FCC Web Rules Create Pushback

The Wall Street Journal

Is FCC chairman in over his head?

The head of the Federal Communications Commission on Thursday outlined a proposal for regulating the Internet that he described as a "third way," or middle ground between "heavy-handed" regulation and a do-nothing approach that could hurt competition and leave consumers unprotected.

FCC Chairman Julius Genachowski is proposing to promote competition and preserve the free flow of Web traffic by applying to broadband Internet service certain provisions of rules designed to regulate traffic on copper-wire telephone networks.

Big phone and cable companies, which provide much of the nation's broadband service, expressed dismay at the FCC chairman's decision to extend his regulatory authority to broadband, predicting it would damp investment and lead to court battles that could last years.

"We are very concerned about the direction this is going," said Grant Seiffert, chief executive of the Telecommunications Industry Association, an industry lobbying group.

Industry executives said privately that they didn't trust the notion that the FCC would take only a limited approach to the new regulations, applying just six sections of Title II of the Communications Act to broadband while not enforcing others.

They also expressed concerns about the legality of the proposal. "We believe that the chairman's stated approach is legally unsupported," said Tom Tauke, executive vice president of Verizon Communications Inc., in a statement.

Broadband policy has evolved into a deeply partisan issue in Washington. Democratic lawmakers applauded Mr. Genachowski's stance Thursday, but Republicans blasted his plan, saying it would cost jobs.

Senate Republicans began recirculating legislation proposed in 2009 by Sen. John McCain (R., Ariz.) that would prohibit the FCC from regulating the Internet. House Minority Leader John Boehner (R., Ohio) called the decision a "government takeover of the Internet" and a "job-killing big government scheme."

An FCC spokeswoman declined to comment.

The FCC's two Republicans also dissented. "This proposal is disappointing and deeply concerns us," said Commissioners Meredith Attwell Baker and Robert McDowell, in a joint statement. They argued that the FCC was overstepping its authority.



Mr. Genachowski doesn't need congressional approval or the votes of his Republican colleagues to adopt the proposal. The other two Democrats on the FCC's five-person board have said they will support his efforts.

Consumer groups applauded some aspects of Mr. Genachowski's plan, but some groups, including Public Knowledge and Consumers Union, expressed concerns that the FCC plan doesn't go far enough to ensure greater competition among Internet-service providers.

Six Sections to Apply:

    * Section 201—Requires Internet providers to interconnect and charge reasonable rates
    * Section 202—Prevents price or service discrimination
    * Section 208—Sets up FCC complaint process
    * Section 222—Protects customer privacy and proprietary commercial information
    * Section 254—Allows use of Universal Service Fund for broadband
    * Section 255—Ensures disability access

Mr. Genachowski said the FCC needed to take action to protect consumers after a federal appeals court last month questioned the agency's authority to enforce rules that require broadband providers to treat all Internet traffic equally, prohibiting them from deliberately slowing or blocking such traffic.

These so-called net neutrality guidelines are strongly supported by the Internet-commerce industry. Broadband providers have said rigid net-neutrality rules aren't desirable because that restricts their freedom to manage their fast-evolving networks.

The appeals court ruled in April that the FCC overstepped its bounds in deciding to sanction Comcast Corp. for deliberately slowing some broadband subscribers' traffic in 2008. The court's ruling essentially threw into question much of the agency's efforts to set rules for broadband providers over the past eight years.

The FCC's proposal seeks to provide "a solid legal foundation for achieving the policy goals that benefit consumers and our economy in the most effective and least intrusive way," Mr. Genachowski said Thursday.

The FCC chairman said he doesn't intend to regulate rates for Internet service or require service providers to share their lines with rivals at government-regulated rates.

The agency would require broadband providers to allow data to travel from the Internet to a subscriber's computer without meddling. However, it isn't planning to regulate material sent over the Internet, like email, online videos or games.

That's an important distinction for Silicon Valley, where a handful of companies including Google Inc., Amazon.com Inc. and Netflix Inc. sent Mr. Genachowski a letter Thursday applauding his "middle ground approach" to regulation.

"This is a great way to move forward," said Paul Misener, vice president of global public policy at Amazon.

The move catches the communications industry, and phone companies in particular, at a difficult time.

Phone companies and cable operators are spending billions of dollars slugging it out to snare broadband and TV subscribers. Wireless service, the growth engine of phone companies for the past decade, has become a mature market.

The FCC proposal adds another layer of uncertainty that industry executives say will cause them to delay investments in land-based and wireless Internet infrastructure. Any such cuts in capital spending could lead to job losses and hurt the Obama administration's plan to extend faster broadband service across the country. Investors are worried about the potential fallout as well.

Under questioning from an analyst on a conference call after its first-quarter earnings release Thursday, Cablevision Systems Corp. Chief Operating Officer Tom Rutledge said a move to reclassify broadband lines under "1930s laws, utility-type regulation" would be disappointing. "We operate in a highly competitive environment," he said.

FCC Chief Julius Genachowski faces Broadband Dilemma
USA Today

Federal Communications Commission Chairman Julius Genachowski will soon have to make a wonky but controversial decision that could have a profound impact on how much consumers pay for broadband, how fast their services will be — and possibly whether millions of people will be able to get it at all.

He can ensure that the FCC has the power to set rules for high-speed Internet service if he asks his fellow regulators to define it, in legal terms, as a highly regulated common carrier service like telephones. Or he can let cable and phone companies call the shots by allowing it to remain a lightly regulated information service.

There's no deadline for a decision. But if Genachowski waits too long, he may have to abandon dozens of policy changes that he has proposed to close the digital divide and protect broadband subscribers.

That would mean Genachowski "will have no legacy," says Josh Silver, executive director of Free Press, an activist group that favors more broadband oversight.

But if he does act, cable and phone companies likely would "launch an all-out attack" on the FCC leading into this year's congressional elections, "with charges of lost jobs, lost investment, lost (broadband) deployment and more Democratic meddling in industry," says analyst Rebecca Arbogast of Stifel Nicolaus, a financial services firm.



Genachowski ran into this dilemma last week when the U.S. Court of Appeals for the District of Columbia overturned a commission decision from 2008 that involved Comcast's management of Internet traffic. Justices said the FCC lacked an explicit mandate to regulate broadband. The agency tied its own hands in 2005 when it defined phone DSL broadband as an information service, similar to a decision it made in 2002 about cable modems.

The court tossed aside the FCC's view that it could infer some power over Internet services from its authority to set rules for cable TV and phone services. The ruling hit just weeks after the FCC unveiled a sweeping proposal, called the National Broadband Plan, designed to make high-speed Internet a staple of everyday life.

Separately, Genachowski and President Obama have said that they want to require Internet providers to treat all Web services equally, a policy known as net neutrality.

Without a change in the law that defines broadband, many of these proposals would have to be scuttled or might end up being "litigated before a skeptical court," Arbogast says.

The FCC won't say whether Genachowski is inclined to reassert regulatory power over broadband by reclassifying it as a common carrier service. But whatever decision he makes will create shock waves.

Rules are 'badly out of date'

If the FCC changes the way it treats high-speed Internet, then "everybody in the industry would sue," says Scott Cleland, chairman of NetCompetition.org, an Internet forum supported by cable and phone companies.

"It would be like an 8.0 earthquake under the sector," he adds. "Hundreds of billions of dollars have been invested (in broadband) in the belief that there'd be a market rate of return, not a regulated rate."

The FCC's two Republican commissioners have said they'd fight a move to reclassify broadband.

Verizon and AT&T have said that they'd prefer to see Congress clarify the FCC's role and what rules should apply to new players including Google. Laws are "badly out of date," Verizon Executive Vice President Tom Tauke said in a recent speech.

But consumer advocates and others say that Genachowski can't afford to wait. "It would surely take a year or two" to get a major law through Congress, says Andrew Schwartzman of the Media Access Project, a public interest law firm.

And if an FCC decision to reclassify broadband draws a lawsuit, it makes more sense to have "one big court case instead of a dozen small cases," Schwartzman says.

Genachowski's fellow Democrats on the commission also are eager to act. Michael Copps called reclassification the "only way the commission can make lemonade out of (the Appeals Court's) lemon of a decision."

If Genachowski wants to defuse the issue, he could try to engineer a compromise. For example, he could agree to take broadband reclassification off the table as long as providers make legally binding promises to offer consumer protections called for in the National Broadband Plan and to agree to treat all Web services equally. But it will be hard to please everybody as advocates gear up for a fight.

While reclassification isn't a sexy issue, as the Internet becomes the main pipeline for media and communications and phone DSL broadband, the FCC's rules "will shape everything that people use to interact with the world," Silver says.