Out of Control Policy Blog

žOpenÓ or žForcedÓ?

Competition is great, but let's not forget about property rights. And the Supremes haven't done so well on the property rights front lately.

But here's some good news:

    Proponents of "open access" suffered a major setback on Monday in the so-called Brand X case, when the U.S. Supreme Court decided that the cable industry doesn't have to let competitive ISPs onto its wires.

    The fight moves next to Congress and the Federal Communications Commission, where telephone companies are expected to seek similar exemptions from line-sharing rules.
    ...

    The case decided Monday pitted the National Cable & Telecommunications Association and the FCC against internet service provider Brand X internet of Santa Monica, California.

    Brand X -- supported by the wider ISP community and consumer groups -- had asked the Supreme Court to affirm an October 2003 decision by the 9th U.S. Circuit Court of Appeals. The lower court favored Brand X when it found that cable-modem service is partly a "telecommunications" service and therefore should be subject to the same line-sharing rules that govern broadband DSL services run by telephone companies.

    In 2002, the FCC had classified cable-modem service as an "information" service not subject to traditional telephone rules that would require leasing lines to competitors.

David Kopel does a nice job of explaining why "Forced Access" is a more accurate term than "Open Access":

    The decision in National Cable Telecommunications Assoc. v. Brand X Internet Services, was a victory for technological progress, and for property rights. For nearly a decade, some Internet predators (including, for a while, AOL) claimed that the government should give them the right to sell ISP services delivered on a broadband network which was built by someone else. In other words, if A builds a restaurant, then B claims that he has the right to sell food in A's restaurant, as long as B pays A a "reasonable" fee for access to the restaurant. In a broadband context, the government-abetted piracy was called "Open Access", and claimed as giving consumers more choice. But the more accurate term was Forced Access, since B would use government force in order to intrude B's business onto A's property. In the long run, Forced Access would have drastically reduced consumer choice, since Internet companies would be reluctant to innovate and take risks to build infrastructure, if the government might force an innovative company to share the infrastructure with another company that did not innovate technologically, but did exercise political clout.

    The Court's decision today did not address the merits of Forced Access, but instead deferred to the judgment of the Federal Communications Commission in interpreting an ambiguous statute. (Whether broadband is an "information service" or a "telecommunications service.") The F.C.C. did act on a policy basis. Back in 1999, I wrote a lengthy Policy Study for the Heartland Institute warning that a policy of Forced Access could harm the rapid development of broadband connectivity. Fortunately, the covetous companies that demanded Forced Access enjoyed only mild success in their preferred forum (city councils) and their schemes were defeated when the Federal Communications Commission intervened.

See also Kyle Dixon from the Progress & Freedom Foundation.

And here are some thoughts on Grokster.

Ted Balaker is Producer


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