Reply Brief — National Cable & Telecommunications Assn. v. Brand X Internet Services

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NATIONAL CABLE & TELECOMMUNICATIONS

ASSOCIATION, ET AL., PETITIONERS

BRAND X INTERNET SERVICES, ET AL.

FEDERAL COMMUNICATIONS COMMISSION AND THE

UNITED STATES OF AMERICA, PETITIONERS

BRAND X INTERNET SERVICES, ET AL.

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE FEDERAL PETITIONERS

PAUL D. CLEMENT

Acting Solicitor General

Counsel of Record

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

AUSTIN C. SCHLICK

Acting General Counsel

Federal Communications

Commission

Washington, D.C. 20554

TABLE OF CONTENTS

The FCC reasonably concluded that cable modem

service is an “offering” of a single, integrated

— ——— — cacti

Under long-settled standards, cable modem

service is not a common- carrier service under the

„/

A. Common carrier status under the Act n

B. The Computer Il regime does not provide

a basis to challenge the Commission’s decision

1 —ͤͤ —

C. The FCC’s regulation of DSL providers does not

dictate its analysis of cable modem providers .......

Respondents’ other challenges to the Commission's

interpretation of the Communications Act have

—̃ “ deanna

A. The Commission's classification of cable modem

service is consistent with the policies of the

B. The Commission’s forbearance powers do not

require it to classify all services as telecom-

Deen...

C. The Commission's pending proceeding on

application of CALEA to cable modem service

has no bearing on this case . . . . . . . . . ..

(J)

TABLE OF AUTHORITIES

Cases:

AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999) ........

Auer v. Robbins, 519 U.S. 452 (1997) . . . . . . .

Chevron LS. A., Inc. v. NRDC, 467 U.S. 837 (1984)

EEOC v. Associated Dry Goods, 449 U.S. 590 (1981)

FCC v. Midwest Video Corp., 440 U.S. 689

K—KͤK 8

GTE Serv. Corp. v. FCC, 474 F.2d 724 (2d Cir.

?»¾‚ßb!.,

MCI Telecommunication Corp. v. AT&T Co,,

BEB WB, SEB CID .

National Ass'n of Regulatory Util. Comm s v. FCC,

525 F.2d 630 (D.C. Cir. 1976), cert. denied, 42 U.S.

1 . c

United States v. Midwest Video Corp., 406 U.S. 649

Kc 00 0 0

United States v. Southwestern Cable Co., 392 U.S.

190.

Verizon Communications, Inc. v. FCC, 535 U.S. 467

5 K— —

Virgin Islands Tel. Corp. v. FCC, 198 F.3d 921

CEL. Car. SGD ccnscctssassnscnsentnasinnticianguesetiiiiiadnasamiaitasiadmiaiiial

Statutes:

Communications Act of 1934, 47 U.S.C. 151 ef seq. e

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GT UBC. 66... 57

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ZU ccocecccsassesscsnssiiiecnssnticaninsantnianmiinmtienas

Tt. II. 67 UAC. sr

Communications Assistance for Law Enforcement

Act, 47 U. AC. 1001 66 600. ...„„

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- III

Statutes—Continued: Page

Telecommunications Act of 1996, Pub. L. No. 104-104,

110 Stat. 56 4

Preamble, 110 Stat. 56 19

§ 706, 110 Stat. 153 18

§ 706(a), 110 Stat. 153 18

42 U.S.C. 214(a) 16

Miscellaneous:

Amendment of Section 64.702 of the Commissions

Rules and Regulations (Second Computer Inquiry),

In re, 77 F. C. Cd 384 (1980), aff'd sub nom. Com-

puter & Communications Indus. Ass'n v. FCC,

693 F. 2d 198 (D.C. Cir. 1982), cert. denied, 461 U.S.

938 (1983) 6, 10, 11, 12, 13

Amendment to Section 64.702 of the Commissions

Rules and Regulations (Third Computer Inquiry),

In re, 3 F. C. C. R. 1150 (1988), vacated in part on

other grounds, sub nom. California v. FCC,

905 F.2d 1217 (9th Cir. 1990) 12

Appropriate Framework for Broadband Access

to the Internet over Wireline Facilities (Wireline

Broadband NPRM), In re, 17 F.C. C. R. 3019 (2002) ...... 15

AT&T Corp. Pet. for Declaratory Ruling Regarding

Enhanced Prepaid Calling Card Services, FCC 05-41

(filed Feb. 23, 2005) 17

Availability of Advanced Telecommunications Cap-

ability, In re, 19 F.C.C.R. 20,540 (2004) 18

http//www .fee.gov/egb/ecfs 10

Cable & Wireless, PLC, In re, 12 F. C. C. R. 8516 (1997) „ 8.9

Comments of EarthLink, Inc., C.S. Docket No. 02-52

(filed June 17, 2002) 10

Comments of WorldCom, Inc., GN Docket No. 00-185

(filed Jan. 10, 2001) 10

Communications Assistance for Law Enforcement

Act & Broadband Access & Services, In re, 19

F.C.C.R. 15,676 (2004) 20

In the Supreme Court of the United States

Miscellaneous—C ontinued: Page

Deployment of Wireline Servs. Offering Advanced No. 04-277

— 0 * mn be nag 0 14 NATIONAL CABLE & TELECOMMUNICATIONS

r), In re, C. C. R. 24, . 1

Federal-State Joint Bd. on Universal Serv., In re, ASSOCIATION, ET AL., PETITIONERS

13 F.C. C. R. 11,501 (1998) ....... 3, 4, 5, 6, 13, 16 ' U.

Implementation of Sections 255 and 251(a)(2) of the BRAND X INTERNET SERVICES, ET AL.

Communications Act, In re, 16 F.C.C.R. 6417

(1999) e “ —— — 10 No. 04-281

Implementation of the Non- Accounting Safeguards of

Sections 271 and 272 of the Communications Act FEDERAL COMMUNICATIONS COMMISSION AND THE

N won 4 „

UNITED STATES OF AMERICA, PETITIONERS

92 P.C.C.R. (19BG) 221..ccccccesececcsscccsessssssescsnsensnsosssssesssensssnsenenses 14

Independent Data Communications Mfrs. Ass'n, In re, v.

10 F.C. C. R. 13,717 (Common Carrier Bur. 1995) 12 BRAND X INTERNET SERVICES, ET AL.

Regulatory Policies Concerning Resale & Shared Use

of Common Carrier Servs. & Facilities, In re, 60 — EN OF CERTIOR AR 8

— — eee 4 FOR THE NINTH CIRCUIT

REPLY BRIEF FOR THE FEDERAL PETITIONERS

The fundamental question in this case is whether cable

modem service must, as a matter of law, be segregated into

distinct information and telecommunications services for

purposes of regulation under the Communications Act, or

may instead, as the FCC found, be classified as “a single,

integrated service that enables the subscriber to utilize

Internet access service through a cable provider's facilities.”

Pet. App. 95a. The text and congressional purposes of the

Communications Act, 47 U.S.C. 151 et seq., and the history of

the Commission’s regulatory treatment of information ser-

vices fully support the Commission’s classification decision.

Respondents’ arguments to the contrary rest on strained

characterizations of the ambiguous statutory text and on

mischaracterizations of the regulatory and legislative

history, and must be rejected.

(1)

I. THE FCC REASONABLY CONCLUDED THAT CA-

BLE MODEM SERVICE IS AN “OFFERING” OF A

SINGLE, INTEGRATED INFORMATION SERVICE

1. The FCC’s conclusion that cable modem service is an

“offering” of a single, integrated information service finds

ample support in the text of the Communications Act. The

Act’s definition of “telecommunications service” requires

consideration of what is (1) “offerfed]” (2) “for a fee” (3) di-

rectly to the public.” 47 U.S.C. 153(46) (emphasis added).

Respondents essentially ignore the question of what is “of-

ferſed] and move directly to whether cable modem service

is provided “for a fee” and “to the public.” See, e.g., Earth-

Link Br. 18. As the Commission reasonably found, however,

when examined from the perspective of “the nature of the

functions that the end user is offered,” cable modem service

does not include an offering of pure transmission service (i.e.,

“telecommunications”) because “[aJs provided to the end

user the telecommunications is part and parcel of cable mo-

dem service and is integral to its other [information-pro-

cessing] capabilities.” Pet. App. 94a, 96a. See id. at 98a

(analysis “focuses * * * on the single, integrated informa-

tion service that the subscriber to cable modem service

receives”).

Respondents’ argument to the contrary rests at bottom on

the assumption that an “offering” of an integrated service or

product must necessarily be viewed as the “offering” of each

constituent part as well. EarthLink Br. 18-19; States Br. 18-

22; MCI Br. 15-16. That assumption, however, is not well

founded. The government's opening brief discusses the ex-

ample of a New York-to-Los Angeles flight with a refueling

stopover in Chicago, in which it would be far from obvious

that the service offering must be disaggregated for regula-

tory purposes. See FCC Br. 27-28; see also NCTA Br. 21 &

n.26. In Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984),

the Court in a similar context affirmed an Environmental

Protection Agency (EPA) regulation providing that multiple

pollution-emitting devices in a large facility need not each be

deemed a separate “stationary source” under the Clean Air

Act—an issue on which the EPA itself had adopted varying

positions over time. See id. at 852-859.

As those examples illustrate, the answer to the question

whether a multi-component service or item should be di-

vided into its constituent parts for purposes of legal analysis

depends on the legal context, purposes, and policies that are

at stake. Congress entrusted the consideration and weigh-

ing of those factors in the first instance to the expert agency

with responsibility for construing the statute. Thus, in Chev-

ron itself, the EPA was entitled to deference when it deter-

mined that a group of multiple pollution-emitting devices

constitutes a single “stationary source” under the Clean Air

Act. 467 U.S. at 866. For the same reasons, deference is due

to the FCC’s expert determination that cable modem service

is a single, integrated information service under the Commu-

nications Act without a separately regulated telecommuni-

cations service component.

Respondents’ contrary argument would lead to a dramatic

expansion of the scope of Title II’s common carrier regula-

tions. As NCTA explains, because most Internet service

providers (ISPs) are responsible for some transmission of

the subscriber’s information—between their facility and the

subscriber and/or between their facility and the Internet

“backbone”—respondents’ view results in making most inde-

pendent ISPs providers of telecommunications services

regulable under Title II of the Communications Act, 47

U.S.C. 201, even though such entities have always been

deemed to be solely providers of information services. See

NCTA Br. 20, 22; In re Federal-State Joint Bd. on Universal

Serv., 13 F. C. C. R. 11,501, 11,536 44 73-75 (1998) (Universal

Serv. Report).' That result is impossible to square with the

' Respondents err in denying that their theory would turn independ-

ent ISPs into providers of telecommunications services. EarthLink ar-

gues (Br. 45) that the FCC exercised its forbearance authority in 1985 to

deregulatory purposes of the Telecommunications Act of

1996 (1996 Act), Pub. L. No. 104-104, 110 Stat. 56; see pp. 15-

19, infra.

2. Respondents state that it is “critical” to their argu-

ment that “subscribers [are] not required to use the informa-

tion services offered by the cable company, but could ‘click

through’ those services and use the telecommunications com-

ponent of cable modem service for the sole purpose of reach-

ing information services offered by other providers.” Earth-

Link Br. 16; States Br. 20 n.7, 22; MCI Br. 15. That “critical”

prong of respondents’ argument, however, is both legally

and factually incorrect.

In the first place, respondents err in suggesting that a

subscriber's ability to “click-through” without utilizing cer-

tain information processing functions could negate the “in-

formation service” character of cable modem service. The

Act’s definition of “information service” encompasses the

“offering of a capability” for retrieving and utilizing informa-

tion or engaging in various information-processing activities.

47 U.S.C. 153(20) (emphasis added). A cable modem sub-

scriber’s choice not to utilize certain capabilities does not

eliminate that capability or change the underlying character

of the service offering.

deregulate non-facilities-owning ISPs, but the FCC's forbearance author-

ity did not even come into existence until the 1996 Act, and the FCC has

never made a finding that the requirements necessary to forbear under 47

U.S.C. 160 have been satisfied with respect to independent ISPs. The

States, by contrast, argue (Br. 46) that ISPs are not telecommunications

service providers because they may lease, but do not own, the telecom-

munications facilities at issue. Nothing in the Act, however, specifies that

only owners of facilities can be providers of telecommunic_-ions services.

See Universal Serv. Report, 13 F.C. C. R. at 11,563 4 129. See In re

Regulatory Policies Concerning Resale & Shared Use of Common

Carrier Servs. & Facilities, 60 F.C. C. 2d 261, 308 101 (1975) (“The fact

that an offeror of an interstate wire and/or radio communication service

leases some or all of its facilities—rather than owning them— ought not

have any revulatory significance. * * The ultimate test is the nature of

the offering to the public.”), aff'd, 572 F.2d 17 (2d Cir. 1978), cert. denied,

439 U.S. 875 (1978) (agency history omitted).

In any event, respondents’ argument is counterfactual.

Cable modem service subscribers do not typically obtain or

use pure transmission capacity, divorced from all infor-

mation-processing features. Although “click-through” access

enables subscribers to bypass the cable operator’s web page,

e-mail service, and the like, such access still entails the use of

other information-processing features offered by the cable

operator. Most fundamentally, by “clicking through” to

another ISP’s website, a subscriber is necessarily utilizing

the cable provider’s services to interact] with stored data

* * * maintained on the facilities of” the other ISP (namely,

the contents of the requested web pages, e-mail boxes, etc.)

and is thereby utilizing the cable operator’s “capability for

* * * acquiring,* * * retrieving land] utilizing * * *

information”. Universal Serv. Report, 13 F.C.C.R. at 11,830

176, 47 U.S.C. 153(20).

In addition, “Internet access service generally includes

using the DNS” (i.e., the domain name system), which is a

“data retrieval and directory service” that is “most com-

monly used to provide an IP address associated with the do-

main name (such as www.fec.gov) of a computer.” Pet. App.

92a. DNS capability “is necessary because routing of traffic

over the Internet is based on IP addresses, not domain

names,” and “before a browser can send a packet to a web-

site, it must obtain the address for the site.” Jd. at 66a n.98.

The FCC has found that DNS provides “a general purpose

information processing and retrieval capability,” and it thus

does not involve pure telecommunications functions. Id. at

93a. Another example of an information access and retrieval

capability that subscribers generally do not bypass when

using “click-through” access is “caching” (ie,, storing) of

popular content on local computer servers. See id. at 67a

n. 76. Contrary to respondents’ contention that “most of

2 The Act’s definition of “information service” excludes “any use of

any such capability for the management, control, or operation of a telecom-

munications system or the management of a telecommunications service.”

what the end user purchases and values is raw, unadulter-

ated transmission,” MCI Br. 15, the fact is that the Internet

access obtained by end users is integrally tied to informa-

tion-processing functionality.

3. Respondents also err in contending (EarthLink Br. 37-

39) that “information service” and “telecommunications ser-

vice” cannot be deemed mutually exclusive. Nothing in

text of the Communications Act compels the conelusion

those two categories (which entail markedly different regu-

latory consequences) must overlap, and the Commission’s

conclusion that they do not is supported by the 1996 Act’s

legislative history and by decades of administrative practice,

including the FCC’s contemporaneous construction of the

1996 Act. See Universal Serv. Report, 13 F.C. C. R. at 11,516-

11,517 & nn. 52-55 J 33; id. at 11,521-11,524 44 42-45; EEOC

v. Associated Dry Goods, 449 U.S. 590, 600 n.17 (1981).

The text of the Act is entirely consistent with that view,

because “telecommunications” is exclusively defined as

“transmission * * * without change in the form or content

of the information.” 47 U.S.C. 153(20). Thus, “telecommuni-

cations” is limited to a “pure transmission path,” as the Com-

mission has consistently concluded in analyzing both that

term and the related term “basic service,” its predecessor

under the Computer Inquiries regime. Universal Serv.

Report, 13 F. C. C. R. at 11,536 J 73; In re Amendment of

Section d. e of the Commissions Rules and Regulations

(Second Computer Inquiry), 77 F.C.C.2d 384, 419-420 JJ 93,

95, 96 (1980) (Computer II) (“basic” service is “pure trans-

47 U.S.C. 153020). Respondents are correct that use of what EarthLink

terms “incidental information management components” in providing

traditional telephone service does not convert ordinary telephone service

into an information service. See EarthLink Br. 16 n.4, MCI Br. 22-23. But

information-processing capabilities such as the DNS and caching are not

used “for the management, control, or operation” of a telecommunications

network, but instead are used to facilitate the information retrieval

capabilities that are inherent in Internet access. Their use accordingly

does not fall within the statutory exclusion. Pet. App. 98a-94a & n.150.

mission capability”), aff d, 693 F.2d 198 (D.C. Cir. 1982), cert.

denied, 461 U.S. 938 (1983). Because an information service

like cable modem service offers the ability to change the

form or content of information and to generate, acquire,

store, and retrieve information, it is by definition not limited

to “pure transmission capability” (as would be required for it

to be an offer of “telecommunications”), and accordingly the

two categories of service offerings may appropriately be

viewed as mutually exclusive. See FCC Br. 21-23.

Respondents mistakenly suggest (EarthLink Br. 37, 38)

that the Commission’s reasoning would exclude cable modem

service from the category of “information service,” because

information services are by definition provided “via telecom-

munications” whereas cable modem service generally entails

a change in the form or content of information. But the fact

that cable modem service is not viewed as an “offering” of

telecommunications (and hence is not a telecommunications

service) does not mean that it does not contain a telecom-

munications component; to the contrary, the Commission has

consistently found that Internet access generally, and cable

modem service in particular, employ telecommunications in

conjunction with information processing capabilities. Pet.

App. 95a-98a. There is no “offering” of telecommunications

because the Commission has reasonably concluded that the

“offer” should be examined as a whole from the perspective

of the subscriber.

II. UNDER LONG-SETTLED STANDARDS, CABLE

MODEM SERVICE IS NOT A COMMON-CARRIER

SERVICE UNDER THE COMMUNICATIONS ACT

A. Common Carrier Status Under The Act

Respondents place considerable reliance on the FCC’s

pre-1996 regulation of common carriers’ “enhanced” service

offerings under the Computer II regime. According to

respondents, the FCC is obligated to regulate cable modem

service in the 21st century using the same regulatory

approach it adopted decades ago to govern telephone com-

mon carriers operating in a monopoly environment. Respon-

dents’ arguments are wholly unpersuasive.

1. The FCC’s view that a provider of cable modem ser-

vice has made an “offering” of only a single, integrated infor-

mation service is consistent with the settled understanding

of the Communications Act. A provider of telecommunica-

tions service is a common carrier under the Act. See 47

U.S.C. 153(44). It has long been settled that an entity may

become a common-carrier provider of telecommunications

services in two ways. The entity may either voluntarily

choose to offer telecommunications (i.e., pure transmission

capacity) to the public generally as a common carrier, or, if

“the public interest requires common carrier operation of the

proposed facility,” the Commission may require the entity to

make such an offering. In re Cable & Wireless, PLC, 12

F. C. C. R. 8516, 8522 JJ 14-15 (1997). See generally Virgin

Islands Tel. Corp. v. FCC, 198 F.3d 921, 925-926 (D. C. Cir.

1999); National Ass of Regulatory Util. Comm 's v. FCC,

525 F.2d 630, 642 (D.C. Cir.), cert. denied, 425 U.S. 992

(1976). Generally, the FCC has found that the public

interest prong is satisfied if the entity involved has sufficient

market power to warrant imposing a common-carrier

requirement. See Cable & Wireless, 12 F.C.C.R. at 8522-

8523 JJ 15-16; Virgin Islands Tel., 198 F.3d at 925.

2. Under that settled analysis, respondents’ repeated

complaints that the Commission has allowed cable operators’

“self-interested economic choice,” EarthLink Br. 26, to de-

termine the regulatory status of their offerings ring hollow.

Recognizing that cable operators have the same prerogative

to choose how to offer their service as others under the Act

will not cause common carriage regulation to “fall apart” or

render Title II “a dead letter.” EarthLink Br. 21; MCI Br.

14. One prong of the test for common-carrier status has

always turned on business decisions by the entity in question

—i.e., whether the entity voluntarily chooses to offer pure

transmission services indiscriminately to all purchasers.

Cable modem providers have not done so. Pet. App. 97a.

Accordingly, cable modem providers are not common car-

riers—and not providers of telecommunications service—

under that prong of the test.

3. The other prong of the “common carrier” test gives

the Commission ample authority to require cable operators,

if “the public interest requires,” Cable & Wireless, 12

F.C.C.R. at 8522 44 14-15, to break out the transmission

component incorporated into their service and offer it as a

separate, common-carrier service. But the Commission has

not yet made such a determination. In its order below, the

Commission issued a broad notice of proposed rulemaking

seeking further comment on whether “to require that cable

operators provide unaffiliated ISPs with the right to access

cable modem service customers directly.” Pet. App. 134a;

see id. at 135a-136a. As a result of that further proceeding,

the Commission could conclude that the public interest re-

quires some sort of ISP access requirement short of common

carriage, or even that cable operators must offer tele-

communications on a stand-alone basis, such that they would

become telecommunications carriers subject to Title II. At

present, however, the Commission has not completed that

further proceeding. Accordingly, cable operators are not

now subject to common carrier obligations under Title II.

Respondents argue that the further notice of proposed

rulemaking is largely illusory, because the Commission’s

classification decision precludes all federal regulation of

cable modem service. The precise scope of the Commission’s

authority under Title I of the Communications Act, 47 U.S.C.

151, is not at issue in this case, and it is one of the subjects on

which the Commission sought comments in its further notice.

See Pet. App. 137a-14la. Nonetheless, Title I grants the

Commission broad “regulatory authority over all ‘interstate

. . »« communication by wire or radio.“ United States v.

Southwestern Cable Co., 392 U.S. 157, 173 (1968) (quoting 47

U.S.C. 152). Thus, even if a particular service is not re-

gulated under Title II, “Commission jurisdiction (so-called

‘ancillary’ jurisdiction) could exist even where the Act does

not apply.“ AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366,

380 (1999). The Commission has long asserted its ancillary

authority over interstate information-precessing services,

see Computer II, 77 F. C. C. 2d at 432 J 124-125, and it has

exercised that authority. See, e.g., In re Implementation of

Sections 255 and 251(a)(2) of the Communications Act, 16

F. C. C. R. 6417, 6455-6462 44 93-108 (1999) (asserting juris-

diction over voice mail and interactive menu services to pro-

mote disability Access); see also Pet. App. 137a-138a. In-

deed, in proceedings before the FCC, some of the respon-

dents have urged the Commission to exercise its Title I

authority to require cable operators to make their trans-

mission capabilities available to unaffiliated ISPs—a position

directly contrary to respondents’ arguments in this Court.

B. The Computer II Regime Does Not Provide A Basis

To Challenge The Commission's Decision In This

Case

To support their assertion that the transmission com-

ponent of cable modem service must be broken out as a sepa-

rate offering of telecommunications, respondents invoke the

3 The Commission may not use its Title I regulatory authority to con-

tradict express statutory prohibitions. See FCC v. Midwest Video Corp.,

440 U.S. 689, 700 (1979); see also United States v. Midwest Video Corp.,

406 U.S. 649, 670 (1972) (FCC may use its ancillary authority to require

cable operators to originate local programming). Nothing in the Commu-

nications Act, however, precludes the FCC from regulating cable modem

service providers on a non-common-carrier basis or from determining, if it

were to become necessary in the public interest, that such providers must

provide service as common carriers.

4 See Comments of EarthLink, Inc., CS Docket No. 02-52 (filed June

17, 2002), at 13 (“EarthLink believes that the Commission retains suffi-

cient authority to require multiple ISP access” notwithstanding its deci-

sion to classify cable modem service as an information service); Reply

Comments of WorldCom, Inc., GN Docket No. 00-185 (filed Jan. 10, 2001),

at 32 (“The FCC retains ample authority to mandate nondiscriminatory

access to [cable modem service's] telecommunications capability under“

* Title I.”). Those comments are available through the Commission’s

website at http://www.fec.gov/cgb/ecfs.

Commission’s historical regulation of telephone common

carriers and, in particular, the regulatory regime that the

Commission developed in its Computer I] proceeding in the

1980s. In Computer II the Commission concluded that

(1) “enhanced” services (now encompassed in the “informa-

tion service” category) generally should not be subject to

regulation under Title II, notwithstanding their inclusion of

a transmission component, 77 F.C.C. 2d at 428-435 44 114-

132, and (2) telephone common carriers would be allowed to

offer eahanced services on an unregulated, non-tariffed

basis, but that common carriers using their own transmission

services to do so must also offer competing providers of

enhanced services “non-discriminatory access” to those same

transmission services, id. at 475 J 230-231. See FCC Br.

33-35. Contrary to respondents’ arguments, however,

neither the Commission nor Congress has extended those

obligations wholesale to providers of cable modem service.

1. The Computer II order does not stand for the sweep-

ing proposition that “the telecommunications component of a

bundled package offered by the owner of a telecommuni-

cations facility is separately regulated.” EarthLink Br. 24;

see MCI Br. 3, 37. Rather, Computer I] compelled facilities-

based common carriers (i.e., traditional telephone com-

panies) that provide “enhanced” services to offer the under-

lying pure transmission capacity separately on a common-

carrier basis. That obligation imposed on telephone com-

panies was an exercise of the Commission’s broad authority

to “regulat[e] the entrance of communications common car-

riers into the nonregulated field” of enhanced services. GTE

Serv. Corp. v. FCC, 474 F.2d 724, 730 (2d Cir. 1973); see

Computer IT, 77 F. C. C. 2d at 389 J 15, 391 4 18. Nothing in

Computer II suggests that its specialized requirements for

telecommunications common carriers necessarily apply out-

side of that specific historical and regulatory context.

5 Indeed, the Commission subsequently made clear that, when “value

added networks,” which were not common carriers, offered enhanced ser-

The Commission thus reasonably rejected the view that

the regulatory treatment of cable modem providers was dic-

tated by the Computer I] regime. See Pet. App. 100a.

Whereas Computer II compelled “traditional wireline com-

mon carriers” to “offer the underlying telecommunications

as a stand-alone service,” id. at 99a, 100a (emphasis added),

the Commission noted that no “requirement that such an

offering be made” had been imposed on cable modem pro-

viders. Id. at 97a. Cable operators have not traditionally

been regulated as common carriers, see Computer II, 77

F.C. C. 2d at 431-432 44 122-123, and thus are not subject to

the kind of forced “offering” of telecommunications to which

telephone companies have historically been subject under

Computer II. Accordingly, the FCC’s reasoned conclusion

that Computer Il is inapplicable in this context is entitled to

substantial judicial deference. Auer v. Robbins, 519 U.S.

452, 461 (1997).

vices “in conjunction with basic transmission services” leased from third

parties, the “entire offering” would be classified as a single, unregulated,

enhanced service. In re Independent Data Communications Mfrs. Ass 'n,

10 F. C. C. R. 13,717, 13,719-13,720 44 17-18 (Common Carrier Bur. 1995); Jn

re Amendment to Section 64.702 of the Commissions Rules and Regula-

tions (Third Computer Inquiry), 3 F.C.C.R. 1150, 1170 n.23 (1988), va-

cated in part on other grounds, 905 F.2d 1217 (9th Cir. 1990) (agency

history omitted). The Commission did not adopt the logic of respondents’

approach, which would have mandated that such entities isolate the tele-

communications component of their service offering so that it could be

subject to regulation under Title II.

6 The Commission also reasonably rejected arguments that it should

at a minimum apply Computer Il requirements to those cable modem ser-

vices provided by cable operators that also offer local telephone service.

Pet. App. 101a-104a. The Commission explained that Computer II re-

quirements had never been applied outside the context of a traditional

telephone network and that, even if Computer II did apply to cable

operators providing local telephone service, the Commission would waive

those requirements. Id. at 102a-104a. Imposing Computer II require-

ments on cable modem service whenever cable operators also offer local

telephone service would treat some cable modem providers differently

than others and would discourage competitive entry into

local telephone markets. [bid.; see Verizon Communications, Inc. v. FCC,

2. There is no basis for respondents’ assertion that the

1996 Act extends to cable modem service providers the tele-

phone companies’ Computer Il obligation to offer separately,

on a common carrier basis, the telecommunications capabil-

ity that they use in providing Internet access services.

Rather than citing any provision of the 1996 Act that specifi-

cally imposes such a requirement, respondents invoke the

Commission’s statement in the Universal Service Report, 13

F. C. C. R. at 11,511 J 21, that the 1996 Act’s definitions of

“telecommunications service” and “information service”

“build upon frameworks established” in the Computer Il pro-

ceeding. EarthLink Br. 22, 42; MCI Br. 34-35. Respondents

misconstrue the relevant administrative history.

As the Commission explained in the Universal Service

Report, Congress built upon the Computer II definitional

“framework” in order to ensure that “information service

providers are not subject to regulation as common carriers

merely because they provide their services ‘via telecommu-

nications. 13 F.C.C.R. at 11,511 1 21 (emphasis added).

Thus, Computer I/’s definitional framework directly sup-

ports the Commission's approach here. Under Computer II.

Aa] basic transmission service is one that is limited to the

common carrier offering of transmission capacity,” whereas

Aan enhanced service is any offering over the telecommuni-

cations network which is more than a basic transmission

service.” 77 F.C. C. 2d at 419 1 93, 420 1 97 (emphases

added). Because cable operators’ offerings are not “limited

to” pure transmission, \hey would not be classified as basic

service under Computer II. Respondents’ real complaint,

therefore, is not that the Commission departed from the

Computer II definitional framework, but rather that it did

not treat cable companies as if they were facilities-based

telecommunications common carriers—an issue that Com-

puter IT did not address.

535 U.S. 467, 489 (2002) (Congress sought to “give aspiring competitors

every possible incentive to enter local retail telephone markets”).

In any event, the Communications Act’s definition of “in-

formation service” is broader than (and entirely subsumes)

the Computer I] term “enhanced service,” because it is not

limited to services offered over common carrier facilities. In

re Implementation of the Non-Accounting Safeguards of

Sections 271 and 272 of the Communications Act, 11

F.C.C.R. 21,905, 21,956 J 103 (1996). Respov»i» its’ conten-

tion that the Act codified and froze the entix: Computer II

regulatory framework gives no effect to Congress’s sub-

stantive expansion of the information service category.

C. The FCC’s Regulation Of DSL Providers Does Not

Dictate Its Analysis Of Cable Modem Providers

1. Respondents err in contending (EarthLink Br. 25-26;

States Br. 15, 23; MCI Br. 7) that the FCC’s analysis of DSL

service is inconsistent with the Commission's decision in this

case. Consistent with its reasoning below, the Commission

has concluded that, when DSL technology is used “to pro-

vide members of the public with a transparent, unenhanced,

transmission path,” it should be classified as a telecommuni-

cations service. In re Deployment of Wireline Servs. Offer-

ing Advanced Telecommunications Capability (Advanced

Servs. Order), 13 F.C. C. R. 24,011, 24,030 1 36 (1998). Under

the Computer II regime, DSL providers (i e., traditional

telephone companies) have historically been required to offer

pure DSL transmission capability on a common carrier basis

separately from their “enhanced” or information service

offerings (which have not been treated as common carrier

offerings at all). Accordingly, the historical treatment of

DSL technology flows from the Commission’s historical

treatment of telephone company monopolists when they

offered new information services over their traditional

7 Although the term “DSL” is commonly associated with Internet

access, it also refers to the underlying transmission technology that in-

creases the capacity of telephone lines. Telephone companies have offered

that pure transmission technology on a stand-alone basis to various types

of customers. See Advanced Servs. Order, 13 F. C. C. R. at 24,030 1 36.

telephone networks. Cable operators lack similar obligations

at this time because they have no comparable history of

regulation as monopoly common carriers.

2. In any event, and contrary to respondents’ assertions,

the Commission has never stated that the Communications

Act requires it to break an integrated DSL Internet access

service into separate information and telecommunications

services. To the contrary, the Commission has tentatively

concluded that such a service, like cable modem service,

prospectively should be classified as solely an information

service under the Communications Act. In re Appropriate

Framework for Broadband Access to the Internet over Wire-

line Facilities, 17 F.C. C. R. 3019, 3030 | 20 (2002); see FCC

Br. 36 n. 16. There is no basis for overturning the FCC’s

classification of cable modem service on the ground that the

Commission has treated DSL differently, especially when

the Commission is currently embarked on a proceeding to

determine whether DSL providers (notwithstanding the

historical reasons for their current treatment) should now be

treated in the same manner as cable modem providers.

3. Contrary to respondents’ contention (EarthLink Br.

41; States Br. 7; MCI Br. 20), the Commission’s classification

of cable modem service is consistent with the requirement

that the statutory definition of “telecommunications service”

should be applied “regardless of the facilities used.”

47 U.S.C. 153(46). If the Commission had concluded that

cable operators offer “telecommunications for a fee directly

to the public,” but nonetheless refused to classify that

offering as a telecommunications service because it is pro-

vided through cable facilities rather than telephone facilities,

respondents’ argument might have merit. The Commission,

however, rested its classification of cable modem service on a

determination that cable modem service providers—unlike

traditional telephone companies—have not made such an

offering. Pet. App. 97a.

III. RESPONDENTS’ OTHER CHALLENGES TO THE

COMMISSION’S INTERPRETATION OF THE COM-

MUNICATIONS ACT HAVE NO MERIT

A. The Commission's Classification Of Cable Modem

Service Is Consistent With The Policies Of The Act

1. Respondents argue that the Commission’s interpreta-

tion of “telecommunications service” as an offering of pure

transmission allows cable modem service providers “to

escape regulation” under Title II. EarthLink Br. 14. As ex-

plained above, however, a provider that is under no obli-

gation to make an “offering of telecommunications for a fee

directly to the public” is permitted under the Act to refrain

from doing so, and thus to remain outside the scope of Title

II.

Nor can common carriers subject to Title II eliminate

their common carrier status through mere pricing changes,

as EarthLink also suggests (Br. 14). Telecommunications

common carriers cannot cease providing telecommunications

service without Commission authorization, 47 U.S.C. 214(a),

and Computer II demonstrates that the Commission has

ample authority to preclude evasion of Title II by common

carriers. Under the Commission’s approach, moreover, the

classification of a service turns on “the nature of the service

being offered” and “whether, functionally, the consumer is

receiving two separate and distinct services.” Universal Ser-

vice Report, 13 F. C. C. R. at 11,530 1 59, 60. The Commission

thus classified cable modem service as a unitary information

service not merely because subscribers pay a single price for

all the capabilities of the service, but also because the trans-

mission component serves no function other than to “enable[)

the subscriber to utilize Internet access.” Pet. App. 95a.

Local telephone service provides an obvious contrast to cable modem

service. Traditional telephone service provides a “pure” telecommuni-

cations link between the calling and called parties. Adding voice mail or

another information-processing feature as part of a local telephone pack-

age does not affect subscribers’ use of that telecommunications link for

2. Respondents attack the Commission’s classification of

cable modem service on the basis of their own policy view

that the common carrier obligations in Title II should apply

to that service. EarthLink Br. 28-32, States Br. 28-32; MCI

Br. 18-19. They argue, at the extreme, that the Internet will

“cease to function” unless cable modem service providers are

subject to Title II. EarthLink Br. 31 n.9. That is an odd

claim to make about maintaining the status quo. Cable

modem service has not to date been regulated as a telecom-

muni ations service, yet it—and the Internet as a whole

—have prospered. See FCC Br. 29-30.

In any event, there is one important, underlying policy

that respondents ignore. Respondents’ essential argument

is that cable modem service should be viewed as containing a

separate telecommunications component, because that con-

struction of the Act would allegedly increase competition by

allowing independent ISPs to market their services to end

users through the cable companies’ facilities. But respon-

dents’ construction would achieve that result only by im-

posing substantial regulatory costs and disincentives on

cable modem service providers. Such reguiatory burdens

could lead to higher prices and reduced investment in broad-

band deployment by cable operators, and hence to reduced

consumer choice, particularly in rural or other underserved

areas. See FCC Br. 31.

The FCC’s goal, like that which respondents assert, is

increased competition. But the Commission has determined

that a truly competitive market is best achieved by encour-

aging “multiple electronic platforms” for broadband service,

“including wireline, cable, terrestrial wireless and satellite.”

purposes other than accessing voice mail or other forms of information

services. Cf. AT&T Corp. Pet. for Declaratory Ruling Regarding En-

hanced Prepaid Calling Card Services, FCC 05-41 (filed Feb. 23, 2005)

(calling card that automatically provides advertisement prior to call re-

mains “telecommunications service,” because the card “offer{s]” only tele-

phone service and does not provide an information service capability).

Pet. App. 48a.” As the Commission explained, Ibly promot-

ing development and deployment of multiple platforms, we

promote competition in the provision of broadband capabili-

ties, ensuring that public demands and needs can be met.”

Ibid. The end result is a more competitive marketplace in

which competing broadband providers have the incentive to

invest in costly facilities and service enhancements so as to

meet consumer needs and desires—including (if desired) the

option to choose from multiple ISPs. That is the kind of

choice that the FCC must be entitled to take into account in

construing the Act, especially in a dynamic market that, far

from respondents’ dire predictions, has shown enormous

growth under a hands-off regulatory regime.

B. The Commission's Forbearance Powers Do Not Re-

quire It To Classify All Services As Telecommu-

nications Services

As the government’s opening brief explains (Br. 29-32),

the Commission’s classification of cable modem service pro-

motes the statutory policy of “encourag{ing] the deployment

{of broadband services] on a reasonable and timely basis,”

1996 Act § 706, 110 Stat. 153,“ and the Commission's goal of

creating a “minimal regulatory environment” that encour-

ages broadband investment and innovation. Respondents

assert that the Commission may pursue those objectives

only by exercising its forbearance authority under Section 10

Another emerging source that has already made its commercial

debut is broadband over power lines. See generally In re Availability of

Advanced Telecommunications Capability, 19 F.C.C.R. 20,540, 20,561

(2004).

Respondents err in contending (EarthLink Br. 43, States Er. 59-40)

that Section 706 has significance only for broedband technologies classified

as telecommunications services. Congress's directive to “remove barriers

to infrastructure investment” in order to promote “reasonable and timely”

deployment, § 706(a), 110 Stat. 153, applies equally to all broadband

technologies, without regard to the manner in which they are offered to

consumers.

of the Act, 47 U.S.C. 160. EarthLink Br. 44; States Br. 32-

33; MCI Br. 27-28.

Respondents err in contending that the Commission must

construe all ambiguities in Title II so as to impose a greater

regulatory burden on information service providers, which

the Commission could then lift under Section 10. FarthLink

Br. 44; see MCI Br. 28. That contention flies in the face of

Congress’s objective in adopting the 1996 Act. Rather than

drafting an expansively regulatory statutory regime that the

Commission could then ease under Section 10, Congress

expressly sought through the 1996 Act to “reduce regulation

in order to * * * encourage the rapid deployment of new

telecommunications technologies.” Preamble, 110 Stat. 56

(emphasis added). The Ninth Circuit’s extension of Title II

to cable modem service defies that legislative objective, and

is not made permissible by the fact that the Commission may

have power under Section 10 to lessen the harm of the

judicial error.

C. The Commission's Pending Proceeding On Applica-

tion Of CALEA To Cable Modem Service Has No

Bearing On This Case

Contrary to EarthLink’s suggestion (Br. 49), the FCC's

pending rulemaking proceeding under the Communications

Assistance for Law Enforcement Act (CALEA), 47 U.S.C.

1001 et seg., has no bearing on the reasonableness of the

FCC’s classification of cable modem service under the Com-

munications Act. CALEA, which imposes requirements on

“telecommunications carriers” to facilitate authorized elec-

tronic surveillance by law enforcement agencies, see 47

'! MCI Telecomm. Corp. v. AT&T, 512 U.S. 218 (1994), on which

responderts rely (EarthLink Br. 34-35), is inapposite. In MCI, the Court

concluded that the Commission's authority to “modify” the Act's express

tariff-filing requirements authorized only “moderate chenge,” not “a

fundamental revision of the statute.” 512 U.S. at 228, 231. Here, by con-

trast, the Commission has not sought to change any arrangement codified

in the Communications Act, but has simply applied the Act's definitions to

determine the regulatory classification of cable modem service.

U.S.C. 1002, has its own distinct structure and purposes.

CALEA has a significantly broader definition of “telecom-

munications carrier” than that in the Communications Act,

which includes, inter alia, a service providing “a replace-

ment for a substantial portion of the local telephone ex-

change service” if the “public interest” so requires—a pro-

vision with no express analogue in the Communications Act.

See 47 U.S.C. 1001(8)(B)(ii). CALEA does not include the

Communications Act’s narrow definition of “telecommunica-

tions” or the mutually exclusive regulatory dichotomy of

“telecommunicationsservice” and “information service.”

In August 2004—two years after the Commission’s

decision in this case—the FCC released a Notice of Proposed

Rulemaking in which it tentatively concluded that, given

CALEA's broader reach, all “facilities-based providers of

any type of broadband Internet access, including * * *

cable modem,” are “subject to CALEA.” In re Communi-

cations Assistance for Law Enforcement Act & Broadband

Access & Servs., 19 F.C. C. R. 15,676, 15,703 J 47 (2004). The

classification of cable modem service under CALEA will be

addressed in that administrative context. With that pro-

ceeding pending, this Court should not address any interplay

between CALEA and the Communications Act here.“

R * X X *

For the foregoing reasons and those stated n the opening

brief, the judgment of the court of appeals should be

reversed.

Respectfully submitted.

2 Respondents concede (EarthLink Br. 49; States Br. 17 n.6) that this

Court is not bound by the Ninth Circuit’s refusal to apply Chevron, and

they make no effort to defend the judgment below on that ground. As

previously explained, however (FCC Br. 38-44), that erroneous rationale

has pernicious consequences for administrative law, and it would be

appropriate for this Court to address the issue in order to provide

guidance to the courts of appeals.