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À ?        ? ? ?      ?    8?       ? ? ~  ?  ? ?  ? ?  ?    ?  ? ??  ?   ?   ? ??  ?   ?  ? ? ? ? ? ? ? ? ?  ? ?   ?   ?   ?  ?  ? ?? ? ? ??? ~?   ? ? ? ?? ? ??  ? ? ??  ?  ?  ?À? ? ?? ?? ?? ? ? ? ?? ?? ??? ? ?? ?? ? ? ?? ? ?? ??  ??  ???  ?  ?  ? ?? ??  ?  ?  >?  ?  ?? - ?: 9 4ǀ? ?4 4 4? 4 4 4 4 5? 5 4 ?4 ?4 5 5 5 ?1? ?1 ?1 ?1 ?0 1x 1 / /? ?/π / / / .? ??.? ?. <. - - - --,,?,,-?----?+?* ??* ?+,>,,,?,?,?,--.?.?.?.%?À%%%%%%?%%?%?%?%&&'''?'?'?''?'())))x)?)?)?))*+++ǀX? π? ? ??? ##?&#&#? %#0%#x?%#?x%#?|%#?%#?%#?%#?%#%#%#%# ?%# $# ?$#?$# $# ?$# $#$#$#$#$#$#$#$###??####?##?##?#$ ?#$'$?'$'*'*'+'++XC yO-y!((@Unnfcclogo.wpgy$(#(#  (#(#!` $ #X\  P6G;ɒP#Federal Communications Commission !`  Office of Plans and Policy !`  1919 M Street NW  yOX-!`  Washington, DC 20554#xP7+P#  R -!` #Xm2PG;XP# !`    (#(#(#(#  j <#W24Pk|P#OPP Working Paper Series#:}24PkXP# #24Pk` P#  0 -yx0|dddhy  f 30` ` #:}24PkXP# #v24Pk4P# #G2PG;4P#Internet Over Cable: (#` XxX` ` Defining the Future In Terms of the Past(#`  R/- #Xm2PG;XP#  j<#W24Pk|P#  jL<yx0M dddx0yAugust 1998#t24Pk P#  yOJ-# W24Pk|P##]\  PCɒP#  j%<#2PG;|P#Barbara Esbin#X\  P6G;ɒP#  X'-#]\  PCɒP##o\  PC ynXP#'0*0*0*) `  !pw(inal.828.recon.901|'#n\|h.9010recon4.cmpn:M '#| QroM mp.recon.826n:\wi X` hp x (#%'0*,.8135@8:.  xCopies may also be purchased from International Transcription Services, Inc., 1919 M Street,  xNW, Room 246, Washington, DC 20554, (202) 8573800. Copies are also available from the  xNational Technical Information Service, 5285 Fort Royal Road, Springfield, VA 22161 (703) 4874650.  X- "0*0*0*u"  "hi# .\4 PP# Internet Over Cable: Defining the Future in Terms of the Past  uK#u\4 P |XP## #\4 P nP#  uh K Barbara Esbin *# u\4 P |XP#у b Associate Bureau Chief, Cable Service Bureau  X-  tK#  PE37 nP#  uKK  Office of Plans and Policy Federal Communications Commission 5Washington, DC 20554  u3K#August 1998# Xw PE37 |XP#у  uRK #  PE37 nP#OPP Working Paper No. 30# Xw PE37 |XP# Ã  VC  xP$-# c PE37 P#rrn* This Working Paper originated as a research project commissioned by former Cable Services Bureau Chief, Meredith J. Jones. I would like to thank her, William Johnson and JoAnn Lucanik for their helpful advice and comments in the early stages of the project. I am especially indebted to Robert Pepper, Dale Hatfield, and Stagg Newman for their guidance and assistance with the final project. The views expressed in this paper are those of the author, and do not necessarily represent the views of the Federal Communications Commission or any of its Commissioners or other staff. f!r"d)0*0*0*."  tK##\4 P nP# CONTENTS # Xj\  P6G; ynXP#  XM-Xr4 z <p x (#%'0*,.8135@8: at p.1 ("Brief History of the Internet"). With respect to the Internet and related developments, traditional dividing lines become blurred as individual companies  X -provide capacity to transmit communications for others and also provide their own content.  Xy- xThe emergence of the Internet as a preeminent global communications medium was largely contemporaneous with the development of the 1996 Act's fundamental regulatory framework. As a result, the 1996 Act's primary approach to communications services, service providers and facilities neither fully reflects nor anticipates the impact of Internetbased communications capabilities on existing networks and the regulatory regimes that govern them. While the Internet arguably represents one form of technological and service "convergence," the 1996 Act's deregulatory, procompetitive program depends upon the viability of distinct regulatory categories for services, facilities, and service providers to establish the rights and obligations of carriers as competition is introduced to formerly monopolybased markets. As the Commission has recognized: "All of the specific mandates of the 1996 Act  X-depend on application of the statutory categories established in the definitions section."! yO"-ԍ By amendment to its 1998 appropriations legislation, Congress required the Federal Communications Commission ("the Commission") to undertake a review of its implementation of the provisions of the 1996 Act relating to and impacting universal service, including telecommunications and Internet access, to be completed  {O>%-and submitted to Congress no later than April 10. See Common Carrier Bureau Seeks Comment for Report to  {O&-Congress on Universal Service Under the Telecommunications Act of 1996, Public Notice, CC Docket No. 9645  {O&-(Report to Congress), DA 982 (January 5, 1998); In the Matter of FederalState Joint Board on Universal  {O'-Service, Report to Congress, CC Docket No. 9645, FCC 9867 (released April 10, 1998) ("Report to Congress")"'0*(('"  yO-at para. 21. " X0*(("Ԍ X- Ù xThe 1996 Act's distinction between "telecommunications" and "information" services, and the differing regulatory consequences that attach, largely carries forward the "basic"  X-versus "enhanced" distinction created by the Commission during the course of its Computer  X-Inquiry proceedings, beginning in the late 1960s.^X! {O-ԍ See Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication  {O-Service and Facilities, Notice of Inquiry, 7 FCC 2d 11 (1966); Supplemental Notice of Inquiry, 7 FCC 2d 16  {OZ-(1967) (entire series of proceedings referred to herein as "Computer Inquiry"); Report to Congress at para. 45. Integrated service offerings, such as those provided over the Internet, present fundamental problems to a regulatory framework dependent upon technological distinctions. As one writer recently observed, "[w]hen basic and enhanced services become intertwined and indistinguishable, the current regulatory system  Xc-implodes."c~! {O -ԍ Ira H. Goldman, "Technology Will Kill Telecom Taxes," The Wall Street Journal, Aug. 10, 1998 at A14. xCurrently the overarching consensus among domestic policy makers is that the government should recognize the unique qualities of the Internet, and avoid unnecessary  X -regulation and undue restrictions on electronic commerce conducted over the Internet.8  ! {O-ԍ See, e.g., 47 U.S.C. 230(b) (it is the policy of the United States to "preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or  {OZ-State regulation"); "The Emerging Digital Economy," Secretariat on Electronic Commerce, U.S. Department of Commerce, April 15, 1998. This report is part of the Clinton Administration's initiative on global electronic  {O-commerce, described in the July, 1997, "Framework for Global Electronic Commerce." Both reports are  {O-available at: . See also Kevin Werbach, "Digital Tornado: The Internet and  {O-Telecommunications Policy," OPP Working Paper Series No. 29, Federal Communications Commission, Office  {OJ-of Plans and Policy, March 1997 ("Digital Tornado"), for the author's analyses and conclusions on Internet  {O-Regulatory Policy; Report to Congress at para. 82 ("We recognize the unique qualities of the Internet, and do not  yO-presume that legacy regulatory frameworks are appropriately applied to it"). Nonetheless, there is a certain tension evident in the 1996 Act's approach toward regulation of the Internet which contains statements of congressional intent to leave the Internet "unfettered" by Federal or State regulation, and provisions criminalizing  {O6-the provision of specified Internet content. Compare 47 U.S.C.  230(b) and  223(a) & (d).  Yet regulators charged with implementing communications regulation find themselves unavoidably drawn into a process of determining the application or not, of existing rules whose terminology was established without regard to this new medium for delivering communications  X -services. How the existing regulatory categories may be adopted to, or walledoff from, new developments such as the Internet, which fundamentally differs from existing communications  X}-capabilities, is a topic only beginning to be explored herew\}! yO>#-ԍ Concurrent with the initiation of its proceeding to reform the Commission's "access charge" rules, the  {O$-Commission launched an inquiry into Internetbased services and related regulatory questions. See Section IV.E.,  {O$-infra; see also Report to Congress.w and abroad. }4! yO-ԍ In a statement released on January 15, 1998, the European Commission decided that at this time, telephony delivered over the Internet is not mature enough to be considered "voice telephony," and should not be subject to  {O -licensing or universal service fund requirements by national authorities within the European Union. "Status of  {O-Voice Communications on Internet Under Community Law, and in Particular, Under Directive 90/388/EEC," Published in the OJ No. C 6, 10.1.1998, p.4. The Notice suggests that phonetophone Internet telephony would be treated as "voice telephony" (and potentially subject to EC universal service fund contributions) in the future if the service were marketed to the public as an alternative form of voice telephony service, with speech quality guaranteed by a bandwidth reservation, and represented to the public as equal to that of circuitswitched voice telephony. "} 0*((K"ԌxTo date, that exploration has focused entirely on the issue from a telecommunications  X-perspective.H \! {O6 -ԍ In its Report to Congress, the Commission expressly reserved for the future consideration of the  {O -"regulatory classification of Internet services provided over cable television facilities." Report to Congress at  yO -para. 69 n.140. H Future examinations must also consider the case of cableprovided Internet services. Cable service has traditionally been regulated and delivered as an integrated video,  X-information content, and conduit service under Title VI.  ! yO,-ԍ The statutory framework for cable regulation was first established by the Cable Communications Policy Act of 1984 ("1984 Cable Act"). Cable Communications Policy Act of 1984, Pub. L. No. 98549, 98 Stat. 2779  {O-(1984), 47 U.S.C.  521 et seq. (adding Title VI to the Communications Act of 1934, as amended, 47 U.S.C.   {O-151 et seq. Title VI was further amended by the Cable Television Consumer Protection and Competition Act of  {OP-1992, Pub. L. No. 102385, 106 Stat. 1460 (1992), 47 U.S.C. 521 et seq. ("1992 Cable Act") (collectively, "the Cable Act"). The regulatory model for cable services presents a particularly intriguing model in terms of current and future integrated  X-digital communications offerings. xThe pre1996 Act definition of cable services in the Communications Act was descriptive of the way cable services, which were developed to receive and transmit analog broadcast television signals by wire, were provided. Cable services have traditionally consisted of a series of channels and services largely, but not exclusively, under the control of the cable operator. The 1996 Act introduced a new component to the definition of cable services under section 602 by addition of the two words, "or use," to the provision describing subscriber  X -interaction required for "the selection of such video programming or other programming service" found in the previous version. The legislative history states, "[t]he conferees intend the amendment to reflect the evolution of cable to include interactive services such as game channels and information services made available to subscribers by the cable operator, as well  Xy-as enhanced services."Z y>! {Oh"-ԍ Joint Explanatory Statement at 169. Z x xThe Commission has only begun to evaluate the implications of Internet communications for the regulatory frameworks it administers. The Commission's examination of the 1996 Act definitions and rules relevant to the Internet has been undertaken exclusively in the context of its implementation of the Act's new regulatory regimes intended to bring competi" 0*(("Ԯtion to local telephone markets. The Commission has found that Internetbased services and Internet service providers fall within the regulatory categories of both "information" and "en X-hanced" services, and that information services are not telecommunications services. ! {OK-ԍ See, e.g., Report to Congress at paras 52, 55, 6182. See discussion infra. Section V. This classification places Internetbased communications services that utilize wireline public switched telephone network ("PSTN") connections outside the scope of Title II telecommunications common carrier regulation, but arguably within its Title I jurisdiction over wire  Xv-communications. vZ! {O -ԍ See Cannon, Robert, "What is the 'Enhanced Service Provider Status of Internet Service Providers?,"  {OK -FCBA News, Feb. 1997 at p. 11 ("ESP Status of ISPs"). xCable industry representatives argue that the Commission could reasonably find that Internetbased services provided by telecommunications carriers over telecommunications  X -facilities are information and/or enhanced services, but that Internetbased services provided  X -over cable systems by cable operators are cable services. ! {Oj-ԍ As discussed in Section VI., infra, the National Cable Television Association ("NCTA") and several individual cable operators have advocated this both formally and informally before the Commission. Among other benefits, bringing cable Internetbased services under the cable framework would provide the industry desired  X -regulatory stability at the most fundamental level.  xCable regulators and other government entities are also examining the regulatory status of cable Internet offerings. Local cable franchising officials are interested in franchising issues arising out of the introduction of Internetbased services in terms of whether such services are covered under their cable and/or telecommunications franchising authority.  XK- Similarly, Congress is currently considering legislation exempting Internet access and interactive computer online services from taxation generally. Whether this legislation will continuing to permit local franchising authorities to collect franchise fees on revenues derived from cable operators' provision of Internetbased services over their cable systems remains to  X-be seen.f. Z! yO-ԍ The "Internet Tax Freedom Act," which originated in the House of Representatives as, H.R. 1054,  {Ox-continues to undergo significant change as it progresses through the House. See 105th Congress, 1st Sess., H.R. 1054 (1997). The companion bill in the Senate is S. 442 (1997) H.R. 1054 contained a sixyear moratorium imposed on the collection of taxes and fees on access to, or use of, Internet or online services and related applications. By October, 1997, the draft bill also included a list of state and local taxes that would be grandfathered in the moratorium, including sales and transaction taxes, telephone taxes, and cable franchise fees. Arguably, this exemption from the moratorium is an additional indication that Congress may view cable Internet services as Title VI cable services, subject to franchising obligations and fees. Since late 1997, the approach of  {O#-the draft legislation has undergone significant change. See Communications Daily, July 29, 1998. In the Senate, the Committee on Commerce, Science and Transportation's bill, S. 442, was referred to the Senate Finance Committee for markup in late July, 1998. The Senate Finance Committee passed a new version of the Internet Tax Freedom Act, replacing the 6year moratorium on new state and local Internet taxes with a 2year ban on  {O'-new Internet taxes, likely to go to the Senate floor for a vote in September. Id.  As reported out by the Finance"'0*(('" Committee, the substitute bill would impose a moratorium on Internet access taxes, "bit" taxes, and multiple and  {OX-discriminatory electronic commerce taxes. "Senate Finance OKs 2Year Internet Tax Moratorium," Telecommunications Reports, Aug. 3, 1998 at p. 22. f The terms of the dialogue bear watching as they may shed additional light on"0*((" Congress' view of the regulatory status of cable Internet services. xThe potential classification of Internetbased services as "cable services" when provided over cable systems by cable operators raises difficult definitional, jurisdictional and policy concerns. If the Commission were to classify cableprovided Internet services as cable services under Title VI, the result would be the creation of "parallel universes" for regulation of cable and telephony Internetbased services. Cable operators would be permitted to provide advanced cable services under a Title VI regime, free of interconnection and unbundling requirements, while certain telecommunications carriers would be obligated under the 1996 Act and the Commission's rules to offer network interconnection, unbundled network elements, and tariffed rates to competing enhanced and information service providers. x xThe first portions of this paper provide a description of the Internet and how it functions; review the 1996 Act's approach to the Internet and Internetrelated definitions; examine both the Commission's historical approach to services like those now being provided by Internet service providers; and review its implementation of the provisions of the 1996 Act with respect to the regulatory treatment or classification of the Internet. The final sections focus on the pre1996 definition of cable services; the significance of the 1996 Act revision; and the specific issues raised by Congress' revision to the definition of cable services visavis Internet services, from both a definitional and policy perspective. They also discuss the regulatory consequences that would flow from a classification of cableprovided Internet services as Title VI cable services, and review several proceedings pending before the Commission. xAn understanding of this regulatory backdrop should provide the basis upon which informed decisions regarding Internetbased communications services may be made so that the goals of the 1996 Act, to preserve and promote the "vibrant and competitive free market that  X-presently exists for the Internet and other interactive computer services,"@! yO.-ԍ 47 U.S.C.  230(b).@ may be fully  X|-realized.  Xe-  XN- II. THE INTERNET AND THE 1996 ACT ă  X - A. xA Brief Description of the Internet  X -  X- x 1.` ` General Background  X-  X -xThe Internet is not a single physical or tangible entity, but rather a complex series of interconnected computer networks forming a widespread information infrastructure, commonly"!z0*(( " described as a "network of networks." Such networks are connected in a manner which permits each computer in any network to communicate with computers on any other network in the system by using the nonproprietary Internet protocol ("IP"), a set of rules for exchang X-ing data.z! yO4-ԍ IP is a routing protocol that defines the structure of data, or "packets," transmitted over the Internet. The higherlevel "transmission control protocol" or "TCP" and the "userdefined protocol" or "UDP" are transport protocols that control the transmission of these packets across networks. Most Internet services use TCP, and therefore the Internet is often referred to as a "TCP/IP" network. The important fact is that this simple IP protocol separates new services and applications development from the transmission and switching of the digital  {O -bits, so that new services can be introduced without affecting the Internet. See, generally, Digital Tornado at 10 n.12.  This global web of linked networks and computers is referred to as "the Internet."  X- Some of the computers and computer networks that make up the Internet are owned by governmental and public institutions, some are owned by nonprofit organizations, and some are privately owned by corporations. The resulting whole is a decentralized, global medium of communications or "cyberspace" that links people, institutions, corporations, and  XH-governments around the world.JH ! {O-ԍ See ACLU v. Reno, 929 F. Supp. 824, 831 (E.D. Pa. 1996); Shea v. Reno, 930 F.Supp. 916, 925  {O-(S.D.N.Y. 1996), affirmed Reno v. ACLU, 117 S.Ct. 2329 (1997); Reno v. Shea, 117 S.Ct. 2501 (1997)  {O-(hereinafter "Reno v. ACLU"). The District Court decision in ACLU v. Reno made extensive findings of fact,  {Oa-most of which were based on a detailed stipulation prepared by the parties. See 929 F.Supp. 824, 830849. The findings describe the character and the dimensions of the Internet, the availability of sexually explicit material in that medium, and how one accesses and sends messages over the Internet. These undisputed facts also formed  {O-the underpinnings for the Supreme Court's discussion of the legal issues in Reno v. ACLU, 117 S. Ct. at 2334. ACLU v. Reno, 929 F.Supp. at 831. xSpiraling growth is one of the hallmarks of the Internet. By January 1997, there were over sixteen million host computers on the Internet, more than ten times the number of hosts  X -five years earlier.F ! {O-ԍ Digital Tornado at 21.F Although the United States is still home to the largest proportion of  X -Internet users and traffic, more than 175 countries are connected to the Internet.3 ! {O4-ԍ Id.3 As many as  X -40 million people around the world were estimated to access the Internet by 1997.3 @! {O-ԍ Id.3 By 1998, the number using the Internet is estimated to have grown to over 100 million, with traffic on  X-the Internet doubling every 200 days.X! {O#-ԍ The Emerging Digital Economy at p. 2, 7.X "This expansion is driving dramatic increases in  Xy-computer, software, services and communications investments."9yd! {O%-ԍ Id. at 7.9  XK-xOrigins. The Internet had its origins in 1969 as an experimental project of the U.S."K0*((" Department of Defense's Advanced Research Project Agency ("ARPA"), that was called the  X-"ARPANET."! {Ob-ԍ ACLU v. Reno, 929 F. Supp. at 831. The ARPA changed its name to Defense Advanced Research Project Agency ("DARPA") in 1971. This network linked computers and computer networks owned by the military, defense contractors, and university laboratories conducting defenserelated research. As ARPANET grew during the 1970s and early 1980s, several similar networks were  X-established, primarily between universities.3"! {Ow-ԍ Id.3 The Internet was based on the idea that there would be multiple independent networks of rather arbitrary design, beginning with the ARPANET as the pioneering packet switched network, but soon to include packet satellite  X_-networks, groundbased packet radio networks and other networks.F_! {O -ԍ Brief History of the Internet at 36. According to the authors, the Internet's history revolves around four distinct aspects. The first is the technological evolution that began with early research on packet switching and the ARPANET (and related technologies), and where current infrastructure research continues to examine issues such as scale, performance, and higher level functionality. The second is the operations and management aspect of a global and complex operational infrastructure. Third is the social aspect, which has resulted in a broad  {O-community of "Internauts" working together to create and evolve the technology. Finally, there is the communications aspect, resulting in an extremely effective transition of research results into a broadly deployed  {O@-and available infrastructure. Id. A key underlying technical concept for the Internet was "open architecture networking." In an open network architecture, the individual networks may be separately designed and developed and each may have its own unique interface which it may offer to users and/or other providers, including  X -other Internet providers.3 ! {Ov-ԍ Id.3 From its inception, the Internet was designed to be a decentralized, selfmaintaining series of redundant links between computers and computer networks, capable of rapidly transmitting communications without direct human involvement or control, and with the automatic ability to reroute communications if one or more individual links were  X -damaged or otherwise unavailable.Q T ! {O-ԍ ACLU v. Reno, 929 F.Supp. at 831.Q xHaving successfully implemented a system for the reliable transfer of information over a computer network, ARPA began to support the development of communications protocols for transferring data and electronic mail (email) between different types of computer net X4-works.R4! {O"-ԍ Shea v. Reno, 930 F. Supp. at 926.R Recognizing the usefulness of computer networking, and especially email, many universities, research facilities, and commercial entities began to develop and link together  X-their own networks implementing these protocols.Sx! {O/&-ԍ Brief History of the Internet at 7.S For example, the U.S. Department of Energy established "MFENET" for its researchers in Magnetic Fusion Energy; NASA Space" 0*(( " Physicists established "SPAN," several individuals established "CSNET" for the (academic and industrial) computer science community with an initial grant from NSF, AT&T disseminated the UNIX computer operating system, which gave rise to "USENET," and the development by two individuals of the "BITNET," which linked academic mainframe computers in an "email as card images" paradigm. With the exception of BITNET and USENET, many of the initial networks were intended for, and largely restricted to, closed communities of scholars and researchers in particular scientific and academic areas and there was little pressure for the  X_-individual networks to be compatible with one another.3_! {O-ԍ Id.3  X1-xInternet Protocols. "TCP," or "Transmission Control Protocol," converts messages into streams of packets at the source, then reassembles them back into messages at the destination. "IP," or "Internet Protocol," handles the addressing, seeing to it that packets are routed across multiple nodes and even across multiple networks with multiple standards, including Ethernet,  X -"FDDI" and X.25 protocol.i Z! {O-ԍ See, e.g., Digital Tornado at 10; Metcalfe Lecture.i The TCP/IP enables communications between distant public and private networks running over any medium: analog or digital phone lines, traditional network lines, fiber, cable television facilities and wireless systems. It is also "computer independent," running across personal computers (PCs), Macintoshes, workstations and mainframes. Other Internet protocols are the "file transfer protocol" or "ftp," which specifies how directories of files are named and exchanged among client and server computers, and "mail transfer protocols" or "MTP" are used by client computers to send and receive electronic messages email through mail servers, which store, copy, distribute, and forward the messages to their  X-destinations. !Z! {O-ԍ See "Internet Futures," a lecture delivered by Dr. Robert Metcalfe for the Massachusetts Institute of Technology Enterprise Forum, June 26, 1997, available upon request at: ("Metcalfe Lecture").   X-xGovernment Internet Policy. In 1985, the "NSFNET," a highspeed "backbone" network, funded and sponsored by the National Science Foundation, announced programs  X-intended to serve the entire higher education community, regardless of discipline.]"! {O-ԍ A Brief History of the Internet at 79.] A condition for a U.S. university to receive NSF funding for an NSFNET connection was that ".  X-. . the connection must be made available to ALL qualified users on campus."9#! {O"-ԍ Id. at 7.9 That same year, NSF made a critical decision, that TCP/IP would be the mandatory protocol for the NSFNET program, in recognition of the need for a widearea networking infrastructure to support the general academic and research community. This decision also supported the related decision to develop a strategy for establishing such infrastructure on a basis ultimately"72 #0*(("  X-independent of direct federal funding.9$! {Oy-ԍ Id. at 8.9 One step in process was to ensure the interoperability of ARPA's and NSF's pieces of the Internet by having the two organizations jointly author  X-the formal specifications for "Internet Gateways."3%Z! {O-ԍ Id.3  X-x  X-xThe military portion of ARPANET had been integrated in to the Defense Data Network by the early 1980s, and the civilian portion of ARPANET was taken out of service in 1990. By that time, the NSFNET had supplanted ARPANET as a national backbone to which smaller regional networks were connected. It is this series of linked networks (themselves linking computers and computer networks) that is today commonly known as the  X1-Internet.Q&1! {O -ԍ ACLU v. Reno, 929 F.Supp. at 832.Q x xAccording to several of the developers of the Internet, in addition to selecting the critical TCP/IP protocols for the NSFNET program, federal agencies made and implemented several other policy decisions which shaped the Internet of today. These significant decisions  X -are:' ~! {O-ԍ The following list has been condensed slightly from the original, which appears at p. 89 of A Brief  {O-History of the Internet. Xx Federal agencies shared the cost of common infrastructure and jointly supported "managed interconnection points" for interagency traffic, which served as the models for the Network Access Points ("NAPs") and "*IX" facilities that are prominent features of today's Internet architecture.  Xx To coordinate this sharing, the Federal Networking Council ("FNC") was formed. The FNC also cooperated with other international organizations, such as RARE in Europe, through the Coordinating Committee on Intercontinental Research Networking, "CCIRN," to coordinate Internet support of the research community worldwide.  Xx This sharing and cooperation between agencies on Internetrelated issues dates back to an agreement in 1981 between CSNET and the NSF, and ARPA that permitted CSNET traffic to share ARPANET infrastructure on a statistical and unmetered settlements basis.  Xx NSF subsequently encouraged its regional (initially academic) networks of the NSFNET to seek commercial nonacademic customers, expand their facilities to serve them, and exploit the resulting economies of scale to lower"'0*((Z" subscription costs for all.  Xx On the NSFNET Backbone, the nationalscale segment of the NSFNET, NSF enforced an "Acceptable Use Policy" which prohibited Backbone usage for purposes "not in support of Research and Education." The predictable and intended result of encouraging commercial network traffic at the regional and local level, while denying its access to nationscale transport, was to stimulate the emergence and/or growth of private, competitive longhaul networks such as Performance Systems International ("PSI") and UUNet Technologies ("UUNet") and others.  Xx The National Research Council published several reports commissioned by the NSF that laid the foundations for the concept of a future "information superhighway." One, in 1988, was entitled, "Towards a National Research Network," ushered in high speed networks that laid the networking foundation for the future information superhighway. Another, published in 1994, entitled, "Realizing the Information Future: The Internet and Beyond,"articulated an influential blueprint for the evolution of the information superhighway. It also anticipated the critical issues of intellectual property rights, ethics, pricing, education, architecture and regulation for the Internet.  Xx NSF's privatization policy culminated in April, 1995, with the elimination of funding for the NSFNET Backbone. The funds recovered were competitively redistributed to regional networks to buy nationalscale Internet connectivity from the now numerous, private longhaul networks. Thus, the backbone had made the transition from a network built from routers out of the research community to commercial equipment in just under nine years.  xThus, while the Internet has been left unregulated in traditional terms, the federal government played a significant role in its funding and development, and through prescient and targeted policy decisions, largely shaped the Internet as we know it today.  X -xDomain Names. "Domain names" are the familiar names for Internet computers.(^ ! {O-ԍ See Digital Tornado at 1819. See also "A Proposal to Improve Technical Management of Internet  {Oc -Names and Addresses," Discussion Draft 1/30/98, a proposed rule of the U.S. Department of Commerce.  {O-!- at 12 ("NTIA DNS Proposal"). The computer nodes on the Internet are divided into basic categories. Most in the United States are grouped into six generic "toplevel domains" ("TLDs" or "gTLDs"): "gov," "mil," "edu," "com," "org," and "net;" respectively, government, military, educational, commercial,  X -nonprofit organizations, and net computers serving as gateways between networks.3) ! {Oc&-ԍ Id.3 The names map to unique IP numbers that serve as routing addresses on the Internet. The"!)0*(( " "domain name system" or "DNS," translates Internet names into the IP numbers needed for  X-transmission of information across the network.G*! {Ob-ԍ NTIA DNS Proposal at 1.G Currently, all Internet service providers recognize one standard for Internet addresses, known as: "Uniform Resource Locators," or "URLs." The phenomenal growth in Internet usage makes resolution of this issue of critical importance. As of December 1996, about 627,000 Internet domain names had been registered. Within one year, the number of registered domain names had nearly doubled, to reach  Xv-1.5 million.U+vZ! {O -ԍ "The Emerging Digital Economy," at 2.U xIn 1993, the NSF contracted with a private entity to register three key Internet domain name addresses (.com, .org. and .net), numbering at that time in the thousands. Today, over one million domain names have been registered, and the NSF has recently announced that the commercialization of the Internet leaves the NSF less reason to stay involved, and has no  X -plans to renew the private entity's contract to administer the names.9,8 ! {O-ԍ See Rebecca Quick, "Internet Addresses Spark Storm in Cyberspace," Wall Street Journal, April 29, 1997,  {OS-at B1; David Hilzenrath, "Network Solutions Dropped as Registrar of Internet Domains," Washington Post, April  {O-24, 1997 at E1; "ITU to Serve as 'Depository' for Internet Domain Document," Telecommunications Reports, April 28, 1997 at 29. Shortly thereafter, an international accord was signed (Memorandum of Understanding "MoU") that directs the International Telecommunications Union ("ITU") to act as depository for the MoU. The MoU sets up a new selfgoverning system for registration of Internet addresses, however not all Internet service  {O?-providers have agreed to this accord. Francis Williams, "Pact will regulate registration of Internet addresses,"  {O -Financial Times, May 1, 1997 at p.6; "Internet Group Signs Accord on Addresses; But Holdouts Remain," Wall  {O-Street Journal, May 2, 1997 at B2. See also NTIA DNS Proposal. The U.S. prepared a revised version of its  {O-policy regarding Internet governance in June, 1998. "European Commission Paper Welcomes Changes in U.S.  {Og-Plan for Future Internet Governance," Telecommunications Reports, August 3, 1998 at 21. The U.S. Department of Commerce's revised statement of policy on the Internet Domain Name System is available at . 9 The NSF's action regarding domain names brought to the fore the question of who has sufficient authority over the Internet to control the creation and administration of domain names remains. xThe Internet domain name governance issue is currently under examination both domestically and abroad. More recently, U.S. and European policy proposals on the future governance of the Internet are reported as indicating a growing consensus "that all pending decisions on Internet governance should be referred to the [a] new privatesector, selfregulatory Internet Assigned Numbers Authority (IANA)," which is to be created in the next  X-few months.l-! {O#-ԍ Id., Telecommunications Reports, August 3, 1998 at 21.l  X-xDecentralized Control. During the 1990s, the Internet expanded explosively beyond universities and scientific sites to include businesses and individual users connecting through"~-0*(("  X-commercial ISPs and consumer online services.a.Z! {Oy-ԍ See Shea v. Reno, 930 F. Supp. at 926; ACLU v. Reno, 929 F.Supp. at 831 (in 1981, fewer than 300 computers were linked to the Internet; by 1990, over 9.4 million host computers worldwide, of which approximately 60% are located within the United States, were estimated to be linked to the Internet).a By the time the federal agencies had ceased direct funding for the Internet, the TCP/IP protocols had supplanted or marginalized most other widearea network computer protocols. Collaborative coordinating activities were responsible for much of the practical, engineering and standardssetting functions supporting  X-Internet communications. "Because the Internet links together independent networks that merely use the same data transfer protocols, it cannot be said that any single entity or group of entities controls, or can control, the content made publicly available on the Internet, or  X_-limits or can limit, the ability of others to access public content."W/_! {O -ԍ Shea v. Reno, 930 F.Supp. at 926.W Rather, the Internet: XxX` ` exists and functions as a result of the fact that hundreds of thousands of separate operators of computers and computer networks independently decided to use common data transfer protocols to exchange communications and information with other computers (which in turn exchange communications and information with still other computers). There is no centralized storage location, control point, or communications channel for  X-the Internet.S0|! {O-ԍ ACLU v. Reno, 929 F.Supp. at 832. S x` xNo single government or network entity has responsibility for managing the Internet as a whole. Nonetheless, certain functions, such as domain name routing and standards setting must be coordinated to ensure technical compatibility if each network had to coordinate such  X-issues with all others.F1! {O-ԍ Digital Tornado at 20.F Such coordination functions have largely been accomplished through  X-voluntary agreements between large user organizations.2! {OW-ԍ Id. at 2021. "The Internet Society ("ISOC"), established in 1992, is the closest thing to an authoritative body. Although nongovernmental, it receives some government funding. Membership is open to any business, organization or individual interested in "extending the development and availability of the Internet and its associated technologies and applications." The Internet Engineering Task Force ("IETF), predates the ISOC, but now operates in association with it. IETF is a large, open international community of network designers, operators, vendors, and researchers who develop standards for the Internet. The Worldwide Web Consortium ("W3C") was formed in 1994 to formalize standards for the Web. Domain name registrations have also been handled cooperatively. They are done through "InterNIC," a project partially supported in the past by NSF, but  yO$-run by AT&T and Network Solutions, Inc. ("NSI"), private corporations." BBN Corporation, "Get Smart:  yOa%-Customer Tutorial, What actually is the Internet?", ā xAs the Internet continues to evolve away from its origins as a method of linking":20*((" military, scientific and academic communities to a commercial communications medium, changes in the way access and service are provided are likely to increase, which in turn are likely to result in increased calls for regulation.  X-  X-xDefining the Internet. On October 24, 1995, the Federal Networking Council passed a resolution defining the term Internet, in consultation with members of the Internet and intellectual property rights communities. The definition is as follows:  VH-XxX` ` RESOLUTION: The Federal Networking Council (FNC) agrees that the following language reflects our definition of the term "Internet." "Internet" refers to the global information system that (i) is logically linked together by a globally unique address space based on the Internet Protocol (IP) or its subsequent extensions/followons; (ii) is able to support communications using the Transmission Control Protocol/Internet (TCP/IP) suite or its subsequent extensions/followons, and/or other IPcompatible protocols; and (iii) provides, uses or makes accessible, either publicly or privately, high level services layered on the commu Xb-nications and related infrastructure described herein.i3b! {O-ԍ A Brief History of the Internet at 13 (italics original).ix`  XM-  X6-xAs the foregoing definition demonstrates, it remains difficult even today to describe the Internet without lapsing into highly technical language. There are a huge variety of potential applications for the new Internetbased technologies, all of which offer broader options for global communication among telephone subscribers and computer users. Netscape has described the new paradigm of the Internet as "a connectionless protocol for communica X-tions traversing multiple interconnected carrier networks."4Z! yO-ԍ Netscape Opposition filed in response to ACTA Petition, RM No. 8775, filed May, 8, 1996, text at n. 17, . The Internet also encompasses numerous "intranets" and sector enterprise networks which, although operated privately, use  X-the same physical networks, technologies and protocols.F5! {O-ԍ Digital Tornado at 16.F Netscape argues that Internet  X~-technology is rapidly opening the way for new forms of "intermodal" competition.46~D! {Os!-ԍ Id. 4  Xg-  XP- x2.` ` Features and Functions of Communications Over the Internet  X"-xPacket Switching. The basic operational characteristics of the Internet are that it is a  X -distributed, interoperable, packetswitched network.t7 ! {O'-ԍ Id. at 10, 1718. See also ACLU v. Reno, 929 F.Supp. at 831.t It is comprised of an interconnected" h 70*((y" web of "host" computers, each of which can be accessed from virtually any point on the network. Routers (other computers) throughout the network regulate the flow of data at each connection point, in contrast to the centralized public switched telephone network, in which all users within a local exchange connect to a single switch location. The network is interoperable through use of common or open protocols, permitting many different types of networks and facilities to be transparently linked together, and over which multiple services  Xv-can be provided to different users.L8v! {O-ԍ Digital Tornado at 17.L Packetswitching splits up data transmitted over packetswitched networks into small chunks or "packets." In contrast to circuitswitched networks, it does not require a dedicated endtoend transmission path (or circuit) to be opened for each transmission. Rather, each router calculates the best routing for a packet at a particular moment, given current traffic patterns, and send the packet to the next router, through a process known as "dynamic routing." At the destination point, packets must be reassembled,  X -and packets that do not arrive must be resent.39 Z! {O-ԍ Id.3 "This system allows for efficient use of network resources, as many different communications can be routed simultaneously over the  X -same transmission facilities.":: ! {O[-ԍ Id. at 18.:  X -  X-xCommon Protocols. The TCP/IP protocols function by sending data packets on any  Xy-available path, with dynamic selfadapting routing.:;y~! {O-ԍ Id. at 18.: The data comprising an Internet communication can therefore be handled by numerous different networks, with different portions of the communication being routed over completely different computer networks. Internet routers have no fixed routing tables, but rather dynamically update themselves by "talking" autonomously to other routers on the Internet in order to find available paths over which to transmit Internet data packets. There is no certainty that IP packets will follow the same path for a continuing stream of data or session; and if the underlying connectivity is broken or if congestion arises, an almost infinite array of alternative paths could be employed  X-without the user or ISPs knowing it.<! {O-ԍ See Netscape Opposition, supra, text at notes 21, 22; Digital Tornado at 1118. XxX` ` When an end user sends information over the Internet, the data is first broken up into packets, [each of which contains] a header that indicates the point from which the data originates and the point to which it is being sent, as well as other information. TCP/IP defines locations on the Internet through use of "IP  X -numbers."F= ! {Os'-ԍ Digital Tornado at 18.F x` " 4 =0*(("Ԍ"Internet users generally do not need to specify the IP number of the destination site, because  X-IP numbers can be represented by alphanumeric domain names such as 'fcc.gov.'"3>! {Ob-ԍ Id.3 "Domain name servers throughout the network contain tables that cross reference these domain names with their underlying IP numbers;" the network "convert[s] the destination into its correspond X-ing IP number and use[s] that for routing purposes."@?Z! {O-ԍ Id. at 19.@  Xv-xInternet Services. The routing mechanisms of TCP/IP do not define the actual services  X_-provided through the Internet to end users.:@_! {O -ԍ Id. at 19.: The Internet services "depend on higherlevel applications protocols, such as hypertext transport protocol ("HTTP"); file transfer protocol ("FTP"); network news transport protocol ("NNTP"), and simple mail transfer protocol  X -("SMTP").@A ~! {OI-ԍ Id. at 18.@ "Because these protocols are independent of the Internet itself, a new applicationlayer protocol can be operated over the Internet through as little as one server computer that transmits the data in the proper format, and one client computer that can receive and  X -interpret the data."3B ! {O-ԍ Id.3 XxX` ` By the late 1980s, the primary Internet "services" included email, Telnet, FTP and USENET news. Email, the most widely used Internetbased service, allows users to send textbased messages to each other using a common addressing system. Telnet allows users to "log into" other proprietary networks, such as library card catalogs, through the Internet, and to retrieve data as though they were directly accessing those networks. FTP allows users to "download" files from a remote host computer onto their own system. USENET "newsgroups" enable users to  X-spot and review messages on specific topics.C! {O+ -ԍ Id. at 1920. See also Report to Congress at paras. 7677 for a description of the Internet services that Internet access providers (ISPs) typically provide their subscribers.x`  X-xWorld Wide Web. The World Wide Web or "Web" is one of the most wellknown  X-remote information retrieval methods.QD ! {O@%-ԍ ACLU v. Reno, 929 F.Supp. at 836.Q The Web began in 1989 as an experiment at CERN, the European Particle Physics Laboratory in Switzerland to enable members of CERN's widely dispersed highenergy physics community to share information readily. "e D0*((O"ԌXxX` ` [It] was created to serve as the platform for a global, online store of knowledge, containing information form a diversity of sources and accessible to Internet users around the world. Though information on the Web is contained in individual computers, the fact that each of these computers is connected to the Internet through Internet protocols, allows all of the information to  Xv-effectively become part of single body of knowledge.3Ev! {O-ԍ Id.3 x` "The Web is essentially a series of documents stored in different computers all over the  X1-Internet."3F1Z! {O< -ԍ Id.3 From the user's perspective, the Web appears as a giant global distributed database of multimedia documents. "Documents contain information stored in a variety of  X -formats, including text, still images, sounds, and video."3G ! {O-ԍ Id.3 x"An essential element of the Web is that any document has an address (rather like a telephone number). Most Web documents contain "links," which are short sections of text or  X -image which refer to another document."AH ~! {O-ԍ Id. at 836.A "Many organizations now have 'home pages' on the Web. These are documents which provide a set of links designed to represent the organization, and through links from the home page, guide the user directly or indirectly to  Xb-information about or relevant to that organization."9Ib! {O#-ԍ Id.9 Thus, fullscale user interfaces and complex services such as online shopping, continuously updated news information, and interactive games can be provided through the Internet over a nonproprietary system. Increasingly, the Web is becoming an interactive medium, where sites invite visitors to offer feedback via email and to participate in online chats. The Web thus forms the foundation for virtually all of the new Internetbased services that are now under development. xThe Web utilizes three Internet protocols. The first, URLs, are a standard way of specifying a type of Web document, the domain name server where it is to be found, and the  X-location of the document on the server's disk.EJ! {O"-ԍ See Metcalfe Lecture.E The second, "Hypertext Markup Language or "HTML," is a standard format for Web documents that allows them to be formatted richly and  Xe-to make references, or "Hyperlinks," using URLs, to other Web documents.3Ke4 ! {OJ&-ԍ Id.3 The "Hypertext Transfer Protocol," or "HTTP," uses DNS to resolve URLs and uses TCP/IP to download"N K0*((0"  X-HTML documents from servers to client browsing software.3L! {Oy-ԍ Id.3 x"The Web links together disparate information on an evergrowing number of Internetlinked computers by setting common information storage formats, the HTML, and a common language" or open architecture coding format that drives text and graphics for Web docu X-ments, the HTTP.MZ! {O-ԍ See Digital Tornado at 1920; see also ACLU v. Reno, 929 F.Supp. at 83738. "The Web was designed so that organizations with computers containing information can become part of the Web simply by attaching their computers to the Internet  X_-and running the appropriate Web software."PN_! {O -ԍ ACLU v. Reno, 929 F.Supp. at 38.P Although from the user's perspective it may appear to be a single, integrated system, in reality it is a distributed system with no central X1-ized control point.3O1~! {O`-ԍ Id.3  X -XxX` ` The Web exists fundamentally as a platform through which people and organizations can communicate through shared information. When information is made available, it is said to be "published" on the Web. Publishing on the Web simply requires that the "publisher" has a computer connected to the Internet and  X-that the computer is running Web server software.4P! {OQ-ԍ Id. 4 x` Various "search engines," or "browsers," such as "Yahoo," "Lycos" and "Magellan," have been developed to allow users of the Web to search for particular information among all of the  X4-public sites that are part of the Web.9Q4! {O-ԍ Id.9 The browsers permit the user to access information by pointing to it with a computer "mouse" or keystroke.  X-  X-xService Providers. As noted above, in contrast to traditional telephone networks, no  X-one entity or organization governs the Internet.QR4 ! {O!-ԍ ACLU v. Reno, 929 F.Supp. at 838.Q Each facilitiesbased network provider that is interconnected with the global Internet controls operational aspects of its own network. It is still possible to differentiate "online service providers" from "Internet service providers" or  X-"ISPs," although the distinctions have grown blurred in practice.AS ! {O &-ԍ Id. at 833.A Online service providers,  X|-such as America Online, Inc., CompuServe, Inc., Netcom, Earthlink and the Microsoft"|X S0*((" Network generally combine content origination, computer database services and proprietary  X-interfaces with IP access (a computer connection) to the Internet.dTZ! {Ob-ԍ SeeReport to Congress at para. 63. Online service providers package proprietary content with Internet access, and that ISPs increasing are adding content, such as Internet directories, search engines, and user yO-configuration realtime information distribution, to their services. d These services offer nationwide computer networks (so that subscribers can dialin to a local telephone number) and the services provide extensive and wellorganized content within their own proprietary computer networks and also allow subscribers to link to the much larger resources of the Internet. ISPs generally offer consumers and businesses purely access to the Internet, including at least an IP connection to an Internet host/router. More typically they offer a full pointtopoint protocol IP connection, allowing the end user to connect to the Internet using communications software on his or her own computer. ISP offerings typically include dialup  X1-analog, ISDN, dedicated and framerelay based Internet connections.U$1! {O -ԍ See, generally, Report to Congress at para. 63 ("Access providers, more commonly known as Internet service providers, combine computer processing, information storage, protocol conversion, and routing with transmission to enable users to access Internet content and services;" "Internet access providers" and "Internet  {O&-service providers" are used interchangeably in the Report). "Content providers make information available on 'servers' connected to the Internet, where it can be accessed by  X -end users."V ! {O-ԍ Id. at para. 63. The Commission has identified major content providers to include, inter alia, Yahoo,  {OT-Netscape, and Time Warner's "Pathfinder" service. Id.  X -xBy mid1997, there were more than 3,700 ISPs in North America alone.-W 2 ! {O-ԍ See Metcalfe Lecture. Because widespread use of the Internet is fairly recent, and its uses are developing rapidly, reliable figures are difficult to find. This discussion cites generally accepted figures reported over the last year to illustrate the magnitude of the industry. Carriers are cited by name and industry position for similarly illustrative purposes. The pace of industry consolidations and related corporate changes complicates the task facing any written analysis of the Internet industry.- More recent estimates indicate that the number of local and regional ISPs has grown to over  X -4,800.>X ! {O<-ԍ See Matt Richtel, "Power Companies Embrace the Internet," The New York Times, August 3, 1998 at D3 (Boardwatch Magazine, and industry trade journal, reports the number of ISPs to have grown to 4,850 from  {O-1,500 since 1993); see also Greg Howard, "What Mom and Pop are Doing," tele.com, April 1998, Vol. 3, No. 4 at 43 (reporting results of 1998 survey conducted on local and regional Internet providers by "Infonetics  {O`!-Research") ("What Mom and Pop are Doing"). > At one point, collectively, the "Big Four" online service companies America Online, Inc., ("AOL") CompuServe (CompuServe was later acquired by AOL), Microsoft Corp., and Prodigy, Inc. served 84% of the total audience. Including AT&T Corp.'s "WorldNet" (the largest socalled "pure" Internet access provider) into a "Big Five" takes the collective total market share of these entities up to 88%, and underscores the increasing"KX0*((I"  X-contribution of Internet access services to the overall online services sector.Y$! {Oy-ԍ See "Online Services Households Top 20 Million Mark; IISR Scoreboard Shows Big 4 Serve 84% of the  {OC-Total Audience," Telecommunications Reports Daily, April 28, 1997 (reporting results of quarterly census conducted by TR's sister publication, Information & Interactive Services Report). Erols is an example of another "pure" Internet access provider. At the time of the lower court cases challenging the Communications Decency Act, these commercial online  X-services had almost 12 million individual subscribers.UZ! {O7-ԍ See Reno v. ACLU, 117 S. Ct. at 2334.U xBoth ISPs and online service providers transport TCP/IP packets to the next IP router  X-up the line, typically a midlevel or backbone Internet gateway.E[F! {O -ԍ See Metcalfe Lecture.E Metcalfe divides ISPs into the following categories: "Backbone" ISPs specialize in highspeed long haul circuits, and they employ large, fast routers and switches to provide their service. "DialUp" ISPs specialize in many points of presence, or "POPs," which accept local dialin calls from clients using modems. "Backend" ISPs specialize in Web hosting and carrying frequently accessed information to server caches near to large populations of users. "Frontend" ISPs specialize in highperformance access and data caching for local user populations. In addition, the large telephone companies are beginning to integrate into Internet markets, in part through vertical  X -and horizontal mergers.9\ ! {O^-ԍ Id.9 Infonetics Research, Inc. has also recognized segmentation among ISPs, and has classified providers into five distinct groups: "local and regional ISPs, competitive local exchange carriers, cable operator ISPs, major Internet backbone providers, and telco  X-ISPs."w]j ! {O-ԍ What Mom and Pop are Doing, tele.com at 43. The author of the article is the director of service  {Ou-provider programs at Infonetics Research, Inc. Id. at 44. The article discusses primarily the results of its survey of the ISP industry with respect to local and regional ISPs. Infonetics explains that a "local ISP has points of presence (POPs) within one state, and a regional ISPs has POPs in more than one state but does not have direct  {O-connections to network access points on both the East and West Coasts." Id. at 44.w x"Backbone providers" "route traffic between Internet access providers, and interconnect  XK-with other backbone providers."I^K ! {O!-ԍ Report to Congress at 63.I Reports in mid1997 indicated that five Internet "backbone" suppliers in the United States, MCI Communications, Sprint, UUNet Technologies Co. (subsequently acquired first by MFS Communications, Co., and later by WorldCom), BBN (later a unit of the GTE Corporation), and ANS, handled approximately 80 percent of the  X-nation's Internet traffic._! {OR&-ԍ See Steve Lohr, "The Internet as Commerce: Who Pays, Under What Rules?"  New York Times, May 12, 1997 at D1. Worldcom Inc., a Jackson Miss. telephone company, announced in" _0*((" early September, 1997 that is would acquire Compuserve and then sell its consumer subscription service to AOL, the largest online provider in the U.S. In return, AOL was to sell its Internet telecommunications unit, ANS, to WorldCom. WorldCom also became owner of UUNet through its purchase of MFS Communications. In early October, 1997, WorldCom announced a bid to acquire MCI Communications Corp., another significant provider of  X-Internet infrastructure.`! {O-ԍ See "Worldcom to Buy CompuServe Corp.," Wall Street Journal, Sept. 8, 1997 at A3; "Would  {O-WorldComMCI Deal Lift Tolls on the Net?," Wall Street Journal, Oct. 2, 1997 at B1. The combined company, if Worldcom succeeds with its offer, would control more than 60 percent of all U.S. traffic on the Internet and a large share of the traffic world wide, according to some estimates. Such a concentration of ownership of backbone Internet infrastructure may be a harbinger of changes in the way Internetbased services are priced and provided in the future. GTE, a competing bidder for MCI, is reported to have estimated that the combination of MCI with its backbone network and WorldCom through UUNet would control almost 40 percent of the data  {O -moving across the Internet. See Communications Daily, October 22, 1997, reporting views of GTE General Counsel William Barr regarding relative merits and problems with respect to WorldCom versus GTE's bids to acquire MCI. Barr allegedly distinguished GTE's acquisition of BBN as giving GTE a reseller of Internet access, not the facilities that controlled such access.  Subsequently, MCI and WorldCom announced an agreement to sell MCI's Internet holdings to address concerns by U.S. and European regulators that the  X_-combined company would unfairly control traffic on the Internet.a_. ! {O>-ԍ See Mike Mills, "Cable & Wireless, MCI Reach Deal," The Washington Post, July 14, 1998 at C1.  X1-xNetwork Interconnection Arrangements. The sharing of traffic over the interconnected networks forming the Internet on a statistical and unmetered "settlements" (or "bill & keep") basis was a hallmark of early federal agency involvement in the development of the Internet.  X -This system of traffic carriage free of charge became known as "peering."bF ! {O]-ԍ See Brief History of the Internet at 710. In May, 1997, WorldCom's ISP subsidiary, UUNet, announced that it would no longer provide "peering" service to smaller ISPs whose traffic is not routed on a "bilateral and equal basis." UUNet would continue peering traffic exchanges only with ISPs that operate a national network with dedicated diversely routed DS3 or faster backbone facilities. For companies whose infrastructure does not support the exchange of similar traffic levels, UUNet would impose a monthly charge based upon the capacity of  {OG-the connection. Steve Lohr, "The Internet as Commerce: Who Pays, Under What Rules?" New York Times,  {O-May 12, 1997 at D1. Following an outcry among Internet service providers, WorldCom dropped this plan. See Communications Daily, October 22, 1997. Another arrangement for traffic carriage was for one network to purchase the ability to have its traffic transit another network to other points on the Internet.  X-xAccessing the Internet. There are multiple options for individuals to access the Internet, in addition to the commercial online services, including access through their schools  Xb-and employers.Qcb! {O$-ԍ ACLU v. Reno, 929 F.Supp. at 832.Q Many educational institutions, businesses, libraries, and individual communities maintain a computer network linked directly to the Internet and issue account numbers"K`c0*((+"  X-and passwords enabling users to access the network directly or by modem.Jd! yOy-ԍ A "modem" (a contraction of "modulator" and "demodulator") is a device that translates digital information into a signal for transmission over a telephone (or cable) line ("modulation") and translates a signal  {O -received over a telephone line into digital information ("demodulation"). Shea v. Reno, 930 F.Supp. at 926 n.4.  {O-For purposes of the Communications Decency Act, the court in ACLU v. Reno found that a modem could be considered a "telecommunications device." 929 F.Supp. at 828 n.5.J Many communities across the country have established "freenets" of community networks to provide their citizens with a local link to the Internet, and to provide localoriented content and discussion groups. In addition, individuals can also access the Internet using some (but not all) of the thousands of local dialin computer services, often called "bulletin board systems" or  X-"BBSs."Qe|! {O -ԍ ACLU v. Reno, 929 F.Supp. at 833.Q  X_-xCommunicating Over the Internet. "Once one has access to the Internet, there are a variety of different methods of communication and information exchange over the network,  X1-which are themselves constantly evolving."Af1! {O-ԍ Id. at 834.A Although constantly evolving, "the most common methods of communications on the Internet (as well as the major online services) can be roughly grouped into six categories: (1) onetoone messaging (such as "email"); (2) onetomany messaging (such as "listserv"); (3) distributed message databases (such as "USENET newsgroups"); (4) real time communication (such as "Internet Relay Chat"); (5) real time remote computer utilization (such as "telnet"), and (6) remote information retrieval  X -(such as "ftp," "gopher," and the "World Wide Web")."3g ! {O-ԍ Id.3 Various types of information,  X-including text, data, computer programs, sound, visual images (i.e., pictures), and moving video images can be transmitted by most of these methods. xEach of these six categories involves one of two basic uses of the Internet. "First, an individual who obtains access to the Internet can correspond or exchange views with one or many other Internet users. Second, a user can locate and retrieve information available on  X-other computers."Qh2 ! {O-ԍ Shea v. Reno, 930 F.Supp. at 926.Q "For any communication to take place over the Internet, two pieces of software, adhering to the same communication protocol, are required. A user must have access to certain kinds of 'client' software, which enables his computer to communicate with and make requests of remote computers where information is stored; these remote computers must be running 'server' software, which provides information in response to requests by  X-client software.";i ! {O &-ԍ Id. at 927.;  X~- "~ V i0*((P"Ԍ X- B.xStatutory Definitions and Policies  X- x  X-xThe 1996 Act defines the term "Internet" as, "the international computer network of  X-both Federal and nonFederal interoperable packet switched data networks."Dj! yO4-ԍ 47 U.S.C.  230(e)(1). D It defines the term "interactive computer service" to mean, "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such  X_-systems operated or services offered by libraries or educational institutions."Ck_X! yOh -ԍ 47 U.S.C.  230(e)(2).C xThe 1996 Act added many definitions to those contained in the Communications Act of 1934, both in the general definitions of Title I, section 3, and in specific provisions under  X -Title VI. Definitions relevant to the classification and regulatory treatment of Internetbased services that will be examined in this paper are found throughout Title I, governing wire  X -communications ("telecommunications," "telecommunications carrier," "telecommunications  X -service," "information service," "wire communication");lX ! yOW-ԍ 47 U.S.C.  153(43)(telecommunications);  153(44)("telecommunications carrier");  153(46)("telecommunications service");  153(20)("information service");  153(51)("wire communication" or "communication by wire").  Title VI, governing cable communi X -cations ("cable service," "video programming," "other programming service," "cable sys X-tem,""cable operator," "interactive ondemand services," m! yOI-ԍ 47 U.S.C.  522(6)("cable service");  522(20)( "video programming");  522(14)("other programming service");  522(7)("cable system");  522(5)("cable operator");  522(12)("interactive ondemand services"). ); and Section 706 of the 1996 Act  Xy-("advanced telecommunications capability").(ny` ! yO-ԍ Section 706 of the 1996 Act, entitled, "Advanced Telecommunications Incentives," directs the Commission to periodically initiate and complete inquiries concerning the availability of "advanced telecommunications capability," for all Americans, and in particular, elementary and secondary schools and classrooms, and to take  {O-appropriate action to accelerate deployment of such services. 47 U.S.C.  157 nt; see  157(c)(1) nt ( "advanced telecommunications capability").(  XK-xThe operative provisions of the 1996 Act deal with the Internet itself in fairly limited ways. The general approach to the Internet in the 1996 Act appears to have been that computer networks, web pages and online services comprised a market that was sufficiently  X-competitive so that federal regulatory intervention was both unnecessary and undesirable.o! {O#-ԍ See Michael Meyerson, "Ideas of the Marketplace: A Guide to the 1996 Telecommunications Act," Federal Communications Law Journal, Vol. 49, Number 2, Feb. 1997, at 28485.  X-The major area where the Congress did attempt to regulate interactive computer services involved the presentation of indecent material which could be accessed by minors. In"!lo0*(("  X-addition to several noncontroversial provisions,_p|! yOy-ԍ For example, the 1996 Act makes it a crime to use telecommunications devices to induce a minor to engage in any illegal sexual act, 1996 Act, section 508, codified at 18 U.S.C.  2422(b), or to annoy or harass another person either with obscene and indecent communication or by repeated telephone calls. Section 502, codified at 47 U.S.C.  223(a)(1)(B), (D)(E). The Act also clarifies that it is a felony to use a computer to transmit obscene material. Section 508, codified at 18 U.S.C. 1462. Preexisting obscenity law was generally  {Oa-interpreted to reach that result. See United States v. Thomas, 74 F.3d 701, 70405 (6th Cir. 1995) (affirming  {O+-obscenity convictions for the operation of a computer bulletin board). Meyerson, id. at 285 n.210._ section 223 made the use of interactive computer services to display "patently offensive" sexually explicit material so that it was  X-"available" to minors a criminal offense.q ! yO -ԍ The Communications Decency Act of 1996, which constitutes Title V of the 1996 Act, is codified at 47 U.S.C.  223(a) to (h) ("CDA"). xSection 223(e)(6), which lists defenses to claims of violations of the operative provisions in subsection (a) and (d), specifically states that "[n]othing in this section shall be construed to treat interactive computer services as common carriers or telecommunications  X_-carriers."r _d ! yOt-ԍ 47 U.S.C.  223(e)(6). Section 223(e)(6) by its terms applies only as a defense to charges that a provider of interactive computer services has violated the Communications Decency Act provisions of the 1996 Act. Nonetheless, it is instructive of a broad congressional policy to temper the Commission's authority with respect to the rapidly changing information services market. On the other hand, the Act protects what it terms "good samaritan" blocking of  XH-certain programming.SsXHL ! yOE-ԍ 47 U.S.C. 230(c)(2). This provision states that those who run interactive computer services may not be held liable if they voluntarily restrict access to material they consider, in good faith, to be "obscene, lewd, lascivious, filthy, excessively violent, harassing or otherwise objectionable." S The 1996 Act also protects those who provide connections to the Internet or networks they do not control, and who are not responsible for online content.  X -This protection is reserved for "entities that simply offer general access to the Internet and  X -other online content."vt l! {O -ԍ Id.,  223(e); see Joint Explanatory Statement at 190. v Thus, a possible distinction appears to be imbedded in these provision of 1996 Act between the regulatory treatment of entities that provide only access to the Internet, but no content of their own origination, and Internetbased service providers who originate and provide their own online content together with access to the Internet. xSeveral provisions of the CDA were held unconstitutional by two different threejudge  Xy-courts in ACLU v. Reno and Shea v. Reno.uXy! {O(#-ԍ ACLU v. Reno, 929 F. Supp. 824 (First Amendment was violated by provisions of the Communications Decency Act that prohibited transmission of obscene or indecent communications by means of a telecommunications device and that prohibited sending patently offensive communications to person under the age of 18  yO%-through use of interactive computer service); Shea v. Reno, 930 F.Supp. 916 (First Amendment was violated by provisions of CDA that prohibited transmission of obscene or indecent communications by means of telecommunications device and that prohibited sending patently offensive communications to person under the age of 18"'t0*((Q'" through use of interactive computer service; for purposes of CDA, a modem is a "telecommunications device"; court deferred resolution of tension between terms "telecommunications device" and "interactive computer service" in the statute for another day). These judgments were affirmed by the Supreme"y"u0*(("  X-Court in Reno v. ACLU, 117 S.Ct. 2329 (1997). The Supreme Court held, inter alia, that the "indecent transmission" provision, section 223(a), and the "patently offensive display" provision, section 223(d), were contentbased blanket restrictions on speech, and, as such, could not be properly analyzed on First Amendment challenge as a form of time, place, and manner regulation, and that the challenged provisions to be facially overly broad, in violation of the First Amendment. xSignificantly, the Supreme Court rejected attempts to find a proper analogy for the Internet to other previously recognized media of communications, and instead focussed on the  X3-unique nature of the Internet and Internet communications.v"3! {O -ԍ See, e.g., Reno v. ACLU, 117 S.Ct at 233435 (Internet communication and information retrieval methods such as email, listservs, newsgroups, chat rooms, and the World Wide Web, taken together "constitute a unique medium known to its users as 'cyberspace' located in no particular geographic location but available to anyone, anywhere in the world, with access to the Internet"). "As the District Court found, 'the content on the Internet is as diverse as human thought.' 929 F.Supp., at 842 (finding 74). We agree with its conclusion that our cases provide no basis for qualifying the level of  X -First Amendment scrutiny that should be applied to this medium."Bw ! {Oq-ԍ Id. at 2344.B xThe Court found that the "vast democratic fora of the Internet has [not] been subject to the type of government supervision and regulation that has attended the broadcast indus X-try,"and that the Internet is not as invasive as radio or television.Bxd ! {O-ԍ Id. at 2343.B Nor is the Internet supervised by any federal agency, and cannot be considered a "scarce" expressive commodity like broadcast spectrum at the outset of governmental regulation. "This dynamic, multifaceted category of communication includes not only traditional print and news services, but also  X6-audio, video, and still images, as well as interactive, realtime dialogue."<y6 ! {O-ԍ Id. at 2344.< x The remainder of the CDA, apart from the "indecent transmission" and "patently  X-offensive display" provisions, was left intact by the Court's decision in Reno v. ACLU. One  X-of the remaining portions of the CDA is the "Online Family Empowerment," provision. Section 509 of the 1996 Act, "Online Family Empowerment," amended Title II of the Communications Act of 1934 by adding at the end new section 230, "Protection for Private Blocking and Screening of Offensive Material." Section 230(a) contains five significant congressional findings with respect to the Internet: "i# y0*(("ԌXxX` ` (1) The rapidly developing array of Internet and other interactive computer services available to individual Americans represent an extraordinary advance in the availability of educational and informational resources to our citizens.x` XxX` ` (2) These services offer users a great degree of control over the information that they receive, as well as the potential for even greater control in the future as technology develops.x` XxX` ` (3) The Internet and other interactive computer services offer a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity.x` XxX` ` (4) The Internet and other interactive computer services have flourished, to the benefit of all Americans, with a minimum of government regulation.x` XxX` ` (5) Increasingly, Americans are relying on interactive media for a variety of political, educational, cultural, and entertainment  X-services.z! yO -ԍ 47 U.S.C.  230(a). This memo discusses only the legislative findings and statement of policy contained in section 230.x` x Section 230(b), in relevant part, states that, it is the policy of the United States, "to promote the continued development of the Internet and other interactive computer services and other interactive media [and] to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by Federal or State regulation."  X-  III. VOICE AND DATA COMMUNICATIONS  X- UNDER COMMISSION'S RULES  X- xThe Communications Act of 1934, as amended ("the Act") gave the Commission extensive authority over all "common carriers," which the Act defined to include all persons  Xe-"engaged as a common carrier for hire, in interstate and foreign communication."U{e ! {O6-ԍ Report to Congress at para. 22.U Title II  XN-of the Act requires, inter alia, "that common carriers provide service at just and reasonable prices, and subject to just and reasonable practices, classifications and regulations; that they make no unjust or unreasonable discrimination; that they file tariffs, subject to Commission scrutiny; and that they obtain Commission approval before acquiring or constructing new  X-lines."|! {OW%-ԍ Id. (footnotes omitted), citing 47 U.S.C.  201(b), 202(a), 203205, 214. x xHow to reconcile the "convergence and interdependence of communication and data" $D|0*((" processing technologies" with the strictures of Title II common carrier regulation has been the subject of one of the Commission's longest running, and most complicated, set of proceed X-ings.}! {OK-ԍ See Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication  {O-Service and Facilities, Notice of Inquiry, 7 FCC 2d 11, 12 (1966). In the mid1960s, the Commission determined that communications over telephone lines increasingly involved computers, with respect to both the means of communication how a message is transmitted and switched and the content of the communication  X-providing data processing services to users.I~$! {Ob -ԍ ESP Status of ISPs at 11.I The Commission initiated a series of proceed Xv-ings in 1966, known as the "Computer Inquiry" proceedings, which, at the outset attempted to separate the regulatory treatment of computers that were involved in the means of communi XJ-cation from the treatment of computers which perform data processing services.1\J! {O -ԍ See Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication  {O{-Service and Facilities, Notice of Inquiry, 7 FCC 2d 11, 12 (1966); Supplemental Notice of Inquiry, 7 FCC 2d 16 (1967). 1  X -xFrom the outset, the central regulatory and policy questions in the Computer Inquiry proceedings were: "(a) the nature and extent of the regulatory jurisdiction to be applied to data processing services; and (b) whether, and under what circumstances, and subject to what conditions or safeguards, common carriers should be permitted to engage in data process X -ing."2 ! {OM-ԍ Regulatory and Policy Problems Presented by the Interdependence of Computer and Communication  {O-Services and Facilities, Tentative Decision, 28 FCC 2d 291, 295 (1970) (Computer I Tentative Decision); Final  {O-Decision and Order, 28 FCC 2d 226 (1971) (Computer I Final Decision), aff'd in part sub nom. GTE Serv.  {O-Corp. v. FCC, 474 F.2d 724 (2nd Cir.) (Computer I.), decision on remand, 40 FCC 2d 293 (1973) (Computer I  {Ou-Remand). In the Computer I Tentative Decision, the Commission identified possible dangers to the competitive data processing markets posed by common carrier entry as follows: "The dangers . . . relate primarily to the alleged ability of common carriers to favor their own data processing activities by discriminatory services, crosssubsidization, improper pricing of common carrier services, and related anticompetitive practices and activities." 28 FCC 2d at 301302. 2 The primary focus of the Commission's effort was the establishment of regulatory  X -safeguards that would permit efficient telephone company participation in competitive computer and data processing service markets, while at the same time protecting their customers and competitive service providers against unlawful crosssubsidization and intercon Xh-nection discrimination through the establishment of competitive safeguards.`h! {O!-ԍ Computer I Tentative Decision, 28 FCC 2d at 295.` The regulatory categories that emerged reflect these goals, and still form the basis for regulation of certain Internet access services provided by Title II common carriers.  X < A.xComputer I   X-xComputer I delineated the circumstances in which computer use constituted common"%F0*((" carrier communication subject to regulation under Title II of the Act versus unregulated data  X-processing.:! {Ob-ԍ Computer I Final Decision, 28 FCC 2d at 26870 (discussion of the extent of Commission jurisdiction over data processing not necessary in light of decision not to regulate date processing as such; however, Commission reserves right to reexamine its policies in future should significant changes in the structure of the  {O-industry develop or if abuses occur that require the exercise of corrective action); Computer I Tentative Decision, 28 FCC 2d at 29598 (Commission has broad regulatory jurisdiction over communications by wire or radio that may encompass data processing services, but also has discretion in determining jurisdictional base and regulatory tools most effective in advancing Congressional objective; effective competition in data processing market renders governmental regulation of such activities at this time unnecessary, except to limited extent of regulating  {O -provision of such services by certain common carriers). See, also, ESP Status of ISPs at 11; People of the State  yOp -of California v. FCC, 905 F.2d 1217, 1240 n.35 (9th Cir. 1990) (Commission's Title I jurisdiction over enhanced services is ancillary to its Title II authority over common carrier communications services). : Under Computer I, the Commission looked at the manner in which computerization was employed to determine how a service would be regulated. To facilitate this functional approach, the Commission established a threepart classification of computer and communications services, based on their technological and functional characteristics, with a different regulatory treatment for each classification. "Data processing" was defined as the use of a computer for the processing of information as distinguished from the use of comput Xa-ers for circuit or messageswitching.`a. ! {O@-ԍ Computer I Final Decision, 28 FCC 2d at 268 n.3.` "Processing" was defined as involving the use of the  XJ-computer for operations which include, inter alia, the functions of storing, retrieving, sorting, merging and calculating data, according to programmed instructions. xTitle II empowers the Commission to regulate only common carriers engaged in  X -interstate or foreign communication by wire or radio.\ ! {Oa-ԍ Id. at 264; 47 U.S.C.  152; 201205.\ The Commission determined not to regulate "data processing" services, which it found were being offered on a highly competitive  X -basis.A R ! {O-ԍ Id. at 270.A The Commission chose to regulate what it described as "communications services" as  X -common carrier offerings under Title II of the Act.; ! {O@-ԍ Id. at 274.; Thus, computer processing involved in the means of communications, such as messageswitching, would be regulated under Title II of the Communications Act, whereas computer services providing data processing to end users over the telephone network would not be regulated under Title II. x"Hybrid" services, which the Commission defined as offerings that combine remote access data processing and messageswitching to form a single integrated service, were to be treated as either data processing or communications services, based on casebycase determinations as to which of the two functions were predominant in the particular hybrid service.  X-The Commission specifically declined to regulate hybrid services that are primarily data processing services under Title II, despite their incorporation of a communications component,"&v0*((" and regardless of whether that hybrid service was offered by a common carrier or non X-common carrier."! {Ob-ԍ See Id. at 27678; Computer I Tentative Decision, 28 FCC 2d at 305 (where messageswitching is offered as an integral part of and as an incidental feature of a package offering that is primarily data processing, there will be total regulatory forbearance with respect to the entire service whether offered by a common carrier or  yO-noncommon carrier).ij Although data processing services were not regulated under Title II, the Commission found that it had jurisdiction over these services under the ancillary jurisdiction  X-of Title I.c! {O -ԍ See Computer I Final Decision, 28 FCC 2d at 26870.c  X-x Under Computer I, the Commission permitted common carriers over a certain size to  Xx-provide data processing services subject to a "maximum separation" requirement.AxD! {Om -ԍ Id. at 275.A The maximum separation requirement meant that common carriers could offer data processing services only through a separate corporate entity having separate accounting records, personnel, equipment and facilities. This requirement was designed to protect telephone ratepayers and competitive data processing service providers by preventing the common carriers from engaging in anticompetitive behavior, such as interconnection discrimination and from unfairly burdening their regulated communications services with costs properly attributable to unregulated data processing services. The Commission did not establish requirements for  X -AT&T and its affiliated Bell System companies in Computer I, based upon the assumption that they were precluded from offering any type of data processing services by the terms of an  X-antitrust consent decree then in effect.! {O-ԍ See United States v. Western Electric Co., 13 Rad. Reg. (P&F) 2143, 1956 Trade Cas. (CCH) 71,134 (D.  {O-N.J. 1956) (the 1956 Decree).  X}-  Xf<B.xComputer II and Computer III   X9-xAlthough the Computer I rules were upheld on appeal, casebycase determination of which hybrid services were to be treated as unregulated data processing, as opposed to Title II common carrier services, ultimately proved unsatisfactory in light of the increasing conver X-gence of these services.P2 ! {O -ԍ See ESP Status of ISPs at p. 12.P In response, the Commission initiated the Computer II, and later,  X-Computer III proceedings., ! {OV#-ԍ Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry),  {O $-Final Decision, 77 FCC 2d 384 (1980) (Computer II Final Order), recon., 84 FCC 2d 50 (1980), further recon.,  {O$-88 FCC 2d 512 (1981), aff'd sub nom., Computer and Communications Indus. Ass'n v. FCC, 693 F.2d 198 (D.C.  {O%-Cir. 1982) (CCIA), cert. denied, 461 U.S. 9389 (1983); Amendment of Section 64.702 of the Commission's Rules  {O~&-and Regulations (Third Computer Inquiry), Phase I, Report and Order, 104 FCC 2d 958 (1986) (Computer III  {OH'-Phase I Order), modified on recon., 2 FCC Rcd 3035 (1987), further recon., 3 FCC Rcd 1135 (1988), second"H'0*(('"  {O-further recon., 4 FCC Rcd 5927 (1989); Phase II, Report and Order, 2 FCC Rcd 3072 (1987)(Computer III  {OZ-Phase II Order), further recon., 4 FCC Rcd 5927 (1989), rev'd in part sub nom., California v. FCC, 905 F.2d  {O$-1217 (9th Cir. 1990), on remand, 6 FCC Rcd 7571 (1991), vacated in part and remanded, California v. FCC, 39  {O-F.3d 919 (9th Cir. 1994). See also Computer III Further Remand Proceedings: Bell Operating Company  {O-Provision of Enhanced Services, Notice of Proposed Rulemaking, CC Docket No. 9520, 10 FCC Rcd 8360 (1995)., "'J0*(("Ԍ X-ԙxComputer II. In its 1980 Computer II Final Decision, the Commission adopted a regulatory scheme that distinguished between the common carrier offering of basic transmis X-sion services and the offering of enhanced services.]J! {O -ԍ Computer II Final Decision, 77 FCC 2d at 387.] This decision introduced the concepts of "basic" and "enhanced" services, and divided these services into two nonoverlapping  X-categories.C! {O3 -ԍ See Implementation of the Telecommunications Act of 1996: Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Customer Information, Implementation of the Non {O-Accounting Safeguards of Section 271 and 272 of the Communications Act of 1934, as Amended, CC Docket No.  {O-96115, CC Docket No. 96149, Second Report and Order and Further Notice of Proposed Rulemaking, FCC 98 {OY-27 (released Feb. 28, 1998) ("Use of CPNI") at para. 46 (summarizing Commission precedent as indicating that telecommunications services and information services are "separate, nonoverlapping categories, so that information services do not constitute 'telecommunications' within the meaning of the 1996 Act"). C These categories rest upon the nature of the processing performed. Basic service was limited to "the common carrier offering of transmission capacity for the movement of information," or "a pure transmission capability over a communications path that is  Xa-virtually transparent in terms of its interaction with customer supplied information."`a$! {O6-ԍ Computer II Final Decision, 77 FCC 2d at 41920.` Data processing, computer memory or storage, and switching techniques can be components of a  X3-basic service if they are used solely to facilitate the movement of information.33! {O-ԍ Id.3 xEnhanced services were defined as "any offering over the telecommunications network which is more than a basic transmission service," and as "combin[ing] basic service with computer processing applications that act on the format, content, code, protocol or similar aspects of the subscriber's transmitted information, or provide the subscriber with additional, different, or restructured information, or involve subscriber interaction with stored informa X-tion.;H! {O!-ԍ Id. at 387.; The Commission's rules were revised to define enhanced services in terms of the functions that were considered to be different from basic telephone service: "the term 'enhanced services' shall refer to services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, protocol or similar aspects of the subscriber's transmitted information; or"6(0*((*"  X-involve subscriber interaction with stored information."! {Oy-ԍ See 47 U.S.C.  64.702(a). Thus, enhanced services under Computer II include both data processing  {OC-services under Computer I and "hybrid" forms of communications.  xThe Commission acknowledged that with respect to the line it drew between basic and enhanced services, "[p]lausible arguments can be tendered for drawing it elsewhere. At the margin, some enhanced services are not dramatically dissimilar from basic services or  X-dramatically different from communications as defined in the Computer Inquiry I."]$! {Ob -ԍ Computer II Final Decision, 77 FCC 2d at 434.] Nonetheless, the Commission refused to redraw the line at this margin because such action potentially would subject the issue to constant adjudication over the status of individual  XJ-services offerings.3J! {O -ԍ Id.3 In addition, the Commission stated that it had tried to draw the line "in a manner which distinguishes wholly traditional common carrier activities, regulable under Title II of the Act, from historically and functionally competitive activities not congruent with the Act's traditional forms," in recognition of the policy "that substance not form govern the treatment of services within the Act's reach." "We have acted upon that belief by applying traditional Title II regulatory mechanisms to basic services and applying no direct regulatory  X -mechanism for enhanced services."; H! {O-ԍ Id. at 435.; Continuing, the Commission stated that although it recognized "the existence of a communications component" and that "some enhanced services may do some of the same things that regulated communications services did in the past," there was also a substantial data processing component in all of these enhanced services, over which  Xd-the agency had never imposed a scheme of regulation.3d! {O-ԍ Id.3 XxX` ` Any agency regulatory decision in this area must assess the merits as we do in this order of extending regulation to an activity simply because a part of it is subject to the agency's jurisdiction where such regulation would not be necessary to  X-protect or promote some overall statutory purpose.;l ! {O -ԍ Id. at 435.;x` xThe Commission observed that because enhanced service was not explicitly contemplated in the Act, there is no more a requirement to confront it with a specific traditional regulatory mechanism than there was for, for example, with cable television (then unregulated under the Act), which has formal elements of common carriage and broadcast television. "Precedent teaches that the Act is not so intractable as to require us to routinely bring new services within the provision of our Title II and III jurisdiction even though they may involve"9) 0*(("  X-a component that is within our subject matter jurisdiction."A! {Oy-ԍ Id. at 430.A  X- xBecause the Commission determined that the enhanced services market was competitive, and that consumers were deriving benefits from this competition, the Commission  X-declined to regulate enhanced services as common carriage under Title II of the Act.?Z! {O-ԍ Id. at 43035. ? Such comprehensive regulation of competitive services would not be "directed at protecting or  Xv-promoting a statutory purpose.";v! {O -ԍ Id. at 433.; Nonetheless, the Commission again noted that it had jurisdiction over enhanced services under the ancillary jurisdiction of Title I, on the grounds that the enhanced services under consideration "constitute the electronic transmission of  X1-writing, signs, signals, pictures, etc., over the interstate telecommunications network .""1~! {O`-ԍ Id. at 432; see also California v. FCC, 905 F.2d 1217, 1240 n.35 (9th Cir. 1990) (Title I jurisdiction is not an independent source of regulatory authority; it confers on the FCC only such power as is ancillary to the Commission's specific statutory responsibilities; in the case of enhanced services, the specific responsibility to  yO-which the Commission's Title I authority is ancillary is its Title II authority over common carrier services).  It further found that it could reasonably exercise these ancillary powers by imposing certain separate subsidiary requirements where required, to assure wire communications services at reasonable rates. Regulation of enhanced services provided by common carriers was deemed necessary to prevent the dominant carrier from burdening its basic transmission service customers with part of the cost of providing competitive enhanced services. In addition, the Commission stated that it could rely on the direct regulation it retains with respect to the independent provision of basic services, which remain a component of the charges for  Xy-enhanced services. ]yh ! {O-ԍ Computer II Final Decision, 77 FCC 2d at 435.] xIt is clear from the foregoing discussion that the Commission created its distinction between basic and enhanced services with the jurisdictional consequences of regulation versus  X-no regulation (i.e., Title II versus Title I) very much in mind. Again, as in Computer Inquiry  X-I, the Commission's primary concern was in setting up definitional categories and regulatory consequences that would curtail the potential for anticompetitive conduct that could result from telephone carrier participation in competitive markets by means of integrated operations and service offerings. Of particular concern was that carriers with local telephone distribution networks could use their control over basic services to discriminate against other enhanced service providers' (ESPs) services and products, as well as with the potential for"* 0*((Q"  X-anticompetitive crosssubsidization from unregulated to regulated activities."! yOy-ԍ Crosssubsidization occurs when a carrier mis-attributes costs incurred in the provision of unregulated services to the provision of regulated services. Because rates for regulated services are based partially upon the cost of providing those services, mis-attribution of costs results in the carrier's monopoly ratepayers' bearing a  {O-part of the cost of unregulated services. See Computer II Final Decision, 77 FCC 2d at 445, 47677.  To guard against such abuses, the Commission required the major carriers with local distribution networks, the AT&T companies and GTE, to provide enhanced services and CPE only  X-through corporate affiliates fully separated from their basic services operations."! {O -ԍ  Id. at 46675 (in contrast, nontelephone carriers, e.g., specialized carriers such as MCI, lack local distribution facilities entirely, and have no reservoir of monopoly ratepayers from which to extract the excess profits necessary to crosssubsidize other services; such carriers would be in a position to deny access only to a limited number of interexchange transmission systems).  X-xSection 202 of the Act prohibits common carriers from discriminating unreasonably in their provision of communications services. Pursuant to section 203, common carriers are required to tariff their interstate communications services. Although the separate subsidiary  XH-requirements of Computer II applied only to AT&T (and later to the divested Bell Operating  X3-Companies, "BOCs"),3! {O-ԍ See Policy and Rules Concerning the Furnishing of Customer Premises Equipment, Enhanced Services  {OJ-and Cellular Communications Services by the Bell Operating Companies, Report and Order, CC Docket No. 83 {O-115, 95 FCC 2d 1117 (1983) (BOC Separations Order) (applying Computer II structural safeguards to BOCs).  {O-Subsequent history omitted. In Computer II, the Commission found that although AT&T remained subject to the  {O-1956 Decree, that decree did not bar AT&T from the offering of customer premises equipment and enhanced services on a separated basis insofar as those offerings were "subject to regulation" by the Commission.  the other requirements of Computer II applied to all facilitiesbased  X -common carriers, regardless of whether their revenues exceeded the Computer I threshold. Carriers owning common carrier transmission facilities and providing enhanced services must unbundle the basic from the enhanced components of their services. They must offer the unbundled transmission capacity to other enhanced service providers pursuant to the same tariffed terms and conditions under which they provide such services to their own enhanced  X -service operations. ! yO|-ԍ "[T]hose carriers that own common carrier transmission facilities and provide enhanced services, but are not subject to the separate subsidiary requirement, must acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized. Other offerors of  {O-enhanced services, would likewise be able to use such a carrier's facilities under the same terms and conditions."  {O -Computer II Final Decision, 77 FCC 2d at 475. In Computer II, the Commission also preempted state regulation of the sale of both customer premises equipment ("CPE") and enhanced services. xOn August 11, 1982, the District Court for the District of Columbia entered a consent decree, known as the "Modification of Final Judgment" or "MFJ," settling the antitrust lawsuit against the AT&T's Bell System. The MFJ required AT&T to divest itself of the BOCs. The"Q+0*((+"  X-MFJ distinguished between "telecommunications" and "information" services.[! {Oy-ԍ United States v. Western Elec. Co., 552 F. Supp. 131, 22632 (D.D.C. 1982) (citing terms of the  {OC-original MFJ). , aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); United States v. Western Elec.  {O -Co., 569 F. Supp. 1057 (D.D.C. 1983) (Plan of Reorganization), aff'd sub nom. California v. United States, 464  {O-U.S. 1013 (1983); see also United States v. Western Elec. Co., No. 820192 (D.D.C. Apr. 11, 1996) (vacating the MFJ). [ The BOCs were to provide local exchange telecommunications services, but because of their control of the local exchange bottleneck, were prohibited from providing information services, interLATA services, manufacturing and selling telecommunications equipment, and manufacturing CPE. The interLATA information services restriction was modified in 1987 to allow BOCs to provide voice messaging services and to transmit information services generated by  Xv-others.0(v! {O -ԍ See United States v. Western Elec. Co., 673 F. Supp. 525 (D.D.C. 1987); United States v. Western Elec.  {Oq -Co., 714 F. Supp. 1 (D.D.C. 1988).  In 1991, the restriction on BOC ownership of contentbased information  {O;-services was lifted. United States v. Western Elec. Co., 767 F. Supp. 308 (D.D.C. 1991), stay vacated, United  {O-States v. Western Elec. Co., 19911 Trade Cases (CCH)  69,610 (D.C. Cir. 1991).0 The MFJ's category of "information services" was very similar, although not identical, to the Commission's "enhanced services" category. The MFJ's definition of  XH-information services was the basis for the 1996 Act's use of that term. Hp ! yOi-ԍ The MFJ defines "information service" as the "offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information which may be conveyed via telecommunications . . . . " "Information" is defined as "knowledge or intelligence represented by any form of  {O-writing, signs, pictures, sounds, or other symbols."  U.S. v. Western Electric Co., Inc., 552 F.Supp. at 22729.  {O-See H.R. Rep. No. 204, Part 1, 104th Cong., 1st Sess. 125 (1995) ("Information service" and "telecommunications" are defined based on the definitions used in the MFJ). In the HouseSenate conference on the 1996 Act, the Senate receded to the House on the definition of information service. The House receded to the Senate on the definition of telecommunications, but the House and Senate bills contained similar definitions of this term. H.R. Conf. Rep. No. 458, 104th Cong., 2d Sess. 116 (1996).  X -xComputer III. In the Computer III proceeding, the Commission reviewed its customer premises and enhanced service safeguards, and replaced the structural separation requirement for the provision of enhanced computerized data services with a set of phasedin non X -structural safeguards.h\ D! {O-ԍ See Amendment of Section 64.702 of the Commission's Rules and Regulations (Computer III), CC Docket  {O-no. 85229, Phase I, 104 FCC 2d 958 (1986) (Computer III Phase I Order) (subsequent history omitted). The customer premises equipment provisions were addressed separately. h Thus, BOCs and AT&T would be permitted to provide enhanced  X -services on an "integrated" basis (i.e., through the regulated telephone company), subject to certain "nonstructural" safeguards. In general, these safeguards were developed to (1) prevent crosssubsidization through cost accounting measures, (2) prevent discriminatory network access or interconnection practices; and (3) to regulate joint marketing practices through protection of customer proprietary network information (CPNI). The Commission also preempted nearly all state regulation of the sale of enhanced services by communications"O,h0*((+"  X-common carriers. d! {Oy-ԍ Computer III Phase I Order, 104 FCC 2d at 112628; see also Separation of Costs and Regulated Telephone Service from Costs of Nonregulated Activities & Amendment of Part 31, the Uniform System of Accounts for Class A and Class B Telephone Companies to Provide for Nonregulated Activities and to Provide  {O-for Transactions Between Telephone Companies and Their Affiliates, CC Docket No. 86111, 2 FCC Rcd 1298  {O-(1987) (Joint Cost Order), recon, 2 FCC Rcd 6283 (1987), further recon., 3 FCC Rcd 6701 (1988), aff'd sub  {Og-nom. Southwestern Bell Corporation v. FCC, 896 F.2d 1378 (D.C. Cir. 1990). The Joint Cost Order adopted (1) cost allocation standards and, for certain carriers, a requirement that a cost allocation manual ("CAM") be filed with the Commission; (2) rules for recording transactions between regulated telephone companies and their corporate affiliates; and (3) accounting procedures, audit requirements, and other implementation and enforcement mechanisms.d xThe nonstructural safeguards featured implementation of a concept known as "open network architecture" or "ONA," designed to ensure nondiscriminatory access to network  X-facilities and functions for all ESPs. ONA as originally envisioned in Computer III was to provide all ESPs equal access to the components of the BOCs' telephone network, as well as the ability to select network service elements not used by the BOCs in providing their own  Xa-enhanced services. "As a first step in implementing Computer III, the Commission permitted the BOCs, pending full structural relief, to offer individual enhanced services on an integrated  X5-basis ("i.e., directly by the operating company, rather than through a separate affiliate)  X -following approval of servicespecific comparably efficient interconnection (CEI) plans."18 h ! {O9-ԍ Amendment of the Commission's Rules to Establish Competitive Safeguards for Local Exchange Carrier  {O-Provision of Commercial Mobile Radio Services, et al., WT Docket No. 96162, GEN Docket No. 90314, Notice  {O-of Proposed Rulemaking, Order on Remand, and Waiver Order, 11 FCC Rcd 16639, 1668416685 (Wireless  {O-Safeguards Notice). By the term "integrated," the Commission referred to the provision of enhanced services and  {Oa-basic services in a manner not consistent with the Computer II separation requirements. Under structural integration, BOCs have been able to offer enhanced services without establishing separate subsidiary companies, hiring separate personnel, or using separate computer equipment and other facilities. BOCs are still permitted to offer their enhanced services through subsidiaries, but those subsidiaries can share personnel and resources with  {O-the parent company. See Bell Operating Companies' Joint Petition for Waiver of Computer II Rules, 10 FCC  {OM-Rcd 4169 n.4 (1995) (Joint Computer II Waiver Order). In their CEI plans, BOCs were required to describe: (1) the enhanced service or services to be offered, (2) how the underlying basic services would be made available for use by competing enhanced service providers (ESPs), and (3) how the BOC would comply with the other non {O-structural safeguards Computer III imposed. 1 The other nonstructural safeguards include: "accounting safeguards; timely disclosure to competing ESPs of network information, including technical interfaces; access to and use of  X -CPNI; and quarterly reporting to help ensure that BOC provision of basic services to  X -competing ESPs was nondiscriminatory in terms of quality, installation, and maintenance."$ h! {O"-ԍ Wireless Safeguards Notice, 11 FCC Rcd at 16685. "CPNI" was defined as "all the information about a customer's network services and a customer's use of those services that a BOC possesses by virtue of its  {Oo$-provision of network services." See Filing and Review of Open Network Architecture Plans, CC Docket No. 88 yO9%-2, Phase I, 4 FCC Rcd 1 (1988), para. 411.  xThe CEI requirement for BOCs was based upon a finding that the BOCs possessed"-T0*((j" local network facilities that, although increasingly subject to bypass by alternative local access providers, still possessed substantial market power in providing network access for most end users and other large companies. Similarly, the Commission found that although AT&T was increasingly subject to competition in the markets for its regulated offerings, AT&T's position in interexchange basic service markets remained sufficiently strong, and therefore warranted the imposition of CEI requirements on its enhanced service offerings. The Commission further concluded that it would limit the CEI and ONA requirements to AT&T and the BOCs even though other "dominant" carriers with market power in the provision of basic services, including the independent telephone companies, could engage in the discriminatory practices against enhanced service providers that CEI is designed to  X -prevent. Later, these requirements were extended to the GTE local exchange companies. ! {O -ԍ Computer III Phase I Order, 104 FCC 2d at 102627. See also Application of Open Network Architec {O] -ture and Nondiscrimination Safeguards to GTE Corporation, CC Docket No. 92256, 9 FCC Rcd 4922 (1994) (scope of GTE's expanded local exchange operations sufficiently similar to BOCs to justify imposing ONA and nondiscrimination safeguards to GTE to safeguard continued competitive development of enhanced services markets). x  X -xIn addition, the Computer III decisions subject certain carriers to further unbundling  X -requirements in offering an enhanced service.F |! {O-ԍ See, e.g.., Computer III Phase II Order, 2 FCC Rcd 3072 (1987); see also Filing and Review of Open  {O-Network Architecture Plans, Memorandum Opinion and Order, 4 FCC Rcd 2449, 245354 (1988) (approving AT&T's plan involving a basic packet switching service underlying an enhanced protocol processing service):  {M`-AT&T CEI Plan for Protocol Conversion and Storage Services with Packet Switching Services, Memorandum  {O(-Opinion and Order, 5 FCC Rcd 651 (1990). F Under the ONA model, ESPs may obtain access to various unbundled ONA services, termed "Basic Service Elements," through access  X -links described as "Basic Serving Arrangements." 2 ! {O-ԍ See Filing and Review of Open Network Architecture Plans, 4 FCC Rcd 1 (1988) (BOC ONA Order),  {OV-recon., 5 FCC Rcd 3084 (1990) (BOC ONA Reconsideration Order), 5 FCC Rcd 3103 (BOC ONA Amendment  {O -Order) (subsequent history omitted). Other ONA elements included unbundled basic service features an end user could obtain from a BOC in order to receive or use an enhanced service, and nonTitle II services, such as  {O-billing and collection that may be useful to enhanced service providers. See BOC ONA Amendment Order, 5 FCC Rcd at 3104. Noncarrier ESPs are not subject to Title II regulation, even if their enhanced service offering contains enhanced protocol processing service in conjunction with basic transmission service under the Commission's "contamina Xd-tion" theory.d! {O!-ԍ  Amendment of Section 64.702 of the Commission's Rules and Regulations (Third Computer Inquiry),  {O"-Supplemental Notice, FCC 86253, para. 43 n.52 (rel. June 16, 1986), 51 FR 24410 (July 3, 1986).  X6-xIn Computer III, the Commission reaffirmed earlier decisions concluding that three types of protocol processing are not enhanced services within the meaning of its rules. First, the enhanced services definition applies only to endtoend communications between or among  X-subscribers. Thus, communications between a subscriber and the network itself (e.g., for call".0*((" setup, call routing and call cessation) are not considered enhanced services. Second, protocol conversions necessitated by the introduction of new technology (requiring protocol conversion to maintain compatibility with existing customer premises equipment) are also outside the ambit of the enhanced services definition. Third, internetworking protocol conversions those taking place solely within the network that result in no net conversion between users  X-are treated as basic services.e! {O-ԍ Computer III Phase II Order, 2 FCC Rcd 3072, 308182.e  X_-xIn early 1998, the Commission issued a Further Notice of Proposed Rulemaking in the  XH-Computer III docket, that is also part of its 1998 Biennial Regulatory Review. The Commission believed it necessary to not only respond to the issues remanded by the Ninth Circuit  X -Court of Appeals regarding Computer III unbundling requirements for BOC intraLATA enhanced services, but also to reexamine its nonstructural safeguards regime governing the  X -provision of information services by the BOCs in light of the 1996 Act.V Z! {O-ԍ Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services,  {O-1998 Biennial Review of Computer III and ONA Safeguards and Requirements, CC Docket No. 9520, CC  {O-Docket No. 9810, Further Notice of Proposed Rulemaking, FCC 988 (released Jan. 30, 1998) ("Computer III  {OY-Further Remand Proceedings"). See also 47 U.S.C.  161. Pending the conclusion of the Computer III Further  {O#-Remand Proceedings, the Commission's Computer II, Computer III, and ONA rules are the only regulatory means by which certain independent ISPs are guaranteed nondiscriminatory access to BOC local exchange services used in the provision of intraLATA information services.V Comment was  X -sought, inter alia, on whether the Commission's "definition of basic service and the 1996 Act's definition of 'telecommunications service' should be interpreted to extend to the same  X -functions, even though the two definitions differ."d ! {O-ԍ Computer III Further Remand Proceedings at para. 41.d Comment was also sought on the impact of the Act's unbundling and structural separations requirements on the Commission's current nonstructural safeguards framework; on the question of whether certain ISPs should have the same type of access to unbundled elements of BOC networks as is granted to telecommunications carriers under section 251 of the 1996 Act; and on certain specific proposals to stream X:-line requirements for BOC provision of enhanced services.w:6 ! {O!-ԍ See Computer III Further Remand Proceedings at paras. 78. w  X - C.xBOC Provision of Internet Access Under Computer III  X-xConsistent with Computer III, BOCs wishing to provide intraLATA Internet access service to connect end users to the Internet currently must file, and receive approval of, CEI plans that demonstrate that the underlying basic services are available on an equivalent,  X-unbundled basis to unaffiliated ESPs.^ ! {O&-ԍ See Computer III Phase II Order, 2 FCC Rcd 3072 (1987). Although AT&T remains subject to certain  {O&-Computer III and ONA requirements, its burdens have been substantially lessened visavis those of the BOCs.  {O'-See, e,g, Competition in the Interstate Interexchange Marketplace, Memorandum Opinion and Order on"'0*(('"  {O-Reconsideration, 10 FCC Rcd 4562 (1995). The Computer III Further Remand Further Notice, supra, seeks comment on elimination of the CEI Plan requirement for BOC intraLATA services. For example, Bell Atlantic received such approval"/"0*((3"  X-from the Common Carrier Bureau in June 1996, for its "Internet Access Service" ("IAS"). "! {O-ԍ  Bell Atlantic Telephone Companies Offer of Comparably Efficient Interconnection to Providers of  {O-Internet Access Services, Order, CCBPol 9609, 11 FCC Rcd 6919 (Com.Car.Bur. 1996) (Bell Atlantic Internet  {Og-Access CEI Plan Order), reconsideration pending. In that order, the Common Carrier Bureau determined that Bell Atlantic's provision of Internet access service did not constitute an interLATA information service. On July  {O-19, 1996, MFS Communications Co. filed a petition for reconsideration of the Bell Atlantic Internet Access CEI  {O-Plan Order, arguing, inter alia, that Bell Atlantic's Internet access service offering is an interLATA service that Bell Atlantic may provide only through a section 272 separate affiliate after obtaining section 271 authorization  {OU -from the Commission, and that Bell Atlantic cannot simply rely on compliance with the Commission's Computer  {O -II, Computer III and ONA requirements. At about the same time, Southwestern Bell Telephone Company  {O -(SWBT) filed a CEI plan for Internet Support Services. See Pleading Cycle Established for Comments on SWBT's Comparably Efficient Interconnection Plan for Internet Support Services, CC Docket Nos. 85229, 90623 & 9520, Public Notice, DA 961031 (rel. June 26, 1996). Thereafter, MFS filed a petition to consolidate the Bell Atlantic, SWBT and a rulemaking proceeding to implement section 272 on the grounds that all three  {O -proceedings raise similar novel, policy, factual and legal arguments. See Petition to Consolidate Proceedings filed by MFS Communications Company, Inc. (filed July 25, 1996). The rulemaking proceeding implementing the sections 271 and 272 non-accounting safeguard requirements will be discussed below in Section IV.C. Bell Atlantic's service description indicated that, in addition to access to the Internet, the carrier would offer users supporting services, including access to the World Wide Web and  X-Usenet, electronic mail, and "chat" services. As described in the Bell Atlantic Internet Access  X-CEI Plan Order, Bell Atlantic's IAS uses several tariffed services, including Switched MultiMegabit Data Service ("SMDS"), Frame Relay Service, and Integrated Services Digital Network ("ISDN"). It also utilizes a new service, "Internet Protocol Routing Service" ("IPRS"), which consists of network routers located at LATA hub sites that collect the customer's end user traffic and concentrate it for connection and transport over a Bell Atlantic  X5-SMDS interface.5|! {Ob-ԍ Bell Atlantic Internet Access CEI Plan Order, 11 FCC Rcd at 6922, 6930. The SMDS, Frame Relay Service, ISDN and IPRS basic services are all provided by Bell Atlantic separately from each other and unbundled from the proposed enhanced service, at the same rates, terms, and conditions they are available to Bell Atlantic's enhanced service operations. All are required to be provided under both state and federal tariffs for basic ONA services and services underlying the CEI Plan.   X -xThe Bell Atlantic Internet Access CEI Plan Order recites the following service characteristics: "end user customers will be able to dial into IAS using a standard seven or tendigit telephone number, or may obtain direct connection through special access service;" "in either case, the end user customer will subscribe to the telecommunications service connecting the end user to IAS;" "end users using switched access are connected to a digital modem or ISDN port at Bell Atlantic's premises;" "modems and ports provide the customer with connection to a terminal router;" "[a]fter the customer enters a valid identifying pass Xh-word, Bell Atlantic's processor will connect the call to the Internet."Gh.! {OG'-ԍ Id. at 69226923.G Once connected,"h00*((" switched access customers are able to navigate the Internet through "browser" software and an Internet "gateway" service to be provided by Bell Atlantic on an unregulated, unbundled basis.  X-Dedicated access subscribers, in contrast, are continuously connected to the IAS and are not required to enter a password to access the Internet. Dedicated access subscribers also have the  X-option of obtaining from Bell Atlantic browser software and Internet gateway functionality.F! {O-ԍ Id. at 692223 & n.25.F xFinally, the service includes design and hosting services for database providers. The  X_-Bell Atlantic Internet Access CEI Plan Order recites that the "design services will aid information providers in developing home pages and databases . . . the hosting services will provide ESPs with the ability to store Internet information, such as home pages, databases, bulletin boards, and other data on Bell Atlantic's processor, from which connection is  X -provided to the Internet."B Z! {O-ԍ Id. at 6923.B  X < D.xFrame Relay Order   X - xThe Common Carrier Bureau's Frame Relay Order applied to common carrier frame  X-relay services the Computer II requirement that all carriers that own common carrier transmission facilities and also provide enhanced services, must unbundle basic from enhanced services and offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced  X;-operations.~;! {O-ԍ IDCMA Petition for a Declaratory Ruling that AT&T's Interspan Frame Relay Service is a Basic  {O-Service, Memorandum Opinion and Order, 10 FCC Rcd 1371718, 13725 (Com.Car.Bur. 1995) ("Frame Relay  {Ol-Order"), recon. pending. AT&T's InterSpan Service's "core aspects" are: (1) provision of bi-directional frame transfer; (2) maintaining the frames across the network in the same sequence in which they were delivered to the network; (3) detection of errors; (4) transportation of user data transparently; and (5) no acknowledgement of frames (in contrast to X.25 protocol). InterSpan also provides protocol conversion for CPE that does not have a frame relay interface This ruling came in response to a petition for declaratory ruling that AT&T's InterSpan Frame Relay Service is a basic transmission service, subject to tariffing and other requirements of Title II. The petitioner argued that AT&T possessed sufficient market power  X-in the provision of frame relay service to warrant regulation.W2 ! {O -ԍ Frame Relay Order, 10 FCC Rcd at 13720.W AT&T, in turn, sought a ruling that the decision regarding InterSpan should apply to all other interexchange carriers (IXCs). AT&T maintained that its InterSpan frame relay service was enhanced service because protocol conversion was an integral part its service; other parties commenting,  X-including several BOCs, countered that they provide basic frame relay service under tariff.C ! {O&-ԍ Id. at 1372013721.C "1V 0*((A"Ԍ X-xThe 1995 Frame Relay Order described frame relay technology "as a relatively new, highspeed packetswitching technology used to communicate digital data between, among other things, geographically dispersed local area networks (LANs). In addition, frame relay technology often serves as the intermediary format for data traveling between different  X-computer systems employing different communications protocols."=! {O-ԍ Id. at 13718.= The Frame Relay Order also recited that, in contrast to voice communications, data communications between computers is generally considered "bursty" traffic. "Packetswitched networks were developed to take advantage of the "bursty" nature of data communications. With packet switched data transmission, many users can share a single digital transmission channel. Each user's packet contains a header with address information that enable the network to route the packet to the  X -proper destination."C Z! {O) -ԍ  Id. at 13717.C Packets may be sent separately and reassembled at their destination; packets from several users may be interspersed during transmission, allowing more efficient channel usage.  X -xThe Frame Relay Order explained that "protocol conversion" is employed to permit existing customer terminal equipment to originate and terminate data sent by packet networks. Frame relay networks communicate "frames" containing digital data; frame relay switches are faster than packet switches because they do not store frames until positive acknowledgement is received from the destination switch. Rather, the destination switch, if it receives frames with errors, simply discards the frame, relying on higherlayer protocols of intelligent  X:-customers premises equipment to note omissions and take corrective action.K:! {O-ԍ Id. at 1371713718. K  X -xThe Frame Relay Order stated: XxX` ` Protocol refers to the ensemble of operating disciplines and technical parameters that must be observed and agreed upon by subscribers and carriers in order to permit the exchange of information among terminals connected to a particular telecommunications network. A subscriber's digital transmission necessarily consists of two components: informationbearing symbols and protocolrelated symbols. The informationbearing symbols constitute a subscriber's message. The protocolrelated symbols initiate various transmission control functions and also define the format in which the informationbearing symbols appear within  X-the composite data stream.I~! {O)&-ԍ  Id. at 13717 n.5. I x` "20*((;"Ԍ"Protocol processing" was identified as "a generic term, which subsumes 'protocol conversion' and refers to the use of computers to interpret and react to the protocol symbols as the information contained in a subscriber's message is routed to its destination. 'Protocol conversion' is the specific form of protocol processing that is necessary to permit communica X-tions between disparate terminals or networks."4! {O-ԍ  Id. 4  X-  Xv-xThe Frame Relay Order noted that, prior to its divestiture, AT&T offered neither  Xa-packet switching services nor protocol conversion.aZ! {Ol -ԍ But see American Telephone and Telegraph Company Tariff F.C.C. No. 270, Rates and Regulations for Bell Packet Switching Service; Tariff F.C.C. No. 267, Revisions to Dataphone Digital Service, Tariff F.C.C. No.  {O -268, Revisions to Provide Digital Central Office Connecting Facilities, Memorandum Opinion and Order, 91  yO -FCC 2d 1 (1982) (case was decided on other grounds; Commission did not reach the specific question whether BPSS was basic or enhanced, but directed AT&T to supplement the record on this issue when it filed for its section 214 facilities authorization)  Independent vendors of packet switched communications services known as "valueaddednetwork" service providers ("VANs") purchased common carrier transmission facilities (lines linking switches together) from AT&T and added "value" by reselling the underlying transport services in conjunction with their own  X -packet switched information services. | ! {O-ԍ Frame Relay Order, 10 FCC Rcd at 1371713718; see also Petitions for Waiver of Section 64.702 of the  {OV-Commission's Rules (Computer II), 100 FCC 2d 1057 (1985) (Asynch/X.25 Order). Communications over packet switched networks have traditionally used the synchronous X.25 interface protocol. Most of the existing terminal equipment used by customers to originate and terminate data communications between their computers and other computers does not support the X.25 protocol, but rather, uses an asynchronous protocol. Thus, data communicated under asynchronous protocols must be converted to data employing synchronous X.25 protocol in order to be transmitted over a packetswitched network.  By 1995, AT&T, the BOCs and many other service providers (both facilitiesbased carriers and VANs) offered packet switched and protocol conversion services, such as asynchronoustoX.25 conversion.  X -xThe Frame Relay Order found that, despite some interim changes to the information transported over AT&T's packet switched data network, AT&T's frame relay service offered a transmission capability that is virtually transparent in terms of its interaction with customersupplied data, and thus constitutes a basic service under the Commission's rules. InterSpan provided protocol conversion for CPE that did not have a frame relay interface. The "core" of InterSpan service was the provision of frame transmission in the frame relay format between the point where a customer's data enters the public switched network and the point  X -where it leaves the network. ! {O#-ԍ Frame Relay Order, 10 FCC Rcd at 13718, 1372213723 (also noting that six BOCs treat frame relay as a basic transport service). Treating frame relay, and basic digital services in general, as basic common carrier services was in the public interest because such a classification provides competitors with access to the underlying basic service of facilitiesbased carriers that are better able to implement new communications technologies. This treatment, in turn, permits"3t0*((q" competitive ESPs to enter and compete in the market for such technologies, thus promoting the public interest by accelerating the development of emerging digital technologies. xAT&T was directed to unbundle its basic frame relay service from any enhancements, and offer it pursuant to tariff. AT&T retained the ability to package CPE and enhanced protocol processing with the basic frame relay service, so long as the underlying basic service  Xv-is also separately offered under tariff.Cv! {O-ԍ Id. at 13724.C Significantly, the Frame Relay Order concluded that,  Xa-pursuant to Computer II, all facilitiesbased common carriers providing enhanced services in conjunction with basic frame relay service must file tariffs for the underlying frame relay service and acquire that tariffed service in the same manner as resale carriers. This require X -ment was found to apply independently of any additional requirements under the Computer III  X -proceedings.K Z! {O-ԍ Id. at 13725. K The Bureau's order did not distinguish dominant from nondominant common carriers for purposes of this unbundling requirement.  X -; V. TELECOMMUNICATIONS AND INFORMATION SERVICES  X - UNDER THE 1996 ACT ă  X- xFollowing enactment of the 1996 Act, the Commission initiated what it termed a "trilogy" of actions focussed on achieving Congress' goal of establishing a "procompetitive, deregulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all  X#-Americans by opening up all telecommunications markets to competition."U#! {O-ԍ See Joint Explanatory Statement at 1.U The trilogy  X -consists of the Local Competition Order, the Universal Service Order, and the Access Charge  X-Reform Order. In addition to the local competition trilogy, the Commission launched several proceedings to implement various provisions of the Act (sections 271, 272, and 274) governing BOC entry and/or continued provision of specific services in competitive markets, such as interstate interexchange and information services, telemessaging, electronic publishing and  X-alarm monitoring.F~! yO-ԍ On December 31, 1997, the United States District Court for the Northern District of Texas, Wichita Falls Division, granted the plaintiffs, SBC Communications, Inc. and U.S. West Communications, Inc.'s motion for summary attacking the constitutionality of Subtitle B of Title I of the 1996 Act (sections 271275). The Court found that these "Special Provisions" concerning the Bell Operating companies amounted to an unconstitutional  {O"-"bill of attainder" in violation of Article I,  9, Clause 3, of the Constitution.  SBC Communications Inc. v.  {O#-Federal Communications Commission, Civil Action No. 7:97CV163X, 1997 WL 800662 (N.D. Tex. Dec. 31,  {O$-1997), request for stay pending. Proceedings implementing these provisions are discussed herein solely in terms of their treatment of the Internet classification issue. xWhile not initiated expressly to determine the appropriate regulatory treatment of"o4 0*((" Internetbased services, each proceeding addressed issues that inevitably arise where Internetbased communications services are provided by Title II telecommunications common carriers. The key underlying questions raised in the "trilogy" are whether Internetbased communications are "telecommunications" or "information services" under the 1996 Act, and the related question of whether ISPs are telecommunications carriers, entitled to interconnection rights under section 251 and subject to universal service fund contribution obligations, or are access service end users, exempt from paying access charges for their local exchange connections, and exempt from contributing to the universal service fund. The BOC entry proceedings necessitated decisions on whether BOCprovided enhanced services fell into the category of "information services" under the 1996 Act, and if so, the consequences for their existing and future intra and interLATA information service offerings, including Internet access services.  X -x` `  X -A.x Interconnection Rights and Obligations Under Section 251; Who is a  X -"Telecommunications Carrier"? xSection 251 requires all telecommunications carriers to interconnect directly or indirectly with other telecommunications carriers to facilitate the creation of a "network of networks." Section 251(a) specifically requires all telecommunications carriers: (1) "to interconnect directly or indirectly with the facilities and equipment of other telecommunications carriers;" and (2) "not to install network features, functions, or capabilities that do not  X-comply with the guidelines and standards established pursuant to sections 255 or 256."A! yO-ԍ 47 U.S.C.  251(a). A The issue presented visavis the Internet was whether enhanced and information service providers would be subject to the reciprocal interconnection rights and obligations imposed on telecommunications carriers under section 251. xThe 1996 Act defines a "telecommunications carrier" as "any provider of telecommunications services, except that such term does not include aggregators of telecommunications  X|-services (as defined in section 226)."TX|X! yO-ԍ 47 U.S.C.  153(44). The term "aggregator" is defined as "any person that, in the ordinary course of its operations, makes telephones available to the public or to transient users of its premises, for interstate telephone calls using a provider of operator services." 47 U.S.C.  226(a)(2).T A telecommunications carrier shall be treated as a common carrier under the Act "only to the extent that it is engaged in providing telecommunications services, except that the Commission shall determine whether the provision of fixed  X7-and mobile satellite service shall be treated as common carriage."A7x! yO`#-ԍ 47 U.S.C.  153(44).A A "telecommunications service" is defined as the "offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the  X-facilities used."C! yO'-ԍ 47 U.S.C.  153(46). C "Telecommunications" is defined in the Act as "the transmission, between"50*((<" or among points specified by the user, of information of the user's choosing, without change  X-in the form or content of the information as sent and received."A! yOb-ԍ 47 U.S.C.  153(43).A  X-xThe Local Competition Order concluded that, to the extent a carrier is engaged in providing for a fee domestic or international telecommunications, directly to the public or to such classes of users as to be effectively available directly to the public, the carrier falls  Xx-within the definition of "telecommunications carrier."fxX! {O -ԍ Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket  {OK -No. 9698, First Report and Order, 11 FCC Rcd 15499,1598815989.(1996) (Local Competition Order), Order  {O -on Reconsideration, CC Docket No. 9698, 11 FCC Rcd 13042 (1996) (Local Competition Reconsideration  {O -Order), vacated in part on other grounds, Iowa Utilities Board v. FCC, No. 963321 and consolidated cases,  {O -1997 WL 403401 (8th Cir. July 18, 1997), appeal pending.f In addition, all telecommunications carriers that compete with each other would be treated alike regardless of the technology used, unless there is a compelling reason to do otherwise. Companies that provide both telecommunications and information or enhanced services, will be classified as telecommunications carriers for section 251 purposes. They will subject to the obligations under section 251(a), to  X -the extent that such companies are acting as telecommunications carriers. Information and enhanced service providers that do not also provide domestic or international telecommunications, and are thus not telecommunications carriers within the meaning of the Act, do not  X -obtain interconnection rights under section 251.c ! {O-ԍ Local Competition Order, 11 FCC Rcd at 15990.c  X- B.x Universal Service; Status of Internet Services and Service Providers Under  X{-Section 254  XM-xThe Report to Congress states that the "universal service system is designed to ensure that lowincome consumers can have access to local phone service at reasonable rates," and also ensures that consumers in all parts of the country, particularly those in sparsely populated  X -rural areas, "are not forced to pay prohibitively high rates for their phone service."N ! {O_-ԍ Report to Congress at para. 6.N The  X-Report further explains that before passage of the 1996 Act, "universal service was promoted through a patchwork quilt of implicit and explicit subsidies at both the state and federal  X-levels."?6 ! {O"-ԍ Id. at para. 7.? The 1996 Act directed the restructuring of universal support mechanisms so that support would be explicit, "and that 'every telecommunications carrier that provides interstate telecommunications service shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve"6 0*((2"  X-and advance universal service.'"g! {Oy-ԍ Id. at para. 8, citing 47 U.S.C.  254(d)(e).g  X-x 1.` ` Requirements of Section 254 xSection 254 directs the States and the Commission to establish support mechanisms to ensure the delivery of affordable telecommunications service to all Americans, including lowincome consumers, eligible schools and libraries, and rural health care providers. Section 254(c)(1) defines universal service as "an evolving level of telecommunications services that the Commission shall establish periodically under this section, taking into account advances in telecommunications and information technologies and services." In making this determination, the definition of the services that are supported by Federal universal service support mechanisms, are to take in account specific statutory characteristics, including whether the services "have, through the operation of market choices by customers, been subscribed to by a  X -substantial majority of residential customers."F Z! yO-ԍ 47 U.S.C.  254(c)(1)(B).F  X -xSection 254 explicitly designates elementary and secondary schools and libraries among the entities eligible to receive the benefits of universal service support. Section 254 describes the services that are to be supported for schools and libraries in terms of "telecommunications services," "special" or "additional" services, and access to "advanced telecommu XK-nications and information services."VK! yO-ԍ 47 U.S.C.  254(c)(1), (c)(3), (h)(2)(A).V Section 254(c)(3), "special services," provides that, in addition to the telecommunications services designate for support under section 254(c)(1), the Commission may designate "additional services" for universal support for schools, libraries  X-and health care providers for purposes of subsection (h).dz! yO1-ԍ The 1996 Act contains no express definition of "special" or "additional" services or "advanced telecommu {O-nications and information services," as those terms are used in section 254. But see 47 U.S.C.  157(c)(1) nt (section 706 definition of "advanced telecommunications capability," defined without regard to transmission media or technology "as highspeed, switched, broadband telecommunications capability that enables users to originate and receive highquality voice, data, graphics, and video communications using any technology").d Section 254(d) mandates that universal service support should be explicit, and that, with respect to federal universal support, "every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service." xImplementation of section 254 required: (1) examination of whether the telecommunications services supportable by universal service funds could be defined to cover information and enhanced services, including Internet access services; (2) examination of whether the access to "advanced telecommunications and information services," and the "additional"" 7, 0*((" services supportable for schools, libraries and health care providers includes Internet access services; and (3) determination of the status of Internet service providers with respect to the statutory obligation to contribute to universal support mechanisms, and the statutory right to  X-benefit from such support.j! yO4-ԍ In November 1996, the FederalState Universal Service Joint Board issued recommendations to the Commission for reforming its system of universal service so that universal service in accordance with section 254  {O-of the Act. FederalState Joint Board on Universal Service, CC Docket No. 9645, Recommended Decision, 12  {O-FCC Rcd 87 (Corrected Version) (1996) (Joint Board Recommended Decision). On May 8, 1997, the  yOX-Commission released the Report and Order in the Universal Service proceeding, reflecting virtually all of the Joint Board's recommendations on the establishment of universal support mechanisms that will fulfill the specific  {O -universal service goals established in the 1996 Act.  FederalState Joint Board on Universal Service, CC Docket  {O -No. 9645, Report and Order, 12 FCC Rcd 8776 (released May 8, 1997), as corrected by FederalState Joint  {O| -Board on Universal Service, Errata, CC Docket No. 9645, FCC 97157 (released June 4, 1997) (Universal  {OF -Service Order), appeal pending in Texas Office of Public Utility Counsel v. FCC and USA, No. 9760421 (5th  yO -Cir. 1997) (subsequent history omitted).j  X-x 2.` ` Section 254(c)(1) "Core" Telecommunications Services Do Not Include  Xv-Internet Access  XH-xThe Universal Service Order defines the "core" or "designated" telecommunications services that will be supported by universal service support mechanisms as: single party service, voice grade access to the PSTN, dial tone multifrequency ("DTMF") signaling or its functional equivalent, access to emergency services, access to operator services; access to interexchange service, access to directory assistance, and toll limitation services for qualifying  X -lowincome consumers.\ 4 ! {O-ԍ Universal Service Order, 12 FCC Rcd at 8809.\  X -xThe Universal Service Order addressed the question of whether Internet access should be included in the category of core telecommunications services supported by universal service mechanisms. It recognized that Internet access consists of more than one element.  Xf-The Universal Service Order stated that Internet access includes a network transmission component, which is the connection over a LEC network from a subscriber to an ISP, and an  X:-information service component.B: ! {O-ԍ Id. at 8822.B Voicegrade access to the public switched network usually enables customers to secure access to an ISP, and thus to the Internet. Thus, it concluded that "the information service component of Internet access cannot be supported under section 254(c)(1), which describes universal service as an 'evolving level of telecommunications  X-services.'":X ! {O$-ԍ Id. : "80*((3"Ԍ X-x 3.` ` Supportable Services for Schools and Libraries Include "Basic Conduit  X-Access to the Internet"  X-x The Universal Service Order adopted the Joint Board's recommendation that all eligible schools and libraries should receive discounts of between 20 and 90 percent on all telecommunications services, Internet access, and internal connections provided by telecommunications carriers, subject to an annual cap. However, the Commission took this action pursuant to section 254(c)(3) and section 254(h)(1)(B) rather than section 254(h)(2), on which  XJ-the Joint Board relied.HJ! {O -ԍ Id. at 90029003. H The Commission concluded that sections 254(c)(3) and 254(h)(1), in the context of the broad policies set forth in section 254(h)(2), authorized it to permit schools and libraries to receive, the telecommunications and information services needed to use the  X -Internet at discounted rates provided by telecommunications carriers.A Z! {O-ԍ Id. at 90089009.A The Commission reasoned that section 254(c)(3) grants it authority to "designate additional services for  X -support" and section 254(h)(1)(B) authorizes it to fund any section 254(c)(3) services.< ! {Ot-ԍ  Id. at 9009.< xIn addition, the Commission noted that section 254(a)(1) and (a)(2) mandate that the Commission define the "services that are supported by Federal universal support mechanism,"  X{-but does not limit support to telecommunications services.B{~! {O-ԍ Id. at 9009.B The Commission concluded that use of the broader term "services" in section 254(a) provides further validation for the inclusion of services in addition to telecommunications services in sections 254(c)(3) and  X6-254(h)(1)(B).96! {O-ԍ  Id.9 Accordingly, schools and libraries may receive rate discounts from telecommunications carriers for the basic "conduit" access to the Internet, and that it could include the  X-"information services," e.g., protocol conversion and information storage, that are needed to access the Internet, as well as internal connections, as "additional services" that section  X-254(h)(1)(B) , through section 254(c)(3), authorizes the Commission to support.B! {O/ -ԍ  Id. at 90099011. B xThe Commission clarified that there are two types of "information" services at issue,  X-and that it is not granting discounts on the cost of purchasing information content.B4 ! {O|$-ԍ Id. at 90119012. B Rather, it is authorizing the provision of discounts on the data links and associated services necessary to provide classrooms with access to those educational materials, even though these functions meet the statutory definition of "information services" because of their inclusion of protocol"R9 0*((0" conversion and information storage. Without the use of these "information service" data links, schools and libraries would not be able to obtain access to the "research information, [and] statistics" available free of charge on the Internet. It noted that these information services are essential for effective transmission service, i.e., "conduit" service; they are not elements of the  X-content services provided by information publishers.=! {O-ԍ  Id. at 9012. = xThe Commission also offered a more precise definition of what "information services" will be eligible for discounts under this program by crossreferencing the category of services excluded from the definition of "electronic publishing" in section 274 of the Act. The Commission specified that eligible schools and libraries will be permitted to use support to obtain discounted information services consisting of: XxX` ` (i) the transmission of information as a common carrier;x` XxX` ` (ii) the transmission of information as part of a gateway to an information service, where that transmission does not involve the generation or alteration of the content of information but may include data transmission, address translation, protocol conversion, billing management, introductory information content, and navigational systems that enable users to access information services that do not affect the presentation of such information services to users; and x`  X-XxX` ` (iii) electronic mail services [email]."Z! {O(-ԍ Id. at 9013. The Commission added a new "Part 54" to its Rules, 47 C.F.R.  54.1, et seq. Subpart A,  54.5, "Terms and definitions," defines "Internet access," as including the three elements described in the text above, transmission of information as common carriage, transmission of information as part of a gateway to an information service, etc., and as email services.x`  X-x 4.` ` NonTelecommunications Carriers May Receive Support for xxInternet  X-Access Services Provided to Schools and Libraries  X-xThe Commission determined that sections 254(c)((3) and 254(h)(1)(B) authorized support for telecommunications, Internet access and internal connections provided by telecommunications carriers, and relied upon sections 254(h)(2)(A) and 4(i) to authorize support for discounts for Internet access and internal connections provided by nontelecommu XN-nications carriers.aND! {OC#-ԍ Universal Service Order, 12 FCC Rcd at 90849085.a Thus, the same nontelecommunications services eligible for discounts if provided by telecommunications carriers under section 254(h)(1)(B) are eligible for discounts if provided by nontelecommunications carriers, such as cable operators, under section" :0*((z"  X-254(h)(2)(A).! yOy-ԍ The Commission observed that section 254(h)(2)A) is not limited, as is 254(h)(1)(A), to extending support to services provided by telecommunications carriers, but rather, supplements the Commission's authority to enhance access to advanced telecommunications and information services free of limitations based upon the identity of the service provider. Accordingly, the Commission concluded that pursuant to authority in sections 254(h)(2)(A) and 4(i) of the Act, nontelecommunications carriers will be eligible to provide supported non {Oa-telecommunications services to schools and libraries at a discount. Id. at 90859088.  X-  X-x 5.` ` Telecommunications Carriers Alone Must Contribute to Universal  0 X-Service Support  X-  X-xSection 254(d) directs that all telecommunications carriers that provide interstate telecommunications services must contribute to the support mechanisms. It also states that the Commission may require "[a]ny other provider of interstate telecommunications" to contribute  XH-to universal service, "if the public interest so requires."sHB! {O;-ԍ 47 U.S.C.  254(d); Universal Service Order, 12 FCC Rcd at 9182.s To be considered a mandatory contributor to universal service under section 254(d): (1) a telecommunications carrier must offer "interstate" "telecommunications;" (2) those interstate telecommunications must be offered "for a fee;" and (3) those interstate telecommunications must be offered "directly to  X -the public, or to such classes of users as to be effectively available to the public."B ! {Oq-ԍ Id. at 9173.B The Commission concluded that only common carriers should be considered mandatory contributors to the support mechanisms, but that any entity that provides interstate telecommunications to users other than significantly restricted classes should be required to contribute under the Commission's "permissive" authority. Entities in this latter category may include private network operators that lease excess capacity on a noncommon carrier basis, as "other  Xb-providers of interstate telecommunications."Xbf ! {Oy-ԍ Id. at 91789179; 91839186.X xConversely, information and enhanced service providers are not required to contribute  X-to support mechanisms to the extent they provide such services.G ! {O-ԍ Id. at 91799181.G The Commission rejected the argument that information services are "inherently" telecommunications services because  X-information services are provided "via telecommunications."9 ! {O*#-ԍ Id.9 The Commission stated that information services are not inherently telecommunications services under section 254(h), because that section directs the Commission to enhance access to advanced telecommunications and information services. The Commission reasoned that if they were the same thing,";0*(("  X-the language "and information services" would be repetitive.:! {Oy-ԍ  Id. : xThe Commission observed that ISPs alter the format of information through computer processing applications such as protocol conversion and interaction with stored data, while the statutory definition of telecommunications only includes transmissions that do not alter the  X-form or content of the information sent.<Z! {O-ԍ Id. at 9180.< Telecommunications services, by definition, do not involve a change in the form or content of the user's information as sent or received, whereas information services, although provided via telecommunications, by definition involve "generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making  X1-available information."$1! {O -ԍ See 47 U.S.C.  153(20). Universal Service Order, 12 FCC Rcd at 9180 n.2023, citing Amendment of  {O-Section 64.702 of the Commission's Rules and Regulations, Report and Order, 2 FCC Rcd 3072, 3080 (1987).$ Finally, the Commission recognized that the classification of information services, and especially Internetbased services, raises many complicated and overlapping issues, with implications far beyond section 254, and indicated that it would  X -review the status of ISPs under the 1996 Act in a comprehensive manner in the Internet  X -Usage Notice of Inquiry.B H! {O-ԍ Id. at 9181.B As discussed infra, the Commission addressed many of these  X -classification issues in its April 10, 1998 Report to Congress.  X- C.xBOC Safeguards Under Sections 271 and 272 for InterLATA Information  0 X-Services  Xh- xThe 1996 Act ended the prohibition against provision of interLATA services by BOCs  X:-that was imposed by the MFJ.u~:! yO-ԍ Section 3(21) of the 1996 Act defines interLATA services as "telecommunications between a point located in a local access and transport area and a point located outside such area." 47 U.S.C.  153(21). LATAs  {OU-were created as part of the MFJ's "plan of reorganization" under which the BOCs were divested from AT&T.  {O-See United States v. Western Elec. Co., supra, 552 F. Supp. 131; see also United States v. Western Elec. Co., No. 820192 (D.D.C. Apr. 11, 1996) (vacating the MFJ). Pursuant to the MFJ, "all BOC territory in the continental United States [was] divided into LATAs, generally centering upon a city or other identifiable  {Oy -community of interest."  United States v. Western Elec. Co., 569 F. Supp. 990, 993 (D.D.C. 1983).u The 1996 Act conditions the BOCs' entry into certain inregion interLATA services on their compliance with the requirements of section 271. Under section 271, the Commission must determine, among other things, whether the BOC has complied with the safeguards imposed by section 272. Section 272 established certain structural safeguards for BOC entry into interLATA telecommunications services originating in states in which they provide local exchange and exchange access services, interLATA"< 0*(("  X-information services,u! yOy-ԍ The 1996 Act excludes electronic publishing (as defined in section 274(h)) and alarm monitoring (as defined in section 275(e)) from the separate affiliate requirement for interLATA information services. 47 U.S.C.  272(a)(2)(C). BOCs may participate in electronic publishing by means of a separated affiliate or electronic publishing joint venture in accordance with section 274. 47 U.S.C.  274. With certain exceptions for existing activities, BOCs are prohibited from providing alarm monitoring services for five years after enactment of the 1996 Act. 47 U.S.C.  275. u and BOC manufacturing activities. With enumerated exceptions, section 272 generally requires that such services be provided through one or more structurally separate affiliates. The Commission's proceeding to implement what it termed the "non X-accounting" (i.e., structural safeguards) in section 272, addressed the relationship between its category of "enhanced services," and the statutory definition of "information service," for  X-purposes of determining which services must be provided through separate affiliates.@! {O -ԍ Implementation of the NonAccounting Safeguards of Sections 271 and 272 of the Communications Act of 1934, as amended, CC Docket No. 96149, First Report and Order and Further Notice of Proposed Rulemaking,  {O-11 FCC Rcd 21905 (1996) (NonAccounting Safeguards Order), recon. pending, petition for summary review in  {O-part denied and motion for voluntary remand granted sub nom., Bell Atlantic v. FCC, No. 971067 (D.C. Cir.  {O-filed Mar. 31, 1997), petition for review pending sub nom., SBC Communications v. FCC, No. 971118 (D.C. Cir. filed Mar. 6, 1997)(held in abeyance pursuant to court order filed May 7, 1997), Order on Reconsideration, 12 FCC Rcd 229 (1997) (clarifying categories of protocol processing services that the Commission has  yO-previously treated as basic services will now be treated as telecommunications services), Second Order on Reconsideration, FCC 97222 (released Jun. 24, 1997) (section 272(e)(4) nondiscrimination and cost allocation requirement applies to interLATA services that the BOC is otherwise authorized to provide and is not an affirmative grant of authority to provide integrated interLATA services on a wholesale basis).  Xa-x 1.` ` Enhanced Services are Information Services  XJ-  X3-xThe NonAccounting Safeguards Order concluded that all of the services that the  X -Commission has previously considered to be "enhanced services" are "information services."e ! {Ow-ԍ NonAccounting Safeguards Order, 11 FCC Rcd at 21955.e The Commission stated that "interpreting 'information services' to include all 'enhanced services' provides a measure of regulatory stability for telecommunications carriers and ISPs alike, by preserving the definitional scheme under which the Commission exempted certain  X -services from Title II regulation."= :! {O-ԍ  Id. at 21956.= It found "no basis to conclude that by using the MFJ term 'information services,' Congress intended a significant departure from the Commission's  X-usage of 'enhanced services.'"3! {O#-ԍ Id.3 xHowever, the Commission also found that "information services" category includes services that are not classified as enhanced services under the Commission's rules. That is,  X8-"while all enhanced services are information services, not all information services are"8=^0*((*"  X-enhanced services."C! {Oy-ԍ Id. at 21956.C Under Commission precedent, "enhanced services" are limited to services offered over common carrier transmission facilities used in interstate communications. In contrast, "information services" under the 1996 Act may be provided, more broadly, "via telecommunications."  LIVEOP Further, live operator telemessaging services that do not involve computer processing applications are information services, even though they do not fall within  X-the definition of "enhanced services."9Z! {O-ԍ Id.9  X_-x 2.` ` Protocol Processing Services are Information Services  XH- xThe Commission concluded that, subject to certain exceptions, "protocol processing  X -services constitute information services under the 1996 Act."= ! {O-ԍ  Id. at 21956.= It rejected arguments that the "information services" category only includes services that transform or process the content of information transmitted by an enduser. Rather, the statutory definition makes no reference to the term "content," but requires only that an information service transform or process  X -"information."3 ~! {O-ԍ Id.3 The Commission also agreed that an endtoend protocol conversion service that enables an enduser to send information into a network in one protocol and have it exit the network in a different protocol clearly "transforms" user information. The Commission found that other types of protocol processing services that interpret and react to protocol information associated with the transmission of enduser content clearly "process" such information. Therefore, it concluded that both protocol conversion and protocol processing  X4-services are information services under the 1996 Act.94! {O-ԍ  Id.9 This interpretation is consistent with the Commission's existing practice of treating endtoend protocol processing services as  X-enhanced services.$! {OY-ԍ  Id. at 2195621957. See, e.g., Bell Operating Companies Joint Petition for Waiver of Computer II Rules,  {O#-10 FCC Rcd 13758, 13766,  51 and 1377013774, app. A (1995) (BOC CEI Plan Approval Order) (approving PacTel CEI plan for provision of enhanced protocol processing services, as well as CEI plan amendments by Bell Atlantic, BellSouth, SWBT, and U S West). xThe Commission rejected BOC arguments that it should treat protocol processing service as telecommunications services, noting that it had previously rejected similar argu X-ments in its Computer III Phase II Order.e T {O%-ԍ NonAccounting Safeguards Order, 11 FCC Rcd at 21957.e  Although the Commission observed that theoretically it would be possible to treat protocol processing services as telecommunications"> 0*((" services, that treatment would subject them to Title II regulation. Such theoretical possibilities were outweighed by other deregulatory policy considerations supporting the conclusion  X-that endtoend protocol processing services should be treated as information services.[! {OK-ԍ Id.  The Commission also stated that it had previously rejected treating protocol processing services as  {O-telecommunications services, in favor of treating them as enhanced services in the Computer III Phase II Order, 2 FCC Rcd at 3078, on the basis that protocol services were being effectively provided on a competitive, unregulated basis, and that reclassifying such services as basic services could cloud the regulatory boundary  {Oo-between basic and enhanced services. Id. at 21957 n.239.[  X-xThe Computer II and Computer III rules had treated three categories of protocol processing services as basic services, rather than enhanced services, because they result in no  Xx-net protocol conversion to the enduser. These categories include protocol processing: (1)  Xa-involving communications between an enduser and the network itself (e.g., for initiation, routing, and termination of calls) rather than between or among users; (2) in connection with the introduction of a new basic network technology (which requires protocol conversion to maintain compatibility with existing CPE); and (3) involving inter-networking (conversions taking place solely within the carrier's network to facilitate provision of a basic network  X -service, that result in no net conversion to the enduser)." ~! {O-ԍ  Frame Relay Order, 10 FCC Rcd at 13719 (paras 1416);  Computer III Phase II Order, 2 FCC Rcd at 308182. An example of the third type of protocol conversion occurs when a carrier converts from X.25 to X.75 formatted data at the originating end within the network, transports the data in X.75 format, and then converts the data back to X.25 format at the terminating end. The Commission again found that analogous treatment should be extended to these categories of "no net" protocol processing  X -services under the statutory regime.e h ! {O-ԍ NonAccounting Safeguards Order, 11 FCC Rcd at 21958.e Because "no net" protocol processing services are information service capabilities used "for the management, control, or operation of a telecommunications system or the management of a telecommunications service," they are excepted  X}-from the statutory definition of information service. Thus, "no net" protocol conversion services were held to constitute telecommunications services, rather than information services,  XO-under the 1996 Act.4O ! {O-ԍ Id. 4 x ADJUNCT Finally, the Commission found that services previously classified as "adjuncttobasic" should be classified as telecommunications services, rather than information services. In the  X-NATA Centrex order, the Commission held that the enhanced services definition did not  X-encompass adjuncttobasic services. ! {O$-ԍ Id. at 21958. Such treatment of "adjuncttobasic" services would correspond to the statutory definition of information services, which "does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service." 47 U.S.C.   {Ou&-153(20). See 47 C.F.R.  64.702(a); see also North American Telecommunications Association Petition for Declaratory Ruling under Section 64.702 of the Commission's Rules Regarding the Integration of Centrex,"?'0*((r'"  {O-Enhanced Services, and Customer Premises Equipment, ENF No. 842, Memorandum Opinion & Order, 101  {OZ-FCC 2d 349, 359361(1985) (NATA Centrex Order), recon., 3 FCC Rcd 4385 (1988) (NATA Centrex Reconsid {O$-eration Order); 47 U.S.C.  153(20). Adjuncttobasic services include, inter alia, speed dialing, call forwarding, computerprovided directory assistance, call monitoring, caller i.d., call tracing, call blocking, call return, repeat dialing, and call tracking, as well as certain Centrex features. Although the latter services may fall within the literal"?~0*((" reading of the enhanced service definition, they work to facilitate establishment of a basic transmission path over which a telephone call may be completed, without altering the fundamental character of the telephone service. Similarly, the Commission concluded that "adjuncttobasic" services are also covered by the "telecommunications management exception" to the statutory definition of information services, and therefore are treated as  X-telecommunications services under the 1996 Act.f~! {O -ԍ NonAccounting Safeguards Order, 11 FCC Rcd at 21958. f xApplying these definitions to BOCprovided Internet access services, the Commission concluded that, if a BOC's provision of an Internet or Internet access service, or any information service, incorporates a bundled, inregion, interLATA transmission component provided by a BOC over its own facilities or through resale, that service may only be provided through a section 272 separate affiliate, after the BOC has received inregion interLATA authority under section 271. For purposes of its decision, the Internet was described as follows: "The Internet is an interconnected global network of thousands of interoperable packetswitched networks that use a standard protocol, Transmission Control Protocol/Internet Protocol  X -(TCP/IP), to enable information exchange . . . . An enduser may obtain access to the Internet from an Internet service provider, by using dialup or dedicated access to connect to  Xy-an Internet backbone provider that carriers traffic to and from other Internet host sites."{y! {O:-ԍ Id. at 2196721968 & n.291. In denying an MFS request to consolidate issues relating to Bell Atlantic  yO-and Southwestern Bell Telephone's provision of Internet access services, the Commission also noted that the rulemaking was not the appropriate forum for considering whether the various specific Internet services provided by BOCs are "interLATA information services." Rather, such determinations must be made on a casebycase  {O\-basis in the context of the separate CEI plan proceedings regarding each service. Id. at 21967.{  XK- D.xBOC Safeguards Under Section 274 for Electronic Publishing  X4-  X- xThe Commission addressed the nonaccounting requirements of sections 260, 274 and 275 of the Communications Act, which cover telemessaging, electronic publishing, and alarm  X-monitoring services, respectively in a separate proceeding.^ ! {Od"-ԍ Implementation of the Telecommunications Act of 1996: Telemessaging, Electronic Publishing, and  {O.#-Alarm Monitoring Services, CC Docket No. 96152, First Report and Order and Further Notice of Proposed  {O#-Rulemaking, 12 FCC Rcd 5361 (1997) ("Telemessaging/Electronic Publishing Order"), recon. pending. Although "electronic publishing" is included in the definition of "information service" in section 3, section 274(g)(1) specifically allows a BOC to provide electronic publishing service disseminated by means of its basic telephone service only through a "separated affiliate" or an "electronic publishing joint venture" that meets the separation, joint marketing, and nondiscrimination requirements in that"@0*((" section.  X- x "Electronic publishing" is defined in Section 274(h)(1) as, "the dissemination, provision, publication, or sale to an unaffiliated entity or person, of any one or more of the following: news (including sports); entertainment (other than interactive games); business, financial, legal, consumer, or credit materials; editorials, columns, or features; advertising; photos or images; archival or research material; legal notices or public records; scientific, educational, instructional, technical, professional, trade, or other literary materials; or other like or similar information." Section 274(h)(2) excludes from the definition of electronic  X1-publishing, inter alia, common carrier provision of telecommunications service, information access service, information gateway service, voice storage and retrieval, electronic mail, certain data and transaction processing services, electronic billing or advertising of a BOC's regulated telecommunications services, language translation or data format conversion, "white pages" directory assistance, caller identification services, repair and provisioning databases, credit card and billing validation for telephone company operations, E 911 and other emergency assistance databases, and video programming and full motion video entertainment on  X-demand.H! yO -ԍ 47 U.S.C.  274(h)(1), (2).H  Xd-x The Telemessaging/Electronic Publishing Order found that electronic publishing services may include services provided through the Internet or through proprietary data networks. The Commission also clarified the scope of the "gateway" exception of section 274(h)(2)(C), which states that electronic publishing shall not include, "the transmission of information as part of a gateway to an information service that does not involve the generation or alteration of the content of information, including data transmission, address translation, protocol conversion, billing management, introductory information content, and navigational systems that enable users to access electronic publishing services, which do not affect  X-the presentation of such electronic publishing services to users."sX! {O-ԍ Telemessaging/Electronic Publishing Order, 12 FCC Rcd at 53805381.s xThe Commission concluded that a BOC's provision of access to introductory Web home pages, other types of introductory information, and software (such as browsers) does not constitute the provision of electronic publishing services under section 274(h)(2)(C). As long as a BOC merely provides access to a home page, or an initial screen that does not include any of the enumerated content types in section 274(h)(1), it is engaged in the provision of "gateway" services that section 274(h)(2)(C) excludes from the definition of electronic  X-publishing services.<! {O$-ԍ Id. at 5381.< The Commission stated that "end user software products, such as World Wide Web browsers, to the extent they enable users 'to access electronic publishing services' and do not themselves incorporate the content types listed in section 274(h)(1), also constitute" A|0*(("  X-"navigational systems" that are excepted from the definition of electronic publishing."B! {Oy-ԍ Id. at 5381.B  X- Hypertext "links," and other "pointers, from any gateway or navigational system to electronic publishing content are similarly "navigational" systems and thus are not electronic publishing  X-services under section 274(h)(1)."&Z! {O-ԍ Id. at 5381. The Commission defined a "hypertext link" is a reference from one document to another. On the World Wide Web, a user can select a link on one page and "jump" to a second page referenced by that  {OX-link. Telemessaging/Electronic Publishing Order, at para. 46 n.114, citing Wired Style: Principles of English  {O" -Usage in the Digital Age (Hale ed., 1996) at 49-50. Id.   X- x  X<E.xAccess Reform Order/Internet Usage NOI   Xw-  X`- x 1.` ` Access Charges  XI-x  X2- xIn providing interstate longdistance service, interexchange carriers ("IXCs") use local telephone company facilities to originate and terminate calls. The use of local telephone company facilities to originate and terminate longdistance calls is referred to as "access  X -service."  Under Part 69 of the Commission's rules, LECs receive access charges for providing IXCs with connections to the LEC's customers. The rules were designed to promote competition in the interstate, interexchange market by ensuring that all IXCs would be able to originate and terminate their traffic over incumbent LEC networks at just, reasonable, and  X-nondiscriminatory rates.&H! {O-ԍ See 47 C.F.R.  69.1 et seq. (Part 69). The Part 69 rules are designed to be consistent with the Commission's jurisdictional separations rules that govern the allocation of incumbent LECs' expenses and  {O-investment between the interstate and state jurisdictions. See Part 36 of the Commission's Rules; 47 C.F.R.   {O-36.1 et seq.  Xz- xIn 1983, the Commission determined that ESPs would be exempt from the access charge requirements, even though ESPs typically use the local exchange network to originate  X5-and terminate interstate communications.56 ! {O-ԍ  MTS and WATS Market Structure, Docket No. 7872, Memorandum Opinion and Order, 97 FCC 2d 682,  {O-71122 (1983) (Access Charge Reconsideration Order) (referring to origination and termination of interstate  {O-communications by enhanced service providers as "leaky" private branch exchange or "PBX" scenario). See also  {Oz -Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers, CC Docket No. 87 {OD!-215, Order, 3 FCC Rcd 2631 (1988) (ESP Exemption Order).  ESPs were classified as noncarrier "end users," exempt from Title II regulation generally. To obtain connections, ESPs generally pay local business rates and interstate subscriber line charges for their switched access connections to LEC central offices. ESPs also pay interstate special access surcharges under the"B0*(("  X-Commission's rules.$! {Oy-ԍ  Amendments of Part 69 of the Commission's Rules Relating to Enhanced Service Providers, Order, 3  {OC-FCC Rcd 2631 (para. 2 n.8) (1988);  see also MTS and WATs Market Structure, (para. 4); 47 C.F.R.  69.2(m)(1996) ("End User" means any customer of an interstate or foreign telecommunications service that is not a carrier).  X<x 2.` ` Access Reform Order  ; Internet Service Providers Will Continue to be  X-Treated as Access Service End Users  X-xThe Commission released its First Report and Order in the Access Charge Reform  Xy-proceeding on May 16, 1997.y! {O -ԍ Access Charge Reform; Price Cap Performance Review for Local Exchange Carriers; Transport Rate Structure and Pricing; Usage of the Public Switched Network by Information Service and Internet Access  {Op -Providers, CC Docket Nos. 92262, 941, 91213, 96263, Notice of Proposed Rulemaking; Third Report and  {O:-Order and Notice of Inquiry, 11 FCC Rcd 21354 (1996) (Access Reform Notice and Internet Usage NOI)  {O-(collectively, Access Reform proceeding); Access Charge Reform; Price Cap Performance Review for Local  {O-Exchange Carriers; Transport Rate Structure and Pricing; End User Common Line Charges, CC Docket Nos.  {O-92262, 941, 91213, 9572, First Report and Order, 12 FCC Rcd 15982 (1997) (Access Reform Order),  {Ob-affirmed, Southwestern Bell Telephone Company, et al. v. Federal Communications Commission, No. 972618, et  {O,-al. (8th Cir. 1998) available at: . The Access Reform Order concluded that the existing pricing structure for ISPs should remain in place, and that incumbent LECs will not be permitted to assess interstate perminute access charges on ISPs. In other words, ISPs would continue to  X6-be treated as access service end users, not as IXCs (i.e., telecommunications carriers), and would thus not be required to pay the carriertocarrier interconnection charges imposed under Part 69 of the Commission's Rules. Maintaining the existing pricing structure for ISP services was found to avoid disrupting the stillevolving information services industry and to advance the goals of the 1996 Act that the Internet remain free from regulation.  X -xIn support, the Access Reform Order noted that the access charge system still contains noncostbased rates and inefficient rate structures, and that the reforms instituted therein only  X-go part of the way to remove rate inefficiencies.Y ! {O-ԍ Access Reform Order, 12 FCC Rcd at 16133.Y "Moreover, given the evolution in ISP technologies and markets since the Commission first established access charges in the early 1980s, it is not clear that ISPs use the public switched network in a manner analogous to interexchange carriers. Commercial Internet access, for example, did not even exist when  X&-access charges were established."C &&! {O"-ԍ Id. at 16133.C The Commission further noted that many of the characteristics of ISP traffic (such as large numbers of incoming calls to Internet service providers)  X-may be shared by other classes of business customers.3 ! {Oa&-ԍ Id.3 In addition, the Commission was not convinced that the nonassessment of access charges results in ISPs imposing uncompensated"CJ 0*(("  X-costs on incumbent LECs.E ! {Oy-ԍ Id. at 1613316134. E The Access Reform Order noted that ISPs do pay for their connections to incumbent LEC networks by purchasing services under state tariffs. Incumbent LECs also receive incremental revenue from Internet usage through higher demand for second lines by consumers, usage of dedicated data lines by ISPs, and subscriptions to incumbent  X-LEC Internet access services._ ZZ! yO-ԍ The Commission observed that, to the extent that some intrastate rate structures fail to compensate incumbent LECs adequately for providing service to customers with high volumes of incoming calls, incumbent  {OA -LECs may address their concerns to state regulators. Id. at 16134. _  Xx-x Finally, the Commission rejected incumbent LEC allegations that network congestion  Xa-warranted imposition of interstate access charges on ISPs.E a|! {O -ԍ Id. at 16134. E Rather, it observed that the extent to which this usage creates congestion depends on the ways in which incumbent LECs provision their networks, and ISPs use those networks. "Incumbent LECs and ISPs agree that technologies exist to reduce or eliminate whatever congestion exists; they disagree on what pricing structure would provide incentives for deployment of the most efficient technolo X -gies."3 ! {O-ԍ Id.3 The Commission found that the public interest would best be served by policies that foster such technological evolution of the network. The access charge system was designed for basic voice telephony provided over a circuitswitched network, and even when stripped of its current inefficiencies it may not be the most appropriate pricing structure for Internet  X-access and other information services. As reflected below, the Commission pledged to consider solutions other than the imposition of access charges to solve any Internetrelated  Xd-network congestion. In the meantime, ISPs would remain classified as end users for purposes  XM-of the access charge system.KM! {O-ԍ Id. at 1613416135. K The Access Reform Order was affirmed on review by the  X8-United States Court of Appeals for the Eighth Circuit.P82 ! {O-ԍ See note 263, supra.P  X < x3.` `   Internet Usage NOI ; Inquiry Begun on Broader Issues  X-  X- xThe focus of the Internet Usage NOI was whether the Commission should consider  X-additional actions relating to interstate information services and the Internet. The Commission acknowledged that it must consider the broader question of how its rules can provide incentives for investment and innovation in the underlying networks that support the Internet and  X-other information services.^ ! {O&-ԍ Internet Usage NOI, 11 FCC Rcd at 2149021491.^ The Commission found that the development of the Internet and"DV 0*((_" other information services raise many critical questions that go beyond their relation to the interstate access charge system. "Ultimately, these questions concern no less than the future of the public switched telephone network in a world of digitalization and growing importance of data technologies. Our existing rules have been designed for traditional circuitswitched voice networks, and thus may hinder the development of emerging packetswitched data net X-works."=! {O-ԍ Id. at 21491.= To avoid this result, the Commission sought to identify policies that would best facilitate the development of future highbandwidth data networks, while preserving efficient  X_-incentives for investment and innovation in the underlying voice network. 9_Z! {Oj -ԍ Id.9  X1-xThe Internet Usage NOI recognized that because virtually all residential users today connect to the Internet a packetswitched data network through incumbent LEC switching facilities designed for circuitswitched voice calls, issues regarding switch congestion would  X -arise. It noted that endtoend dedicated channels created by circuit switches are often unnecessary and inefficient when used to connect an end user to an ISP. The Commission sought comment on how its rules can most effectively create incentives for the deployment of  X -services and facilities to allow more efficient transport of data traffic to and from end users.= ! {OF-ԍ Id. at 21491.= In addition, comment was sought on what regulatory barriers at either the state or federal level might prevent provision of alternate network access arrangements for information service providers, or might create artificial dis-incentives against use of such arrangements  XM-when they become available.9M~! {O|-ԍ Id.9  X-xThe Commission recognized that the current division in its rules between basic and enhanced services may not accurately capture the types of companies that provide information  X-services today, and the manner in which these companies use incumbent LEC facilities.C! {O-ԍ Id. at 21492.C It noted that there are many kinds of information services, with different usage patterns and  X-effects on the network, and sought comment on whether it should distinguish between  X-different categories of information or enhanced services. The Commission sought comment on how new services such as Internet telephony, as well as realtime streaming audio and video services over the Internet, should affect its analysis. It observed that another new service, "Internet telephony" (also referred to as "Internet Protocol" or "IP telephony") allows what appears to be a basic service voice transmission to take place over a packet"PE0*(("ԫ X-switched interactive data network traditionally considered to be an enhanced service.9\! {Oy-ԍ Id. The Commission also stated that it planned to address the legal questions about Internet telephony  {OC-raised in the ACTA Petition, and broader issues about the continued viability of its basic/enhanced dichotomy, in separate proceedings.9 This proceeding remains pending before the Commission.  X-  X-F.xReport to Congress (Universal Service)  X-xOn November 26, 1997, in an Appropriations Act, the Commission was directed to report to Congress on certain aspects of the Commission's implementation of certain provi X_-sions of the 1996 Act regarding the universal service system.X_! yO -Ѝ Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act, 1998, Pub. L. No. 105119, 111 Stat. 2440, 25212522,  623 (the "Appropriations Act"). Specifically, the Appropriations Act requires the Commission to submit a report to Congress, no later than April 10, 1998. Among other things, the Appropriations Act directed the Commission to review "the definitions of 'information service,' 'local exchange carrier,' 'telecommunications,' 'telecommunications service,'  X -'telecommunications carrier,' and 'telephone exchange service.'"O ! {O-ԍ Report to Congress at para. 13.O It also required the Commission to review "the application of those definitions to mixed or hybrid services and the impact of such application on universal service definitions and support, and the consistency of the Commission's application of those definitions, including with respect to Internet  X -access under section 254(h)."F ! {O -ԍ Id. at para. 14.F The Commission was directed to review its decisions regarding "who is required to contribute to universal service under section 254(d)" as well as who is eligible to receive support under sections 254(e), 254(h)(1), and 254(h)(2) of the  Xy-Act.Ey0 ! {OZ-ԍ Id. at paras. 16, 17.E  XK-xThe April 10, 1998 Report to Congress focused on the Commission's implementation  X6-of the definitions relevant to universal service.E6 ! {O-ԍ Id. at para. 6.E It revisited many of the Commission major decisions related to implementing the 1996 Act, with particular regard to the manner in which the regulatory classification of Internet and "information" services visavis "telecommunications" services impact on the current and future provision of universal service. x xAt the outset, the Commission reiterated that the 1996 Act carried forward the ba X-Ԛsic/enhanced framework established under Computer II and reflected in the MFJ: XxX` ` [T]he categories of "telecommunications service" and "informa"FT 0*((P"Ԯtion service" in the 1996 Act are mutually exclusive. . . . Congress intended these new terms to build upon frameworks established prior to the passage of the 1996 Act. Specifically, we find that Congress intended the categories of "telecommunications service" and "information service" to be mutually exclusive, like the definitions of "basic service" and "enhanced service"  Xv-developed in our Computer II proceeding, and the definitions of "telecommunications" and "information service" developed in the Modification of Final Judgment that divested the Bell Operating Companies from AT&T. We recognize that the 1996 Act's explicit endorsement of the goals of competition and deregulation represents a significant break from the prior regulatory framework. We find generally, however, that Congress intended to maintain a regime in which information service providers are not subject to regulation as common carriers merely because they  X -provide their services "via telecommunications."S ! {O"-ԍ Id. at para. 13 (footnote omitted).Sx` xWith respect to the application of these definitions to "mixed or hybrid services," the  Xd-Report concluded that "entities providing pure transmission capacity to Internet access or backbone providers provide interstate 'telecommunications.' Internet service providers  X8-themselves generally do not provide telecommunications."F8Z! {OC-ԍ Id. at para. 55.F In those cases where an Internet service provider owns transmission facilities, and engages in data transport over those facilities in order to provide an information service, the Commission does not currently  X-require contributions to universal service, but stated that it may reconsider this in the future.3! {O-ԍ Id.3 Finally, with respect to what it described as "phonetophone IP [Internet Protocol] telepho X-ny," the Report tentatively found "that certain of these services lack the characteristics that would render them 'information services' within the meaning of the statute, and instead bear  X-the characteristics of 'telecommunications services.'"3 ~! {O-ԍ Id.3  Xk-xThe Report to Congress also noted: XxX` ` [t]he phrase 'mixed or hybrid services,' as used in the Appropriations Act, does not appear in the text of the 1996 Act. We understand these terms to refer to services in which a provider offers a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing or making available informa"G 0*((;"Ԯ X-tion via telecommunications, and as an inseparable part of that service transmits information supplied or requested by the us X-er."F!! {OM-ԍ Id. at para. 56.F x`  X-By reference to its Computer II decision, the Commission concluded that, despite the inclusion of a "telecommunications" component, "hybrid services are information services, and  Xz-are not telecommunications services."@"zZ! {O -ԍ Id. at para. 57.@ "An offering that constitutes a single service from the end user's standpoint is not subject to carrier regulation simply by virtue of the fact that it  XL-involves telecommunications components."x#L! {O -ԍ Id.; citing Computer II Final Decision, 77 FCC 2d at 42028.x Characterizing this as a "functional approach," the Commission stated that it is consistent with "Congress' direction that the classification of  X -a provider should not depend on the type of facilities used."@$ ~! {OM-ԍ Id. at para. 58.@ Thus, in the difficult case of classification of the services offered by facilitiesbased providers, the question becomes,  X -"'functionally, [is] the consumer receiving two separate and distinct services.'"%& ! {O-ԍ Id. at para. 60, quoting FederalState Joint Board on Universal Service, Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, Transport Rate Structure and Pricing, End User Common  {OC-Line Charge, CC Docket No. 9645, CC Docket Nos. 96262, 941, 91213, 9572, Fourth Order on Reconsider {O -ation, FCC 97420 (released Dec. 30, 1997) (Fourth Order on Reconsideration) at para. 282.  x  X -xThe Report to Congress states: "[m]ore generally, Internetbased offerings represent  X -perhaps the most significant category of 'mixed or hybrid services.'"O& ! {O\-ԍ Report to Congress at para. 61.O The Report describes the Internet as "a loose interconnection of networks belonging to many owners. It is comprised of tens of thousands of networks that communicate using the Internet Protocol  Xj-(IP)."@'j ! {O-ԍ Id. at para. 62.@ For purposes of the Report, the Commission found it "useful to distinguish five types of [Internet] entities: (1) end users; (2) access providers; (3) application providers; (4) content  X>-providers; and (5) backbone providers."3(>"! {O"-ԍ Id.3 The Commission explained that in the Report, it was using the terms "Internet access providers" and "Internet service providers" interchangeably, and that "access services," as described therein, "are similar to the 'conduit services,'"  X-the Commission defined in the Universal Service Order.F)! {O`&-ԍ Id. at para. 63 n.125.F "Application providers" are those who "offer users a discrete endtoend service rather than openended Internet connectivity,""HF)0*((&"  X-and examples include IP telephony and email service providers.@*! {Oy-ԍ Id. at para. 63.@ "Content providers," "make information available by 'servers' connected to the Internet, where it can be accessed  X-by end users."3+Z! {O-ԍ Id.3 The Commission also recognized that "[m]any companies fall into more  X-than one of these categories."3,! {OX-ԍ Id.3  X-xThe Report to Congress notes that ISPs "typically utilize a wide range of telecommunications inputs," including purchases of analog and digital lines from LECs to connect their dialin subscribers, and leased lines (T1s, T3s and OC3s) from telecommunications carriers  XJ-(e.g.,, IXCs) and also interconnection arrangements with one or more Internet backbone  X5-providers.F-5~! {Od-ԍ Id. at para. 66.F ISPs "themselves provide information services, not telecommunications (and hence do not contribute to universal service mechanisms)," but to the "extent that any of their underlying inputs constitutes interstate telecommunications," the Commission would have authority to require that the providers of those inputs contribute to federal universal service  X -mechanisms."3. ! {O-ԍ Id.3 In the context of its discussion of the issues regarding a facilitiesbased ISP's "furnishing of raw transmission capacity to itself," which would arguably constitute the  X -provision of "telecommunications,"@/ ! {O-ԍ Id. at para. 70.@ the Commission stated that it expressed no view on the  X-applicability of this analysis to cable operators providing Internet access service. The Report  X-specifically declined to establish the regulatory classification of Internet services provided  Xh-over cable television facilities.F0h4 ! {OM-ԍ Id. at para. 69 n.140.F  X:-xThe Report to Congress recognized that Internet access service has data transport  X%-elements; information processing elements; and information content elements.@1% ! {O -ԍ Id. at para. 80.@ In the context of Internet services obtained by means of dialup connections over the public switched telephone network, the Commission has stated that it would be incorrect to conclude that  X-Internet access providers offered subscribers separate activities (e.g., email, web browsing, etc.) that should be deemed to have separate legal status, so that, for example, email might be treated as a "telecommunications service," but web hosting treated as an "information service." XxX` ` The service that Internet access providers offer to members of"IX 10*((" the public is Internet access. That service gives users a variety of advanced capabilities. Users can exploit those capabilities through applications they install on their own computers. The Internet service provider often will not know which applications a user has installed or is using. Subscribers are able to run those applications, nonetheless, precisely because of the enhanced  Xv4functionality that Internet access services gives to them.@2v! {O'ԍ Id. at para. 79.@ x`  XH4The Report to Congress notes that an Internet access provider, in essential aspect, looks much like other enhanced or information service providers, in that, an Internet access provider typically owns no telecommunications facilities of its own; it "conjoin[s] data transport with data processing, information provision, and other computermeditated offer X 4ings;" and thereby creates an information service provided to the end user.F3 Z! {O'ԍ Id. at para. 81.F The Commission stated that its findings with respect this regulatory classification "are reinforced by the negative policy consequences of a conclusion that Internet access services should be classified as 'telecommunications,'" in light of the "significant consequences for the global development  X4of the Internet."@4! {O/'ԍ Id. at para. 82.@ Significantly, the Commission stated: "[w]e recognize the unique qualities of the Internet, and do not presume that legacy regulatory frameworks are appropriately  Xd4applied to it."35d~! {O'ԍ Id.3 Nonetheless, the Commission recognized that despite its conclusions that Internet access providers do not offer "telecommunications service," when they furnish Internet access to their customers, it must also consider whether certain other Internetbased services might  X4fall within the statutory definition of "telecommunications."F6! {O'ԍ Id. at para. 83.F The Commission stated that  X4"IP telephony" services "enable realtime voice transmission using Internet protocols,"[7! {O- 'ԍ Id. at para. 84. "The services can be provided in two basic ways: through software and hardware at customers premises, or through "gateways" that enable applications originating and/or terminating on the PSTN. Gateways are computers that transform the circuitswitched voice signal into IP packets, and vice versa, and perform associated signalling, control, and address translation functions. The voice communications can be  {OO#'transmitted along with other data networks for improved performance." Id. (footnotes omitted).[ and  X4that it had not yet considered the legal status of IP telephony.8Z\V ! {O%'ԍ Id. at para. 83. The Commission noted that many of the issues addressed in the Report regarding IP telephony were also raised in the pending ACTA petition seeking a declaration that IP telephony software and hardware providers be classified as common carriers, and stated that it would be considering the petition directly"\'70*((j'"  {O'in a separate order. Id. at n. 172, citing Common Carrier Bureau Clarifies and Extends Request for Comment on  {OZ'ACTA Petition Relating to "Internet Phone" Software and Hardware RM 8775, Report No. CC 9610 (March 25, 1996). The Commission clarified"J80*((" that when it uses the term "phonetophone" IP telephony, it tentatively intends to refer to services in which the provider meets the following conditions: XX` ` (1) [the provider] holds itself out as providing voice telephony or facsimile transmission service; (2) it does not require the customer to use CPE different from that CPE necessary to place an ordinary touchtone call (or facsimile transmission) over the public switched telephone network; (3) it allows the customer to call telephone numbers assigned in accordance with the North American Numbering Plan, and associated international agreements; and (4) it transmits customer information without net  X 4change in form or content.@9 ! {O'ԍ Id. at para. 88.@ x` The Commission found that there are certain services provided over the Internet, such as "phonetophone" IP telephony, may be offered to the public in a manner that makes them functionally indistinguishable from traditional voice telephone services. In the future, it stated that it may be appropriate to classify such services as "telecommunications" rather than "information" services, and subject them to certain Title II regulatory requirements. The Commission deferred making more definitive conclusions in the absence of a more complete  XK4record focused on particular cases.J:K~! {Oz'ԍ Id. at paras. 8891.J In contrast, the Commission found that the provision of "computertocomputer" IP telephony, through which individuals use software and hardware at their premises to place calls between two computers connected to the Internet, did not constitute the provision of  X4"telecommunications" under the Act.F;! {O'ԍ Id. at para. 87.F The Commission observed that "Internet service providers over whose networks the information passes may not even be aware that particular customers are using IP telephony software, because IP packets carrying voice communications  X4are indistinguishable from other types of packets."3<! {O"'ԍ Id.3 In that case, the "Internet service  X|4provider does not appear to be 'provid[ing]' telecommunications to its subscribers."3=|4 ! {Oa%'ԍ Id.3   XN4The Report to Congress also examined the policy implications of the foregoing scheme"NK =0*((" of regulatory classification, and concluded that the "Internet and other enhanced services have been able to grow rapidly in part because the Commission concluded that enhanced service providers were not common carriers within the meaning of the Act. This policy of distinguishing competitive technologies from regulated services not yet subject to full competition  X4remains viable."O>! {O'ԍ Id. at para. 95. O The Commission further found that Congress, "by distinguishing 'telecommunications service' from 'information service,' and by stating a policy goal of preventing the  Xv4Internet from being fettered by state or federal regulation, endorsed this general approach."l?vZ! {O 'ԍ Id. at para. 95; 47 U.S.C.  230(b)(1)(2). l At the same time, the Commission recognized that it is critical to make sure that its interpretation of the statute will continue to sustain universal service in the future. It acknowledged arguments that, as new communications services such as Internet access and IP telephony grow, traffic will shift away from conventional telecommunications services, thus draining the support base for universal service. The Commission stated that, in order to promote equity and efficiency, it should avoid creating regulatory distinctions based purely on technology, and reiterated its view that Congress did not limit "telecommunications" to circuitswitched wireline transmission, but instead defined that term on the basis of the essential  X4functionality provided to users.@! {O-'ԍ Id. at para. 95; see 47 U.S.C.  153(46) ("The term 'telecommunications service' means the offering of  {O'telecommunications for a fee directly to the public . . . regardless of the facilities used.") (emphasis added). See  {M'also American Telephone and Telegraph Company, For Authority under Section 214 of the Communications Act of 1934, as amended, to Install and Operate Packet Switches at Specified Telephone Company Locations in the  {OQ'United States, Memorandum Opinion, Order and Authorization, 94 FCC 2d 48 (1983) (BPSS) (classifying pure packet switching as a basic service).  Xb4The Report to Congress further addressed providers of pure transmission capacity used for Internet services, and concluded that these entities provide services that meet the legal  X64definition of "telecommunications."FA6j ! {OQ'ԍ Id. at para. 98.F In addition, to the extent the Commission were to conclude that certain forms of phonetophone IP telephony are "telecommunications," and to the extent that providers of such services are offering those services directly to the public for a fee, those providers would be "telecommunications carriers." Accordingly, those providers would fall within section 254(d)'s mandatory requirement to contribute to universal service  X4mechanisms.3B ! {Op#'ԍ Id.3 The Report to Congress finds that, if such providers are exempt from universal service contribution requirements, users and carriers might have an incentive to modify networks to shift traffic to Internet protocol and thereby avoid paying into the universal service fund. In the near term, they might avoid payment of the universal service contributions embedded in interstate access charges. If that occurs, it could increase the"iL B0*((" burden on the more limited set of companies still required to contribute, which, in turn, could  X4well undermine universal service. At this time, however, the Report to Congress found that there is no evidence that there is an immediate threat to the sufficiency of universal service  X4support. 3C! {O6'ԍ Id.3  X' G.Summary  Regulatory classification of any service provided over the Internet that is functionally similar to more traditional services provided over conventional networks may depend not only upon the functionality it provides the end user/subscriber, but also upon how the service is positioned in the marketplace. The Commission's main focus is clearly upon whether, functionally, the subscriber is receiving two separate and distinct services, or is receiving one service consisting of integrated communications components. Traditionally, the Commission's answers to such questions have been influenced by the policy implications that classification as a regulated versus nonregulated service would entail.  X4With the exception of the analytical approach initiated in the Report to Congress on universal service issues, all of the 1996 Act proceedings discussed above largely assume the answers to fundamental questions about the nature of Internet access and Internetbased content and information services by concluding that they are synonymous with the more familiar category of enhanced services. The initiation of its other recent proceedings,  X!4including the Internet NOI, and the expansion of the Computer III further remand proceeding to reflect changes and requirements under the 1996 Act, should provide the Commission a much needed opportunity to review, in a more holistic fashion, its existing rules and policies with respect to the Internet. Significantly, the important question that none of these, or other Commission proceedings has directly addressed, is whether cable Internetbased services may receive significantly different regulatory treatment as Title VI services.  X4  ă  X4 8 V. EVOLUTION OF CABLE SERVICE ă  Xk4  XT' A.Definition of "Cable Service" Under the 1984 Cable Act  X&4When cable television service (known then as community antenna television or "CATV") began in the 1950's, the Commission initially determined that it did not have jurisdiction to regulate the new service under the Communications Act, as it was neither clearly a wire common carriage service governed by Title II (wire communications), nor a radio broadcast communications service, governed by Title III (radio/broadcast communica X!4tions).D\!Z! {O%'ԍ See Frontier Broadcasting Co. v. Collier, 24 FCC 251 (1958), reconsideration denied, Report and Order,  {O&'Docket No. 12443, 26 FCC 403, 428 (1959); United States v. Southwestern Cable Co., 392 U.S. 157, 164 (1968) (according to the FCC, cable systems are "neither common carriers nor broadcasters, and therefore are within"R'C0*((^'" neither of the principal regulatory categories created by the Communications Act"). In 1966, the Commission reconsidered and began to regulate the cable industry.E!X! {O 'ԍ See Malrite T.V. of New York v. FCC, 652 F.2d 1140, 114344 (2d Cir. 1981). "!ME0*((% " The Supreme Court approved, to the extent that the Commission's regulations are "reasonably ancillary to the effective performance of the Commission's responsibilities for the regulation  X4of television broadcasting."YF! {Om'ԍ Southwestern Cable. Co., 392 U.S. at 164.Y In order to prevent telephone company abuse of control over local network facilities, and to preserve a competitive environment for the development and use of broadband cable facilities and services, the Commission adopted regulations prohibiting telephone companies  X_4from directly providing cable television to subscribers.G(_|! {O 'ԍ See Telephone CompanyCable Television CrossOwnership Rules, Sections 63.5463.58, 2 FCC Rcd  {OV'5092 (1987); see also Applications of Telephone Common Carriers for Section 214 Certificates for Channel  {O 'Facilities Furnished to Affiliated Community Antenna Television Systems, 21 FCC 2d 307, reconsideration in  {O'part, 22 FCC 2d 746 (1970); 47 C.F.R.  63.5463.58. In 1972, the Commission created a comprehensive, dual regulatory regime whereby the state or local government issued franchises, while the Commission exercised "exclusive authority over all operational aspects of cable communication, including technical standards  X 4and signal carriage.H l ! {O 'ԍ See New York State Comm'n on Cable Television v. FCC, 749 F.2d 804, 809 (D.C.Cir. 1984). In 1984, Congress enacted legislation expressly designed to (de)regulate cable television, establish the boundaries of federal, state and local authority over cable systems, and establish franchise procedures and standards to encourage the growth and  X 4development of cable systems. The 1984 Cable Act, inter alia, exempted cable television operators from common carrier regulation insofar as they provide "cable service," preserved  X{4the local franchising system, and codified the telephonecable crossownership restrictions.nI{ ! {O*'ԍ See 47 U.S.C.  541(c), 541(a)(2) and 533(b)(1)(b)(4).n  XM4One of the driving factors behind the 1984 Act was the recognition that cable systems were capable of delivering both traditional oneway televisionlike programming and twoway  X4data and voice transmission services.>J ! {O`!'ԍ H.R. Rep. No. 934, 98th Cong., 2d Sess. 1923 (House Report) ("[L]ocal cable systems began to develop the capability to provide services other than those essentially resembling television broadcast. This included twoway communications services through which subscribers could call up programming or communicate over the cable system, and institutional networks with the capacity to provide the full range of communications and data transmission services to government and educational institutions and private businesses").> The definition of "cable service" was developed to prevent cable systems delivering video programming from being treated as common carriers, while preserving existing federal and state authority to develop a regulatory scheme for the cable operators' expected future provision of nontraditional broadband communications"NBJ0*(({" services. Of particular concern with respect to cable's increasing capacity for twoway transmission services was the effect of telephone subscriber bypass of the regulated local exchange networks in favor of the potentially unregulated provision of competing voice and data services by the cable companies. Such bypass might leave the phone companies subject to universal service obligations, but lacking the revenues to support them, ultimately resulting  X4in local telephone service rate increases. lK\! {O'ԍ See House Report at 2729. The House Report cited several ongoing proceedings at the federal and  {O'state level examining, inter alia, regulatory approaches to alternative suppliers of local private line services, including cable operators, and the question of local exchange bypass.l The 1984 Cable Act defined the term "cable service" as the oneway transmission to subscribers of video programming or other programming service together with subscriber interaction, if any, which is required for the selection of such programming. The term "video programming" was defined as programming provided by, or generally considered comparable  X 4to programming provided by, a television broadcast station.BL ! yO'ԍ 47 U.S.C.  522(20). B The term "other programming service" was defined as information that a cable operator makes available to all subscribers  X 4generally.AM |! yO'ԍ 47 U.S.C.  522(14).A Further light on the nature of cable services under the statute comes from the definition of "basic cable service," also contained in section 602. Section 602(4) defines "basic cable service" as "any service tier which includes the retransmission of local television  X4broadcast signals."@N ! yOM'ԍ 47 U.S.C.  522(4).@ The term "cable system" is defined as: "a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to  X4multiple subscribers within a community . . . ."O@! yOj'ԍ 47 U.S.C.  522(7). The definition also specifically excludes certain facilities, as follows: "(A) a facility that serves only to retransmit the television signals of 1 or more television broadcast stations; (B) a facility that serves subscribers without using any public rightofway; (C) a facility of a common carrier which is subject, in whole or part, to the provisions of title II of this Act, except that such facility shall be considered a cable system (other than for purposes of section 621(c)) to the extent such facility is used in the transmission of video programming directly to subscribers, unless the extent of such use is solely to provide interaction ondemand services; (D) an open video system that complies with section 653 of this title; or (E) any facilities of any electric utility used solely for operating its electric utility systems."  The term "cable operator" is defined to mean, "any person or group of persons (A) who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system, or (B) who otherwise controls or is responsible for, through any arrangement, the management"OO0*(({"  X4and operation of such a cable system.@P! yOy'ԍ 47 U.S.C.  522(5).@ The legislative history states that the Committee intended its definition of cable service "to mark the boundary between those services provided over a cable system which would be exempted from common carrier regulation under section 621(c) and all other communications  X4services that could be provided over a cable system."IQX! {O'ԍ House Report at 41.I The House Report explains that the Committee intended to "exempt video programming from common carrier regulation in accordance with the traditional conception that the oneway delivery of television programs, movies, sporting events and the like is not a common carrier activity. Other programming services that make nonvideo information generally available to all subscribers are included as cable services because they are sufficiently like video programming to warrant a similar  X 4regulatory exemption.":R ! {O'ԍ Id. : Further, the legislation did XX` ` not affect existing regulatory authority over the use of a cable system to provide noncable communications services, such as private line data transmission or voice communication, that compete with services provide by telephone companies. Thus, the definition of other programming services requires that the information provided in a cable service must be made available to all subscribers generally and may not include information that is subscriber specific. If information transmitted over a cable system is made available only to an individual subscriber or to a discrete group of subscribers, the transmission of this information  X4is not a cable service.CS|! {O'ԍ Id. at 4142.Cx` In contrast, information that is of interest or use to only a particular class of customers may still be offered over a cable system as a cable service as long as it is made generally  X4available to all subscribers. The House Report gives as an example of a "cable service" the offering to all subscribers, for use on personal computers, the transmission or downloading of computer software (such as computer or video games or statistical packages). The fact that such service would only be of interest and use to those cable customers who possess a personal computer, and the fact that the downloaded software could be used on such personal computers for a wide variety of purposes (including calculation and word processing) would not make the transmission or downloading of the software a noncable communications  X4service.@T! {O''ԍ Id. at 42.@ "PT0*(("Ԍ X4ԙThe House Report also cautions that the requirement that cable operators "make available" the information in a cable service to all subscribers generally is not intended as a requirement that the cable operator actually create the information. "Accordingly, the provision of information over a cable system by a channel lessee or by the cable operator through a joint venture or other commercial arrangement would be a cable service if it met all  X4other criteria for being a cable service."@U! {O'ԍ Id. at 42.@ The distinction between cable service and other services offered over cable systems "is based upon the nature of the service provided, not upon a technological evaluation of the twoway transmission capabilities of cable systems. For instance, any service that allows customers to buy a product by sending a signal over cable facilities, regardless of the precise mechanism used to transmit the signal, would not be  X 4a cable service."CV Z! {O' 'ԍ Id. at 4243.C  X 4The House Report contains an extensive discussion of what nontraditional cable services fall within the statutory definition of cable services, and which services would be excluded. In general, all services offered by a cable system that "go beyond providing generallyavailable video programming or other programming are not cable services." Thus, "services providing subscribers with the capacity to engage in transactions or to store, transform, forward, manipulate, or otherwise process information or data would not be cable  Xf4services."@Wf! {O'ԍ Id. at 42.@ For example, a cable service may not include "active" information services such as athome shopping and banking that allow transactions between subscribers and cable operators or third parties. Similarly, a cable service XX` ` may not provide subscribers with the capacity to communicate instructions or commands to software programs such as computer or video games or statistical packages that do not retrieve information and that are stored in facilities off the subscribers' premises. For this reason, a service that makes available the capaci X4ty to calculate the Dow Jones average using software located off the subscribers' premises could not be carried by a cable system as a cable service, even though a service that makes the Dow Jones average available to all subscribers would be a cable  X=4service.OX=~! {Ol#'ԍ Id. at 42 (emphasis original).Ox` However, the Committee intended to permit a cable service to include interaction between the subscriber and the cable operator or a thirdparty for the limited purpose of  X4selecting information provided in other nonvideo programming services. The House Report"QX0*((" further distinguishes the type of subscriber interaction permitted in a cable service, the capacity to retrieve information, from the interaction that is excluded the capacity to engage in "offpremises data processing." XX` ` The Committee intends that the interaction permitted in a cable service shall be that required for the retrieval of information from among a specific number of options or categories delineated by the cable operator or the programming service provider. Such options or categories must themselves be created by the cable operator or programming service provider and made generally available to all subscribers. By contrast, interaction that would enable a particular subscriber to engage in the offpremises creation and retrieval of a category of information would not fall  X 4under the definition of cable service.%YZ ! {ON'ԍ Id. at 4243. It appears that "other nonvideo programming services" in this context refers to services such as transmission and downloading of computer software and video games to the subscriber's personal computer, discussed previously.%x`  X 4The House Report gives as an example of interaction permitted in cable services, "simple menu selection," and keyword information retrieval from presorted data bases in accordance with a specific index of key words. Such subscriber requests for information would not activate a sorting program and would not produce a subset of data individually tailored to the subscriber's request. "Rather the information would already be sorted into a specific, limited number of options, all of which would themselves be generally available to  X4all subscribers."=Z! {O'ԍ Id. at 4344.= In contrast, unlimited keyword searches of information stored in data bases would not be included as cable services because such unlimited interaction goes beyond  X4information retrieval and becomes a variety of data processing.@[|! {O'ԍ Id. at 44.@ Using these criteria, specific examples of cable services given were: "video programming, payperview, voter preference polls in the context of a video program video rating services, teletext, oneway transmission of any computer software (including, for example, computer or video games) and oneway videotex[t] services such a[s] news services, stock market information, and online airline guides and catalog services that do not allow customer  XP4purchases."@\P! {O$'ԍ Id. at 44.@ Specific examples of noncable services given were: "shopathome and bankathome services, electronic mail, oneway and twoway transmission on [sic] nonvideo data and information not offered to all subscribers, data processing, videoconferencing, and all""R\0*((<"  X4voice communications."3]! {Oy'ԍ Id.3 The House Report observed that many contemporary commercial  X4information services offer a package of services, some of which would be cable services (e.g..  X4news and stock listings) and some of which would not be cable services (e.g., email and data processing). Nonetheless, while cable operators would be permitted under the provisions of Title VI to provide any mixture of cable and noncable services they chose, the manner in which a service was marketed would not alter its regulatory status as either a cable or non X|4cable service.3^|Z! {O 'ԍ Id.3  XN4Consistent with the definition of cable services, the House Report explained that the definition of "cable system" in section 602 would apply by its terms regardless of the fact that the system was utilized to provide both cable and noncable communications services. "The term 'cable system' is not limited to a facility that provides only cable service which includes video programming. Quite the contrary, many cable systems provide a wide variety of cable services and other communications services as well. A facility would be a cable system if it were designed to include the provision of cable services (including video programming) along  X 4with communications services other than cable service.":_ ! {OL'ԍ Id. at 44.:  X4 B.    "Cable Service" and "Cable System" Under Heritage Prior to the 1996 Act, Section 224 empowered the Commission to adjudicate disputes between cable television system operators and telephone and electric utilities concerning  X&4alleged unjust and unreasonable pole attachment rates, terms and conditions. In a pole  X4attachment complaint proceeding, referred to herein as "Heritage,"`^~! {O>'ԍ Heritage Cablevision Associates of Dallas, L.P., and Texas Cable TV Association, Inc. v. Texas Utilities  {O'Electric Company, Memorandum Opinion and Order, 6 FCC Rcd 7099 (1991) (Heritage), recon. dismissed, 7  {O'FCC Rcd 4192 (1992), affirmed, Texas Utils. Elec. Co. v. FCC, 997 F2d 925 (D.C. Cir. 1993). the Commission addressed a cable operator's claim that an electric utility unjustly and unreasonably imposed a separate charge for the attachment of facilities employed to provide non-video broadband  X4communications services (e.g. data transmission services), in addition to the regulated rate that the utility had assessed the cable operator and its predecessor. The Commission adopted an expansive definition of a "cable system" for purposes of defining the scope of protection afforded cable system operators attaching their facilities to utility poles under section 224 of  Xr4the Act, as amended in 1978.a$\r! yO$'ԍ Pub. L. No. 95234,  6, 92 Stat. 33, 35 (codified as amended at 47 U.S.C.  224) ("Pole Attachments  {O%'Act"). Heritage, 6 FCC Rcd at 710102. The Supreme Court has found that Congress enacted this legislation "as a solution to a perceived danger of anticompetitive practices by utilities in connection with cable television  {O!''service." FCC v. Florida Power Corp., 480 U.S. 245, 247 (1987). By conferring jurisdiction on the Commis"!'`0*((*'"Ԯsion to regulate pole attachments, Congress sought to constrain the ability of telephone and electric utilities to  {OX'extract monopoly profits from cable television system operators in need of pole space. Id. at 24748. See also  {O"'Alabama Power Co. v. FCC, 773 F.2d 363, 364 (D.C. Cir. 1985)"rSa0*(("ԌFor purposes of clarity, and consistent with the 1984 Cable Act, the Commission  X4defined the terms "conventional" or "traditional" cable service as used in Heritage: to refer to the delivery of television broadcast signals, cablecast or access programming, or other video programming by cable television systems to subscribers. Excluded from this category are non-video and other services not associated with the provision or selection of conventional or traditional cable services, such as electronic mail delivery, facsimile transmissions and other data transmission services. The Commission rejected TU Electric's challenge to the Commission's jurisdiction to resolve the dispute under section 224, on the grounds that Congress had not intended section 224 to reach only those pole attachments supporting equipment employed exclusively to distribute television broadcast signals and other video  X 4programming.]b ! {O'ԍ Heritage, 6 FCC Rcd at 7099 n.2., 7102.] The Commission found that nothing in the legislative history of section 224 supported a conclusion that protection for traditional cable television service was Congress' exclusive concern. Although there was no explicit discussion of the issue in the House Report, the  X 4Senate Report had specifically referenced testimony "that the introduction of broadband cable  X4services may pose a competitive threat to telephone companies, and that the pole attachment practices of telephone companies could, if unchecked, present realistic dangers of competitive  Xh4restraint in the future."ch~! {O'ԍ Id. at 7102, quoting S. Rep. No. 580, 95th Cong., 1st Sess. at 13, reprinted in 1978 U.S. Code Cong. & Ad. News at 121 (emphasis added). The Commission further found that the term "broadband cable services" to which Congress was referring, has commonly been understood throughout the  X:4years to include non-video services, e.g., business data transmission, as well as video services. As early as 1972, the Commission had identified the following services among those possible over cable's multichannel or broadband capacity: XX` ` [F]acsimile reproduction of newspapers, magazines, documents, etc.; electronic mail delivery; merchandising; business concern links to branch offices, primary customers or suppliers; access to computers; e.g., man to computer communications in the nature of inquiry and response (credit checks, airlines reservations, branch banking, etc.), information retrieval (library and other reference material, etc.), and computer to computer communica X?4tions. . . .d?! {O%'ԍ Id. at 7102, quoting Cable Television Report and Order, 36 FCC 2d 143, 144 n.10 (1972), quoting Notice of Proposed Rule Making and Notice of Inquiry, Docket 18397, 15 FCC 2d 417, 41920 (1968). x` "(T2 d0*(("Ԍ X4Heritage cited earlier orders in which the Commission explicitly adopted restrictions on telephone common carriers' ownership and operation of CATV facilities in order to ensure that cable television development into a broadband communications system would not be inhibited by telephone companies. The Commission stated that "CATV service represents the  X4initial practical application of broadband cable technology" and that "there is a substantial  X4expectation that broadband cables, in addition to CATV services, will make economically and technically possible a wide variety of new and different services, involving the distribution of data, information storage and retrieval, and visual, facsimile and telemetry transmissions of all  XN4kinds.eN! {O 'ԍ Id. at 7102, quoting Section 214 Certificates, Final Report and Order, 21 FCC 2d 307, 32425 (1970) (emphasis added). The Commission reiterated its earlier concern for the orderly development of cable within the structure of the existing nationwide communications system, in which it noted that cable television "presumably will become a major and integrally vital element of what many  X 4see as the broadband communications system of the future."f "! {O'ԍ Id. at 710203 n.28, quoting Clarification of the Cable Television Rules, 46 FCC 2d 175, 176 (1974)  yOx'(emphasis added).  Recognition that cable could provide "these broader functions" had previously led the Commission to substitute use of the "more inclusive term cable television systems" for "CATV." Similarly, in an antitrust action against telephone utilities for an alleged conspiracy to restrain trade in refusing a cable company's request to attach cables to telephone poles, the court construed the term "broadband" as applying to "a wide range of communications services including meter reading, stock market quotations, burglar and fire alarm services, athome shopping services, data service,  X<4and twoway television."g<|! {Oi'ԍ Id. at 710203, quoting TV Signal Company of Aberdeen v. AT&T, 617 F.2d 1302, 1304 n.1 (8th Cir. 1980). The Commission concluded that, given the commonly understood meaning ascribed to the term "broadband cable services," both prior to and contemporaneous with the passage of section 224, Congress was aware of the Commission's longstanding view of cable as a provider of video and non-video broadband services, and did not intend to limit its pole attachment authority to exclude non-video broadband services. It rejected TU Electric's arguments that the section 224 should be interpreted in light of the Cable Act definitions of "cable service" and "cable television system," and that these definitions did not encompass  Xm4data transmission services, but were limited to video entertainment services.hm! yO#'ԍ At the time of Heritage, section 602(6) defined "cable system" as "a facility . . . designed to provide cable service which includes video programming and which is provided to multiple subscribers within a  {O%'community . . . Heritage, 6 FCC Rcd at 7103; 47 U.S.C.  522(6)(1991). "Cable service"was then defined as, "(A) the oneway transmission to subscribers of (i) video programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the selection of such video programming or other"'g0*(('"  {O'programming service." Id.; 47 U.S.C.  522(5) (1991). The only relevant difference between these definitions and the definitions under the 1996 Act, is the addition of the words "or use" in subsection (B), discussed below.  "mU"h0*((~"ԌThe Commission first noted that the statute specifies that the Cable Act definitions apply only "for purposes of this [Title VI]," and that nothing in the language or legislative history of the Cable Act suggests its definitions were intended to limit the Commission's pole  X4attachment jurisdiction.]i"! {O'ԍ Id. at 7104; 47 U.S.C.  522 (1991).] Even when section 224 is read in conjunction with the Cable Act, cable facilities carrying both video and non-video broadband services are not excluded from section 224. Several provisions of the Cable Act expressly contemplated that cable systems would carry both traditional cable services and noncable communications services without the operators' facilities ceasing to be "cable systems" under the Title VI. Section 621 (then, as now) specifically reserves the authority of any State to regulate any cable operator to the extent that such operator provides any communications service other than cable service,  X 4whether offered on a common carrier basis or private contract basis.Uj ! {O'ԍ Id.; 47 U.S.C.  541(d)(2) (1991).U The Commission concluded that the facilities at issue, which were designed to include the provision of cable services (including video programming) along with communications services other than cable service, met the definition of "cable system" within the meaning of the Cable Act, even  X 4though the operator also provides data transmission over its system.k F! {O'ԍ Id. at 7104. On appeal, the D.C. Circuit Court affirmed the Commission's decision. The court held that although section 224 was ambiguous as to whether the Commission's regulatory authority extended to cables used to transmit non-video communications, the Commission had reasonably interpreted the Act to conclude that  {O'its authority extended to cables transmitting non-video communications. Texas Utils. Elec. Co. v. FCC, 997 F2d 925, 93235 (D.C. Cir. 1993).   X4Thus, the 1984 Cable Act established a fundamental distinction between a service that is provided over a cable system that is "cable service," and a service provided over such a system that is not within the statutory definition. The excluded category clearly included twoway communications services such as email, facsimile transmissions and data processing, services which are identical to those long defined by the Commission as "enhanced services"  X4under the Computer Inquiry decisions, as well as basic voice communications services. In other words, cable regulation under Title VI contemplated a distinction between "traditional" or "conventional" cable video programming services and "non-video" or "broadband" services that is not unlike the distinction between "basic" and "enhanced" common carrier communi X4cations services established in the Commission's Computer Inquiry decisions. In each case, the "nontraditional" or unconventional service utilizes the facilities of the traditional system without thereby effecting a change in the classification of the underlying facilities for regulatory purposes. And, in each case, the nontraditional or enhanced service was defined principally as anything beyond the basic or traditional service offered by the respective provider. In each instance, this distinction was primarily drawn to exclude such "enhanced" services from the Title II or Title VI regulation otherwise mandated for the "basic" or "tradi";V k0*((8"Ԯtional" service. Carriers would not be prohibited from providing such nontraditional services, but the regulations applicable to their basic service would not necessarily apply.  X4 It appears that, prior to the 1996 Act's revision to the definition of cable service, it would not have been possible for the Commission to have interpreted the section 602(6) definition of "cable service" to include cable Internetbased services. As discussed above, the 1984 Cable Act's legislative history makes it clear that such interactive information and enhanced services as are provided over the Internet could not come within the original definition of cable services insofar as they generally provide the subscriber with a twoway capacity to engage in transactions, or to store, transform, manipulate, or otherwise process information or data. Critical to the classification of "cable services" is the limitation that the programming provided be made available to all subscribers generally and that it arrive by oneway transmission from the cable headend. The follow section examines technological advances in cable architectures and services that demonstrate how cable systems have changed since 1984.  X ' C. Features of Internet Services Provided Over Cable Systems  X4  Xy' 1.` ` Advanced Cable Architecture  XK4The cable industry is in the midst of a transformation from selfcontained, coaxial distribution systems that feature oneway delivery of analog television signals to twoway, interactive broadband systems involving a hybrid of traditional coaxial and modern fiber optic technologies. These new hybrid fibercoaxial ("HFC") networks are often linked by fiber into regional hubs, which enable the industry to deliver a wide range of telecommunications and  X4information services including Internet access, telephony, and digital television.l\! yOQ'ԍ Information in this section is drawn primarily from: National Cable Television Association ("NCTA"),  {O'Telecommunications and Advanced Services Provided by the Cable Television Industry, April 1996, pp. 326 and  {O'NCTA, The Cable Television Handbook, January, 1997, Section 3 ("NCTA 1997 Cable Handbook"). The traditional cable network was optimized for the delivery of traditional cable video programming service through oneway transmission of signals to subscribers. The basic cable system, optimized for oneway transmission, has been a "treeandbranch" full coaxial, 350 MHz system, capable of providing approximately 50 channels of analog video service. The architecture is simple, with larger "trunks" leaving the cable "headend," and splitting into smaller trunks or "feeder or distribution" lines into the neighborhoods served. Along the way, the signal is amplified many times to maintain its integrity. A "drop" line connects the feeder line to the terminal equipment or network interface units at the subscriber's home. The headend is the center of the system, where many programming operations and functions are processed, such as the reception of satellite delivered programming and broadcast signals. It includes facilities for descrambling incoming signals form satellite and broadcast programming networks, assigning them channel numbers, and processing them for retransmission over cable lines. The headend also contains electronic equipment for inserting advertising at the local level, encrypting signals for security purposes, and playing or producing public access/local"#Wl0*((!" origination programming. Trunk lines are highcapacity fiber or coaxial cables which carry signals from the headend to feeder cables serving local neighborhoods. Many cable operators are currently deploying fiber optic transmission lines to replace much of the coaxial cable present in trunk lines. The strategic deployment of fiber optic cable reduces noise in a system by requiring less electronic equipment (e.g., fewer amplifiers) and making the system "passive." Such "passive" architectures support newer, more reliable technologies by providing "cleaner" transmission paths which are necessary for twoway interactivity, telephony, and other new services. The existing feeder and drop lines represent the cable industry's "last mile" of plant into the consumer's home. These lines are high bandwidth coaxial cable, which are capable  X 4of delivering broadband applications at very high data rates.m ! yO| 'ԍ Cable plant is capable of transferring data at rates as high as 43 million bits per second in each 6 MHz  {OD 'television channel allocated for data transmission. NCTA 1997 Cable Handbook at 3A4. The HFC architecture takes fiber from the headend all the way to feeder lines, thereby increasing bandwidth and signal quality while placing fiber optics closer to the customer premises. The fiber terminates in neighborhood nodes, from which feeder and drop lines branch out to subscriber's premises. This network can utilize the treeandbranch form, and can offer a number of capacities, most commonly 550 MHz and 750 MHz. With 750 MHz, a cable operator can offer 118 analog channels with extra capacity usable for telephone or other services. HFC networks offer improved reliability, increased capacity, and clearer signal transmission. The HFC design effectively transforms a single cable system into a series of smaller cable systems, with individual serving areas of as few as 200 to 500 homes. These "mini" systems are connected to the headend by fiber links, which increase bandwidth and facilitate twoway transmission. Advanced cable architectures generally incorporate fiber backbone, fiber redundancy and regional hub interconnection to increase network reliability and interoperability, which are essential to twoway services such as voice transmission. Increasingly, multiple system operators are deploying "regional hubs" to interconnect system headends using high capacity fiber optic rings. Regional hubs also speed the deployment of telephony services and interactive twoway services by allowing cable companies to interconnect with other telecommunications networks, upon deployment of telephony switching and twoway signalling capability. Once these improvements are made, cable's fiberbased platform will enable the industry to transport personal communication services, competitive access for business to  X4connect to long distance companies, and, eventually, local residential voice service.   X 4The cable industry's broadband platform makes cable an optimal medium for transmitting large amounts of digital information data, graphics, and video at high speeds. Upgraded cable systems can, depending upon usage conditions, carry data up to 1000 times faster than transmission using dialup modems over ordinary copper twistedpair phone lines, and 100 times faster than ISDN (integrated services digital network) phone lines. As fiber"h$X"m0*(("" upgrades are completed to accommodate digital services, cable networks will become more "passive," thus increasing the twoway capability of data transmissions over cable lines. Cable companies can operate as "pipeline" or "conduit" services, or become fullservice providers of Internet access and other valueadded services. Cable plant utilizing an HFC cable architecture can transmit both upstream and downstream Internet access. The connection to the Internet is persistent, rather than obtained on a "dialup" basis. Modulators and computer servers are located at the cable system headend, where the cable system interconnects with the Internet or outside information service provider. From the headend, laser nodes send signals to nodes located in the neighborhood, where the signals are transformed to travel over coaxial cable plant to the customer premises. A technical problem for most existing cable systems's provision of twoway interactive data services is return path transmission interference. This problem arises for several reasons. Cable's traditional treeandbranch or "bus" architecture permits a degree of noise ingress that can cause interference with returnpath transmissions. In this arrangement, subscribers share the capacity of the coaxial cable infrastructure potentially making it more vulnerable to interference or other forms of degradation caused by the actions of individual subscriber's  Xb4equipment. nb! {O'ԍ See Implementation of Section 304 of the Telecommunications Act of 1996, Commercial Availability of  {O'Navigation Devices, CS Docket No. 9780, Report and Order, FCC 98116 (released June 24, 1998) at para. 122.  In addition, cable systems have a "low split" (at about 50 MHz) for their return path signals (at 5 MHz 40 MHz), which can interfere with signals on the lower channels, such as channel 2, which start at 54 MHz. Several solutions are available, including utilization of different portions of the transmission path for return transmissions at a "high split" above 550 MHz. Other techniques such as activating "dark fibers" (a second, unused transmission line) and reducing the size of neighborhood nodes can lessen traffic and interfer X4ence and create more bandwidth for return path transmissions.To$! {O'ԍ 1997 NCTA Cable Handbook at 3D3. T Yet another solution, being used by several cable operators, is using cable architecture for transmitting downstream data transmissions, and telephone lines for the upstream or "return" path, which requires far less capacity. This solution, which provides Internet access and content by transmission to the home downstream over cable plant, with transmissions back from the home upstream to the Internet over the analog phone line is an Internet access solution that would permit the vast majority of cable plant which is oneway (80% or more) to be immediately capable of supporting Internet services. The effect of this service configuration on the question of including Internetbased services under the revised statutory definition of cable services, will be discussed below.  X4   X ' 2.` ` Current Cable Internet Services  X"4The highspeed data, interactive computer and other Internetbased services offered by""Yo0*((!" cable operators are also referred to as "cable modem service." The cable modem is the piece of equipment that converts the data transmissions for use in the subscriber's premises. In the home, a cable modem connects to the cable television coaxial wiring and also usually attaches to the user's computer via a standard Ethernet connection. The speed of cable modems offers significant advantages in terms of speed of connection and data transmission over other equipment currently available to connect end users to online services, the Internet and the World Wide Web. Cable modems generally fall into three categories: (1) modems for personal computers, (2) modems for local area network ("LAN")toLAN network bridges, and (3) modems for LANtoLAN routing.  X 4Particular Services. Members of the cable industry maintain that the primary Internetbased services the industry may provide, such as the @Home Network's "@Home" service, Time Warner's "Road Runner," Cablevision's "Optimum Online,"and MediaOne's "MediaOne Express" will be closer in nature to traditional cable offerings, with significant operatorprovided content and browsing capability, than the Internetbased services provided by the telephone carriers, which consist of little more than a telecommunications transmission facility  X4and a browser._pX! yO 'ԍ These services are discussed for illustrative purposes only. The pace of change as the cable industry rolls out its Internetbased services, and forms alliances among operators, precludes absolute accuracy in descriptive text such as this. Any discrepancies should not affect the substantive analysis below._ The @Home Network was originally a joint venture of TeleCommunications, Inc. (TCI), Comcast Corp., Cox Communications, Inc., and Kleiner, Caufield & Byers. Since its founding in May 1995, the @Home Network has reached affiliate agreements with seven leading cable companies in North America, including TCI, Comcast, Cox, InterMedia  X4Partners, Marcus Cable, Rogers, Shaw and Cablevision Systems Corp.8q! {O'ԍ See Telecommunications Reports, Vol. 63, No. 15, April 14, 1997 at p.18; @Home Network, Company Background, . Cablevision Systems announced that it will affiliate with @Home for the delivery of broadband cable modem service and will receive warrants allowing it to buy  {O'shares on the same terms as the other owners. See CableFAX Daily, Oct. 3, 1997; Cable Datacom News, The ThirdQuarter Report from @Home, .8 The @Home service comprises a private broadband network and interactive online service distributed in part though existing cable infrastructure, and uses the @Home Network's highspeed national backbone and a cable modem. @Home's primary offering, the "@Home service," permits residential subscribers to connect their personal computers via cable modems to @Home's Internet backbone. According to @Home, "[t]his service enables subscribers to receive the '@Home Experience,' which includes Internet service," an "always on" connection, and multimedia programming through "an intuitive graphical user interface. The content foundation of the @Home Experience is provided by the Company's @Media group, which aggregates content, sells advertising to businesses and will provide premium services to"7Zq0*(("  X4@Home subscribers."\rZ! yOy'ԍ Written Statement of Milo Medin, Senior Vice President for Engineering and Chief Technology Officer,  {OA'@Home Network, before the Federal Communications Commission, July 9, 1998, En Banc Hearing on Bandwidth. Available on the En Banc page of the Commission's website: \ The @Home Network also offers a business version of its service, known as "@Work." The @Work service offers businesses "endtoend managed connectivity for Internet, intranet and extranet solutions over a variety of transport media including the cable  X4infrastructure and leased digital telecommunications lines."Zs! {O( 'ԍ See, id., Written Statement of Milo Medin.Z @Work is a highspeed, fully managed data services and is designed to meet the demand for superior, reliable and secure network communications. @Work is also designed to enable businesses to connect their LAN  XH4to the Internet and to extend their corporate LAN to their employees working at home.tH|! {Ou'ԍ See also . The @Work service may raise distinct issues in terms of regulatory classification under the Communications Act. From its description, including the fact that it is only partially provided over cable infrastructure, the service does not appear to be readily distinguishable from a traditional telephone carrier's broadband communications service. The conclusions in this paper regarding the potential for a regulatory classification of cable Internet services under Title VI cable services are addressed exclusively to the residential, @Home service.   Road Runner is another broadband online highspeed service over cable developed by the Excalibur Group, a joint venture between Time Warner Cable and Time Inc. According to Time Warner, this service provides customers with an opportunity to connect, at very high speeds, to community resources such as newspapers, libraries and government offices; explore a range of entertainment and information services; access the Internet and existing online locations such as Time Warner's "megasite," Pathfinder; take advantage of email, and use and access other online services. Time Warner claims that what primarily distinguishes Road Runner from other online services is its seamless mix of local content, national content, and cohesively packaged entertainment content provided by Warner Bros. Online, as well as thirdparty providers. In particular, Road Runner is a collaborate effort supported by the resources of Time Warner Cable, Time Inc., CNN and Warner Bros. "Pathfinder," Time Warner's site on the World Wide Web, for example, provides text, photos, graphics, audio and video from several of its more popular publications. Road Runner and the @Home joint venture each offer their respective Internetbased services to other cable operators for resale to cable subscribers. These offerings may be customized by the purchasing system for its locality. The @Home offering delivers broadband Internet access and national and local content directly to the subscriber's personal computer via a cable connection, a cable modem, and a Netscape browser. In addition, @Home supplies subscribers with communications such as email and chat, and customer support. In contrast, Road Runner, which is used by both Time Warner and Cablevision, uses versions of Microsoft's Internet Explorer browser. At present, cable operators only offer"7[ t0*((8" highspeed Internetbased services in selected locations. However, it is noteworthy that the combined cable networks of @Home's partners reach approximately 40 percent of U.S. households alone. Other large cable operators, such as MediaOne, Cablevision Systems and Jones Intercable, originally developed their own brand of Internet offerings, although several  X4are now linking to either the @Home or Road Runner networks.u! yO'ԍ As noted earlier, these services are noted for discussion purposes. Continental Cable had been acquired by US WEST's Media Group. The system was subsequently renamed, "MediaOne," and its Internet service, was renamed, "MediaOne Express." This paper continues to refer to Continental and Highway 1 only in discussing the features of this particular subscriber agreement. Recent reports indicate that Road Runner will combine its  {O= 'service with MediaOne Express (which will change its service name to Road Runner). See "The Broadband Bob  {O 'Report," 08/07/98; ; .  X4 Cablevision of Connecticut launched its Optimum Online, Cablevision System Corporation's highspeed Internet access service in Westport, Conn in 1997. Press reports indicated that Optimum Online links PC users to the Internet via cable modems that break the Web into seven categories for subscribers: news, sports, weather, entertainment, community, learning and children's. Proprietary localized services offered as part of Optimum Online include "News 12 Interactive," an online counterpart to Cablevision's regional cable news service, along with "SportsChannel," "Community Center" and "ExtraHelp Online." Prices range for the service, depending on the customer's level of cable service, with extra charges  X 4per month for the cable modem.lv D! yO'ԍ Broadcasting & Cable, "Cableday," Thursday, October 16, 1997 at 1.l Similarly, Jones Communications, Inc., a subsidiary of Jones Intercable, Inc., launched its "Jones Internet Channel," "highspeed Internet content and Internetovercable access" service over its Alexandria, VA cable system, and nearby suburban systems in 1997. The Jones Internet Channel was described as "an Internet programming network, providing highspeed Internet connections over hybrid fiber optic and coaxial cable systems (cable television systems). Jones Internet Channel also offers local, national, and international content and the tools you need to make the most of your highspeed connection." In addition, the Jones Internet Channel provides fullservice Internet access, which includes access to the World Wide Web, email and newsgroups. The company represented that, "Jones Internet Channel is not a cable television network, but through its use of cable infrastructure and its focus on innovative content, it represents an advance form of cable programming. Additionally, the  X4signal occupies a minimum of one channel space of bandwidth to transmit data."w"! {O"'ԍ See Jones Web site: and (Frequently Asked Questions). Comcast Corporation announced in May, 1998 that it would acquire shares in Jones Intercable, Inc. from BCI Telecom Holding company. Comcast Corporation, News Release, May 25, 1998. The Jones system in Alexandria will be converted to the @Home service.   Xe4Sample Subscriber Agreement. The terms of the MediaOne subscriber agreement, for"e\ w0*((~" example, indicates that the cable operator is offering its Internet service as a "cable  X4services."9x! yOy'ԍ This particular agreement is discussed because it is available in the Commission's files for examination, and is summarized solely for purposes of illustrating the nature of one form of cable Internet access service. It may or may not contain terms and conditions found in other cable operator's cable Internet services agreements. The Commission does not ordinarily require that such service agreements be filed with the agency, and the author has no other similar service agreements upon which to make further comparisons.9 The MediaOne "Highway 1 Cable Internet Access Service" has been offered  X4through a residential Service Agreement ("Highway 1 Service Agreement") that describes the service as a "cable programming service." Under the terms of the agreement, the operator will provide a separate cable connection to the subscriber's computer, one cable modem, the connection between the modem and the home computer, and certain software. The software will include a single user electronic mail account and a web browser, and if required, TCP/IP software. The operator will also provide a single user IP connection through the "BBN planet  XH4commercial network." Other service features are also available for additional charges.yH! {O 'ԍ MAI Petition, Attachment at 1, "Service Agreement for Highway 1 Cable Internet Access Service," Sec.  {OR'1.1 ("Highway 1 Service Agreement"). "Subscriber obligations" include a subscriber acknowledgement that the "Service provides full access to the Internet," and a subscriber representation that the subscriber is at least 18 years of age, and will supervise use of the service by anyone under 18 years of age. There are restrictions on the ability of the subscriber to transfer its rights and obligations  X 4under the agreement to any other person, or residence. The Highway 1 Service Agreement states that through use of the Service, the subscriber may access certain information, products and services provided by third parties for a charge, and that responsibility for all such fees or  Xy4charges is the responsibility of the subscriber.Zzy! {O'ԍ Highway 1 Service Agreement, Secs. 2, 5.1.Z The remainder of the Highway 1 Service Agreement contains various provisions governing installation and access, service and performance, support and maintenance, ownership and use of equipment and software, limitations on liability, disclaimers and disclosures regarding information accessible through the Internet connection it is supplying. Section 11, regarding customer use, describes the service as "a cable programming service for personal use," which includes an "IP connection as a component of the single user electronic mail account." The subscriber is specifically prohibited from reselling or redistributing access, and this prohibition includes, but is not limited to, the provision of email, FTP and Telnet access. "Continental reserves the right to disconnect or reclassify the Service to a commercial grade for failure to comply with any portion of this provision." Certain additional restrictions on use of the Service for illegal purpose, excessive data transfers, and copying or distribution of the software are also included. The customer information and privacy provision expressly acknowledges that the subscriber's privacy interests are "safeguarded by  X 4the subscriber privacy provisions of the 1984 Cable Act, as amended.W{ }! {ON''ԍ Highway 1 Service Agreement, Sec. 12.1.W " ] {0*(("Ԍ X4ԙIP Telephony Over Cable. In addition to the openended Internet connectivity exemplified by services such as @Home, Comcast has recently announced that CableLabs (the research lab for the cable industry) is developing a specialized form of IP telephony tailored for cable systems, that would enable telephone customers to bypass LEC and even IXC telephone networks entirely. As explained by Mark Coblitz, Comcast vice presidentstrategic planning, cablebased IP telephony differs from the forms of Internet telephony already in use. Instead of using the public Internet itself as the "carrier" for a telephone call, cablebased IP telephony uses IP addressing only, but carries the call over what is described  XH4only as an "engineered network."O|H! yO 'ԍ Communications Daily, March 27, 1998.O This form of IP telephony would look like current, PSTNbased telephony from the customer standpoint. Customers would use current telephone handsets and inside wiring, but the wiring would connect the handset to the cable system through a cable modem, advanced settop boc, or other dedicated device. Coblitz speculates that the service would not be marketed as 'IP telephony," but simply as a cheaper alternative  X 4to regular telephone service.3} X! {O'ԍ Id.3 Coblitz acknowledges that this proposed service raises significant, but not insurmountable regulatory issues: "If telephony is just part of an  X 4unregulated data stream, what is it?"3~ ! {OB'ԍ Id.3 The following section will explore the "what is it?" question with respect to cable provided Internetbased services ("cable Internetbased services").  XK'  VI. INTERNET SERVICE AS "CABLE SERVICE"  X4'uUNDER THE 1996 ACT ă  X' A.Revised Definition of "Cable Service" Under the 1996 Act  X4Plain language. Section 602(6) now defines "cable service" as: "the oneway transmission to subscribers of video programming or other programming service, and subscriber  X4interaction, if any, which is required for the selection or use of such video programming or  X4other programming service."@|! yO'ԍ 47 U.S.C.  522(6).@ The "plain language" of the cable service definition raises several related interpretative questions: (1) how does the addition of the two words "or use" before the phrase "of such video programming or other programming service" in section 602(6)(B) change the existing definition of cable services; (2) are Internetbased services to be considered "video programming" under section 602(6)(A)(i) or "other programming services" under section 602(6)(A)(ii); and (3) how may the addition of the subscriber's ability to use the service for twoway communications comport with the definition of cable service in section 602(A) as the "oneway transmission" to subscribers? The legislative history of section 602(6) also provides some guidance on what Congress intended by this change to the"^ 0*((" Act.  X4The only change to the text of the statutory definition of cable services was the inclusion of the words "or use" modifying "of such video programming or other programming service" in section 602(6)(B). To determine the effect of the addition of the subscriber's ability to "use" the video or other programming service, one must first determine whether Internetbased services fall within either the statutory definition of "video programming" or "other programming service." As discussed above, the definition of "cable service" in section 602 was created in 1984 to "mark the boundary between those services provided over a cable system which would be exempted from common carrier regulation under section 621(c) and  X 4all other communications services that could be provided over a cable system."C ! {O 'ԍ House Report at 41.C Section 602(20) defines the term "video programming" as "programming provided by, or generally considered comparable to programming provided by, a television broadcast station." Whether cable Internetbased services would constitute video programming under Title VI will depend largely upon what content is provided over the Internet and how that content is provided. For example, a basic Internet connection permitting a subscriber to visit Web sites put up by third parties may not be comparable to programming provided by a television broadcast station. In contrast, live video images transmitted across the Internet by the technique known as "streaming" video might appear much closer to traditional broadcasting, particularly from the point of view of the subscriber. Section 602(14) defines "other programming service" to mean "information that a cable operator makes available to all subscribers generally." It would appear that cable Internetbased services that are made available to all subscribers generally and that do not include information that is "subscriber specific" may be considered cable services under this  X4prong of the definition.oZZ! yO'ԍ However, the legislative history of that provision also indicates that if information transmitted over a cable system is made available only to an individual subscriber or to a discrete group of subscribers, the  {OE'transmission of this information is not a cable service. See House Report at 4142. o The transmission and downloading of computer software or video games or statistical packages was cited as an example of a cable communications service that would fit under the "other programming services" prong of the definition. It is therefore possible to fit cable Internetbased services within the statutory concepts of either "video programming" or "other programming services," depending upon the nature and manner in which the information is provided to the subscriber. What then does the ability of the subscriber to "use" such programming signify? It is arguable that the phrase "or use" was intended to cover the twoway, interactive nature of the types of communications that typically characterize interactive computer, enhanced and information services and Internet access services,as reflected in the legislative history under the 1996 Act. However, this interpretation also creates an apparent conflict between the later amendment and the un"!_|0*((? "ԫamended portions of the definition of cable service in section 602(6), which rests upon cable services continuing to be defined as "oneway transmission to subscribers of video programming or other programming service." One solution for this apparent conflict is to focus on the cable operator's transmission to subscribers of content and information available through the operator's computer connections to the Internet as the fundamental "cable service." This service, under the revised definition, includes the both the subscribers "selection" and "use" of such programming. These latter concepts could be said to cover the subscriber's "mouseclicks" sending messages upstream to the Internet server located at the cable headend, indicating which site on the Internet or Web the subscriber wishes to "visit, and what information the subscriber wishes to receive and/or download." Under this view, the programming service offered by the cable operator may be said to still be "oneway," while the cable service as a whole now contains a full twoway capability permitting interaction between the subscriber and the cable system for purposes of creation and retrieval of categories of offpremises stored information. Such an interpretation would not have been possible under the 1984 Cable Act definition of "cable  X4services," but it is certainly feasible under the 1996 Act amendments to that definition.J! {O 'ԍ See Id. at 43.J Ultimately, the foregoing attempts at fitting newly developed concepts such as interactive computer services, and Internetbased services into what is still largely a 1984 definition of cable services do not provide entirely satisfactory answers to the question, what did Congress intend to do with its inclusion of the words "or use" in the cable services definition? With the 1984 Cable Act, it was important that cable services be defined in a manner that permitted them to escape common carrier regulation through two basic attributes: cable service would involve only oneway transmission, and its content would be similar to that provided by broadcast television stations in overtheair transmissions. This approach does not lend itself easily to adoption to a world of digital transmission of information in which all communications services and their characteristics "converge." Congress clearly intended to augment the scope of cable services with its added language, but the significance of that addition must take into account the unchanged portions of the definition. Thus, it is necessary to examine the legislative history accompanying the amendment.  X 4Legislative History. The legislative history of section 602(6) states: XX` ` The conferees intend the amendment to reflect the evolution of cable to include interactive services such as game channels and information services made available to subscribers by the cable operator, as well as enhanced services. This amendment is not intended to affect Federal or State regulation of telecommunications service offered through cable facilities, or to cause dialup access to information services over telephone lines to be classi"h$`Z0*((""Ԯ X4fied as a cable serviceS! {Oy'ԍ Joint Explanatory Statement at 169.S x` The definition expands the scope of cable offerings, without drawing under Title VI the similar information services offerings of telecommunications carriers, online service providers, or ISPs. The 1996 Act defines information services as "the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunica X 4tions system or the management of a telecommunications service."A Z! yO% 'ԍ 47 U.S.C.  153(20).A The Commission's rules define "enhanced services" as services, offered over common carrier transmission facilities used in interstate communications, which employ computer processing applications that act on the format, content, protocol or similar aspects of the subscriber's transmitted information; or  X 4involve subscriber interaction with stored information.N ! {OY'ԍ See 47 U.S.C.  64.702(a). N  X4Arguably, the change in the statutory definition of cable services may have been intended to include exactly the types of interactive cable broadband services previously  Xb4excluded under section 602.  This is also suggested by statements on the House floor immediately prior to the passage of the 1996 Act, by Representative Dingell, commenting on how the revised definition of cable services would affect local franchising authorities' revenues from cable franchise fees, "[t]his conference agreement strengthens the ability of local governments to collect fees for the use of public rightofway. For example, the definition of the term 'cable service' has been expanded to include game channels and other interactive services.  X4This will result in additional revenues flowing to the cities in the form of franchise fees."t|! yO'ԍ 142 Cong. Rec. H1156 (daily ed. Feb. 1, 1996) (statement of Rep. Dingell).t Representative Dingell may have been referring to Internet access and like services with his reference to "other interactive services." If so, his statement may taken as further support for the argument that Congress intended the revised cable service definition to include cable X|4provided Internet access and other Internetbased services.| ! yO9"'ԍ This interpretation is supported by the definitions contained in section 230(e) of "interactive computer service" as "any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions." 47 U.S.C.  230(e). On the other hand, references, to "information services" and "enhanced services" as"Na 0*((" examples of the types of interactive services that would now be included under the definition of cable services could potentially raise a question as to whether Congress intended to import a "telecommunications" component into the definition of cable services, and what the significance of such a change would be. In other words, what did the conferees intend by their reference to "information services" which are defined as including transmission "via telecommunications" and, enhanced services, which also include a basic communications transmission component which, under the Commission's rules, are provided over "common carrier transmission facilities"? What would happen to the definition of "cable services" and "cable systems" and their distinct Title VI regulatory regime if cable services are interpreted to include a "telecommunications" component? Is it essential to the concept of "enhanced services" that the underlying facility be regulated as a "common carrier transmission" facility? In the alternative, did the conferees intend to reference an "enhanced" cable service as  X 4opposed to referencing the Commission's Computer Inquiry category of telecommunications services?  X 4Analysis. In the Universal Service Order, the Commission rejected the argument that information services are "inherently" telecommunications services because they are provided "via telecommunications" for section 254 purposes. Rather, the Commission found that, "information services" differ from "telecommunications services" under the Act because telecommunications services by definition do not involve a change in the form or content of the user's information as sent or received, whereas information services by definition involve "generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making  X 4available information." ! {O'ԍ Universal Service Order, 12 FCC Rcd at 9180. See also Report to Congress at paras. 3948. In addition, all services that the Commission previously considered  X4to be "enhanced services" are now to be treated as "information services."uZ! {O'ԍ See NonAccounting Safeguards Order, 11 FCC Rcd at 2195521956.u Under this approach, the reference in the 1996 Act's legislative history of section 602(6) to information services and enhanced services need not be interpreted as importing a telecommunications component into the definition of cable services, or otherwise blurring the  X4distinction between Title II and Title VI services.wX! yO'ԍ Of course, the inclusion of the term "via telecommunications" in the statutory definition of "information services" remains nettlesome. One could argue that it precludes an interpretation of cable Internet services as falling within the definition of cable services, because such services are not delivered "via telecommunications."w Moreover, based upon the precedents discussed above, it does not appear that the addition of nontraditional cable services to a cable operator's offerings would cause the cable operator to lose its identity as a cable  X;4operator, or necessarily turn cable systems into common carrier transmission facilities.; ! yO$'ԍ However, it is possible for a carrier to be considered a telecommunications carrier for some, but not all,  {O%'of its services. See Local Competition Order, 11 FCC Rcd at 1598889. The question becomes whether the nontraditional service would be regulated as a cable or noncable service, and consequently, whether the cable operator would be treated as a cable" bf 0*((" operator or as an Internet service or online service provider for such purposes. Both categories, cable services as well as enhanced services, were created in large part  X4to isolate cable operators and enhanced service providers from Title II regulation.g^! {O4'ԍ See, e.g., 47 U.S.C. 621(c) (exempting cable operators from common carrier regulation insofar as they  {O'provider "cable service"); Computer I Final Decision, 28 FCC 2d at 27781; 47 C.F.R. 64.702; VDT First  {O'Reconsideration Order, 7 FCC Rcd at 5071. g Enhanced and information services share with the category of cable services the common point of origin in having been established to foster the development of competitive broadband and advanced communications by isolating such services from regulation as common carriage under Title II, when provided by companies other than the major telephone carriers. Major telephone carrier offerings of enhanced services were regulated under the Commission's ancillary Title I jurisdiction only to the extent necessary to ensure the nondiscriminatory provision to competing enhanced service providers of the basic transmission services necessary to carry the enhanced service to the end user. Thus, there is nothing inherent in the nature of enhanced and information services that places them outside the potential scope of  X 4cable services for regulatory purposes.& ! yOt'ԍ The possible inclusion of cable television services within the category of contentbased information  {O<'services that the BOCs were prohibited from providing under the MFJ has been recognized. See Robert M.  {O'Pepper, "Through the Looking Glass: Integrated Broadband Networks, Regulatory Policy and Institutional  {O'Change," OPP Working Paper Series No. 24, November 1988 at 2526 & n.46. This is reflected in the Joint Explanatory  X 4Statement's acknowledgment that cable service now includes an information and enhanced service component. It might also support an interpretation of the reference to "enhanced" services as a category of cable, as opposed to common carrier, services.  Xf4The Commission could reasonably conclude that Internet access services, such as @Home and Road Runner, when provided by a cable operator over its cable system, come within the revised definition of "cable services" under Title VI. This interpretation finds support both in the revised definition itself, which suggests that subscriber use of (as opposed to the more passive "interaction" with) other programming services falls within the terms of the definition, and in the conferees's statement with respect to "interactive services such as game channels and information services made available to subscribers by the cable operator." In the case of these Internetbased services, in which the cable operator supplies significant amounts of its own content and local programming and information along with openended Internet connectivity, inclusion under the definition of cable services is relatively easy because, such Internetbased services share many of the features of traditional cable programming services. Moreover, if cable services now include information and enhanced services, and Internetbased services such as those provided by the typical ISP are enhanced/information services, then cable services may include Internetbased services "by definition." Such an interpretation would leave Internet access services provided by a LEC or BOC"c0*((" as both enhanced services under Commission rules, and information services under the Act, while recognizing such Internetbased services as @Home or Road Runner as cable services when provided by cable operators over cable systems. Or, put another way, the Commission could reasonably interpret the 1996 Act as permitting the creation of "parallel universes" for cable and telephony Internetbased services. There is no indication in either the Act itself, or in the legislative history, that such an interpretation would necessarily violate legislative intent. The question remaining would be whether this interpretation would otherwise be inconsistent with such fundamental communications policy goals as competitive and techno XH4logical neutrality.rH! {O 'ԍ See Joint Board Recommended Decision, 12 FCC Rcd at 101 (in universal service context, principle of competitive neutrality should include technological neutrality; competitive neutrality in this context means that support mechanisms and rules should neither unfairly advantage nor disadvantage one provider over another, and  {O 'neither unfairly favor nor disfavor one technology over another). See also Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible  {O 'Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, CC  {Ow'Docket No. 98146, Notice of Inquiry, FCC 98187 (released Aug. 7, 1998) ("Section 706 NOI") at para. 77.r  X 4The case becomes more attenuated for cable Internetbased services that may offer the subscriber nothing more than basic conduit access to the Internet. The regulatory status of such a service may best be resolved on a casebycase basis. So too, the case of cable systems that provide cable modem service by utilizing cable plant for downstream transmissions, and the subscriber's telephone lines for upstream or return path transmissions, may present a somewhat different interpretative problem, as the service itself would not readily fall under the plain language of the statute. On the other hand, if the foregoing analysis of why cable services may include Internet access and other Internetbased services is not adopted, and the statutory definition of cable services as "oneway transmission" of video and other programming were interpreted to preclude inclusion of twoway cable transmission services, then the cable down/telephone return path hybrid service might be the only cableprovided  X4Internetbased service that could fit the statutory definition.EX! yO'ԍ The cable down/telephone return path configuration raises a service definition issue as well as the potential for a reciprocal compensation issue in the case of a cable operator that is also certified to operate as a competitive LEC for purposes of receiving upstream communications.E As discussed above, however, a post1996 Act reading the phrase "oneway transmission" as a term of limitation on the service provided does not appear to be consistent with Congressional intent in revising the definition of cable services to be more, rather than less, inclusive. In the alternative, the Commission could find that, using a "functional" approach to the service, cable operators offering Internet access services are simply "Internet access providers" offering members of the public "a variety of advanced capabilities" or "enhanced functional Xe4ity" to exploit on the subscriber's own computers.Se0 ! {OF&'ԍ See Report to Congress at para. 79.S Under such an interpretation, the Internet access offerings of a cable operator would simply be treated as a separate, Internet"Nd 0*(([" access or online "information" services, governed not by Title VI, but subject only to the Commission's ancillary jurisdiction over "wire communications" under Title I of the Act. As noted in the previous section, the provision of "phonetophone" IP telephony over cable systems by cable operators raises a host a difficult regulatory questions. Under the  X4approach indicated by the Commission in the Report to Congress, a cable operator offering IP telephony may, in the future, be classified as offering a "telecommunications service," depending on how the service is configured, offered to the public, and operates with custom XJ4er supplied information.FJ! {O 'ԍ Id. at para. 88.F In summary, certain cable Internetbased services, particularly cableenabled Internet access services, may be found to fall within the Commission's Title VI jurisdiction when viewed against the change to the definition of "cable services" in section 602(6). Or, they may be treated the same as any other Internet access or online service provider's "information service" offerings, and not subjected to Commission regulation under either Title II or Title VI of the Act. Whether the Commission should so classify these services is a policy question that can only be answered in light of an evaluation that persuasive policy  X{4goals exist in support of concluding such services to be cable service under the Act.Z{Z! yO'ԍ The Commission has, in the past, refrained from interpreting the Act so inflexibly as to bring within the Commission's regulatory jurisdiction services which arguably fit within one its recognized regulatory categories,  {O'absent a strong policy reason to do so. See Computer II Final Decision, 77 FCC 2d at 43033. The ultimate significance of a regulatory classification, of course, lay in the particular regulatory consequences that would flow. The following section will briefly discuss several of the more significant questions that the classification of Internet access services as cable services may present under Title VI.   X' B.Selected Cable Regulatory Issues  X' 1.` ` Pole Attachments  The 1996 Act granted telecommunications and cable operators a mandatory right of access to utility poles, and extended Pole Attachment Act protections to telecommunications carriers. Section 224(b)(1) directs the Commission to ensure that pole attachment "rates, terms and conditions are just and reasonable," and section 224(a)(4) provides that a "pole attachment" includes "any attachments by a cable television system or provider of telecommu X"4nications service" to a pole owned or controlled by a utility. Section 224 (d)(3) reserves the current regulated cable rate to "any pole attachment used by a cable television system solely to provide cable service." Section 224 (e)(1) directs the Commission to establish the rate for  X4pole attachments by telecommunications carriers to provide telecommunications services.p|! yO ''ԍ 1996 Act,  703. 47 U.S.C.  224(b)(1), (a)(4), (d)(3), (e)(1).p "e 0*(("ԌUnder revised section 224, cable operators providing "pure" cable services, will pay lower pole attachment rates than cable operators providing commingled cable and telecommunications services. The classification of Internet services as cable services would entitle cable operators to retain the "pure" cable rate under section 224(d)(3). Classification of Internet services as "telecommunications" for section 224(e) purposes would not be consistent  X4with the Commission's prior decisions under the 1996 Act. In contrast, a determination that Internet services were neither cable nor telecommunications services, arguably leaves the proper section 224 pole attachment rate uncertain, as the statutory language does not expressly make provision for other service categories.  X 4The Commission's Pole Attachments Notice sought comment, inter alia, on "whether, and to what extent, overlashing facilitates the provision of services other than cable services  X 4by cable operators, such as Internet access and local telephone service."d\ ! {Og 'ԍ See Implementation of Section 703(e) of the Telecommunications Act of 1996, Amendment of the Commission's Rules and Policies Governing Pole Attachments, CS Docket No. 97151, Notice of Proposed  {O'Rulemaking, FCC 97234 (released Aug. 12, 1997) ("Pole Attachments Notice") at para. 15.d Cable entities responded that the Commission's reference to Internet access as a service other than cable services should not be interpreted to mean that the Commission intended to classify Internet access as a telecommunications service. Rather, they argued, under the 1996 Act, Internet access over the cable is clearly treated as a cable service, and treating it otherwise will disserve the purposes of the amendment to section 602(6) and erect a barrier in the form of higher pole rents to the deployment of such an enhanced cable service. Electric utilities disagreed, arguing that broadband services such as data transmission and Internet services are neither telecommunications nor cable services, but rather are information services not entitled  X4to a regulated pole attachment rate under section 224.B! yO'ԍ  See Comments of the National Cable Television Association, CS Docket No. 97151, filed Sept. 26,  {O'1997 at 67 n.9; see also Comments of Comcast, et al., at 1819 (given the explicit legislative intent to include cabledelivered Internet services squarely within the definition of cable services, it defies logic to argue that Congress intended that such intent would be advanced by triggering a higher telecommunications pole attachment rate); New York Cable Television Assn. at 8 (highspeed Internet access services supplied over a cable system are defined as cable services under section 602(6) and (14)); US West Reply Comments at 23 (the Act's definition of cable service is broad enough to include interactive video services in addition to traditional cable TV service); American Electric, et al., Comments at 10; Edison Electric/UTC Reply Comments at 8.  X4 The Pole Attachments Order, applying a Heritageĩlike analysis, concluded that the section 224(d)(3) cable rate applies to cable television system pole attachments that are used  X4to provide Internet service and traditional cable services commingled on a single facility.( ! {Ol#4ԍ  Implementation of Section 703(e) of the Telecommunications Act of 1996, Amendment of the  {O6$'Commission's Rules and Policies Governing Pole Attachments, CS Docket No. 97151, Report and Order and  {O%'Further Notice of Proposed Rulemaking,  FCC 9820 , at paras. 3034 (released Feb. 6, 1998) ("Pole Attachments  {O%'Order"), recon. pending; petitions for review pending, U.S. Court of Appeals, 11th Circuit.  X4Citing the Universal Service Order, the Commission declined to apply the section 224(e) telecommunications rate to cable Internet service. The Commission reasoned that the"f0*((" definition of "pole attachment" does not turn on the type of service the attachment is used to provide, that the statutory definition of "pole attachment" includes any attachment by a cable television system, and therefore section 224 applies to the rates, terms and conditions for all cable system pole attachments. The Commission relied upon its authority under section 224(b)(1) to set a just and reasonable rate for cable pole attachments. Application of the lower cableonly rate, the Commission reasoned, is consistent with the purposes of the Pole Attachment Act, would serve procompetitive purposes, would encourage greater competition in the provision of Internet service and provide greater benefits to consumers. The Commission found it unnecessary to determine the precise category into which Internet services fit, stating that, "[r]egardless of whether such commingled services constitute 'solely cable services' under section 224(d)(3), we believe the subsection (d) rate should apply." The Commission noted it would continue to examine definitional issues relating to Internet in its forthcoming Report to Congress on universal service implementation, and that it did not wish to foreclose any aspect of that examination. Thus, while the ruling settles the pole attachment rate issue, its significance in terms of Internet classification for broader regulatory purposes remains to be seen.  Xb' 2.` ` Scope of Local Cable Franchises   X44Section 621 has requirements concerning the provision of cable and telecommunications services by cable operators. Generally, pursuant to section 621(b)(1), a cable operator  X4may not provide cable service without a local franchise.C! yO'ԍ 47 U.S.C.  541(b)(1).C The 1996 Act added section 621(b)(3), which exempts the provision of telecommunications services by cable operators from Title VI regulation, while preserving state and local authority over any intrastate  X4communications service provided by a cable system, other than cable service.X! yO'ԍ 47 U.S.C.  541(b)(3). Section 621(c) provides that any cable system shall not be subject to regulation as a common carrier or utility by reason of providing any cable service. Section 621(d)(1) provides, in pertinent part, that a "State or the Commission may require the filing of informational tariffs for , that would be subject to regulation by the Commission or any State if offered by a common carrier subject in whole or in part, to title II of this Act." The legislative history of subsection (b)(3) confirms that, "to the extent permissible under State and local law, telecommunications services, including those provided by a cable company, shall be subject to the authority of a local government to, in a nondiscriminatory and competitively  Xe4neutral way, manage its public rightsofway and charge fair and reasonable fees."Te! {O#'ԍ Joint Explanatory Statement at 180. T Similarly, section 621(d)(2) states: "[n]othing in this title shall be construed to affect the authority of any State to regulate any cable operator to the extent that such operator provides any communication service other than cable service, whether offered on a common" g0*(("  X4carrier or private contract basis."N! yOy'ԍ 47 U.S.C.  541(c) and (d).N Taken together, these provisions of the Act indicate a clear congressional intent to separate cable franchising from other forms of state and local regulation of any other communication services provided by cable operators over their cable  X4systems.^X! {O'ԍ  See TCI Cablevision of Oakland County, Inc., Petition for Declaratory Ruling, Preemption and Other  {O'Relief Pursuant to 47 U.S.C.  541, 544(e), and 253, CSR4790, Memorandum Opinion and Order, FCC 97331  {OX'(released Sept. 19, 1997) at paras. 6266, recon. pending ("Troy Decision"). A Commission determination that Internetbased services offered by cable operators fall within the statutory definition of cable services would mean that such services must be provided under franchise pursuant to section 621. Such a determination would offer local franchising authorities a degree of certainty as to the application of their own cable and telecommunications ordinances or permitting requirements to this valuable service. Conversely, if such Internet services were not treated as cable services under Title VI, a question  X 4might arise as to whether cable operators could provide Internet services under the terms of  X 4their cable franchises." ~! yO'ԍ The scope of the amendments to section 621(b) with respect to local government authority to regulate noncable (telecommunications) services provided by cable operators over cable facilities is one of the issues  {O'raised in the Troy proceeding. The Troy proceeding did not raise the issue of whether either the City of Troy, or any other local authority, may require any Internet service providers to obtain a franchise. The amendments to section 621 indicate a congressional intent to not subject the telecommunications offerings of cable operators to Title VI franchising requirements, while permitting local authorities to exercise whatever independent regulatory authority, if any, they may possess over such service offerings. In the case of Internetbased services, the result is somewhat less clear. To the extent the Commission has already classified Internetbased services as information or enhanced services, and not telecommunications services, a local government's ability to require a separate franchise for such Internetbased services would depend on its state law authorization. Even if a state were to permit local franchising authorities to regulate, in any manner, the provision of Internetbased services, regardless of the identity of the provider, a further question would arise as to whether such regulation would be consistent with Congressional intent, as expressed in section 230(b) of the Act, that the competitive free market that presently exists for the Internet and other interactive  X4computer services, continue "unfettered by Federal or State regulation."@h ! yO"'ԍ 47 U.S.C.  230(b).@  X4  X~' 3.` ` Franchise Fees Section 622 now provides that, for any twelvemonth period, "the franchise fees paid by a cable operator with respect to any cable system shall not exceed 5 percent of such cable"9h 0*((_" operator's gross revenues derived in such period from the operation of the cable system to  X4provide cable services."+! yOb'ԍ Section 303(b) of the 1996 Act amended section 622(b) by inserting "to provide cable services" immediately before the period at the end of the first sentence. This amendment was part of Congress' revisions to the Cable Act that were intended to draw a bright line between the spheres of cable regulation under Title VI and  {O'telecommunications regulatory authority that derives from sources other than Title VI. See, generally, Troy  {O'Decision at paras. 6278. + Consistent with other changes recognizing the expansion of service offerings by cable operators, the 1996 Act amended prior section 622(b) by inserting "to provide cable services" immediately before the period of the end of the first sentence, thus limiting the scope of the services on which cable operators must pay franchise fees with  X4respect to any cable system to cable services only.  Under revised section 622(b), if Internetbased services offered by cable operators over their systems are treated as cable services, they would become subject to any franchise fees imposed for cable services under the relevant franchise agreement. This interpretation is supported by the floor statements of Representative Dingell, indicating that one of the purposes of the revised definition of cable services under section 602(6) was to enlarge the  X 4base of revenues upon which the cities could assess and receive franchise fees.~ |! {O'ԍ See 142 Cong. Rec. H1156 (daily ed. Feb. 1, 1996) (statement of Rep. Dingell).~ The view that the changed definition of "cable services" was intended to expand the base upon which franchise fees may be assessed is reflected by McQuillin's treatise on the law of municipal corporations, in the section dealing with compensation for the use of public rightsofway by  X4cable franchisees.;! yOO'ԍ The Telecommunications Act of 1996 expanded the definition of cable services to include interactive information and enhanced services made available to subscribers by the cable operator. Consequently, some municipalities may be in a position to require fee payments on a broader revenue base then that which is defined  {O'by a cable operator. McQuillin, Eugene, The Law of Municipal Corporations, Third Edition, 1995 Revised Vol. 12, Chap. 34, Franchises,  34.37.20, 1996 Cumulative Supplement at 5. ;  The National Cable Television Association ("NCTA") has advocated that cable Internetbased services are not telecommunications services, and that the revenues gained through such services should be subject to the cable franchise fees authorized under section  X4622 of the Act.p\ ! {O 'ԍ See Communications Daily, Oct. 9, 1997. This position was advocated in the context of Congressional action regarding a proposed moratorium on taxation of revenues derived from the provision of Internet services  {O "'and ecommerce transactions. See 105th Congress, 1st Sess., H.R. 1054 (1997). p In contrast, if these Internetbased services were not treated as cable services, then cable Internetbased services would certainly not be subject to cable franchising fees under section 622. Whether a local governmental authority could asses franchise fees on Internetbased services on some other basis would be dependent on both state and federal law governing the regulation (or not) of such services. "i0*(("  X' 4. ` `  Unbundling/Competitive Neutrality  X4A significant cable industry concern prompting the desire to classify cable Internet services as Title VI services arises from the potential application of the Common Carrier  X4Bureau's Frame Relay Order to any bundled services they may offer, combining common carriage telephony, cable video programming and cable modem Internet services. Adoption of such an interpretation cable fears, would require the unbundling of cable's basic transmission capability from the enhanced portion of their offerings, and the offering of basic frame relay transmission capability and access to cable's high speed data platform to competing Internet access and online service providers, a result fundamentally at odds with the Title VI regulatory regime. AT&T's June, 1998 announcement that it would acquire the nations's second largest cable operator, TCI, has brought this issue into sharp relief. TCI owns 42% of @Home, which is reported to have exclusive contractual arrangements until 2002 to provide Internet access for TCI and its other cable affiliates, including Cox Communications Inc., Comcast  X4Corp., Cablevision Systems Corp., and Rogers Cablesystems Ltd.! {O 'ԍ David Bank, "AT&T Gets At Home Stake in TCI Deal," The Wall Street Journal, June 25, 1998 at A16. Although @Home presently has only 100, 000 Internet access customers, these cable operators together serve  Xd4more than 55 million cable customers.3dZ! {Oo'ԍ Id.3 It is reported that @Home's contracts do not include rights to offer Internetbased telephone service, or fullmotion video segments longer  X64than 10 minutes; those services are reserved for the cable operators.36! {O'ԍ Id.3 At the time of the announcement, AOL was reported to be seeking an arrangement with the proposed AT&TTCI combination to "purchase broadband connections on a wholesale basis for resale to AOL'S customers. Under such an arrangement, AOL could offer a broadband version of its online service to its 12 million customers, using the cable industry's underlying infrastructure but not competing consumer services such as  X4@Home's."3~! {O'ԍ Id.3 Later, AOL suggested that cable operators be required to let competitors "hook  X~4into their networks, much the same as local phone companies must do."~! {O?"'ԍ Mike Mills, "Cable Internet Access Coming to Alexandria," The Washington Post, July 1, 1998 at C11. In other words, unbundle their highspeed data platforms and offer access to competing providers on a wholesale basis. @Home has not reacted favorably to such suggestions, indicating that  X94"[n]obody wants to become a dumb pipe in this equation."g9! {O&'ԍ Id., quoting @Home Chief Executive, Thomas A. Jermoluk.g More recently, AOL's position has been echoed by long distance provider Sprint Corporation. Sprint has expressed the""j4 0*((" desire to gain network access through cable companies generally, and particularly from TCI as  X4a condition for regulatory approval of its acquisition by AT&T.DZ! yOb'ԍ Broadcasting & Cable, Cableday (Cahners Publications) Thursday, July 16, 1998 at p. 2; Fred Dawson,  {O*'"Sprint Suggests Cable Strategy," Multichannel News, Broadband Week, Weekly Edition for July 20, 1998 available at: .D  X4Consistent with Computer II, the Frame Relay Order requires "all facilities based common carriers providing enhanced services in conjunction with basic frame relay service" to file tariffs for the underlying frame relay service and to acquire that tariffed service in the  Xx4same manner as resale carriers.Wx! {O 'ԍ Frame Relay Order, 10 FCC Rcd at 13725.W The first question is whether the addition of frame relay transmission underlying the cable Internetbased services would cause cable system facilities to lose their Title VI "cable system" identity and be classified as "common carrier facilities"  X34under Computer II and the Frame Relay Order. In the context of its open video system implementation, the Commission found that the addition of nontraditional services to cable  X 4operator service offerings did not cause the operator to lose its identity as a cable operator.^ |! {O4'ԍ See In the Matter of Implementation of Section 302 of the Telecommunications Act of 1996; Open Video  {O'Systems, CS Docket No. 9646, FCC 96312, Second Report and Order and First Order on Reconsideration, 11  {O'FCC Rcd 18223 (1996) ("Second OVS Order") at para. 15 (subsequent history omitted). Similarly, the legislative history of the 1984 Cable Act demonstrated a clear intent to separate the nature of the facilities from that of the services provided over them for regulatory  X 4purposes." ! {O'ԍ  See House Report at 4144. See also Section 621(3)(A) (prohibitions on local franchising authority application of Title VI provisions to a cable operator's provision of telecommunications services) and section 621(c) ("Any cable system shall not be subject to regulation as a common carrier or utility by reason of providing any cable service"). This logic can also be applied to cable Internet offerings. The addition of such services does not automatically change the nature of cable system facilities into common carrier facilities, subject to Title II regulation. A second question would be whether it can be said that cable operators in this situation are offering frame relay services, or are, like other ESPs or ISPs, using basic transmission services, adding value to them, and offering the valueadded package or "enhanced" service to the subscriber? It is difficult to see how the traditional competitive  X 4goals of the Computer Inquiry proceedings would be advanced by such an application of  X4Computer II. The Commission has found that the Internet access market is highly competi X4tive.W ! {O$'ԍ See Access Reform Notice, at para. 284.W The Computer II approach to common carrier resale and unbundling was crafted to answer the fundamental question, how can the Commission permit monopoly telephone providers to compete in the competitive computer services and data processing markets without (1) unduly advantaging their own enhanced services, and (2) engaging in"k0*((" anticompetitive conduct visavis their enhanced service competitors?  X