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'Brand X' Ruling Could Spur Telco Deregulation

The Supreme Court's decision to keep cable networks free of telecom-like regulation may be the catalyst to further deregulation of the phone companies, industry participants and observers said.

The Supreme Court's decision Monday to keep cable networks free of telecom-like regulation may be the catalyst to further deregulation of the phone companies, industry participants and observers said.

And while some saw the 'Brand X' decision as a loss for independent Internet service providers and new entrants like Voice over IP provider Vonage Holdings, at least one of the "losers" said that less regulation of advanced IP services is a good thing for the industry and will help foster more innovation in the future.

In a report, telecom analysts at research house Legg Mason called the ruling "a victory for the cable industry (and probably the Bells) and a defeat for 'edge' players such as independent ISPs (e.g., EarthLink), Web service prvoiders (such as Yahoo! and Microsoft), and VoIP providers such as Vonage." But while the Brand X decision may mean that cable companies will not be penalized if they block access to independent services like Vonage, Vonage itself said the decision was a "positive ruling" for the industry.

Brooke Schulz, Vonage vice president for communications, said the company is "generally of the opinion that high-speed Internet should be categorized as an information service to promote growth and remain unfettered from telecommunications regulation." Though Vonage has had some rumored trouble of blocking by cable companies, most leading cable providers have said they wouldn't block such services. Vonage also provides OEM VoIP service to some cable and independent Internet-service providers, including Armstrong and Advanced Cable, as well as Earthlink.

Legg Mason analysts added that the ruling could end up benefiting the RBOCs as much as the cable companies, since it gives them more lobbying ammunition in their attempts to deregulate their own advanced services. The ruling, Legg Mason said, "probably opens the way for the Bells to push the FCC to resurrect proceedings to similarly classify and deregulate the Bells."

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