Splitting along party lines, the five-member Federal Communications Commission approved new regulations Tuesday that effectively designate the federal agency an Internet traffic cop.
The vote culminated months of contentious negotiations involving government officials, industry lawyers, and advocacy groups and seems likely to lead to legal challenges.
Reactions to the new rules ranged from "tepid" to potential "economic nightmare." Comcast Corp., one of the nation's largest broadband providers, said the rules appeared to strike a "workable balance" between competing interests.
Comcast and other telecommunications companies have said Internet regulations could stifle innovation and investment. Supporters of the new rules said they would protect consumers and smaller companies from the actions of telecommunications giants seeking competitive advantages by disrupting the Internet traffic, or prioritizing the traffic of one website over another.
Three Democrats, led by FCC Chairman Julius Genachowski, voted for the rules. Two Republicans voted against them.
As part of the vote, the agency also affirmed that providers may charge subscribers based on how much data they consume, according to Bloomberg News. The pricing issue has become more important as Netflix Inc. and others stream movies, TV shows, and other data-hungry content over the Internet.
The three new specific rules say companies have to more fully disclose information on the speed, performance, and commercial terms of their broadband service, cannot block websites, and cannot "discriminate" in how they treat Internet traffic. But in what some consider a potential loophole, broadband providers are allowed to engage in "reasonable network management" on the Internet.
The new rules do not extend to wireless services, such as those offered by Verizon Wireless and AT&T, which advocacy groups criticized as a mistake.
David Cohen, Comcast's executive vice president, said the new rules "appear intended to strike a workable balance between the needs of the marketplace for certainty and everyone's desire that Internet openness be preserved." Cohen added that a benefit of the new rules may be that the federal agency did not enact stricter measures such as rate-setting.
David Joyce, an investment analyst with Miller Tabak & Co., said he did not see a negative to Comcast's business because of the new rules.
Republicans have voiced concern over regulatory creep, and Republican commissioners Robert McDowell and Meredith Atwell Baker voted against the rules. Texas Sen. Kay Bailey Hutchison has said previously she could cut off FCC funding to enforce them.
Tom Tauke, Verizon's executive vice president of public affairs, policy, and communications, said in a statement that the rules were not based on bipartisan support and broke with past practices.
"Based on today's announcement, the FCC appears to assert broad authority for sweeping new regulation of broadband wire line and wireless networks and the Internet itself," Tauke said. "This assertion of authority without solid statutory underpinnings will yield continued uncertainty for industry, innovators, and investors. In the long run, that is harmful to consumers and the nation."
Exempting wireless services from the new rules was a mistake, said Gigi B. Sohn, president and cofounder of the nonprofit advocacy group Public Knowledge.
"Those who go online with a wireless device will be at the mercy of the big telephone companies to practice whatever mischief they wish," Sohn said. "Cell phones and smart phones are the fastest growing and a major Internet on-ramp for poor Americans."
With the time-consuming Internet rule-making over, the FCC is expected to turn its attention to an exhaustive review of the proposed $30 billion joint venture between Comcast and NBC Universal Inc.