FCC Chairman Proposes 'Net Neutrality' Rules

FAWN JOHNSON AMY SCHATZ

Federal Communications Commission Chairman Julius Genachowski Monday outlined his plan for requiring Internet-service providers to keep their networks open to legal content and external devices.

The plan, which is a top priority of Internet advocates who aggressively supported President Barack Obama in his run for the White House, would put into law the FCC's principles to treat all Web traffic equally, a concept known as "net neutrality."

It also is a blow to big phone companies including Verizon Communications Inc., AT&T Inc. and Comcast Corp., which have argued against further regulation of the their networks.

If the plan is approved, it also would impose broad new regulations on wireless companies like Sprint Nextel Corp. and T-Mobile USA, a unit of Deutsche Telekom AG. Wireless firms, to date, haven't been subjected to the same kind of open-Internet scrutiny that companies providing cable, fiber, or DSL-type connections have faced.

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FCC Chairman Julius Genachowski speaks at the Brookings Institution on Monday.

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"The rule-making process will enable the commission to analyze fully the implications of the principles for mobile network architectures and practices --and how, as a practical matter, they can be fairly and appropriately implemented," Mr. Genachowski said. (Read the FCC chief's full remarks here.)

"The exact expectations you have of your PC, you're going to have of your mobile phone," said Josh Silverman, CEO of Skype Technologies, which has fought to make its Internet-based phone technology available on cellphones.

Mr. Genachowski stressed that his proposal is intended to provide "fair rules of the road for companies that control access to the Internet."

"This is not about government regulation of the Internet," he said. "We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity."

Mr. Genachowski wants the five-member independent FCC to vote on the proposal at its October meeting, the date of which hasn't been scheduled. It would add to the FCC's four existing Internet principles a rule saying companies can't pick and choose among the legal content they serve up, as well as a rule saying providers must disclose how they manage their networks.

The rules would have to be approved by a majority of the board; the three Democrats on the panel support net neutrality.

"I will propose that the FCC evaluate alleged violations of the nondiscrimination principle as they arise, on a case-by-case basis, recognizing that the Internet is an extraordinarily complex and dynamic system," Mr. Genachowski said.

Mr. Genachowski announced his plans at the same time a federal appeals court is reviewing the FCC's citation last year of Comcast for throttling certain high-bandwidth video connections. Comcast and others have argued that the FCC didn't have legal standing to issue the punishment.

The appeals court's decision is expected sometime next year.

Mr. Genachowski hinted at actions that he believes would violate the open-Internet principles, such as wireless companies that have blocked Internet-based phone services on their networks. He also noted that some providers have tried to block access to political content.

The FCC is investigating why Google Inc.'s voice service was rejected by Apple Inc. for the popular iPhone. Apple claims it is still reviewing Google's new phone-management service. Google contends that Apple executives unequivocally declined to include Google Voice in the iPhone application store because the service duplicated an iPhone function.

Google has long been a champion of open-Internet principles. Google's self-described "Chief Internet evangelist," Vint Cerf, said Monday that Google "could not be more pleased to see Chairman Genachowski take up this mantle."

Verizon Vice President of Federal Regulatory Affairs David Young said his company supports the basic tenets of an open Internet and trusts that the FCC will tinker with the rules only when violations are clearly demonstrated.

"I'm pleased to hear that the chairman intends to do only as much as needed and no more," Mr. Young said. "We need to see what are the problems that need to be fixed and what are the examples that require a dramatic change."

The FCC on Monday also launched a new Web site, www.openinternet.gov, designed for the public to follow the discussion and weigh in.

If the FCC does force U.S. wireless carriers to open their networks to data-heavy applications like streaming video, it could push them beyond the limited capacity they have. Already, in areas like New York and San Francisco, a high concentration of iPhones has caused many AT&T customers to complain about degrading service.

In such a scenario, wireless carriers may have to rethink how much they charge for data plans or even cap how much bandwidth individuals get, said Julie Ask, a wireless analyst at Jupiter Research.

The FCC's proposal will take into account the bandwidth limitations faced by wireless carriers, according to people familiar with the plan, and would ask how such rules should apply to current networks.

The rules could encourage big Internet companies to launch new data-intensive services by establishing that their traffic can't be slowed or blocked. In the business market, companies that make Internet-phone services or video-conferencing software may invest more heavily in those services, some analysts say.

The rules are likely to be a big boon to smaller tech companies, like Silicon Valley start-ups and small makers of mobile software for Apple's iPhone and other devices, that wouldn't be able to afford paying Internet providers for special access.

"Any company or piece of software that becomes popular, generating a lot of traffic, would tend to benefit," said Jonathan Zittrain, the co-founder of the Berkman Center for Internet & Society at Harvard University.

Most Internet providers have resisted "net neutrality" rules in the past, saying they have a right to control traffic on networks they own and that it isn't a good idea for the government to micromanage Internet traffic.

Phone companies including AT&T have argued that they can live with the FCC's existing principles, but they have argued there is no reason to put more formal rules put into place.

Republicans are likely to oppose the FCC's new proposal -- both at the FCC and in Congress -- arguing that the FCC is trying to fix problems that don't exist and that the agency should take a more hands-off approach to the fast-changing industry.

"With only a few isolated instances of complaints alleging net neutrality-like abuses ever having been filed, it is a mistake," said Randolph May, president of Free State Foundation, a free-market-oriented think tank.

The concept of network neutrality originated with the nation's longtime telephone monopoly. AT&T and its successors were prohibited from giving any phone call preference in how quickly it was connected. Because the Internet was born on phone wires, the concept survived into the Internet age largely by default.

That notion was challenged toward the end of the 1990s, as cable companies began offering Internet service. Cable companies argued that because they were content companies and not phone companies, the principle of network neutrality didn't apply to them.

Phone companies responded by getting into the content business as well, with television service. As a result, both the cable companies and phone companies had incentives to create conditions on the Internet -- either through pricing or slowing or speeding up certain sites -- to favor their own content.

In 2005, the FCC deregulated the Internet business, by ruling that Internet providers were communications companies and not phone companies and, importantly, were therefore no longer subject to the old phone rules such as network neutrality.

The FCC instead created its four "guiding principles" for protecting network neutrality. They were vague enough to embolden those looking for ways around it. Major phone companies like AT&T subsequently said they were considering creating "fast lanes" on the Internet, available at a higher price -- plans they put on hold amid an outcry.

Now, by codifying the principle, the FCC is seeking to limit erosion of network neutrality.

Mr. Genachowski is expected to set plans to open a formal rule-making process on the issue at the FCC's October meeting.

—Jessica E. Vascellaro, Christopher Rhoads, Niraj Sheth and the Associated Press contributed to this article.