broadband Internet penetration.

"One reason we think that's happening is because there's no competition," he said.

The ruling overturned a decision by the 9th U.S. Circuit Court of Appeals that granted access to cable-modem operations in Portland to an independent Internet service provider called Brand X.

The key issue before the high court was whether cable-Internet access is a "telecommunications service" under federal law that makes it subject to strict FCC rules requiring companies to provide access to independent providers.

The FCC said no, voting in March 2002 to exempt cable companies from the strict rules to stir more investment. The agency reasoned that high-speed Internet over cable was an "information service," making it different from phone service.

Last year, that information service generated $10 billion in revenue from cable-modem subscriptions, making it cable's fastest-growing segment.

Although the phone companies have had to open their systems to competitors, they backed cable interests in the case, making it likely they will now push the FCC to deregulate their rival Internet services on digital subscriber lines.

Currently, DSL is regulated as a "telecommunications" service that requires companies to share their lines with independent providers such as Brand X and EarthLink.

Consumer groups, however, argued that subscribers should be able to choose their own Internet provider rather than be forced to use the cable company.

Left unregulated, cable companies will monopolize the market, with unfettered ability to raise prices and restrict content for their business advantage, they said.

Many computer users still access the Internet through dial-up services, but broadband connections, through phone and cable lines and satellites, are growing quickly. Broadband costs about $40 to $50 a month, depending on location.

Though there are broadband alternatives, including DSL, fixed wireless and satellite, more than 60 percent of high-speed Internet users subscribe to their cable company's service, according to recent studies.

Seattle-based Speakeasy has rolled out an early version of WiMax, a standard that aims to deliver wireless high-speed Internet across large areas. Speakeasy's Seattle network of rooftop base stations y offers WiMax in a 5-square-mile area.

The economics of WiMax make it tough to sell to residential customers, though, and Speakeasy is targeting businesses with its service, said Speakeasy Chief Executive Bruce Chatterley yesterday. Prices range from $500 to $800 a month depending on speed.

Material from The Associated Press, Chicago Tribune and Seattle Times technology reporter Kim Peterson is included in this report.