By Gautham Nagesh
WASHINGTON--Regulators are proposing new rules on Internet
traffic that would allow broadband providers to charge companies a
premium for access to their fastest lanes.
The Federal Communications Commission plans to put forth its new
rules on Thursday. The proposal marks the FCC's third attempt at
enforcing "net neutrality"--the concept that all Internet traffic
should be treated equally.
Developed by FCC Chairman Tom Wheeler, the proposal is an effort
to prevent broadband Internet providers such as Comcast Corp.,
Verizon Communications Inc., and Time Warner Cable from blocking or
slowing down individual websites served up to the consumer. The
idea is that consumers should be able to access whatever content
they choose, not the content chosen by the broadband provider.
But it would also allow providers to give preferential treatment
to traffic from some content providers, as long as such
arrangements are available on "commercially reasonable" terms for
all interested content companies. Whether the terms are
commercially reasonable would be decided by the FCC on a
case-by-case basis.
This latest plan is likely to be viewed as an effort to find a
middle ground, as the FCC has been caught between its promise to
keep the Internet open and broadband providers' desire to explore
new business models in a fast-changing marketplace. It likely won't
satisfy everyone, however. Some advocates of an open Internet argue
that preferential treatment for some content companies inevitably
will result in discriminatory treatment for others.
The proposal would open the door to new products from companies
such as Apple Inc., which has explored the idea of offering a video
service that would rely on a dedicated portion of the broadband
pipe. Like the FCC's previous open Internet rules, the proposal
wouldn't apply to wireless carriers, which aren't governed by any
net-neutrality rules.
The FCC will circulate the proposal on Thursday ahead of a vote
to move forward with the proposal at its May 15 meeting. Moving
forward would represent a milestone in the long fight over rules
governing how service providers treat different kinds of
content.
Net neutrality was a key part of President Barack Obama's
campaign platform in 2008. The D.C. Circuit Court of Appeals threw
out the FCC's last two attempts to implement an open Internet rule
after challenges from broadband providers.
On a consumer level, the plan would probably not affect users'
Internet experience immediately but over the long term it could
spawn new products that use broadband connections in a variety of
ways for home and business communications--for an additional
fee.
If the rule is adopted, winners would be the major broadband
providers that would be able to charge both consumers and content
providers for access to their networks. Companies like Google Inc.
or Netflix Inc. that offer voice or video services that rely on
broadband could take advantage of such arrangements by paying to
ensure that their traffic reaches consumers without disruption.
Those companies could pay for preferential treatment on the "last
mile" of broadband networks that connects directly to consumers'
homes.
Startups and other small companies not capable of paying for
preferential treatment are likely to suffer under the proposal, say
net neutrality supporters, along with content companies that might
have to pay a toll to guarantee optimal service.
One top cable executive said, "I have to say, I'm pleased." The
executive noted that big Internet companies like Google already pay
middlemen carriers to deliver their content efficiently to the
doorstep of cable operators' networks; only the last mile
connecting to customers' homes has been treated differently by
regulators.
Major technology companies including Google, Facebook Inc.,
Microsoft Corp., Amazon.com Inc., Yahoo Inc. and eBay Inc., either
didn't respond to requests for comment or referred requests to the
Internet Association, a trade group representing Web companies
including Google and Yahoo. The Internet Association didn't respond
to requests for comment.
The executive said new business models coming out of such rules
could help cable operators better invest in their broadband
networks. "Somebody has to pay for this, and if they weren't going
to let companies pay for enhanced transport and delivery...it just
seemed like this was going to come back to the consumer."
A spokesman for Verizon, which successfully challenged the
commission's original open Internet rules, said the broadband
provider remains "publicly committed to ensuring that customers can
access the Internet content they want, when they want and how they
want."
"Given the tremendous innovation and investment taking place in
broadband Internet markets, the FCC should be very cautious about
adopting proscriptive rules that could be unnecessary and harmful,"
he said.
John T. Nakahata, an attorney with Wiltshire & Grannis LLP
who works on telecom-and-Internet policy, said Wednesday the FCC's
potential opening of preferred broadband access "follows exactly
the path left open by the courts."
In Silicon Valley, there has been a long-standing unease with
owners of broadband pipes treating some content as more equal than
others. Large companies have been mostly silent about the FCC's
moves regarding broadband service, but some smaller firms or
investors in startups have said the FCC needs to tread carefully so
Internet policies don't disadvantage young companies that can't
afford tolls to the Web.
"For technologists and entrepreneurs alike this is a worst-case
scenario, " said Eric Klinker, chief executive of BitTorrent Inc.,
a popular Internet technology for people to swap digital movies or
other content. "Creating a fast lane for those that can afford it
is by its very definition discrimination."
Some consumer advocacy groups reacted strongly against the
proposal. The American Civil Liberties Union said, "If the FCC
embraces this reported reversal in its stance toward net
neutrality, barriers to innovation will rise, the marketplace of
ideas on the Internet will be constrained, and consumers will
ultimately pay the price." Free Press, a nonpartisan organization
that is a frequent critic of the FCC, said, "With this proposal,
the FCC is aiding and abetting the largest ISPs in their efforts to
destroy the open Internet."
The proposal doesn't address the separate issue of back-end
interconnections, or peering, between content providers and
broadband networks. Netflix CEO Reed Hastings recently called for
the FCC to regulate peering as part of net neutrality, but Mr.
Wheeler has said the two issues are distinct.
Netflix declined to comment.
As part of the rules, the FCC would significantly increase the
amount of information broadband providers must disclose about their
networks, which could include details such as the speed and
congestion of their service along the last mile. The proposal would
also ask whether mobile broadband providers should be subject to a
similar commercially reasonable standard when striking deals with
content providers.
Mr. Wheeler said he planned to issue new open Internet rules in
February after the D.C. Circuit court decision.
The court's ruling sketched out a legal pathway through which
the FCC could try to achieve the same goals, and Mr. Wheeler said
he plans on following that road map.
The court said in January that the FCC has authority to regulate
broadband-company practices under a section of the 1996
telecommunications law that gives it broad authority to encourage
U.S. broadband service. The court also indicated that the FCC could
impose a "no blocking" rule if it found a different legal
justification.
Asked about the new proposal, an FCC spokesman said details like
the construction of a "commercially reasonable" standard, and the
manner in which disputes would be resolved, are all "among the
topics on which the FCC will be seeking comment."
The commission has decided for now against reclassifying
broadband as a public utility, which would subject ISPs to much
greater regulation. However, the commission has left the
reclassification option on the table at present.
Shalini Ramachandran, Shira Ovide, Andrew Fitzgerald and Rolfe
Winkler contributed to this article.
Write to Gautham Nagesh at gautham.nagesh@wsj.com
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