FCC chairman proposes regulating Internet like phone service

WASHINGTON -- Declaring the Internet critical for the nation, a top U.S. regulator Wednesday proposed an unprecedented expansion of federal power to ensure providers don't block or slow web traffic for America's countless users.

The proposal by Federal Communications Commission chairman Tom Wheeler was a victory for advocates of "net neutrality," the idea that Internet providers must allow data to move across their networks without interference. The idea has been the subject of lobbying and millions of dollars in advertising in the past year.

"Net neutrality" means whether you're trying to buy a necklace on Etsy, stream the premiere of Netflix's "House of Cards" or watch a video on Google's YouTube, your Internet service provider would have to load those websites equally quickly.

Major Internet providers insist they have no plans to create such fast or slow lanes, but they oppose the regulation, arguing it could stifle innovation and investment. Open Internet rules had been in place but recently were knocked down by a federal court.

Wheeler's proposal attempts to erase legal uncertainty by reclassifying the Internet as a telecommunications service and regulating it under the 1934 Communications Act. The plan would apply to wired service provided by companies such as Comcast and wireless service by companies like T-Mobile.

That would put all Internet service in the same regulatory camp as telephones and any other public utility, which Republicans and industry officials say would discourage investment and increase taxes.

The FCC will vote Feb. 26 on the proposal; approval is likely.

"It is counterproductive because heavy regulation of the Internet will create uncertainty and chill investment among the many players -- not just Internet service providers -- that now will need to consider FCC rules before launching new services," said Michael Glover,

Verizon senior vice president.

Wheeler says the move is necessary to prevent providers from creating Internet slow or fast lanes in which content companies like Netflix can pay to jump to the head of the queue.

Wheeler also shrugged off any suggestions that his plan would chill industry investment, citing $300 billion in investment by the wireless industry in the past two decades.

"My proposal assures the rights of Internet users to go where they want, when they want, and the rights of innovators to introduce new products without asking anyone's permission," Wheeler wrote in an article that Wired magazine posted online.

Still, his plan is an aggressive regulatory leap in an industry that has so far seen little government oversight. Wheeler said he would not use the new regulations to tell broadband providers how much to charge customers, as the Communications Act would allow. Still, industry says that's only a matter of time.

"Despite the repeated assurances from the president and Chairman Wheeler, we remain concerned that this proposal will confer sweeping discretion to regulate rates and set the economic terms and conditions of business relationships," said Michael Powell, head of the National Cable and Telecommunications Association and former FCC chairman.

Wheeler's plan aligns the former telecom lobbyist and venture capitalist with President Barack Obama, who has called on the FCC specifically to regulate the industry under Title II of the Communications Act. But assuming the FCC adopts the new rule, the next stop would be the courts. Industry lobbyists say it's likely that one of the major providers will sue and ask that enforcement be suspended.

Lawmakers could step in to resolve the uncertainty. But that is considered unlikely in the near term. Because Wheeler's proposal satisfies consumer advocacy groups, Democrats would have little incentive to revisit the issue. And while Republicans have the votes to ram though their own anti-regulation legislation without Democratic support, Obama could veto it.

"These rules are a declaration of Independence for the Internet," said Sen. Ed Markey, D-Mass.

But Sen. John Thune, Republican chairman of the Senate Committee on Commerce, Science, and Transportation, called the plan "radical" and a "power grab" by the FCC.

So far, Republicans have pitched an idea that would enforce basic open Internet rules but also could strip the FCC of its ability to help local municipalities build their own broadband -- a nonstarter for Obama and congressional Democrats who say poor and rural areas have been left behind in the deployment of high-speed Internet.

In addition to banning providers from discriminating among web traffic, the plan would give the FCC the authority to regulate the "back end" of the Internet, where content providers like Netflix say they are still vulnerable. Netflix connects with network middlemen like Cogent or Level 3 Communications that can move data across long distances. Netflix has accused major Internet providers of allowing these transit points to become clogged on purpose. Netflix now pays these providers interconnection fees.

Under Wheeler's plan, a company could ask the FCC to review the fairness of these deals.

"If such an oversight process had been in place last year, we certainly would've used it when a handful of (Internet service providers) opted to hold our members hostage until we paid up," said Netflix spokeswoman Anne Marie Squeo.