For the sake of a rational and less regulatory forward-looking communications policy let's hope the Supreme Court grants certiorari in the Brand X case and once again reverses the Ninth Circuit--and not only because you can't reverse the nettlesome 9th often enough.

Let's be pretty clear here. As Ray points out immediately below, the 1996 Act's "information service" and "telecommunication" categories don't make much sense in today's IP world. You can read the two statutory definitions till your eyes glaze over, and it will not be clear whether "cable modem" service, or for that matter, the telcos' DSL service, fits in one category or the other. As I've said before, it takes a metaphysician to figure out how the outmoded statutory definitions, based as they are on techno-functional concepts that have no relevance to today's marketplace, should be interpreted.

Thus, the Solicitor General's very strong reliance on the Supreme Court's 1984 Chevron decision [Lexis subscription required]. There the Court held, quite appropriately, that where Congress enacts ambiguous laws, the courts must defer to reasonable interpretations of the statutory provision by the agencies charged with implementing the laws. The court declared: "Judges are not experts in the field, and are not part of either political branch of the Government...While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices--resolving the competing interests which Congress either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with administration of the statute in light of everyday realities."

In other words, the Court is saying that when Congress's delegation of authority in the Telecom Act is ambiguous, in our system of governance it is better for the metaphysicians at the FCC to be making policy than the ones wearing robes. So, in this case, I hope the Supreme Court grants cert and defers to the FCC's interpretation that cable modem service is an "information" service.

Now a PS--For those interested in constitutional and administrative law, note that Chevron was a case involving an EPA interpretation of a Clean Air Act provision. Hence, the Court's reference to an agency accountable to the Chief Executive, and deference to "the incumbent administration's views of wise policy to inform its judgments." The FCC is not considered to be part of the Executive Branch accountable to the president in the same way the EPA Administrator is, but rather it is a so-called "independent agency". Query: Should this make any difference for purposes of Chevron deference? Reactions welcome for further discussion--but in the meantime see my August 23 National Law Journal piece, "Consolidate FCC Power," advocating that a "slimmed- down organization should be moved into the executive branch, where the president will be political accountable for FCC policy-making activities."

The 'unregulated' Internet has been in jeopardy ever since the Ninth Circuit issued its Brand X Internet Services v. FCC decision last spring. There, the court ruled that cable modem service is a "telecommunications service," thus paving the way for cable broadband to be regulated according to the common carriage regime that grips the telecommunications world. By contrast, if cable modem is deemed an "information service," it remains in a relatively unregulated space.

This will be an immensely important case from a policy standpoint, an existential moment, as it were, about the future of the Internet's legal status. It also points up the creakiness of the old categories that govern communications--much like VoIP also does. "Information service" and "telecommunications service" simply don't signify any more.

Like VoIP, the achilles heel of cable modem being deemed an information service is the compelling demands of law enforcement and specifically the application of CALEA. It would be a catastrophe for the security concerns to override the value of an unregulated Internet. And it would be a catasrophe for Brand X to stand. With a great and memorable case caption like Brand X, we can hope that the Supreme Court will put the cable modem, and by extension Internet, back into the unregulated category of an information service.

ICANN's interference with VeriSign's introduction of new domain name system (DNS) services has been a source of tension for years. It came to a head in February when VeriSign filed a seven-count lawsuit against ICANN, alleging that ICANN's regulatory interferences breach multiple provisions of ICANN's Registry Agreement with VeriSign, interferes with VeriSign's business relations and violates Section 1 of the Sherman Act.

On Thursday, Judge Matz dismissed the antitrust claim, and directed that the case be transferred to state court where the remaining claims can be tried. He held that VeriSign's detailed allegations that competitors had captured ICANN's decision-making process were insufficient to establish an antitrust conspiracy, since VeriSign failed to allege facts establishing that competitors "controlled" or "dominated" ICANN's board.

I recently wrote a paper arguing that ICANN's regulatory excesses stifle innovation in domain name services, and that reliance on competition, rather than regulation by ICANN, would best serve consumers. Matz takes a rather narrow view of the corporate decision-making process, especially in light of the specific evidence of competitors' key role in many of ICANN's decisions, and even a statement by former ICANN president Stuart Lynn that ICANN's process was "too exposed to capture by special interests." (Judge Matz dismissed this by observing that Lynn had not actually "admitted" that the Board had been captured). But an antitrust claim is admittedly a blunt instrument for curbing ICANN's abuses. Press reports indicate that VeriSign will not appeal this decision (which would add further to the delay in introducing new services), but rather will pursue its state law claims.

As VeriSign's complaint and numerous critiques confirm, ICANN is out of control. It was created to promote competition in domain name services (DNS), given a very narrow regulatory mandate, and directed to meet basic standards of fair and open decision-making. It has adopted an increasingly expansive view of its regulatory mandate while providing virtually no procedural protections to affected parties. And its processes are clearly subject to capture. As a result, ICANN is delaying indefinitely the introduction of beneficial services.

Fortunately, Judge Matz's decision leaves VeriSign free to enforce ICANN's obligations under the Registry Agreement and related obligations in state court. ICANN's position clearly raises risks of regulatory abuse. But the Registry Agreement also contains provisions designed to prevent regulatory abuse by limiting ICANN's power and restricting the manner in which it can be exercised. ICANN should be strictly held to the letter and spirit of these protections.

After The Wall Street Journal editorial today on predation (shameless self-promoting moment has now passed), I have received a couple of comments about how prevalent predatory pricing schemes are in telecommunications.

This is news to me. But let me reiterate the bottom-line of Adam Peters' and my paper: the recoupment phase of a predatory scheme is damn-near impossible to pull-off in communications markets and, indeed, impossible to pull-off with the pervasive mandatory unbundling that now exists. Furthermore, even if you are the most paranoid, Harvard-school antitrust devotee, the remoteness of the predatory threat is dwarfed by the harm that pervasive retail price regulation causes in the name of protecting against predation.

The schizophrenia of the regulatory mindset is simply astounding at times. First, legacy regulatory roles exist because without them prices will be too high; at the same time, they exist because, without regulation, prices will be too low. Which is it?

At the Aspen Summit, there was considerable discussion about reforming the FCC as an institution in the context of the dialogue about the need to reform communications policy in general. During his conversation with Ray on Monday, FCC Chairman Michael Powell said one of his principal legacies would be the institutional changes he initiated during his watch. He mentioned hiring a bunch of new engineers and starting an internal continuing education program in the form of "FCC University".

Perhaps the FCC needed some new engineers, and there is nothing at all wrong with programs designed to continue to educate and motivate FCC staff. But, frankly, now, with competition supplanting the need for regulation across almost all segments of the communications industry, what is needed is a much more radical reformation of the agency. The FCC, which still largely resembles the Progressive-era agency created in 1927, needs a real transformation. For my article in this week's National Law Journal concerning what should be done, click here.

A U.S. District Court has preliminarily enjoined the Kansas Corporation Commission from enforcing its "winback" prohibitions against SBC on First Amendment grounds. [Opinion available on Westlaw with subscription.] The KCC passed rules forbidding the incumbent, SBC, from attempting to "win back" customers migrating to other carriers for 30 days. The court wrote:

Southwestern Bell has demonstrated a likelihood of success on the merits because the Commission has failed to present evidence that the thirty-day restriction will directly and materially advance the Commission's substantial interest in fostering a competitive climate in the local exchange carrier (LEC) market in Kansas or that the restriction is narrowly tailored given the fact that there are obvious, non-speech-infringing alternatives to advance the Commission's asserted interest. Further, Southwestern Bell is faced with the threat of irreparable harm if the injunction is not issued by virtue of the loss of its First Amendment rights as well as the fact that it probably would not have an effective remedy after a full trial on the merits.

Because the court relied on commercial speech grounds, it did not need to delve too deeply into the economic analysis of the effect of the winback rule. Interestingly, the KCC asserted "assuring a climate of competition" as the compelling state interest justifying the winback rules' prohibition on contact. The court found this reason legitimate, but not enough to overcome the First Amendment's Central Hudson commercial speech test.

What pervades the opinion, though, is the KCC's -- and even the court's -- presumption that you can manage competition by creating market rules so CLECs can survive in the market. To quote a famous wordsmith, it is surpassing strange that to create competition you have to forbid a party from competing, as the KCC rules required SBC to do.

The court's commercial speech rationale is a victory not just for free speech but for free commerce (they, of course, go together). Given the variety of legacy regulatory rules that touch on regulated companies' speech rights, I would guess this rationale might have some utility in escaping the old regulatory world.

The Webcast of Day 1 of the Aspen Summit is now available. More to follow...

Jeff Pulver says he is "worried" about the future of VoIP regulation after leaving the Aspen Summit.

I hope it wasn't anything I said. I trust it was not because I tend to see eye-to-eye with Jeff on this.

I believe his worries about VoIP regulation are certainly warranted, and the reasons for this did become apparent at the Summit. The concerns start with the current legal and regulatory taxonomy into which VoIP does not fit. The Commission is left with an unsatisfactory either/or proposition for VoIP classification -- what Randy May properly derides as the "metaphysics of VoIP."-- to classify it as either an "telecommunications service" or an "information service." The former classification means heavy regulation; the latter virtually none.

Two factors create pressure for VoIP to be shoehorned into the "telecommunications service" category. First, the FBI and national security apparatus emphatically assert the need to be able to wiretap VoIP under the Communications Assistance to Law Enforcement Act (CALEA). The leads them to advocate for VoIP (and cable modem service) be classified as "telecommunications." Second, the universal service ethos of the telecommunications world relies on a vast system of price distortions -- taxes, access charges and the like -- that cannot tolerate the regulatory escape from these distortions that VoIP threatens. Thus, the legacy regulatory world by its own internal logic has to try to drag VoIP into its grip.

So, Jeff should be worried. Long-term answers are to solve the outdated regulatory categorizations that do not adequately describe the reality of modern communications and rewrite CALEA for the Internet age. In the meantime, Jeff can at least rely on the good sense of Chairman Powell and Commissioner Abernathy, both of whom we heard from at Aspen and neither of whom wants to regulate VoIP.

Verizon and Qwest are challenging the FCC's interim UNE rules before the DC Circuit, and SBC and BellSouth are not. Perhaps this is one reason why.

Well, at least until the state PSC adopts reasonable UNE rates.

VZ's President also stated that yesterday was a turning point in the history of the company, as a consumer in Keller, Texas went live with Verizon's FTTP (Babbio predicted that the FTTP product will be 30 Mbps downstream by next year).