Bloomberg News

FCC’s Internet Fast-Lane Far From Done Deal as Debate Begins

April 25, 2014

Computer Cables

The proposal would let service providers such as AT&T Inc. and Comcast Corp. negotiate deals with content makers such as Netflix Inc. and Amazon.com Inc. for preferential connections to consumers’ televisions and computers. Photographer: Mario Proenca/Bloomberg

A U.S. proposal to let Internet-service providers charge for faster routes to Web users may face substantial revision before it’s approved.

Federal Communications Commission Chairman Tom Wheeler is already facing pushback from lawmakers who say the plan favors large companies and from consumer groups concerned that the days of an open Internet may be over. Wheeler also has to win over at least two other FCC members and comply with a court ruling that struck down the agency’s last Web-traffic proposal.

“He’s to some extent walking a tightrope,” said Andrew Lipman, a Washington-based partner at the law firm Bingham McCutchen LLP. “He may have to tweak it a bit.”

The proposal would let service providers such as AT&T Inc. (T:US) and Comcast Corp. (CMCSA:US) negotiate deals with content makers such as Netflix Inc. and Amazon.com Inc. (AMZN:US) for preferential connections to consumers’ televisions and computers. Wheeler’s idea to consider judging on a case-by-case basis whether payment-for-priority would be permitted is “a rather dramatic policy shift,” said Clay Brockman and Andrew Parmentier of Height Analytics LLC.

“It is unclear whether Wheeler has the votes and the commissioners could use this time to push for changes,” the two Washington-based analysts said in a note to clients yesterday.

That assures months of debate as Wheeler aims to fill a vacuum left in January when a court rejected the FCC’s previous rules. He may need to work on public opinion, placate Congress and win the votes of the two Democrats who join him to form a majority at the agency where Republicans are hostile to proposed rules, Lipman said.

Stronger Prohibitions

“At least one if not both Democrats may want to go for even sharper teeth and stronger prohibitions” against Internet service providers unfairly exploiting their position as a subscriber’s link to the Internet, Lipman said.

Wheeler, 68, defended the new proposal in a blog post yesterday, saying it doesn’t abandon the FCC’s Internet fairness policy. Advocacy groups including Public Knowledge and Free Press that have supported rules to prevent Internet-service providers from unfairly blocking or slowing Web traffic -- known as “net neutrality” -- said payment arrangements won’t protect Internet users.

“The notion that the FCC might create a fast lane for deep-pocketed companies is deeply disappointing and very troubling,” Senator Al Franken, a Minnesota Democrat, said in an e-mailed statement. “Chairman Wheeler’s proposal would fundamentally change the open nature of the Internet, and I strongly urge him to reconsider this misguided approach.”

Potential Discrimination

The National Cable & Telecommunications Association, a trade group that represents Internet providers including Comcast, said it will work with the FCC for “the best path forward.” The organization is led by Michael Powell, a former chairman of the agency.

“The cable industry supports an open Internet and will continue to provide consumers unfettered access to legal content of their choosing,” Brian Dietz, a spokesman for the Washington-based group, said in an e-mailed statement.

Wheeler said he will push for a preliminary vote at the FCC next month, and wants to have a rule in place by year-end.

U.S. Representative Nancy Pelosi of California, leader of House Democrats, urged Internet entrepreneurs and users to “make their voices heard.”

Accounts of the proposal “raise serious concerns that the Internet might soon lose the core of what it is -- an open space for innovation, entrepreneurship, connection and communication,” Pelosi said in a statement yesterday.

Rejected Rule

The FCC’s now-voided rules passed on a 3-to-2 party-line vote over Republican objections in 2010. The agency’s two current Republican members, Ajit Pai and Michael O’Rielly, yesterday didn’t comment. Democrat Mignon Clyburn in an e-mailed statement said she is reviewing the proposal and Jessica Rosenworcel, another Democrat, in a Tweet said “A free and open Internet is vital.”

The FCC’s rejected rule required companies that provide businesses and consumers high-speed Internet service over wires, or broadband, to treat Web traffic equally and didn’t let them charge for faster or more-reliable access.

It set lighter requirements for mobile traffic, which is growing rapidly, and Wheeler’s proposal would extend the same lesser conditions, said an FCC official yesterday who spoke on condition of anonymity because the proposal hasn’t been made public.

Netflix Agreement

Bulk or wholesale network-to-network connection agreements like one Netflix (NFLX:US) struck with Comcast in February aren’t discussed in Wheeler’s proposal, said the FCC official. Netflix agreed to pay Comcast to ensure improved speed and reliability for its video service.

Netflix, the largest online-video subscription service, in a March 20 blog post backed what it called “strong net neutrality” with rules to prevent Internet-service providers from charging to deliver services and data requested by residential subscribers.

“Netflix is not interested in a fast lane; we’re interested in safeguarding an open Internet for our members,” Christopher Libertelli, vice president of government affairs for the largest video-subscription service, said in a statement yesterday.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Chris Strohm in Washington at cstrohm1@bloomberg.net

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


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