Supreme Court rulings raise concerns about broadband growth

COLORADO SPRINGS, Colo. — Two decisions by the U.S. Supreme Court on Monday (June 27) had broadband service proponents wondering whether they'd just received a double-whammy that could have chilling effect on deployment.

In a unanimous decision, the court ruled in MGM Studios Inc. vs. Grokster Ltd. that both content companies and Internet service providers could be sued for illegal music or video file-sharing over peer-to-peer networks.

Network hosts warned the ruling was broad enough to effectively overturn the court's October 1979 ruling on analog videotaping, in which the court held that Sony Corp. was correct to claim that home videotaping of broadcast television constituted "fair use" of duplication technology.

"This could have a definite impact on TiVo or other [personal video recorders], maybe even on analog videotaping," the anonymous host of one Pacific Northwest peer-to-peer networks told users Monday. "It might not end with networked file-sharing, either. What if you use an e-mail client to send an MP3 file to a friend?"

But Andrew Greenberg, intellectual property attorney working with IEEE-USA on its amicus curae brief, said Justice David Souter's opinion was pretty close to the "balanced ruling" IEEE had sought.Hollywood studios sought a tougher ruling against actual users of file-sharing technology, Greenberg said, but "the beauty of this rule is concentrating not on the behavior of the users, but on the behavior of technologists. Technology developers cannot make specific inducements to engage in infringing behaviors."

"Will this have a chilling effect on broadband use? Only time will tell," Greenberg added. "But peer-to-peer file sharing remains a generic technology. The Internet itself is one big copying machine. The studios may not like that, but let's not forget it, or try to pretend otherwise."

In a second ruling Monday, the Supreme Court ruled 6-3 in the case National Cable & Telecommunications Association vs. Brand X Internet Services that cable operators do not have to share high-speed lines with nonfacilities-based competitors. The requirement would have been similar to the one applied to local exchange carriers which are required to share facilities under the 1996 Telecommunications Reform Act.

Phone companies had seen their own requirements for line-sharing diminish under both FCC and court rulings over the last five years, so the ruling on cable operators surprised few. However, the Court effectively turned the hybrid fiber-coax network into a closed environment on either side of the cable headend — at least until the point where a cable network interfaces with the public-switched phone network.

In the file-sharing case, Justice Souter rejected lower court findings that there is no liability if the distributor has no knowledge of copyright infringement. Rather, Souter said, "One who distributes a device with the object of promoting its use to infringe copyright . . . is liable for the resulting acts of infringement by third parties."

That implies that developers of software intended for sharing files over multiple server networks, such as StreamCast and Grokster, can be found liable. Souter pointed out that StreamCast distributed its OpenNap directly in response to Napster's troubles, using compatible software interfaces with the Napster network and hoping to allow continued file-sharing through anonymous-host peering networks.Souter specifically referred to the VCR case, Sony Corp. vs. Universal City Studios, in stressing the differences between Sony's generalist marketing and StreamCast's specific promotion as a Napster alternative.

The Court ruled that "the only conceivable basis for imposing liability was on a theory of contributory infringement arising from its sale of VCRs to consumers with knowledge that some would use them to infringe."

Three factors enhanced Grokster's and StreamCast's liability, the Supreme Court found: the companies aimed advertising at satisfying a known source of demand; they failed to develop any type of filtering tools to remove copyrighted content from networks; and the companies sold secondary banner ads to users of their software in order to increase revenue streams and increase the user base.

Thus, "the unlawful objective is unmistakeable," Souter ruled.

The only dissent was a disagreement between Justices Ruth Bader Ginsburg and Steven Breyer regarding the amount of modification necessary for the original Sony ruling.In the cable line-sharing ruling, Justice Clarence Thomas cited the 1979 "Computer Inquiry II" findings on the differences between pure transmission and enhanced data services. The FCC ruled in 2002 that cable-TV Internet service did not constitute a basic transmission service requiring line-sharing. Thomas's confirmation of that finding seemed to suggest future issues as cable operators move to voice-over-Internet-protocol services, in many cases using a cable modem with a telephony adapter as the basis for voice service.

"Cable modem service is not a telecommunications offering because the consumer uses the high-speed wire always in connection with the information-processing capabilities provided by Internet access." The difference, Thomas ruled, is whether Internet service is fully integrated with other service offerings. As both cable and phone companies move to bundled triple-play services, the wording of Thomas's ruling could make a stronger case for treating cable offerings as telecommunication services.

Justice Antonin Scalia, in a dissent joined by Souter and Ginsburg, claimed that the FCC is still trying to distinguish DSL and cable transmission in ways that make no sense. Ultimately, physical transmission service linked to specific higher-layer service should be treated the same, and cable companies theoretically can make the same type of local-access bottleneck demonstrated by local phone companies who do not share lines.