The Communications Act of 1934 defines two categories of regulated entities: telecommunications carriers and information-service providers. The Act regulates telecommunications carriers, but not information-service providers, as common carriers. Telecommunications carriers, for example, must charge just and reasonable, nondiscriminatory rates to their customers, design their systems so that other carriers can interconnect with their communications networks, and contribute to the federal "universal service" fund. Information-service providers, by contrast, are not subject to mandatory common-carrier regulation.
In 2002, when there were two principal kinds of "broadband" high-speed Internet services--(1) cable modem service, which transmitted data between the Internet and users' computers via the network of television cable lines owned by cable companies; and (2) Digital Subscriber Line (DSL) service, which used high-speed wires owned by local telephone companies--the Federal Communications Commission (FCC) issued a declaratory ruling stating that broadband cable modem service was an "information service" but not a "telecommunications service," so that it was not subject to mandatory Title II common-carrier regulation.After numerous parties challenged the FCC's ruling, the United States Court of Appeals for the Ninth Circuit was selected, by judicial lottery, as the venue for the challenges. The Court of Appeals vacated the FCC's ruling to the extent that the ruling had concluded that cable modem service was not telecommunications service under the Communications Act, as the Court of Appeals--in holding that the FCC's statutory construction was impermissible--rather than analyzing the permissibility issue under the deferential framework of Chevron U.S.A. Inc. v. Natural Resources Defense Council (1984) 467 U.S. 837, 81 L. Ed. 2d 694, 104 S. Ct. 2778, relied on the purported precedential effect of the Court of Appeals' decision in an earlier case in which the Court of Appeals had held that cable modem service was a "telecommunications service"
Are broadband cable modem companies, which are exempt from mandatory common-carrier regulation, considered a lawful construction of the Communications Act under Chevron and the Administrative Procedure Act?
The Commission's traditional distinction between basic and enhanced service also supports the conclusion that the Communications Act is ambiguous about whether cable companies "offer" telecommunications with cable modem service. Congress passed the Act's definitions against the background of this regulatory history, and it may be assumed that the parallel terms "telecommunications service" and "information service" substantially incorporated the meaning of "basic" and "enhanced" service. That history in at least two respects confirms that the term "telecommunications service" is ambiguous. First, in the Computer II order establishing the terms "basic" and "enhanced" services, the Commission defined those terms functionally, based on how the consumer interacts with the provided information, just as the Commission did in the order under review. Cable modem service is not "transparent" in terms of its interaction with customer-supplied information; the transmission occurs only in connection with information processing. It was therefore consistent with the statute's terms for the Commission to assume that the parallel term "telecommunications service" in § 153(46) likewise describes a "pure" or "transparent" communications path not necessarily separately present in an integrated information-processing service from the end user's perspective. Second, the Commission's application of the basic/enhanced service distinction to non-facilities-based ISPs also supports the Court's conclusion. The Commission has historically not subjected non-facilities-based information-service providers to common-carrier regulation. That history suggests, in turn, that the Act does not unambiguously classify non-facilities-based ISPs as "offerors" of telecommunications. If the Act does not unambiguously classify such providers as "offering telecommunications," it also does not unambiguously so classify facilities-based information-service providers such as cable companies; the relevant definitions do not distinguish the two types of carriers. The Act's silence suggests, instead, that the Commission has the discretion to fill the statutory gap.