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updated 3/29/2005 12:43:49 AM ET 2005-03-29T05:43:49

On Tuesday, the U.S. Supreme Court will hear the Federal Communications Commission's appeal of a decision by the Ninth Circuit Court of Appeals as to whether cable modems are a "telecommunications service" or an "information service." The appeals court ruled in October 2003 that cable modems are akin to telecommunications providers, which meant that they would have to open their lines to rival Internet service providers.

The big question here is not so much what is a cable modem, but who gets to decide what a cable modem is. The appeals court had followed its own earlier interpretation of the federal statute, the Telecommunications Act. In the interim, however, the FCC had issued in 2002 a "declaration" that cable modem service should be considered an information service, which freed the big cable companies like Time Warner and Comcast from the all-comers obligation that applies to telecommunications providers such as SBC Communications and Verizon Communications.

The FCC says the courts should "defer" to its interpretation of the law because of its "expertise."

The Internet service providers who prevailed in the Ninth Circuit say that the FCC has no particular expertise and that the rule that normally requires deference to an expert agency does not apply to basic definitions or interpretations of statutes. This is especially true where the courts have already ruled, and the agency is essentially trying to reverse that court ruling, the ISPs and consumer groups argue.

The consumer groups argue that the appeals court's interpretation would allow more choice and lower prices in the broadband market, as they do in the traditional dial-up ISP market.

Cable companies, though, are eager to be classified "information service" providers, which would mean they would not be required to lease lines to competitor independent ISPs such as Earthlink or Brand X, a Santa Monica, Calif., ISP which filed the original lawsuit. For cable companies, a win in the Supreme Court would also free them from certain service standards and some public utility obligations.

The cable industry has joined forces with the Bush Administration in appealing the Ninth Circuit decision.

In an earlier statement, the Consumers Union said, "The principles of non-discrimination in communications have been a cornerstone of our democracy and dynamic economy since the founding of our republic. Indeed, it is a fundamental part of common law that reaches back to the earliest days of capitalism."

But the ISPs and consumer groups say this principal of deference should not apply where the agency has been inconsistent in its own interpretation of the law and where the agency did not rule at all until after the case got to court.

The Ninth Circuit said that the FCC is not particularly expert in interpreting the statute and the time for its deferring to its expertise had passed. "The judiciary is the final authority on issues of statutory construction," the one judge wrote.

But in their appeal to the Supreme Court, the FCC and the Justice Department say it is up to them. "Congress has delegated to the agency— not the courts of appeals — the primary authority to resolve statutory ambiguities," they argue.

The FCC, of course, has been reversed by appeals courts on important issues numerous times. Part of the reason is that the Telecommunications Act and other statutes it administers have been left by Congress deliberately ambiguous for years. Thus the issue of deference becomes the key to power. It is an issue that has been addressed by the Supreme Court numerous times, but never in a context like this.

© 2012 Forbes.com

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