Friday, January 7, 2011

Followup Story - Net Neutrality Rules Adopted - Will They Last?

On December 21, a divided U.S. Federal Communications Commission adopted Internet traffic rules that would ban Internet service providers from blocking or discriminating against traffic on their networks. The rules, expected to come into effect early this year, will also allow high-speed Internet providers to charge customers according to their level of usage and would give wireless carriers additional network management freedoms. However, it may be some time before the full impact is apparent, even if the rules survive any court challenge.

Following are the likely impacts on various companies, consumers and the FCC based on reports from analysts and industry insiders:


* Cable companies like Comcast Corp, Time Warner Cable, Cablevision Systems Corp, and big landline providers like AT&T Inc. and Verizon Communications Inc. are banned from blocking or discriminating against lawful Internet content.

* The rules will not stand in the way of usage-based pricing, allowing cable and other fixed line companies that also serve as high-speed Internet providers to increase rates for subscribers that do bandwidth-heavy tasks.

* Cable subscribers considering dropping their TV service to watch television and movies online may think twice if new pricing schemes push up the cost of streaming content.

* Cable companies are better off than when the FCC was considering reclassifying broadband under the stricter regulatory regime of existing phone rules.


* Verizon Wireless (joint venture of Verizon Communications and Vodafone Group Plc, AT&T, Sprint Nextel Corp, T-Mobile (U.S. unit of Deutsche Telekom AG) and others would be granted added flexibility under the rules, acknowledging tighter bandwidth-constraints.

* They would be subject to a looser version of the no-blocking policy - banning only the blocking of websites and competing voice and video services.

* Mobile broadband could still discriminate against bandwidth-heavy content.

* CTIA, the trade association for the wireless industry, continues to say the rules are unnecessary, but commended the FCC for recognizing the need to regulate mobile broadband differently from landline services.


Google Inc, Microsoft Corp,, Facebook, Netflix Inc. and other content providers could lose some of the edge they were building over cable companies if downloading content becomes more expensive under usage-based pricing.

According to Reuters “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. Some industry analysts think a court challenge is still likely. At issue is whether regulators need to guarantee that all stakeholders continue to have reasonable access to the Internet ("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 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 saying they would support the proposal despite some misgivings. But McDowell warned that the FCC was defying the court and also circumventing the will of Congress. "Litigation will supplant innovation. Instead of investing in tomorrow's technologies, precious capital will be diverted to pay lawyers' fees," McDowell warned. Genachowski, spoke last at the meeting, and 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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C. Cohn

Cohn-Reilly Report

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