Internet Gets New Rules of the Road
Consumers Guaranteed Right to View Content; Service
Providers Allowed to Sell Faster, Priority Speeds for Extra Money
By AMY SCHATZ And SHAYNDI RAICE
WASHINGTON—Consumers for the first time got federally
approved rules guaranteeing their right to view what they want on the Internet.
The new framework could also result in tiered charges for web access and alter
how companies profit from the network.
The Federal Communications Commission on Tuesday voted
3-2 to back Chairman Julius Genachowski’s plan for what is commonly known as
“net neutrality,” or rules prohibiting Internet providers from
interfering with legal web traffic. President Barack Obama said the FCC’s
action will “help preserve the free and open nature of the Internet.”
The move was prompted by worries that large phone and
cable firms were getting too powerful as Internet gatekeepers.
Most consumers haven’t had a problem viewing whatever
they want online; few instances have arisen of an Internet provider blocking or
Rather, the FCC rules are designed to prevent potential
future harms and they could shape how Americans access and use the Internet
years from now. In the future, the Internet industry will be increasingly
centered around the fastest-growing categories of Internet traffic—online
video, gaming and mobile services, analysts say. Cisco Systems Inc., the
broadband network provider, has forecast those services could quadruple by
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.
Comcast Corp. and other Internet providers have
experimented with ways to handle the growing problem of network congestion.
Recently, Mr. Genachowski suggested that instead of selectively slowing certain
traffic to cope with congestion, providers could consider charging consumers
for how much data they consume. That would be a departure from the flat monthly
fees consumers pay now for Web access. It’s something providers privately say
is one of the only ways to make a profit and fund network infrastructure.
Such a system could
pose a challenge to companies like Netflix Inc., which streams movies over
broadband networks to
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The new rules will also allow phone and cable companies
to sell to Internet companies like Amazon.com Inc. faster data delivery for
extra money, particularly on wireless networks. That would let a company that
offers streaming video, like Google Inc.’s YouTube, pay a wireless company like
Verizon Communications Inc. a bonus for guaranteed delivery of its videos to
consumers’ smart phones.
But FCC officials said any such priority service must be
disclosed, and they said they would likely probe and reject such efforts. That
could prompt some of the many expected legal challenges to the new rules, since
it is not clear if the FCC has authority to enforce them.
Consumer groups and other organizations, including the
American Library Association, oppose such high-speed toll lanes, arguing all
Americans should have the same quality of Internet access.
The FCC’s decision is
a mixed bag for consumers. The new rules—which haven’t been released in
full—say 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 providers to give consumers
But the rules come with some wiggle room for the
industry. Service providers will be allowed to 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 industry because consumers are increasingly accessing the web using
hand-held devices such as iPhones or Blackberries. Mr. Genachowski said mobile
carriers faced more congestion issues than other companies and need more leeway
to manage their networks.
Wireless companies would be prohibited from blocking
Internet voice services but they could block access to many other applications,
citing congestion issues.
Reaction the FCC’s rules was mixed. AT&T Inc. said
the rules were “not ideal” but would bring some “market
certainty so that investment and job creation can go forward.” Verizon
said it was “deeply concerned” because it didn’t think the rules were
needed. A coalition of Internet companies including Google said the rules were
a good first step but stronger regulations on wireless networks were needed to
ensure the same rules apply to both wired and wireless Internet.
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Wozniak, a co-founder of Apple Inc. and a staunch proponent of keeping the
Internet unregulated, after an FCC hearing on Tuesday.
Some venture capital firms that invest in innovative
applications and wireless technology expressed concern about how the rules will
impact the wireless business. “The problem is that there’s so much
ambiguity in the rules,” said Brad Burnham of Union Square Ventures, which
has invested in startups including Foursquare and Twitter Inc.