BrandX: It's not Chicken McNuggets, it's butter
In the Supreme Court’s reversal,Download file,today in the FCC v. BrandX case, the Court analyzed whether the FCC’s construction of the Communications Act was a “reasonable policy choice”. The ISPs had argued that the Commission’s interpretation was unreasonable because it would allow a communications provider to evade common-carrier regulation by bundling information services with telecommunications.
The Court disagreed, stating:
“[T]he high-speed transmission used to provide cable modem service is a functionally integrated component of that service because it transmits data only in connection with the further processing of information and is necessary to provide Internet service. The Commission’s construction therefore was more limited than respondents assume.”
The FCC's Declaratory Ruling had classified Internet service provided by cable companies solely as an “information service”. The FCC concluded that "cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service." The effect of the FCC’s ruling was that cable modem services would be governed by a lower level of regulation, and among other things would not be required to serve as common carriers of competing Internet services from other ISPs.
At oral argument on March 29, 2005,Download file, Paul Capuccio, counsel for the National Cable and Telecommunications Association, offered the following analytics that apparently were persuasive to the Court:
“Are these two separate products? Is this communications and Chicken McNuggets bundled together? Or are these two ingredients that are so interwoven . . . as to form a distinct product?”
“[I[f I bake cakes and someone was to say, ‘If you offer cakes, you don’t offer butter,’ there’s nothing in the English language, Justice Scalia, that makes that unreasonable, that a person who offers cakes to the public does not offer butter to the public. And if you believe that example is correct, then you have to uphold the FCC, because what it says is, the offer of the final product is not offering, to the public, the ingredient.”
This apparently did not persuade Justice Scalia, who dissented,Download file, possibly swayed by the analogies of Thomas Goldstein, counsel for the ISPs:
“But take anything that Congress regulates. Take, for example, that we regulate offering of cigarettes to children. Now a merchandiser couldn’t come along and say, “I’m not offering cigarettes. What I’ve done is, I’ve created a smoking service. I’ve taken the cigarettes, and I’ve put a lighter in it, and you’ve just got one bill that you have to pay for it.’ The idea that that would evade what Congress is concerned about is loopy.”
“Now this is not a question of whether or not there’s butter in a cake, because . . . . fundamentally, the telecommunications is the same; it hasn’t been ‘cooked’ into something else.”
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