A host of tech outfits, from Google to Intel, suffered a setback in a battle over access to the Internet on Apr. 26. At issue is whether telcos like AT&T and cable operators such as Comcast, which maintain the country's vast broadband networks, can favor one provider's Web traffic over another's. A measure that would bar the practice was shot down by a Congressional committee.
In a vote of 34 to 22, the House Committee on Energy & Commerce rejected an amendment to a sweeping telecommunications law, the Communications, Promotion, & Enhancement Act of 2006. The proposal, by Rep. Ed Markey (D-Mass.), would have given the Federal Communications Commission the power to prohibit discrimination when it comes to sending traffic over the Internet. In effect, the amendment would block the creation of a multilane "information highway," where network operators could give preference to their own content, or ensure speedier delivery to content providers that pay extra fees.
UNNECESSARY REGULATION. The vote is a defeat for the likes of Google (GOOG), Intel (INTC), Yahoo (YHOO), and eBay (EBAY), proponents of so-called Net neutrality, which aims to ensure equal and unfettered access to the Net (see BW Online, 3/7/06, "Beware of a Two-Lane Internet"). The victors, of course, are telecom carriers such as AT&T (T) and Verizon (VZ) and cable companies like Comcast (CMCSA) and Time Warner (TWX).
Measures like Markey's, they say, will create unnecessary regulation and impede the introduction of high-bandwidth services (see BW Online, 3/16/06, "Say No to 'Net Neutrality' Rules").
The larger bill, which passed with a vote of 42 to 12, now heads to the House for a vote in May. The bill, sponsored by Energy & Commerce Committee Chairman Joe Barton (R-Tex.) and Bobby Rush (D-Il.), requires telecom and cable operators to let consumers access content, run applications, and use services of their choice.
MANAGING NETWORKS. It also provides for competition among all network, application, and content providers. But it still leaves scope for operators to limit the development of publicly available bandwidth while dramatically speeding up a "premium" service that gives faster delivery to companies that pay up.
And at least one notable telecom exec, AT&T CEO Ed Whitacre, has said publicly that is what he would like Internet companies to do. Providers say that in order to ensure future investment in the Net, they need to be able to manage networks as they see fit and create new revenue streams (see BW Online, 12/15/05, "At Stake: The Net as We Know It").
That worries Net neutrality proponents, who want strictly-worded regulation that would guarantee a level playing field for all companies on the Internet, and give the FCC the power to create rules, rather than just set broader "principles."
COUNTING ON A COMMITTEE. While the current system will let companies appeal to the FCC on a case-by-case basis, they worry operators could effectively shut down competing services, and drag their heels through an appeals process. "We want to ensure our customers retain their freedom to access the open Internet," says Paul Misener, vice president of global public policy for Amazon.com (AMZN). This bill and earlier rulings "actually remove the FCC's rulemaking authority in this area by saying it cannot adopt rules concerning net neutrality in the future."
Indeed, the Apr. 26 defeat of the Markey amendment wasn't the first legislative defeat for the Internet companies. A similar version of amendment was also voted down on Apr. 6 in Commerce's subcommittee on Telecommunications and the Internet.
Tech companies now pin their hopes on the Senate Committee on Commerce, Science, and Transportation, which they're urging to set in motion competing legislation. On the eve of the Apr. 26 vote, the CEOs of Amazon.com, eBay, Google, Microsoft (MSFT), Yahoo, IAC/InterActive (IACI), and Intel (INTC) (weighing in on the issue for the first time) asked the committee to "enact legislation preventing discrimination against the content and services of those not affiliated with network operators." The letter went on to say, "absent such safeguards, the fundamental paradigm of the Internet will be irreparably altered."
WARDING OFF LOBBYISTS. The Internet companies also hope they can spark interest in their cause elsewhere in the House of Representatives. The House Judiciary committee may propose its own bill that could be joined with the Barton-Rush bill. "We'll talk to anyone who will listen in both chambers of Congress" says Misener. "I don't view this vote as an unexpected setback -- the clock just ran out on this one."
Pushing such regulation through will be difficult for the Internet companies, says Blair Levin, analyst with Stifel Nicolaus. Consider Supreme Court rulings like the National Cable & Telecommunications Assoc. vs. Brand X in June, 2005, which gave cable operators autonomy in sales of broadband services, and similar allowances by the FCC last summer for telecom operators. "We're in a deregulatory phase right now" says Levin, and with the GOP still showing a strong majority in Congress, there is little willingness to create more rules and regulations.
Plus, the Internet companies -- whose lobbying efforts have been close to nonexistent up until a few years ago -- are going up against some of the most well-funded and experienced lobbyists in the business, making for a fairly lopsided battle. "Right now, I would never invest in a business model that depended on protection from Net neutrality," says Levin.
Helm is a reporter for BusinessWeek Online in New York
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