New U.S. Push to Regulate Internet Access

The Wall Street Journal (Link) - Amy Schatz (May 5, 2010)

In a move that will stoke a battle over the future of the Internet, the federal government plans to propose regulating broadband lines under decades-old rules designed for traditional phone networks.

The decision, by Federal Communications Commission Chairman Julius Genachowski, is likely to trigger a vigorous lobbying battle, arraying big phone and cable companies and their allies on Capitol Hill against Silicon Valley giants and consumer advocates.

Breaking a deadlock within his agency, Mr. Genachowski is expected Thursday to outline his plan for regulating broadband lines. He wants to adopt �net neutrality� rules that require Internet providers like Comcast Corp. and AT&T Inc. to treat all traffic equally, and not to slow or block access to websites.

The decision has been eagerly awaited since a federal appeals court ruling last month cast doubt on the FCC�s authority over broadband lines, throwing into question Mr. Genachowski�s proposal to set new rules for how Internet traffic is managed. The court ruled the FCC had overstepped when it cited Comcast in 2008 for slowing some customers� Internet traffic.

In a nod to such concerns, the FCC said in a statement that Mr. Genachowski wouldn�t apply the full brunt of existing phone regulations to Internet lines and that he would set �meaningful boundaries to guard against regulatory overreach.�

Some senior Democratic lawmakers provided Mr. Genachowski with political cover for his decision Wednesday, suggesting they wouldn�t be opposed to the FCC taking the re-regulation route towards net neutrality protections.

�The Commission should consider all viable options,� wrote Sen. Jay Rockefeller (D, W.V.), chairman of the Senate Commerce Committee, and Rep. Henry Waxman (D, Calif.), chairman of the House Energy and Commerce Committee, in a letter.

At stake is how far the FCC can go to dictate the way Internet providers manage traffic on their multibillion-dollar networks. For the past decade or so, the FCC has maintained a mostly hands-off approach to Internet regulation.

Internet giants like Google Inc., Amazon.com Inc. and eBay Inc., which want to offer more Web video and other high-bandwidth services, have called for stronger action by the FCC to assure free access to websites.

Cable and telecommunications executives have warned that using land-line phone rules to govern their management of Internet traffic would lead them to cut billions of capital expenditure for their networks, slash jobs and go to court to fight the rules.

Consumer groups hailed the decision Wednesday, an abrupt change from recent days, when they�d bombarded the FCC chairman with emails and phone calls imploring him to fight phone and cable companies lobbyists.

�On the surface it looks like a win for Internet companies,� said Rebecca Arbogast, an analyst with Stifel Nicolaus. �A lot will depend on the details of how this gets implemented.�

Mr. Genachowski�s proposal will have to go through a modified inquiry and rule-making process that will likely take months of public comment. But Ms. Arbogast said the rule is likely to be passed since it has the support of the two other Democratic commissioners.

President Barack Obama vowed during his campaign to support regulation to promote so-called net neutrality, and received significant campaign contributions from Silicon Valley. Mr. Genachowski, a Harvard Law School buddy of the president, proposed new net neutrality rules as his first major action as FCC chairman.

Telecom executives say privately that limits on their ability to change pricing would make it harder to convince shareholders that the returns from spending billions of dollars on improving a network are worth the cost.

Carriers fear further regulation could handcuff their ability to cope with the growing demand put on their networks by the explosion in Internet and wireless data traffic. In particular, they worry that the FCC will require them to share their networks with rivals at government-regulated rates.

Mike McCurry, former press secretary for President Bill Clinton and co-chair of the Arts + Labs Coalition, an industry group representing technology companies, telecom companies and content providers, said the FCC needs to assert some authority to back up the general net neutrality principles it outlined in 2005.

�The question is how heavy a hand will the regulatory touch be,� he said. �We don�t know yet, so the devil is in the details. The network operators have to be able to treat some traffic on the Internet different than other traffic�most people agree that web video is different than an email to grandma. You have to discriminate in some fashion.�

UBS analyst John Hodulik said the cable companies and carriers were likely to fight this in court �for years� and could accelerate their plans to wind down investment in their broadband networks.

�You could have regulators involved in every facet of providing Internet over time. How wholesale and prices are set, how networks are interconnected and requirements that they lease out portions of their network,� he said.