Bloomberg News

Google to Netflix Pay-for-Access Deals Said to Be Review by FCC

April 24, 2014

A U.S. regulator is considering letting Internet-service providers negotiate payments from companies including Amazon.com Inc. (AMZN:US) and Google Inc. (GOOG:US) for access to subscribers, according to an official briefed on the plan.

The proposal from Federal Communications Commission Chairman Tom Wheeler would mark a new phase in a struggle over fair Internet practices in which the agency has insisted on equal treatment of online traffic from large and small providers of video and other Web content.

After a court defeat in January, Wheeler is proposing to judge the handling of Web media by service providers led by AT&T Inc. (T:US) and Verizon Communications Inc. (VZ:US) on a case-by-case basis, said the official, who asked for anonymity to discuss the plan, which hasn’t been released. The FCC wants to know whether it should allow fee-for-access arrangements for the final connection to subscribers, the official said.

The FCC has been seeking to replace a rule voided in January by a U.S. court that has come to be commonly known as “net neutrality.” The regulation required companies that provide businesses and consumers high-speed Internet service over wires, or broadband, to treat all Web traffic the same and didn’t let them charge for faster or more-reliable access.

Companies pushing for open-Internet protections have included largest search-engine provider Google, largest Internet retailer Amazon and biggest online-subscription video provider Netflix Inc. (NFLX:US) They are part of the Internet Association, which in an April 3 filing told the FCC the agency should adopt enforceable rules so their services won’t be unfairly blocked, “explicitly or implicitly.”

‘Unnecessary Tolls’

Wheeler will send his proposal to the five-member agency for a preliminary vote next month, he said at a news conference yesterday in Washington without providing details. In a e-mailed statement last night, he insisted that the move wasn’t a “turnaround” in FCC policy.

“The same rules will apply to all Internet content,” Wheeler said. “As with the original open Internet rules, and consistent with the court’s decision, behavior that harms consumers or competition will not be permitted.”

Policy groups that have supported rules to prevent Internet-service providers from unfairly blocking or slowing Web traffic began voicing objections to the Wheeler’s plan as elements of it became public yesterday.

Michael Weinberg, vice president of the policy group Public Knowledge, said Wheeler’s proposal “is not net neutrality.” The FCC is inviting service providers “to pick winners and losers,” Weinberg said in an e-mailed statement.

Flexibility Sought

AT&T in a March 21 filing said the FCC should give Internet-service providers the flexibility to negotiate with companies that provide video and other content over the Web, provided the result isn’t commercially unreasonable. Verizon in a filing March 21 said the agency shouldn’t write prescriptive rules and should instead intervene as needed to address practices that “demonstrably harm” consumers and competition.

Proponents of rules, including Web companies, have said regulations are needed to keep Internet-service providers from interfering with rival video and other services.

Niki Christoff, a Google spokeswoman, declined to comment and Mary Osako, a spokeswoman for Amazon, didn’t immediately provide a comment.

Netflix on March 20 used its blog to call for “strong net neutrality” to prevent service providers from charging a toll to reach offerings such as its movie catalog, Google’s YouTube, or Microsoft Corp.’s Skype calling and video-chat service.

White House

“Pay-for-priority schemes will be a disaster for startups, non-profits and everyday Internet users who cannot afford these unnecessary tolls,” Craig Aaron, president of the group Free Press, said in an e-mailed statement. He called the proposal “a convoluted path that won’t protect Internet users.”

President Barack Obama’s administration in February backed an online petition asking the FCC to regulate service providers to promote open Internet provisions.

“Absent net neutrality, the Internet could turn into a high-priced private toll road that would be inaccessible to the next generation of visionaries,” Gene Sperling, then-director of the National Economic Council, and Todd Park, U.S. chief technology officer, said in a Feb. 18 blog post.

Bulk or wholesale connection agreements like one Netflix struck with leading cable provider Comcast Corp. (CMCSA:US) in February aren’t considered to be among issues to be addressed by open-Internet rules, Wheeler said at a March 31 news conference. Netflix agreed to pay Comcast millions of dollars annually to ensure improved speed and reliability for its video service.

As it acquired NBCUniversal in 2011, Comcast agreed to abide by the FCC’s net-neutrality rules until 2018. The agreement remains in force, and Comcast has said it will be extended to subscribers brought to it as part of its proposed purchase of second-largest U.S. cable provider Time Warner Cable Inc. (TWC:US) The combined company will have about 30 million subscribers, according to Comcast.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Michael Shepard, Elizabeth Wasserman


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Companies Mentioned

  • AMZN
    (Amazon.com Inc)
    • $324.5 USD
    • -6.82
    • -2.1%
  • GOOG
    (Google Inc)
    • $587.37 USD
    • -8.71
    • -1.48%
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