FCC: Internet Gets New Rules of the Road
Wall Street Journal
FCC Gives Government Power to Regulate Web Traffic - WSJ.comInternet Gets New Rules of the Road
Consumers Guaranteed Right to View Content; Service Providers Allowed to Sell Faster, Priority Speeds for Extra Money
The FCC's rules could be less important to day-to-day Web surfing now than they will be to shaping how Americans access and use the Internet years from now. In the future, the Internet industry will be increasingly centered around online video, gaming and mobile services, analysts say.
The FCC has approved rules that would give the federal government authority to regulate Internet traffic and prevent broadband providers from selectively blocking web traffic. WSJ's Amy Schatz explains what the new rules really mean.
Those are the fastest growing categories of Internet traffic, which broadband network hardware provider Cisco Systems Inc. recently forecast could quadruple by 2014.
Recently, Mr. Genachowski suggested that instead of selectively slowing certain traffic to clear network congestion, broadband providers could consider charging consumers on a pay-as-you go basis. That would mark a departure from the flat monthly fees most consumers pay now for unlimited Web access.
Carriers say privately they are concerned that one of the only alternatives left to make a profit off the Internet and pay for network infrastructure is to charge consumers for the amount of data they consume.
The rules would allow phone and cable companies to sell faster priority delivery services for extra money, particularly on wireless networks. That means a video streaming company like Google Inc. could pay a wireless company extra for guaranteed delivery of its YouTube videos to consumers' smart phones.
But FCC officials said any such priority service would have to be disclosed to regulators, and the rules warn that such "pay for priority" plans , if used on landline networks, would be "unlikely" to satisfy the FCC's new standards, which could prompt legal challenges.
For example, the American Library Association and other consumers groups said high-speed toll lanes must be banned so all Americans have the same quality Internet access.
Overall, wireless Internet users will have significantly fewer protections under the rules.
The FCC's 3-2 decision is a mixed bag for consumers. The new rules—which haven't been released in full—state that land-line broadband providers can't block legal content from websites, or "unreasonably discriminate" against companies like Skype or Netflix that want to use broadband networks to provide video or voice services.
They also require that broadband providers give consumers more information about their Internet service, like actual download speeds or usage limits.
But the rules come with some wiggle room for the industry. Broadband providers can engage in "reasonable network management" to cope with congestion on their systems.
Wireless companies are less restricted by the new rules—a win for the wireless industry because more and more consumers are accessing the Web using hand-held devices such as iPhones or Blackberries.
Wireless companies would be prohibited from blocking Internet voice services such as Skype on mobile phones, which has been a significant challenge for the company in the past. But wireless companies could block access to many other applications, citing congestion issues.
The FCC rules suggest the agency will be more restrictive in allowing landline broadband providers to create high-speed toll lanes on their networks. Some broadband providers have considered giving faster delivery of video or games if the companies that produce that content agree to pay extra.
If the industry starts charging consumers based on how much data they use, it could pose a challenge to the business models of companies like Netflix, which streams movies over broadband networks to televisions and computers. Netflix issued a statement Tuesday saying the FCC decision did not go far enough.
Some venture capital firms that invest in innovative applications and wireless technology expressed concern about the lack of limitations in the wireless space. "The problem is that there's so much ambiguity in the rule," said Brad Burnham of Union Square Ventures, a company that invests in tech start-ups like Foursquare, Hashable, Inc., Zynga and Twitter Inc. Mr. Burnham said he wanted to see application-specific discrimination prohibited, in both the wireline and wireless areas.
Reaction the FCC's rules from the telecommunications industry was mixed. AT&T Inc., which was the biggest industry proponent of Mr. Genachowski's proposal, said the rules were "not ideal" but would bring some "market certainty so that investment and job creation can go forward." Sprint Nextel said the FCC's action "appears to be a fair and balance approach to a difficult issue."
But there is a significant threat of legal challenge by other companies or consumer groups. Verizon Communications Inc. said it was "deeply concerned" about the rules and said the FCC appeared to "assert broad authority for sweeping new regulation" without solid authority to do so.
Several consumer groups also expressed dismay that the new rules didn't apply fully to wireless networks.
The rules will go into effect early next year, although they face potential legal challenges as well as Congressional action. Incoming House Speaker John Boehner (R., Ohio), said "federal bureaucrats should not be in the business of regulating the Internet" and said House Republicans will try to reverse the rules next year. But they could face an obstacle in President Barack Obama, who hailed the FCC's action Tuesday, saying it will "help preserve the free and open nature of the Internet."
The FCC has approved rules that would give the federal government authority to regulate Internet traffic and prevent broadband providers from selectively blocking web traffic. WSJ's Amy Schatz explains what the new rules really mean.
Those are the fastest growing categories of Internet traffic, which broadband network hardware provider Cisco Systems Inc. recently forecast could quadruple by 2014.
Recently, Mr. Genachowski suggested that instead of selectively slowing certain traffic to clear network congestion, broadband providers could consider charging consumers on a pay-as-you go basis. That would mark a departure from the flat monthly fees most consumers pay now for unlimited Web access.
Carriers say privately they are concerned that one of the only alternatives left to make a profit off the Internet and pay for network infrastructure is to charge consumers for the amount of data they consume.
The rules would allow phone and cable companies to sell faster priority delivery services for extra money, particularly on wireless networks. That means a video streaming company like Google Inc. could pay a wireless company extra for guaranteed delivery of its YouTube videos to consumers' smart phones.
But FCC officials said any such priority service would have to be disclosed to regulators, and the rules warn that such "pay for priority" plans , if used on landline networks, would be "unlikely" to satisfy the FCC's new standards, which could prompt legal challenges.
For example, the American Library Association and other consumers groups said high-speed toll lanes must be banned so all Americans have the same quality Internet access.
Overall, wireless Internet users will have significantly fewer protections under the rules.
The FCC's 3-2 decision is a mixed bag for consumers. The new rules—which haven't been released in full—state that land-line broadband providers can't block legal content from websites, or "unreasonably discriminate" against companies like Skype or Netflix that want to use broadband networks to provide video or voice services.
They also require that broadband providers give consumers more information about their Internet service, like actual download speeds or usage limits.
But the rules come with some wiggle room for the industry. Broadband providers can engage in "reasonable network management" to cope with congestion on their systems.
Wireless companies are less restricted by the new rules—a win for the wireless industry because more and more consumers are accessing the Web using hand-held devices such as iPhones or Blackberries.
Wireless companies would be prohibited from blocking Internet voice services such as Skype on mobile phones, which has been a significant challenge for the company in the past. But wireless companies could block access to many other applications, citing congestion issues.
The FCC rules suggest the agency will be more restrictive in allowing landline broadband providers to create high-speed toll lanes on their networks. Some broadband providers have considered giving faster delivery of video or games if the companies that produce that content agree to pay extra.
If the industry starts charging consumers based on how much data they use, it could pose a challenge to the business models of companies like Netflix, which streams movies over broadband networks to televisions and computers. Netflix issued a statement Tuesday saying the FCC decision did not go far enough.
Some venture capital firms that invest in innovative applications and wireless technology expressed concern about the lack of limitations in the wireless space. "The problem is that there's so much ambiguity in the rule," said Brad Burnham of Union Square Ventures, a company that invests in tech start-ups like Foursquare, Hashable, Inc., Zynga and Twitter Inc. Mr. Burnham said he wanted to see application-specific discrimination prohibited, in both the wireline and wireless areas.
Reaction the FCC's rules from the telecommunications industry was mixed. AT&T Inc., which was the biggest industry proponent of Mr. Genachowski's proposal, said the rules were "not ideal" but would bring some "market certainty so that investment and job creation can go forward." Sprint Nextel said the FCC's action "appears to be a fair and balance approach to a difficult issue."
But there is a significant threat of legal challenge by other companies or consumer groups. Verizon Communications Inc. said it was "deeply concerned" about the rules and said the FCC appeared to "assert broad authority for sweeping new regulation" without solid authority to do so.
Several consumer groups also expressed dismay that the new rules didn't apply fully to wireless networks.
The rules will go into effect early next year, although they face potential legal challenges as well as Congressional action. Incoming House Speaker John Boehner (R., Ohio), said "federal bureaucrats should not be in the business of regulating the Internet" and said House Republicans will try to reverse the rules next year. But they could face an obstacle in President Barack Obama, who hailed the FCC's action Tuesday, saying it will "help preserve the free and open nature of the Internet."
Just when you think you've got it all figured out, someone changes the rules.
Just when you think you've got it all figured out, someone changes the rules.
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