News Story by Jeremy Pelofsky

JUNE 27, 2005 (REUTERS) - The U.S. Supreme Court today ruled that cable companies don't have to provide rivals with access to their high-speed Internet lines, a victory for the cable and telephone industries, which are seeking deregulation.

The justices by a 6-3 vote overturned a U.S. appeals court ruling that cable high-speed Internet service has a telecommunications component and is subject to traditional telephone network-access requirements.

The Supreme Court backed a 2002 Federal Communications Commission decision that said cable broadband Internet service is an information service -- and is thus free from most telephone rules, including requirements to lease network access to competitors.

FCC officials had argued the move was necessary to spur more investment in high-speed Internet services. But consumer groups and independent Internet service providers such as EarthLink Inc. expressed concern that consumers would have few choices for Web access without some FCC safeguards.

The high court decided that the FCC's decision was reasonable under the Communications Act and that the appeals court didn't extend sufficient deference to the FCC as the expert agency to make its decision. Justices Antonin Scalia, David Souter and Ruth Bader Ginsburg dissented.

The Bush administration has been pushing broadband deployment as an economic booster, and FCC Chairman Kevin Martin opened the door to using the court decision broadly. "This decision provides much-needed regulatory clarity and a framework for broadband that can be applied to all providers," Martin said.

The decision could also benefit telephone companies that offer digital subscriber lines (DSL), an analyst said.

"It says some of the uncertainty is lifted about continued investment in broadband services like cable modems and DSL," said Craig Moffett at New York-based Sanford C. Bernstein & Co. "In that sense, it's a win for the telcos [telecommunications companies] as well, whose DSL services are still regulated as telecommunications services."

Cable companies such as Comcast Corp. and Time Warner Inc. are locked in a fierce battle with Internet service providers and telephone companies that offer their own high-speed Internet service and plan to provide with video service. The cable industry has about 21 million high-speed Internet access subscribers. Despite somewhat slower downloading speeds, DSL services have been gaining on cable and now have about 15 million lines.

"It will simply mean that price-gouging cable companies can keep ratcheting up prices and limiting Internet service options for consumers," said Gene Kimmelman, director of Consumers Union of the United States Inc.'s Washington office.

"This lack of choice limits the future deployment of innovative voice, video and data services beyond just those offered by the local cable company," said Dave Baker, vice president of law and public policy at Atlanta-based EarthLink.