Death & VoIP Taxes

Posted by Sam Churchill on

The 9th Circuit Court says the FCC “erred” when it allowed the cable industry to be exempt from many of the regulatory hurdles facing telco providers; including contributing to the Universal Service Fund and sharing lines with competitors. The decision to overturn the FCC’s cable deregulation agenda by the federal appeals court is sending ripples through the broadband industry.

It all started in 1999, when the city of Portland, Oregon, required AT&T Cable to provide “equal access” to cable modems. The city argued that telcos are subject to Equal Access requirements, and so should cable companies. Portland wanted to stimulate competiton to AT&T’s (now defunct) broadband ISP.

They were promptly sued by AT&T(Comcast). After an initial victory, Portland’s “equal access” provision was shut down by the 9th U.S. Circuit Court Court of Appeals. They decided that cable modem service was a telecommunications, not cable TV service. It prohibited Portland from imposing Open Access requirements and kicked it up to the FCC.

According to a June 22nd, 2000 C/Net story, “The 9th U.S. Circuit Court of Appeals overturned the Portland decision that required AT&T cable to open its lines to rivals of AT&T’s affiliated Internet service provider, Excite@Home, on the grounds that it had overstepped its authority.”

Here’s the Official 9th Circuit Court Opinion.

The court said the Telecommunications Act prohibits a franchising authority from regulating cable broadband Internet access” because such Internet service using cable is a telecommunications service, subject only to regulation.

“This appeal presents the question of whether a local cable franchising authority may condition a transfer of a cable fran- chise upon the cable operator’s grant of unrestricted access to its cable broadband transmission facilities for Internet service providers other than the operator’s proprietary service. We conclude that the Communications Act prohibits a franchising authority from doing so and reverse the judgment of the dis- trict court.”

Oral arguments in Portland three years ago gave both sides a chance to present their cases in front of the judges and a courtroom packed with over 150 press and other observers. Judges Edward Leavy and Sidney Thomas questioned lawyers about defining these sevices as “telecommunications” rather than cable services, a move that could shift regulatory authority away from local municipalities. Portland city commissioner Erik Sten, in a post-hearing news conference said such a move could “open” access through federal regulation. AT&T representatives also expressed optimism in the line of questioning. The FCC has recently expressed a “hands off” approach to regulation.

More coverage below:

While some cable companies (like Time Warner) have allowed network sharing, most successfully fought the push by state agencies to mandate open access. Several companies, including Earthlink, applauded the court’s comments.

The FCC’s decision has seen significant debate since it was unveiled in March of 2002. The issue is getting hotter with the cable industry’s plans to expedite VoIP service.

Now the FCC is considering balancing the competitive scales. They are considering a 9.1% cable tax one of the options. Those hikes would likely be tacked on to your monthly cable bill. The FCC apparently views taxes as preferable to “open access”.

Time Warner sent the FCC a letter suggesting they “should not reverse decades of sound legal and policy conclusions.”

VoIP has already transformed the long haul networks of Sprint, MCI and AT&T. Soon WiFi handhelds using VoIP may become common. Meru Networks is shipping an access point and controller to make wireless voice-over-IP practical. VoiceXML browsers like Envox, embedded in computers and handheld devices, feature speech recognition and Speech Synthesis Markup Language (SSML).

Will legal and policy restrictions kill VoIP? Will new taxes be imposed? Read the lips of the FCC.

Posted by Sam Churchill on Tuesday, October 7th, 2003 at 2:22 am .

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