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Appeals court rubber stamps FCC's DSL (de)regulation
Hangs up on small ISPs
The petitioning ISPs argued that the provision of internet services contains a telecommunications component, and should thus fall under the mandatory access component of the Communications Act. In addition, the petitioners claimed that the FCC's elimination of the 1975 rule violated administrative rulemaking procedures and would harm the market for broadband services.
As to the first argument, the court pointed out that the Supreme Court had previously upheld the FCC's similar determination in regard to cable ISPs. The Supreme Court had declared that, since the end-user simply wanted internet access and didn't care about the equipment used to deliver it, there was no telecommunications portion of cable information services.
The 3rd Circuit then found that the evidence supported the FCC's conclusion that cable and DSL broadband services were similar enough to justify the application of the Supreme Court's reasoning to DSL services as well as cable.
For their argument against the revocation of the 1975 rule, the petitioners claimed that the FCC had failed to conduct a market survey to determine the effect the new order will have on market conditions and regional telecom consolidation. The FCC replied, and the court accepted, that it did not need to conduct such a study since the broadband service market was still in its nascent stages.
Overtaken by events
The FCC explained that, since market penetration of broadband services remains at low levels, any observations it could have made would quickly become obsolete as the market evolves.
The 3rd Circuit also agreed with the FCC's contention that the deregulation will lead to an increase in products and services by removing barriers to the adoption of new equipment. The FCC averred that telecoms companies had previously avoided upgrading their equipment because of the cost of offering independent ISPs nondiscriminatory access to that equipment.
The court rejected petitioners' additional arguments that the telecoms will block small ISPs from markets or relegate them to older, slower and less competitive equipment. Instead, the court again credited FCC findings that the telecoms have financial incentives to provide access to small ISPs at competitive rates, since by doing so they can spread the cost of their networks over as much traffic and as many users as possible.
Of course, they could also cement their regional monopolies, boot the smaller ISPs of the network entirely and finance their operations by raising the rates the end user pays. It's now entirely up to them, after all.®