On August 5 the FCC voted 4-0 to reclassify DSL from a telephone service to an “information service”; effectively removing the regulation requiring telephone companies to offer their lines for free to competing DSL providers. Telephone companies will now be able to sell or lease their lines for what they deem a fair value. This ruling comes just two months after the Supreme Court achieved the same affect in the cable broadband arena with the “FCC v. Brand X” decision which redefined cable broadband as an information service. The new regulation takes effect one year from the decision, giving the industry a chance to adjust and make a smooth transition.

The decision in both cases is predicated largely on the idea that deregulation will encourage greater investment, increase competition, and spur innovation. The assumption is that placing cable and DSL companies on the same footing will encourage both to compete more aggressively with end-users benefiting from this through lower prices, more options, and choice. Competition may emerge also from newer technologies such as satellite, broadband over power lines, and various wireless technologies. Not all agree with that assumption.

FCC Commissioner Michael J. Copps, who disagreed with the Supreme Court’s “Brand X” decision in June, initially opposed the reclassification but went along noting that the “Brand X” ruling made reclassification of DSL inevitable. Despite his vote he did state that he hopes, “Next year the commission will put its money where its mouth is to see if the assumptions yield the results.” And further, “If it doesn't, I hope it will admit that and take appropriate action. I'll be keeping tabs."

The loudest voices from the opposition come from organizations such as the Consumer’s Union, the publisher of Consumer Reports magazine and the California ISP Association, the largest state association of Internet service providers. These groups say that it is does not deliver parity to the market, but a monopoly to the Bells. According to them users lose out on multiple fronts. Jeannine Kenney, senior policy analyst for Consumers Union, told the Associated Press that consumers may soon be forced into longer-term contracts and arrangements where they have to buy additional services to get high-speed Internet. Users will now lack choice of providers, says Dane Jasper, President, California ISP Association, the “Ruling will take away [user’s] right to choose broadband providers and services," These are the more surface accusations, but two that go deeper are the impact on access to content and the implications on innovation.

Though there is a clause in the decision that requires all providers to allow access to all content on the Web so long as it is not illegal, opponents of the decision hold out little hope for this. According to Media Access Project, a non-profit Public Interest Telecommunications Law Firm, “The technology allows cable and phone companies to subtly interfere with users trying to access rival content, while making it easy to access the cable or phone companies’ own content.” MAP also notes that, “Cable companies have also negotiated deals with the largest ISPs to transition narrowband subscribers to broadband services under cable terms. Already major ISPs speak of changing their broadband service to a ‘premium cable’ type service. Users would roam through ‘walled gardens’ of cable content with diminished opportunities to create their own content or seek content from others.”

Perhaps the strongest of the allegations and the one with the most technological ramifications is that the decision will squeeze out the smaller competitors and will thereby remove any chance of serious innovation and will slow the growth of the Internet. In its opposition, Media Access Project refers to a 1999 paper written for the FCC by Jason Oxman, Counsel for Advanced Communications in the Office of Plans and Policy, in which he noted that, “Open access across the telecommunications network has driven the deployment of innovative and inexpensive Internet access services.” Mark Vesser, VP Board of Directors of California ISP Association states that, “Innovation becomes reality only when confident entrepreneurs are willing to take economic risks and ISPs have taken this risk -- to the betterment of the entire economy. Phone and cable companies were not even pioneers in the Internet but they now seek to control access to it. Small businesses are the heart of the American economy because they drive innovation. In fact, new firms are established on the very premise that they can do a better job and recognize that a one-size-fits all approach is not good for business and innovation."