Critics Decry `Secret Deal' as AT&T, Google Huddle With FCC

Google Inc., AT&T Inc., and Verizon Communications Inc. executives are meeting behind closed doors with U.S. officials in talks that critics say reduce the public’s voice in keeping the Internet open.

The companies sought a compromise, in a rare Saturday session last weekend at the Federal Communications Commission, on rules proposed by Chairman Julius Genachowski to regulate how phone and cable companies handle Web traffic such as Google’s YouTube videos.

“These kinds of meetings where the substance isn’t being revealed go against the chairman’s promise of an open, transparent and inclusive agency,” said Gigi Sohn, president of Public Knowledge, a Washington-based advocacy group, in an interview today.

The companies and senior FCC aides have been holding private meetings since June over the regulations, known as net neutrality rules, according to disclosure statements on the agency’s website. Issues include the extent of FCC power over Internet service providers, and whether phone and cable companies can favor some traffic, such as making their own videos run faster.

The FCC may be negotiating a “secret deal” that would keep Genachowski from fulfilling President Barack Obama’s pledge to back net neutrality, said Josh Silver, president of the Washington-based advocacy group Free Press. The agency may be about to “abdicate its responsibility to protect Internet users,” Silver said in an e-mailed statement.

FCC ‘Fully Committed’

“We are fully committed to preserving the free and open Internet,” Jen Howard, an FCC spokeswoman, said yesterday. The sessions, held in conference rooms at the FCC’s Washington headquarters, are properly disclosed in subsequent public filings, as are all such meetings with agency staff, she said.

The long-running fight over net neutrality has pitted cable and phone companies that say they need leeway to protect the performance of their networks against content providers and advocacy groups that say the communications companies may favor their own online offerings or those of partners.

FCC Chief of Staff Edward Lazarus is leading the meetings with a core group of six industry representatives. Among them are Jim Cicconi, senior executive vice president of Dallas-based AT&T; Tom Tauke, executive vice president of New York-based Verizon; Richard Whitt, telecommunications and media counsel for Mountain View, California-based Google; and Christopher Libertelli, senior director of Luxembourg-based Skype Technologies SA.

All six participants declined to comment publicly on the talks.

Mobile-Phone Apps

Questions being hashed out include whether Web providers can boost delivery of some content, at the cost of slowing other traffic, and whether rules should apply to increasingly popular Web applications on mobile phones, according to the disclosure filings on the FCC website that summarize the topics discussed and name the participants.

Lazarus also has met with public-interest groups including Silver’s, Howard said. Howard declined to discuss the substance of the meetings. Lazarus declined to comment in an e-mail yesterday.

A proposal by Genachowski that the FCC claim authority over Internet traffic under rules long used to regulate phone calls has sparked resistance by telephone and cable companies and from members of Congress of both parties.

“He’s interested in getting something that will minimize discord,” Andrew Jay Schwartzman, senior vice president of the Washington-based Media Access Project, a public-interest law firm, said in an interview.

FCC’s Court Defeat

The backdrop is the FCC’s defeat in April before a U.S. court, which said the agency lacked the power to censure Comcast Corp. for interfering with subscribers’ Internet traffic. In response, Genachowski proposed using the rules designed for monopoly telephone service, while promising he wouldn’t invoke the associated power to regulate prices. Phone companies have said future commissions could place price controls on Internet service.

Most congressional Republicans and more than 70 House Democrats have signed letters objecting to Genachowski’s plan, and House Republican Leader John Boehner of Ohio called it “a government takeover of the Internet.”

The talks at the FCC aim to produce Internet-traffic rules that would be enforced by the agency as well as principles for legislation, said Rebecca Arbogast, a Washington-based analyst with Stifel Nicolaus & Co., in an interview.

The pace of the talks intensified in the last week of July, Arbogast said in a note to investors. A deal would be viewed as positive for telephone and cable shares, she said.

Crafting Legislation

The meetings are unusual for their frequency and complexity, and because they aim in part to craft legislation rather than the regulations that are the FCC’s normal concern, said Schwartzman.

The core participants have met at least seven times since June 22, and the agency on its website lists about 50 additional meetings with trade groups and companies such as wireless operator Clearwire Corp. and cable operator Time Warner Cable Inc.

Genachowski and aides are “prepared to go forward if they need to” without a compromise, Arbogast said. “But that level of controversy is unwelcome going into the midterm” elections in November.

Google, which has championed net neutrality, may be negotiating separately with Verizon on a compromise, Paul Gallant, a former FCC aide who is an analyst with Concept Capital’s Washington Research Group, said in a note today to investors. Verizon now sells mobile phones running on Google’s Android software.

Comcast, EBay

In addition to the four company executives attending meetings with Lazarus, participants in the sessions are Kyle McSlarrow, president of the Washington-based National Cable & Telecommunications Association, and Markham Erickson, executive director of the Open Internet Coalition.

Among companies in McSlarrow’s trade group are Comcast and Time Warner Cable. Erickson’s organization, which says it works to keep the Internet fast and open, lists as supporters EBay Inc., Google, Skype, Free Press, Media Access Project, Public Knowledge, Netflix Inc. and IAC/InterActiveCorp unit Ask.com.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

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