The United States Supreme Court this week ruled against Brand X, a small California company that sells Internet access. This ruling is good for consumers and marks the beginning of what could be much-needed reform in broadband policy.

In a 6-3 decision written by Justice Clarence Thomas, the high court overturned a decision that would have forced cable companies to share their networks with competitors, including Internet access providers. This type of "forced access" is mandated for telecom companies under the 1996 Telecom Act, but the Federal Communications Commission (FCC) decided that these arcane rules don't apply to cable.

Information vs. Telecommunication
The FCC's reasoning said that since cable companies are classified as an "information service" and not a "telecommunications service," that means they are not subject to the '96 Act's forced access rules. Brand X and other broadband re-sellers didn't like that idea, so they filed in federal court.

There are many reasons that the Brand X loss is a positive development, but perhaps the most obvious is that it keeps market negotiations alive.

If the Supreme Court had ruled that cable companies must open their lines, that would have given firms like Brand X and Earthlink a government-mandated advantage in what would otherwise be a market-based negotiation. And when government starts picking winners and losers in the marketplace, consumers suffer. Brand X can still re-sell high speed broadband access on cable lines, but in order to do so, it will have to play by market rules, just like other businesses.

There's also the investment issue. If companies think that their competitors will get to use their infrastructure at prices that don't reflect market realities, they tend to stop investing, especially in an area as costly and high-risk as broadband. That's what happened in the telecom space and the reason why cable still outpaces DSL by a significant margin.

Fair and Balanced Market
Brand X and some self-designated consumer advocates attempted to spin the Court's ruling as anti-competitive, but nothing could be further from the truth. Brand X is a re-seller of cable service, not an owner of the lines. Therefore, it does not really introduce more competition into the market; it just looks like it if the retail vs. ownership structure is unclear -- and to most people, it is. But now that the Supreme Court has ruled in favor of the FCC's deregulatory direction, perhaps things will turn around in the entire broadband space.