FCC Set to Back Internet Traffic Rules

Communications regulators were poised to adopt Internet traffic rules on Tuesday that would allow providers to ration access to their networks.

Federal Communications Commission members Michael Copps and Mignon Clyburn issued statements on Monday saying they would support the proposal laid out by FCC Chairman Julius Genachowski early this month despite some misgivings.

The rules would ban high-speed Internet providers like Comcast Corp and Verizon Communications from blocking lawful traffic, while recognizing the need to manage network congestion and perhaps charge based on Internet usage.

The rules, to be somewhat looser for wireless Internet, could help cable companies in competition with plans by Microsoft Corp, Google Inc and Amazon.com to deliver competing video content over the same Internet lines the cable companies run to customers' homes.

"We're adopting a framework that will increase certainty for businesses, investors, and entrepreneurs. We're taking an approach that will help foster a cycle of massive investment, innovation and consumer demand both at the edge and in the core of our broadband networks," Genachowski said in excerpts of a statement he is due to deliver on Tuesday.

Charging consumers more for data-intensive tasks like downloading videos could tip the economics of Internet-delivered television back toward cable. The FCC said it would monitor usage-based pricing for abuses.

"Without regulation, rates could go up and up and up and emerging providers like Netflix and Hulu could have problems attracting users," said Daniel Ernst, an analyst at Hudson Square Research.

Level 3 Communications, a company that helps Netflix Inc stream videos online, has already accused Comcast of charging it unfair fees 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.

LITIGATION RISK

Court challenges are also expected over this latest rule-making effort, although senior FCC officials have said they will invoke new legal arguments not employed in the Comcast case.

Public interest groups were skeptical of the protections for consumers under the traffic rules.

"These rules appear to be flush with giant loopholes," said Craig Aaron, managing director of Free Press, who accused Genachowski of favoring the endorsement of industry over the public interest.

Copps had wanted the FCC to reclassify Internet traffic under tougher rules applying to telephone service, while Clyburn has said she is uneasy about giving wireless Internet providers more freedom to manage their networks than wireline services.

"While I cannot vote wholeheartedly to approve the item, I will not block it by voting against it," Copps said in a statement on Monday.

Clyburn said in a separate statement that the rules, "while not as strong as they could be, will nonetheless protect consumers as they explore, learn, and innovate online."

Support from Copps and Clyburn, both Democrats, would give Genachowski the votes he needs to overcome expected opposition from the agency's two Republicans.

"Nothing is broken and needs fixing," Commissioner Robert McDowell wrote in Monday's Wall Street Journal, adding "Ample laws to protect consumers already exist."

"REASONABLY" MANAGE

Senior FCC officials said the "open" Internet order, to be considered Tuesday at a public FCC meeting, will give both landline and mobile broadband services the flexibility to "reasonably" manage their networks.

They told a briefing for reporters that the order would institute a no-blocking policy for landline Internet providers that covers all lawful content, applications, services and devices.

Landline services would also be prohibited from discriminating against bandwidth-heavy content. The FCC officials said this provision would help prevent paid prioritization of content, where Internet providers charge websites more to reach users quickly.

The rules for wireless carriers, reflecting limited bandwidth and a more recent technology, only ban the blocking of access to websites, or competing voice and video applications.

At stake is how quickly handheld devices, like Research in Motion Ltd's BlackBerry and Apple Inc's iPhone, can receive videos and other data-heavy content.