The appropriate regulatory classification of cable modem services has been disputed for over the last five years. In response to conflicting federal court decisions regarding the interpretation of the federal Communications Act as it applies to cable broadband services, the Federal Communications Commission (FCC) conducted inquiries and requests for comments on the classification of the cable modem platform and declared in its 2002 Declaratory Ruling that cable modem service was an “interstate information service” and was therefore not subject to regulations as either a cable service or a telecommunications service. This classification was based on the industry regulatory classifications in the Communications Act of 1934, with the Telecommunications Act of 1996 as the most recent major revision. The Communications Act distinguishes between three main types of services: 1. Telecommunications service: “[T]he 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). Telecommunications service providers are subject to common carriers obligations and carry a large regulatory burden.
2. Cable service: The uni-directional transmission of information over a pipeline to viewers. Compared to telecommunications services, cable services are less regulated.
3. Information service: “[T]he offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications.” 47 U.S.C. §§ 153(20). Unlike cable service, a bi-directional interaction characterizes information service, where users not only receive, but also send and create information. Providers of information services are users of telecommunications and are not subject to regulations as telecommunications carriers. Information services remain largely unregulated.
Subsequent to FCC’s 2002 Ruling, seven different petitions for review were filed in the Third, Ninth, and District of Columbia Circuits, each contending that the Commission should not have stopped at the conclusion that cable modem service is an “information service,” but should have made additional determination regarding the nature of service. On April 1, 2002, the Judicial Panel on Multidistrict Litigation transferred the related petitions for review to the Ninth Circuit District Court for consolidation with Brand X Internet Service’s petition.
The Ninth Circuit had interpreted the provisions of the Communications Act as applied to cable broadband service in a prior case. At issue in AT&T v. City of Portland was whether local governments have authority to condition the transfer of cable licenses on opening access to Internet access providers. Portland argued that cable modem service was a cable service, and that it had authority under the Cable Act to impose open access conditions on transfers. The Ninth Circuit held that the City could not impose such open access requirements because cable modem service was not a “cable service” since it entailed bi-directional rather than uni-directional information transmission. To the extent that cable modem service provides internet service, it is an information service, however, to the extent that it provides the pipeline through which Internet is accessed, it provides telecommunications service.
Despite the intervening agency action that was contrary to AT&T v. City of Portland, the Court held that it was bound by that decision since precedent can be disregarded in favor of a subsequent agency interpretation “only where the precedent constituted deferential review of [agency] decision-making.” Mesa Verde Construction Co. v. Northern California District Council of Laborers 861 F.2d 1124, 1136 (9th Cir. 1988). The Court found that since cable modem service is not a “cable service” but instead part “telecommunications service” and part “information service,” affirming in part and vacating in part the Declaratory Ruling of the FCC.