WASHINGTON-The U.S. Supreme Court ruled last week in two key high-tech cases that now may move across the street to the U.S. Capitol.
In March, the Supreme Court heard oral arguments on the cases, which both potentially could impact the wireless industry. The Brand X decision will shape both telecom reform and a possible exception to electronic-surveillance capabilities rules, while the Grokster case deals with evolving technology.
Brand X Services Inc. is an independent Internet service provider that wanted access to a cable system to offer its services to the cable operator’s cable-modem customers. The company was blocked when the Federal Communications Commission declared cable-modem service an information service and thus not required to provide open access to other companies.
The Supreme Court was split 6-3 in giving the FCC deference in deciding whether cable-modem service is an information service.
“Agency inconsistency is not a basis for declining to analyze the agency’s interpretation under the Chevron framework. Unexplained inconsistency is, at most, a reason for holding an interpretation to be an arbitrary and capricious change from agency practice under the Administrative Procedure Act,” wrote Justice Clarence Thomas for the majority. “If the agency adequately explains the reasons for a reversal of policy, change is not invalidating since the whole point of Chevron is to leave the discretion provided by the ambiguities of a statute with the implementing agency.”
Chevron refers to Chevron USA Inc. v. Natural Resources Defense Council, a 1984 case that said agencies should be given deference when interpreting and implementing confusing and complex laws passed by Congress.
At a broadband summit last month in Washington, D.C., Brand X was a key topic, especially during the congressional panel.
While the Supreme Court will set the course that policy-makers follow on broadband services, Congress is guaranteed to get involved, said Amy Levine, legislative counsel to Rep. Rick Boucher (D-Va.).
The law enforcement community could get involved under the Communications Assistance to Law Enforcement Act. Information services were specifically excluded from CALEA obligations. If all sorts of carriers-including wireless, which has already hinted in this direction-claim to be information services, CALEA could be in trouble.
FCC Commissioner Kathleen Abernathy acknowledged the problem in a press briefing Thursday. “It is complex. It is going to require a lot of thought,” she said.
It is less clear what Congress may do to ensure effective competition for broadband. Consumer advocates warned that competition for the middle mile has been foreclosed by the Brand X decision.
Those who believe in giving competitors access to communications assets saw the ruling as pro consumer.
“This is a hands-down victory for consumers, maximizing incentives to build competing broadband networks. The Supreme Court sent a strong message to the markets: Compete, don’t look for government handouts,” said Kyle Dixon, adviser to former FCC Chairman Michael Powell and now director of Federal Institute for Regulatory Law & Economics at the Progress & Freedom Foundation.
Telecom carriers must give competitors access under some interpretations of the Communications Act, but FCC Chairman Kevin Martin is expected to move quickly to level the playing field between cable modem and digital subscriber lines. The FCC in September 2000 tentatively concluded that DSL was an information service.
“This decision provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers. We can now move forward quickly to finalize regulations that will spur the deployment of broadband services for all Americans,” said Martin.
Metro-Goldwyn-Mayer Studios Inc. v. Grokster Ltd. pitted the movie industry against Grokster, a peer-to-peer software provider. MGM charged that Grokster software enables people to download movie content illegally.
The wireless industry filed a friend-of-the-court brief on behalf of Grokster.
The Supreme Court ruled unanimously that file-sharing companies can be sued for inducing infringement, but did not speak to the issue of whether carriers can be sued because their customers use file-sharing software to infringe copyright.
“Because of this decision, content providers can be assured that their copyrighted materials won’t be shared via wireless. Grokster creates the right incentives for content and the wireless industry to move forward,” said Michael Altschul, CTIA senior vice president and general counsel. “Certainly the Supreme Court didn’t take us up on our invitation to declare that it is file-sharing companies that should be held liable, not the carriers. The decision says nothing. The theory behind the decision suggests carriers may need to take steps to ensure they are not subject to very costly litigation.”
Technology advocates hailed the fact that the standard set in the 1984 Sony Betamax case remained and vowed to remain vigilant if the entertainment industry tried to get Congress to give it more relief.
“There is nothing that Hollywood would want or need from Congress,” said Gigi Sohn, president and co-founder of Public Knowledge, a public-interest advocacy group. “To the extent that Hollywood wants to run to Congress and change the Sony doctrine, we will oppose that strongly.”
Technologists had been concerned that the Supreme Court would have “radically scaled back” the Sony doctrine, which could have had devastating consequences.
“The legal principles established in Sony have been essential to fostering the climate of innovation that produced many of the most commercially successful and socially valuable technologies of the past two decades,” said CDT. “If every inventor of the past 20 years had been forced to prove that their nascent products could never be used illegally, many of our favorite products may never have made it out of the laboratory. The court rightfully recognized that the act of creating and distributing new technology must be protected.”
