FCC Internet Proposal Called Power Grab as Debate Commences

The chairman of the U.S. Federal Communications Commission overstepped his authority in proposing utility-style rules to keep Web traffic open, Republicans and industry groups said, offering a glimpse of fights to come over regulations key to the future of the Internet.

While Democrats and Web companies such as Netflix Inc. reacted favorably, broadband Internet service providers and members of the congressional Republican majority said the chairman, Tom Wheeler, had gone too far at the behest of President Barack Obama.

The proposal is a “power grab” by an FCC chairman who “succumbed to the bully tactics of political activists and the president himself,” Senator John Thune, the South Dakota Republican who is chairman of the Commerce Committee that oversees the FCC, said in an e-mailed statement. Thune has offered open-Internet legislation that Democratic lawmakers say doesn’t go far enough.

Wheeler, in an article published Wednesday on Wired.com, said he would recommend to the commission rules to bar broadband providers from blocking or slowing Web traffic. The rules would use legal authority set in the last century for telephone networks, and for the first time would apply open-Internet protections to the mobile services that feed smartphones, he said. The rules wouldn’t include price regulation, Wheeler said.

“The Internet must be fast, fair and open,” Wheeler wrote. “That is the principle that has enabled the Internet to become an unprecedented platform for innovation and human expression.”

4 Million Comments

The agency has received 4 million public comments as it seeks to settle a debate about whether the Internet is to be offered to all on equal terms, or whether broadband providers can levy fees and restrict access. Wheeler, a Democrat, will present his recommendations to the agency’s four other commissioners Thursday and a vote is scheduled for Feb. 26.

“We’re certainly encouraged that the FCC is heading in the same direction of safeguarding net neutrality” as Obama proposed in November, White House Press Secretary Josh Earnest said at a briefing. “The president has indicated that as this process moves forward, additional legislation is not necessary.”

Swift Reaction

The Internet Association, a trade group that represents Web companies including Google Inc., Twitter Inc. and Facebook Inc., welcomed Wheeler’s inclusion of mobile services.

“Users expect that they be able to access an uncensored Internet regardless of how they connect,” Michael Beckerman, president of the Internet Association, in an e-mailed statement.

Reaction from Internet service providers and their trade groups was negative, even though the rules were expected.

The proposal is a “radical step,” Michael Glover, senior vice president at Verizon Communications Inc., said in an e-mailed statement. Verizon successfully fought so-called net neutrality rules in court after the FCC approved them in 2010.

“The FCC’s proposed approach could jeopardize our world-leading mobile broadband market and result in significant uncertainty for years to come,” Meredith Attwell Baker, president of CTIA-The Wireless Association, said in an e-mailed statement. Members of the trade group include leading wireless providers AT&T Inc. and Verizon.

‘Sweeping Discretion’

Baker last month told Congress the wireless industry would ask U.S. courts to overturn rules that bring mobile networks under utility-style strictures.

“We remain concerned that this proposal will confer sweeping discretion to regulate rates and set the economic terms and conditions of business relationships,” Michael Powell, president of the National Cable & Telecommunications Association, a trade group with members including Comcast, said in an e-mailed statement.

Reaction on Capitol Hill split along party lines, with Republicans suggesting they may seek to rein in the FCC.

“Wheeler overestimates the FCC’s authority,” Representative Bob Goodlatte, of Virginia, the Republican chairman of the Judiciary Committee, said in an e-mailed statement.

Democrats supported the rules.

“This is a big victory. It’s is a win for consumers, for small businesses trying to compete with the big guys, and for innovation,” said Senator Al Franken, a Minnesota Democrat, in an e-mailed message.

Interconnect Deals

Wheeler’s proposal would assert authority over deals between online video companies such as Netflix and broadband providers that carry their videos to subscribers. Companies could bring complaints to the FCC, according to a fact sheet distributed by the agency.

“If such an oversight process had been in place last year, we certainly would’ve used it,” Anne Marie Squeo, a Netflix spokeswoman, said in an e-mailed statement.

Netflix and data middleman Cogent Communications Holdings Inc. have said their traffic was degraded by congestion that Comcast and Verizon declined to fix. Verizon said its network wasn’t congested, and Comcast said Netflix had changed how traffic is carried in hopes of cutting out wholesalers. Netflix fell 1.8 percent to $448.71 at 4 p.m. in New York.

Comcast, which is seeking regulatory approval to buy Time Warner Cable Inc., climbed 2.7 percent to $56.90 after rising as much as 4.6 percent. Time Warner Cable was up 1.9 percent at $145.53.

AT&T rose 7 cents to $34.41 and Verizon dropped 3 cents to $47.80.

Comcast Opposition

Top U.S. cable provider Comcast hasn’t changed its position that utility-style rules are unnecessary and potentially harmful, Sena Fitzmaurice, a spokeswoman, said in an e-mail.

Obama in November called on the FCC “to implement the strongest possible rules to protect net neutrality.”

Wheeler responded to criticism that his plan would thwart innovation. He wrote that the growth of the Internet was made possible by the FCC intervening to mandate open access for network equipment in the 1960’s.

“The modems that enabled the Internet were usable only because the FCC required the network to be open,” he wrote.