No Jams on Info Freeway

Looks like the Internet is the information superhighway, after all.

In the closely watched Brand-X case, the U.S. Supreme Court ruled that cable Internet services, such as those provided by Comcast (NASDAQ:CMCSA), Cablevision (NYSE:CVC), and Time Warner (NYSE:TWX), do not have to let competing Internet Service Providers (ISPs) onto their wires. Essentially, cable Internet services have been defined primarily as routers of information, not telecommunications. In 2002, the Federal Communications Commission (FCC) classified them as information providers, subject to regulations that differ from those applied to phone companies.

Interestingly, the phone companies have sided with the cable operators. Not out of any sense of altruism, mind you, but rather because phone companies like Bell South (NYSE:BLS) and SBC Communications (NYSE:SBC) will want Congress and the FCC to carve out their own special exemptions from the open-access regulations. Indeed, Verizon's (NYSE:VZ) executive vice president called on Congress to "finish the job" by granting DSL operators the same freedom that cable operators receive. The cable operators have said they would not oppose such a move, because they have been arguing for "regulatory parity" for some time now.

The current case began when Brand-X Internet, a California-based ISP, wanted the cable operators to provide it and other ISPs like EarthLink (NASDAQ:ELNK), Juno, and NetZero access to their networks. The 9th U.S. Court of Appeals sided with the ISPs and consumer groups, affirming that the cable operators should be held to the same regulatory standards as phone companies. The Supreme Court disagreed and noted that the FCC was in a "far better position" to determine the appropriate regulation. In other words, the regulators, not the courts, should set regulation.

While it might seem a harsh ruling for consumers, considering the cable operators have been granted a government-sanction monopoly, and no one loves the high rates they charge for seemingly mediocre service, in fact, we're being well-served by the ruling.

Information services will inevitably evolve over time, and this ruling will help foster new developments. Right now we use cable modems and DSL services, but "broadband over powerlines" may soon be a reality, as will WiMax and other iterations not yet thought of. "Open access" is simply a euphemism for access to other people's property. It would stifle innovation if all of the new technologies were forced to allow competitors access as they took hold.

The Brand-X decision ensures that the information superhighway will maintain a steady flow of traffic.

Keep a steady flow of ideas coming with these related bits of Foolishness:

• Controlling Interest in Net Access
• Danger: Power Lines Overhead?
• Waiting for WiMax

Time Warner and SBC Communications are Motley Fool Stock Advisor recommendations. Get complete access to all of these stock picks by clickinghere.

Fool contributor Rich Duprey has no financial position in any of the companies mentioned in this article. The Fool has a strict disclosure policy.