U.S. FCC Adopts Rules for Web Service by AT&T, Comcast
FCC Chairman Julius Genachowski
Andrew Harrer/Bloomberg
Julius Genachowski, chairman of the U.S. Federal Communications Commission, speaks as Michael Copps, commissioner of the FCC, listens during a hearing on net-neutrality rules at the FCC in Washington, D.C. on Dec. 21, 2010.
Julius Genachowski, chairman of the U.S. Federal Communications Commission, speaks as Michael Copps, commissioner of the FCC, listens during a hearing on net-neutrality rules at the FCC in Washington, D.C. on Dec. 21, 2010. Photographer: Andrew Harrer/Bloomberg
Dec. 21 (Bloomberg) -- Robert McDowell, a Republican member of the Federal Communications Commission, talks about today's 3-2 vote by the FCC banning Internet service providers led by AT&T Inc. and Comcast Corp. from blocking or slowing Web content sent to homes and businesses while allowing mobile phone companies to put limits on traffic. McDowell, who voted against the regulations, speaks with Megan Hughes on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Dec. 21 (Bloomberg) -- Steven Krone, counsel at Mitchell Silberberg & Knupp LLP and a professor at Southwestern Law School, talks about Federal Communications Commission's approval of so-called net-neutrality rules. Krone speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
Dec. 21 (Bloomberg) -- Tim Horan, an analyst at Oppenheimer & Co., talks about rules for Internet-service providers being considered by the Federal Communications Commission. The net-neutrality rules proposed by FCC Chairman Julius Genachowski, a Democrat, would forbid Internet service providers from interfering with subscribers’ Web traffic. Horan, speaking with Betty Liu on Bloomberg Television’s “In the Loop,” also discusses AT&T Inc.’s $1.93 billion purchase of wireless spectrum from Qualcomm Inc. (Source: Bloomberg)
U.S. regulators banned Internet service providers led by AT&T Inc. and Comcast Corp. from blocking or slowing Web content sent to homes and businesses, while allowing mobile phone companies to put limits on traffic.
The Federal Communications Commission approved the so- called net-neutrality rules by a vote of three to two today. Supporters argued that Internet providers, which also own some of the content they deliver online, may interfere with videos and services owned by others such as Google Inc.
The agency also affirmed that providers may charge subscribers based on how much data they consume. The pricing issue has become more important as companies including Netflix Inc. stream movies and other data-hungry content over the Web.
“Today’s decision will help preserve the free and open nature of the Internet while encouraging innovation, protecting consumer choice and defending free speech,” President Barack Obama said in a statement released today by the White House.
The rules create “a strong and sensible framework” that “protects Internet freedom and openness,” FCC Chairman Julius Genachowski, a Democrat appointed by Obama, said before the vote. “We’re adopting a framework that will increase certainty for businesses, investors and entrepreneurs.”
Commissioner Meredith Atwell Baker, one of two Republicans to vote against the regulations, called the rules an overreach.
‘Inhibiting’ Network Evolution
“There is no factual basis to support government intervention,” she said. “The majority’s approach will inhibit the ability of networks to freely evolve and experiment.”
Senator Mitch McConnell of Kentucky, the Senate’s Republican leader, called the vote “a first step in controlling how Americans use the Internet.”
Representative Fred Upton, a Michigan Republican who is to become chairman of the Energy and Commerce Committee when Congress convenes next year, said he would work “to strike down the FCC’s brazen effort to regulate the Internet.”
Genachowski proposed the net-neutrality rules in September 2009, and debate has expanded to involve Congress, courts and companies. Net neutrality is the idea that cable and telephone companies must treat all Web content equally by not interfering with the information their subscribers access on the Web.
Google, Amazon
Google, Amazon.com Inc. and Dish Network Corp. have said FCC rules are needed so that the telecommunications companies that deliver their content, such as electronic maps and online television shows, don’t favor the Internet service providers’ own online products or those of partners that pay for higher speeds. Comcast, for example, will own movies if its purchase of NBC Universal is approved by government officials.
Google rose $8.01 to $603.07 as of 4 p.m. New York time in Nasdaq Stock Market trading. Amazon gained $1.46 to $184.75.
Internet carriers Comcast, Verizon Communications Inc., Verizon Wireless and Time Warner Cable Inc. said rules may make it difficult to manage the growing traffic on their networks, and would limit investment in new Internet capacity.
Comcast increased 32 cents to $22.25 in Nasdaq Stock Market trading. Verizon climbed 20 cents to $34.94, while AT&T dropped 6 cents to $29.07 in New York Stock Exchange composite trading.
Verizon is “deeply concerned” with the FCC vote, which “appears to assert broad authority for sweeping new regulation,” Tom Tauke, the company’s executive vice president of public affairs, policy and communications, said in an e- mailed statement.
‘A Workable Balance’
Comcast Executive Vice President David L. Cohen said in a statement that the rules “appear intended to strike a workable balance between the needs of the marketplace for certainty and everyone’s desire that Internet openness be preserved.”
The compromise passed by the agency appears to provide certainty needed for job creation, “though a final view must await a careful reading of the FCC’s order,” Jim Cicconi, AT&T senior executive vice president, said in an e-mailed statement.
Stephen Wozniak, the co-founder of Apple Inc. who traveled to Washington from his home near San Francisco to attend today’s FCC vote, told reporters after the meeting that the FCC should have passed more restrictive rules.
For example, Internet-service providers may block online consumers from receiving movies streamed by Netflix, forcing users to watch movies owned by the telecommunications and telephone companies, Wozniak said. “Every normal person in the United States knows this,” he said.
‘Fail in Court’
The rules leave intact a system that lets carriers charge more when users consume large amounts of data, which will help Internet-service providers to upgrade and maintain networks, said Rebecca Arbogast, an analyst at Stifel Nicolaus & Co. in Washington.
Subscribers who consume content that requires large amounts of data to deliver, such as movies and online gaming, may bear part of the burden of increased access fees, said Craig Moffett, a New York-based analyst at Sanford C. Bernstein & Co.
“The FCC does not have the legal authority to issue these rules,” Robert McDowell, the other Republican commissioner at the FCC, said during the meeting today. “This new effort will fail in court.”
The rules drew criticism from Republicans in Congress.
Texas Senator Kay Bailey Hutchison, the top Republican on the Senate Commerce Committee, said in an e-mailed statement she would ask Congress to revoke the rules, calling them “an unprecedented power-grab by the unelected members” of the FCC.
‘Nationalizing the Web’
“The FCC is effectively nationalizing the Web,” Republican Representative Marsha Blackburn of Tennessee said in an e-mailed news release today. She said the FCC was exhibiting a “hysterical reaction to the hypothetical problem of anti- competitive online behavior.”
Democrat Jay Rockefeller, a senator from West Virginia who chairs the Commerce Committee, in a statement called the decision “a meaningful step forward.”
Some groups said the agency didn’t go far enough.
The FCC vote was a “squandered opportunity to enact clear, meaningful rules to safeguard the Internet’s level playing field and protect consumers,” Craig Aaron, managing director of the Washington-based advocacy group Free Press, said in a statement.
To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net
To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net.
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