FCC OKs ‘Open Internet’ regulations

By Reuters
Posted Dec. 21, 2010 at 12:20 p.m.

U.S. communications regulators adopted Internet traffic rules on Tuesday that prevent providers from blocking lawful content but still let them ration access to their networks.

The rules aim to strike a balance between the interests of Internet service providers, content companies and consumers, but some industry analysts think a court challenge is still likely.

The Federal Communications Commission approved the “Open Internet” order after FCC Chairman Julius Genachowski’s plan got the support of fellow Democrats Michael Copps and Mignon Clyburn.

At issue is whether regulators need to guarantee that all stakeholders continue to have reasonable access to the Internet, a principle often called “net neutrality,” or whether the Internet is best left to flourish unregulated.

The FCC’s ability to regulate the Internet has been in doubt since an appeals court in April said the agency lacked the authority to stop cable company Comcast Corp from blocking bandwidth-hogging applications.

Senior FCC officials have said they will invoke new legal arguments not employed in the Comcast case.

The two Republican commissioners at the agency opposed the latest rule-making effort, saying it was unnecessary and would stifle innovation. Robert McDowell and Meredith Attwell Baker told an FCC open meeting that they believed the rules would fail in court.

High-speed Internet providers like Comcast and Verizon Communications can “reasonably” manage their networks under the rules and perhaps charge consumers based on levels of Internet usage.

The rules, to be somewhat looser for wireless Internet, could help cable companies in competition with plans by Microsoft Corp, Google Inc and Amazon.com to deliver competing video content over the same Internet lines the cable companies run to customers’ homes.

Adoption of the measure had been expected after Copps and Clyburn had issued statements on Monday saying they would support the proposal despite some misgivings.

But McDowell warned on Tuesday that the FCC was defying the court and also circumventing the will of Congress. Republicans will be in control of the U.S. House of Representatives come January and made gains against Democrats in the Senate in November’s elections.

“Litigation will supplant innovation. Instead of investing in tomorrow’s technologies, precious capital will be diverted to pay lawyers’ fees,” McDowell warned.

Genachowski, speaking last at the meeting, said the Internet currently was unprotected and invoked the names of his Republican predecessors to back adoption of the rules.

“The rules of the road we adopt today are rooted in ideas first articulated by Republican Chairmen Michael Powell and Kevin Martin, and endorsed in a unanimous FCC policy statement in 2005,” said Genachowski.

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  1. joe1 Dec. 21, 2010 at 2:32 pm

    “manage their networks under the rules and perhaps charge consumers based on levels of Internet usage” translation. The big Corp money paid off the FCC .. spin it any way you want thats what it is. As usual the general public will get hosed.

  2. Judd Dec. 21, 2010 at 7:38 pm

    Internet access is a utility service that provides access to the internet in the same way that present electrical and gas utilities provide access to electricity providers and natural gas providers. Thus, the access provider needs to be regulated as a utility—that is, the cost of providing access is totally separate from the cost of the commodity delivered (“content”).

    Further, internet access service cost has but two components, the “fixed” cost of whatever infrastructure is necessary to deliver the service to a particular location, whether it be based on wire, coax, fiber, or radio waves, and the “variable” cost which is based on the volume of the commodity moved over that infrastructure to the customer.

    It is helpful to realize that in this utility scenario the cost of “content”, whether it be electricity, gas, movies, or a Google search, is separate from the cost of delivery of that content. And, it is easily separated, by the way.

    In today’s internet world high-volume users and high-volume providers are unfairly subsidized by lower volume users and providers. Think of, say, movies. I can download two or three a day for the same internet access cost as two or three emails a day—an absolutely preposterous state of affairs. A business model that no one would create if we were starting “from scratch”. Is it not particularly stupid to think that the cost of any utility service is independent of the volume of commodity provided? Why, oh why, in the name of any sense of good business, fairness, or justice should Grandma bear the same monthly internet access cost as the kid next door who downloads two or three movies a day? He’s using billions of times as much hard resources as she is—she simply should not be subsidizing his internet use any more than she does his gas or electricity use. Consider a personal, less egregious example: If you lived in a two-bedroom house trailer would you think it fair for you to pay the same amount each month for gas and electricity as the Super Wal-Mart down the street? Of course not. Then, why is it fair for internet access to be priced that way? It is not, of course.

    Lest one think that this “utility service model” is one-sided in favor of providers, consider this further requirement of the utility model: Internet access providers would not be allowed to provide content that is priced in any way “into” the utility cost of delivering internet access. This is completely consistent with electricity and gas utility regulation. Any entity, whether it provides internet access or not could provide the commodity—electricity, gas, or internet content—but the commodity must be priced separately from the fixed and variable delivery charges. Again, this is not at all difficult to do.

    Further, this third component, internet content, should not be price regulated at all, putting all content providers, whether they provide internet access or not, on an equal and fair footing.

    In fact, there is inherent in the case of the internet access utility, an even more powerful factor, which would make internet access price regulation far simpler than that of other utilities—with the potential of eliminating such regulation entirely— and far more likely to minimize prices and maximize services, simply because of its competitive element. In the conventional electric or gas utility model it is normally totally impractical to provide for more than one content/product delivery system in a given geographical delivery area. In contrast, there are a variety of competitive methods of delivering internet content—wire, coax, fiber, or radio waves— with undoubtedly many innovations to come. Thus, we could have competition, with all its advantages to consumers, in all aspects of internet services—something which is not now possible.

    It seems so logical, so fair, what am I missing?

  3. Just a Citizen Dec. 21, 2010 at 8:50 pm

    Hey everbody! Judd took an MBA class! Joe1, you are absolutely right. What a shame. This country is going to hell.

  4. Unbundle Dec. 21, 2010 at 11:17 pm

    The problems might go away if we could choose in Internet (only) provider. But we can’t — our home internet, in the US, is provided by either the cable company or the phone company. Both have other interests in the products they sell. why did we ever allow this to happen? We must separate these companies from each other — you would buy internet service and then subscribe to whoever you wanted (voip phone, netflix and newer upstart entertainment services). The internet provider should have not interest at all in what you receive using its’ service.