Photographer: Andrew Harrer/Bloomberg

Netflix Deals With Broadband Providers Said to Get Oversight

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U.S. regulators plan to issue rules next month allowing them to review the terms Internet service providers demand for accepting heavy Web traffic from companies such as Netflix Inc., according to a person briefed on the plan.

Such agreements aren’t regulated now, and the move -- part of highly anticipated net-neutrality rules -- would mark an expansion of the Federal Communications Commission’s authority over the Internet. Cable providers led by Comcast Corp. have argued against restrictions on what they can charge content providers while companies such as Netflix sought to ban any fees.

FCC Chairman Tom Wheeler has decided the rules, scheduled for a vote next month, will permit the agreements but include a procedure for companies to ask for agency review, said the person, who asked to remain anonymous because the plan hasn’t been made public.

Wheeler has said he intends to follow President Barack Obama’s call for strong rules to prevent blocking or slowing of Web content by Internet service providers.

Adding the complaint process would give independent video providers -- a group that includes Netflix, Inc. and Google Inc.’s YouTube -- a potential avenue of relief from demands by Internet service providers led by Comcast, AT&T Inc. and Verizon Communications Inc.

With an oversight procedure, the FCC could order an Internet service provider to stop demanding unfair fees, or to improve its connection, said Harold Feld, senior vice president of the Washington-based policy group Public Knowledge. Contracts would be considered against a standard of whether they are “just and reasonable,” Feld said.

Final Passage

Net neutrality policy traditionally has focused on fairly treating traffic between Internet service providers and consumers. For example, Obama has called for banning so-called fast lanes that offer quick service over the last mile in return for payment.

Agreements governing the other end of the transaction -- when high-volume Web companies present music, video and other data to cable and telephone companies -- will be permitted under the new regulations, according to the person.

Netflix accounts for 34.9 percent of Web traffic in North America in peak evening hours, according to Sandvine Inc. The video provider has offered direct connections to service providers to ease the flow.

The FCC is working to replace a net-neutrality regulation that was voided by a court. Wheeler hasn’t publicly disclosed details of the rules, set for a Feb. 26 vote at the Democratic-majority agency. Shannon Gilson, an agency spokeswoman, declined to comment.

Netflix, Cogent

Netflix and data middleman Cogent Communications Holdings Inc. have said their traffic was degraded by congestion that Comcast and Verizon Communications Inc. declined to fix. Verizon said its network wasn’t congested, and Netflix had chosen bulk Internet carriers with limited capacity. Comcast said Netflix had changed how traffic is carried in hopes of cutting out wholesalers.

Netflix in February agreed to pay Comcast millions of dollars annually for more-direct connections that ensure improved speed and reliability for its video service.

“When he signed the deal with Comcast, Netflix’s CEO said it ‘works great for consumers.’ We think so too,” Comcast spokeswoman Sena Fitzmaurice said in an e-mail.

Cogent and Netflix have said Web companies should not have to pay for connections to Internet service providers, in part because subscribers have already paid for service.

Cogent’s Chief Legal Officer Robert Beury said there are shortcomings to a complaint process.

“It’s slow,” Beury said in an interview. “And plays right into the hands of the cable and telephone companies. It takes two years, and in the meantime our connections are congested.”

Anne Marie Squeo, a Netflix spokeswoman, said in an e-mail that the FCC recognizes the importance of the treatment of companies such as hers and Internet service providers.

“Loopholes” in regulations, she said, “could undermine the benefits of an open Internet and prevent consumers from getting what they pay for.”

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