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Net Neutrality an Oxymoron as FCC Decides Winners and Losers

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The AT&T building in Dallas. Close

The AT&T building in Dallas.

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Photographer: Larry W. Smith/EPA/Corbis

The AT&T building in Dallas.

Federal Communications Commission Chairman Tom Wheeler yesterday said “the prospect of a gatekeeper choosing winners and losers on the Internet is unacceptable.”

That’s what the FCC will be, no matter how it fashions final rules.

If it adopts toughened rules as demanded by advocacy groups, some Democratic lawmakers and content providers including Google Inc. (GOOG) and Netflix Inc. (NFLX), Wheeler and carriers foresee years of litigation. If the FCC adopts the Wheeler proposal advanced yesterday to allow some priority arrangements as long as they aren’t “commercially unreasonable,” it could determine winners and losers on a case-by-case basis.

If it kills the preliminary proposal that passed 3-2, there would be no rules to prevent Internet service providers including AT&T Inc. (T), Comcast Corp.and Verizon Communications Inc. (VZ) from charging to distribute Web content. A court in January threw out the FCC’s open-access regulations.

“We look forward to a spirited discussion with Mr. Wheeler next week on the commission’s misguided vision of a heavily regulated Internet,” Representative Greg Walden, an Oregon Republican who heads the House commerce committee’s technology panel, said in a statement joined by committee Chairman Fred Upton, a Michigan Republican.

Photographer: Andrew Harrer/Bloomberg

A demonstrator holds a sign in support of net neutrality outside the Federal Communications Commission headquarters in Washington, D.C. Close

A demonstrator holds a sign in support of net neutrality outside the Federal... Read More

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Photographer: Andrew Harrer/Bloomberg

A demonstrator holds a sign in support of net neutrality outside the Federal Communications Commission headquarters in Washington, D.C.

Yesterday’s vote opens a comment-and-review period intended to lead to a second vote and a final rule later this year. There will be months of lobbying ahead by Internet providers, Web companies and digital rights activists in a fight they all say will dictate the future of online activity.

Preferred Connections

“Without rules governing a free and open Internet it is possible that companies –- fixed and wireless broadband providers –- could independently determine whether they want to discriminate or block content, pick favorites, charge higher fees or distort the market,” Democratic Commissioner Mignon Clyburn said.

In its order published yesterday, the agency said its proposed ban on blocking lawful Web traffic “would allow” Internet service providers flexibility to negotiate preferential connections to consumers’ TVs and computers for Web content producers such as Netflix and Amazon.com Inc. (AMZN)

Arrangements for priority treatment would be subject to agency scrutiny, according to the order published on the agency’s website. Deals would be prohibited if they harm Internet openness, the order said.

Wheeler said there’s nothing in his proposed rule that authorizes fast lanes.

Photographer: Andrew Harrer/Bloomberg

Tom Wheeler, chairman of the Federal Communications Commission. Close

Tom Wheeler, chairman of the Federal Communications Commission.

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Photographer: Andrew Harrer/Bloomberg

Tom Wheeler, chairman of the Federal Communications Commission.

‘Grave Threat’

“I will take a backseat to no one that privileging some network users in a manner that squeezes out smaller voices is unacceptable,” he said.

Internet companies including Amazon, Netflix, Google and Facebook Inc. (FB) told the agency the plan represents a “grave threat” to an open Internet because it could let service providers discriminate against content providers. Artists signed onto a letter of protest, and protesters encamped outside the FCC.

At the meeting, four members of the audience shouted protests and were escorted from the room.

“This is an alarming day for anyone who treasures a free and open Internet,” Michael Copps, a former Democratic FCC member advising the policy group Common Cause, said in an e-mail. “Any proposal to allow fast lanes for the few is emphatically not net neutrality.”

Tougher rules may lead to rate regulation, according to carriers including largest U.S. cable provider Comcast, biggest telephone company by revenue AT&T and No. 2 phone company Verizon.

Obama Watching

Their nervousness stems from Wheeler’s statements that he’s looking at treating Internet service something like a utility.

“Going backwards 80 years to the world of utility regulation would represent a tragic step in the wrong direction,” Jim Cicconi, AT&T's senior executive vice president of external and legislative affairs, said in an e-mail yesterday.

“Utility regulation would strangle investment, hobble innovation, and put government regulators in charge,” Cicconi said.

President Barack Obama as a candidate supported net neutrality, or the concept that Web traffic be treated equally, and his administration “will carefully review” the FCC’s proposal, White House Press Secretary Jay Carney said in a statement yesterday.

“We will be watching closely as the process moves forward in hopes that the final rule stays true to the spirit of net neutrality,” Carney said.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net Elizabeth Wasserman

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