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FCC Closer To Making Internet Traffic Decision

December 20, 2010

A divisive proposal on Internet traffic rules that would allow providers to ration out access to their networks is scheduled to come before the FCC for a vote on Tuesday.

The rules would prohibit high-speed Internet providers like Comcast and Verizon Communications from blocking lawful traffic, but are expected to acknowledge their need to manage network congestion and possibly charge consumers based on their Internet usage.

Federal Communications Commission Chairman Julius Genachowski’s proposal will most likely attract the grudging support of his two fellow Democrats, analysts say, overcoming opposition from the agency’s two Republicans.

Items on the FCC agenda are sometimes shelved on late notice when an agreement cannot be reached, but those following the issue think Democrats Michael Copps and Mignon Clyburn will decides imperfect rules are better than no rules at all.

Copps pushed for the FCC to reclassify Internet traffic with tougher rules applying to telephone service, while Clyburn said she is uneasy about giving wireless Internet providers more freedom to control their own networks than are landline services.

The Republican commissioners said they prefer to keep Internet traffic free of regulation.

According to Reuters, Rebecca Arbogast, an analyst with Stifel Nicolaus and a former division chief at the FCC, said she thinks “it’s more likely that they will work something out.”

Internet providers say they should be free to control their own networks for the benefit of all users, but content providers fear disruption of access and anti-competitive behavior.

Level 3 Communications, a company that works with Netflix to stream videos online, has accused Comcast of charging it unfair prices to deliver content to Comcast subscribers.

The FCC’s ability to regulate the Internet has been in doubt since an appeals court in April said the agency lacked the authority to stop Comcast from blocking bandwidth-hogging applications.

Court challenges are expected over the latest rule-making attempt, although senior FCC officials have said they will raise new arguments not employed in the Comcast case.

FCC’s Genachowski proposed giving wireless Internet providers even greater freedom to manage traffic, recognizing that wireless’ status is a much younger technology.

Supporters of the wireless portion of the proposal say it recognizes the limited bandwidth available to support everything from phone calls to video downloads. At stake is how quickly handheld devices can receive data-heavy content.

Some opposed to the proposal say it gives Internet providers too much power and fear it could harm consumers, suppress innovation and apportion the Internet in irreversible ways, contrary to “open” Internet concepts.

More than 80 groups sent a letter to the FCC on Dec. 10, saying the proposal was not “real” net neutrality. They demanded a ban on paid prioritization of online content, which would ban Internet providers from charging websites for a “fast lane” to reach more users more quickly.

“It is likely that there is going to be strong language disfavoring paid prioritization,” Andrew Jay Schwartzman, senior vice president and policy director of the Media Access Project, told Reuters.

Medley Global Advisors analyst Jeffrey Silva said Copps and Clyburn would likely vote to adopt the rules, but issue statements highlighting where they believe the regulations fall short.

Silva expects the final rules to stay close to Genachowski’s Dec. 1 outline of his proposal, to avoid angering the various Internet stakeholders currently favoring the plan.

Arbogast said tougher rules would stir up these stakeholders and could prompt more aggressive challenges of the rules in court, mainly from wireless carriers like AT&T and the cable TV companies. 

“I would expect challenges from all directions — people who think it’s gone too far and people who think it hasn’t gone far enough,” said Schwartzman, noting that everybody unhappy will go to court.

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