FCC chief seeks to reclassify Internet as a telecom service

Tom Wheeler, head of the Federal Communications Commission, proposed unambiguous rules Wednesday that would dictate how Internet providers manage their networks for consumers, but stopped short of saying the agency would also regulate the rates telecom companies charge consumers.

The stakes are high - for big content providers such as Comcast Corp. and Verizon Communications Inc., and for a public that has become hugely dependent on the Internet.

Supporters, who for years lobbied for the rules online and at the agency, say Wheeler's tough stance will preserve the freewheeling and open nature of the Internet by preventing telecom companies from blocking consumers from websites or slowing Internet speeds for competitive purposes.

Importantly, the agency would reclassify the Internet as a "telecommunications service" instead of an "information service," which would allow the FCC to apply Title II provisions of the Federal Communications Act of 1934.

Telecom companies say they have voluntarily agreed not to block websites or degrade the Internet. Those companies and political opponents of Wheeler's proposed rules reacted angrily, saying the measures could stifle an innovative part of the U.S. economy and, over time, lead to rate regulation that could harm profits and investment.

Comcast, the nation's largest wire-line provider of Internet services, did not have a comment, company spokeswoman Sena Fitzmaurice said. She noted that specific details of the rules were not available because they had not been formally released.

But Michael E. Glover, Verizon deputy general counsel, said the proposal was radical and counterproductive.

Jim Cicconi, AT&T Inc.'s top in-house lobbyist, said, "We continue to believe that a middle ground exists that will allow us to safeguard the open Internet without risk to needed investment and years of legal uncertainty."

Wheeler had been pursuing weaker regulations outside Title II until President Obama disclosed after the November elections that he supported stronger Internet regulations.

Congress separately has taken up the issue of Internet rules, part of the "Net neutrality" debate that dates back more than a decade in Washington.

Senior FCC officials rejected the idea that the agency was flip-flopping on the issue - weaker regulations vs. stronger Title II measures - in a background briefing Wednesday. But they acknowledged it seemed inevitable that if the rules passed, the telecom companies would challenge them in court.

FCC officials said the new rules would not be draconian for those companies. In addition to not regulating rates, the federal government would not force Comcast or other Internet providers to share their networks with competitors.

"These are the strongest open-Internet rules ever proposed by the FCC," a senior agency official, speaking on background, said Wednesday, adding, "They are built to be sustained in court."

Wheeler's rules also would ban telecom companies from creating Internet fast lanes, or so-called paid prioritization.

Fast lanes, critics believe, would lead to a two-tiered Internet, with big companies paying for fast streaming while small companies are shuttled to a second-rate and slower place.

The FCC would expand its regulatory authority over Internet interconnections. Interconnections are a critical component of the Internet in which various networks, such as those operated by Comcast and Verizon, connect with each other for the smooth flow of data.

Netflix Inc., an online streaming service, complained in late 2013 and early 2014 that Comcast was making streaming into its network difficult and was degrading its service.

Comcast shares soared more than 3 percent, to almost $58, after Wheeler's proposal was made public Wednesday morning - an indication Wall Street didn't view the proposal as harmful to the cable and Internet giant. Comcast's stock price settled at $56.90, up $1.49 for the session.

Some of the same issues in the proposed rules are being considered by FCC and Justice Department officials as they review Comcast's proposed $45 billion acquisition of Time Warner Cable Inc., a deal that would marry the nation's largest and second-largest cable companies.

The Philadelphia company has said in public comments with the FCC that it was against using Title II to regulate the Internet.

Michael Powell, head of the National Cable and Telecommunications Association, the cable-TV industry's lobbying group, headed the FCC when the current regulations were enacted in the early 2000s.

Under Powell, the FCC categorized the Internet as an "information service" that needed to be only lightly regulated. Powell believes undoing his handiwork at the agency would be a mistake.

"We believe that such a significant expansion of the FCC's authority is unnecessary and will only deliver further uncertainty, instead of legally enforceable rules that everyone supports," Powell said in a statement. "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."

Chris Lewis, vice president of government affairs at the nonprofit advocacy group Public Knowledge, said Wheeler's proposal ensured that "no innovator or Internet user will have to ask their [Internet service provider] for permission to reach all parts of the Internet or offer new services."

Matt Wood, policy director of the nonprofit advocacy group Free Press, said the proposed rules resulted from years of grassroots organizing.

"We're now one step closer to restoring real public-interest protections to our nation's communications policies," Wood said. "If the full FCC adopts the chairman's proposal, and it's free of any last-minute surprises, then everyone's right to communicate freely online will be secured."

The proposed new rules are expected to be circulated to FCC commissioners and their staffs on Thursday.

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