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CONTACT: Patrick Ross
March 25, 2005
(202) 289-8928
Supreme Court Can Spur Broadband
Overturning Brand X Encourages Investment

WASHINGTON D.C. - When the Supreme Court justices hear oral arguments Tuesday on how broadband networks should be regulated, they can encourage significant investment in new and existing networks by overturning a flawed circuit court decision, says Progress & Freedom Foundation Senior Fellow Kyle Dixon. Incentives for cable operators to invest in further broadband buildouts will be stifled if the High Court fails to overturn a 9th Circuit Court of Appeals ruling in Brand X v. FCC that rejected the agency's effort to spur broadband competition.

"The Brand X case is critical to the FCC's overall policy of enhancing incentives for companies to invest in building high-speed networks," says Dixon, director of PFF's Federal Institute for Regulatory Law & Economics. The Brand X decision challenges the FCC's effort to regulate broadband as an information service, regardless of the industry of the provider. As in the Voice over Internet Protocol (VoIP) context, the FCC hopes to protect broadband from onerous regulation, and thereby encourage investment in competing broadband networks, Dixon argues.

"Consumers benefit most when companies battle to build them the most sophisticated networks possible, not when regulators let companies free-ride on existing networks," says Dixon. "Should the FCC lose in Court or on remand to the 9th Circuit," he says, "the result would saddle broadband with regulatory costs, uncertainties and economic distortions, further delaying real choice for consumers." The FCC and the courts should resist all such calls for economic regulation in broadband, Dixon says.

Some backers of the Brand X decision have said the FCC could simply forbear from regulation rather than categorizing it as an information service, but Dixon, who joined PFF last year after serving as the FCC's broadband advisor, notes problems with that. " The agency's discretion with forbearance is strictly constrained," he says, "both by substantive limitations in the Communications Act and by the fact that this discretion involves a laborious and legally-risky rule-by-rule approach."

"In addition," Dixon says, "the fact that the Supreme Court is forced to examine these issues highlights how the Communications Act has failed to accommodate cable modem and other digital technologies. This is still more clear evidence of the need for thoughtful and forward-looking reform." Dixon and several other PFF fellows are working with dozens of former Democratic and Republican policymakers, academics and fellows from other think tanks to develop such reform, called the Digital Age Communications Act. The aim is to have model legislation before Congress this fall.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation