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Challenges Ahead As FCC Considers ‘Net Neutrality’ Rules

Posted on: Monday, 19 October 2009, 06:30 CDT

Five years into an often-heated policy debate, proponents of so-called “net neutrality” may finally be close to getting their wish of having broadband service providers guarantee equal treatment of all types of Internet traffic.

Such ‘net neutrality’ rules would ensure that Internet users could access any Web site and online services they choose, and that cable and phone companies, for instance, could not block subscribers from using lower-cost Internet calling services or accessing competitive online video sites.

However, despite Democratic control of both the Congress and the White House, enacting “net neutrality” rules is proving to be a challenge.  Ultimately, the courts and perhaps even Congress may have to get involved in the matter.

The Federal Communications Commission (FCC) is scheduled to vote this Thursday on a proposal by chairman Julius Genachowski, which calls for regulations to be drafted that would prohibit Internet providers from discriminating against any type of Internet traffic.

Genachowski’s proposal already has the support of the other two Democrats on the five-member commission. However, the plan has met solid opposition from the nation’s major telecom, cable and wireless companies, who say they should be able to run their networks as they choose, given the billions they have invested in their network infrastructure. 

High-speed Internet providers, such as Comcast Corp., AT&T Inc. and Verizon Communications Inc.,  say this includes offering premium services over their networks that would allow them to differentiate themselves from rivals and earn solid returns on their network investments.

But Republicans in the FCC and in Congress have expressed concerns about the proposal, fearing that network neutrality rules might discourage broadband providers from continuing to invest in expanding and upgrading their networks.

"The risk of regulation really inhibits investment," the AP quoted Republican Commissioner Robert McDowell as saying.

"How do we pay for all that?” he said, referring to the agency's estimated cost of up to $350 billion to make broadband Internet available to all Americans.

But nearly everyone agrees the agency will have to resolve some contentious issues as the proposal moves forward.

For instance, how much flexibility should broadband providers have in  keeping their networks running smoothly by ensuring that high-bandwidth applications such as videos don't consume too much bandwidth and obstruct other types of Internet traffic.

In short, the FCC must decide when legitimate network management crosses the line to become discrimination.

Lawrence Spiwak, president of the Phoenix Center for Advanced Legal & Economic Policy Studies, worries the agency could harm  small, rural carriers, whose networks are more costly to construct.

Without the ability to manage their network traffic, these firms  could be forced to make expensive network upgrades they cannot afford, he told the AP.

The FCC must also decide how the new rules would apply to wireless systems, which have less bandwidth capacity than wireline networks and might therefore have greater legitimate requirements to manage their traffic.

AT&T, for example, is already experiencing capacity issues due to the widespread popularity of Apple Inc.’s iPhone and its bandwidth-intensive applications.  The carrier is the exclusive network provider for the popular device.

"There could be unintended consequences of applying net neutrality to wireless," said Christopher Guttman-McCabe, vice president of regulatory affairs for the industry group CTIA-The Wireless Association, during an interview with the Associated Press.

Genachowski's proposal calls for the FCC to officially adopt four principles that have guided the agency’s enforcement of communications laws in individual cases.  Those principles state that network operators must permit subscribers to access all online content, services, applications and devices as long as they are legal.

The agency used those guidelines last year  in ruling that Comcast Corp. must stop blocking subscribers from using the BitTorrent online file-sharing service, which is used to transfer large files such as online video.  Comcast is challenging the ruling.

Genachowski wants the FCC to adopt two additional principles, one of which would prohibit broadband providers from discriminating against particular content or applications by blocking them or giving priority to other types of traffic.  The other principle would require broadband providers to disclose their network management practices.

Genachowski also seeks to apply all six principles to wireless systems, which until now have gone largely unregulated.

Thursday's vote will set off a proceeding to draft rules based on those principles.  The rules would then be open to public comment, with the agency likely adopting formal regulations by next summer.

Backers of net neutrality seek to prevent broadband companies from becoming online gatekeepers by misusing their control over the Internet.

They caution that new Web sites and services such as Facebook or YouTube might never get off the ground if broadband providers are allowed to prioritize their own online services or those of preferred partners.

"If bandwidth is disproportionately consumed by those who can pay, it would destroy the Internet as a level playing field," Ben Scott, policy director for the public interest group Free Press, told the Associated Press.

Colin Crowell, a senior counselor to Genachowski, called the regulations "sensible rules of the road to preserve a free and open Internet, which has been an economic and innovation engine for the nation."

However, opponents, including large service providers along with many Republicans and some Congressional Democrats, say Genachowski has not proven the need for more regulation considering the few known examples of Internet traffic discrimination.

In addition to the Comcast case last year, the only other major incident occurred in 2005, when a small North Carolina telecom company blocked subscribers from accessing Vonage Holding Corp.'s Internet phone service.   The company reversed its course after the FCC got involved.

"The FCC has a responsibility to prove a market failure before intervening in the market," said Rep. Cliff Stearns, the top Republican on the House subcommittee overseeing communications and technology.

"I don't think they have proven that,” he told the Associated Press.

McDowell, the Republican FCC commissioner, says that current antitrust laws already offer the necessary framework to handle such cases.

Meanwhile, the issue of who has jurisdiction in the matter hangs over the entire proceeding.

In its challenge of the BitTorrent ruling, Comcast argued that the FCC does not have proper authority to mandate nondiscrimination rules due to the agency’s deregulation of Internet service in 2002 – something the Supreme Court upheld three years later.

A ruling in the Comcast case is expected sometime next year.  If the court rules in favor of the cable operator, it could undermine the FCC’s net neutrality proceedings, forcing the agency to reverse course on deregulation or pull Congress into the matter.
 
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Source: RedOrbit Staff & Wire Reports

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