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Powell: Regs Would Hike Modem Rates

12/02/2004 6:38 AM Eastern

Applying traditional phone-industry rules to cable-modem service would raise consumer rates by about 10%, Federal Communications Commission chairman Michael Powell said Thursday.

“If you layered on that instantly -- that every cable-modem offering today has a telecommunications subcomponent -- the massive extension of regulatory obligation on that, I think, is going to drive the cost of broadband up very significantly,” Powell said. “It’s almost an immediate 10% tax.”

Cable operators collect about $10 billion in annual cable-modem revenue, meaning that Powell’s 10% rate-rise prediction would cost cable’s 20 million high-speed-data customers an additional $1 billion.

Powell’s comments came one day before the U.S. Supreme Court is scheduled to decide whether to hear Brand X Internet Services vs. FCC, a case from the U.S. Court of Appeals for the Ninth Circuit that threatens cable-modem service with traditional telecommunications obligations such as open access to Internet-service providers, universal-service payments and interconnection with other telecommunications carriers.

Consumer groups and various ISPs support the Brand X ruling, saying that it would expose cable-modem service to greater competition and make broadband access more affordable.

Powell said the application of telecommunications obligations would impose new financial burdens on cable companies and their customers. Universal-service payments would equal about 8.9% of modem revenue, he added.

“I think you are talking [about] a significant increase in consumer prices,” Powell said. “Right now, if you buy cable-modem service from Comcast [Corp.] under the current regulatory regime, there are not a lot of universal-service fees connected to that [and] there are not the costs of network interconnection.”

As chairman, Powell has fought to keep broadband deregulated while the White House has called for universal and affordable broadband access by 2007. Powell indicated that regulation of cable-modem service would frustrate those policy goals.

“This would be an immediate hit to both the industries and consumers if we couldn’t figure out a better way to do it,” he added.

The Department of Justice and the National Cable & Telecommunications Association have appealed the Brand X case to the high court. The court is expected to announce its decision Dec. 6.

The FCC has the option of employing statutory-forbearance authority to shield cable-modem service from telecommunications rules, but that approach can take up to 15 months to process, followed by a new round of litigation that further clouds regulatory certainty.

When asked if he is pondering the forbearance approach, Powell told reporters, “We haven’t crossed that bridge.”

He added that the FCC could experiment with something called the “doctrine of nonacquiescence,” which would mean that the commission would recognize the Brand X holding only in states within the Ninth Circuit.

“Basically, the rule applies in the Ninth Circuit. It doesn’t apply anywhere else,” Powell said.

The Ninth Circuit is the largest among the 13 federal circuits, both in terms of geography and population. Its jurisdiction includesCalifornia, Oregon, Washington, Arizona, Montana, Idaho, Nevada, Alaska, Hawaii, Guam and the Northern Mariana Islands.

 

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