FCC seeks comment on broadband reclassification

The Federal Communications Commission has taken the first step toward figuring out how it's going to regulate broadband after losing an important legal battle earlier this year.

At an open meeting Thursday, the FCC voted to open a proceeding that seeks comment on three options for redefining the FCC's role in regulating broadband. The FCC is asking for comments on these new proposals, which it hopes will put it on firmer legal footing, after a federal appeals court ruled in April that the agency did not have authority to sanction Comcast for violating Net neutrality principles. Comcast had been caught throttling BitTorrent transfers on its network.

One of the three choices that the public will comment on includes, FCC Chairman Julius Genachowski's "third way" proposal for redefining broadband traffic, which would allow the commission to change the classification of broadband services from a lightly regulated Title I Information Service to a more vigorously regulated Title II Telecommunications service. Broadband service providers, such as AT&T and Verizon Communications, are against the "third way" proposal. And opposition has been growing among Congressional leaders.

It appears that Chairman Genachowski realizes the pickle he is in. Politically, he must do something to satisfy President Obama's backers, who were promised during his election campaign that Net neutrality regulations would be adopted. But with 282 members of Congress--including at least 74 Democrats--asking the FCC to drop its plans to reclassify broadband, the commission said it would consider other options.

In an effort to develop a consensus solution, the measure passed by the FCC on Thursday also explores other options. In addition to the "third way," the FCC is also asking for comments about leaving broadband classification as a Title I service and exploring other provisions in the Telecommunications Act that define the agency's ancillary authority. Another option, which Chairman Genachowski said was unacceptable, is to completely reclassify broadband traffic as a fully regulated Title II service.

With Genachowski's "third way" proposal, the FCC believes it will have the authority to write and enforce rules that would protect consumers and Internet content providers from restrictions imposed by broadband providers. It also believes it will give the agency the necessary authority to move forward with proposals laid out in the National Broadband Plan, such as reforming the Universal Service Fund to expand its use for subsidizing broadband services in rural and low-income areas.

Recognizing that not all the rules in Title II should apply to broadband, Genachowski's proposal also recommends that broadband be exempt from some Title II rules. For example, broadband providers would not be forced to share their infrastructure with competitors, and the government would not regulate pricing for services.

Since it was introduced, Genachowski's proposal has been criticized by broadband providers, namely AT&T and Verizon Communications. These companies believe that changing the classification of broadband traffic could lead to more regulation of the Internet in the future. And they claim that uncertainty with regard to the new rules, as well as the legal challenges that will likely follow when they are adopted, will create so much uncertainty in the market that it will slow investment in broadband infrastructure and services.

AT&T CEO Randall Stephenson told The Wall Street Journal earlier this week that his company would pull back on its investment in its next-generation broadband network called U-verse if the FCC moves forward with plans to reclassify broadband traffic. U-verse, which offers faster broadband speeds and Internet-based TV services, is available today to 24 million homes. The company plans to reach 30 million homes by the end of 2011.

"If this Title II regulation looks imminent, we have to re-evaluate whether we put shovels in the ground," he said in the interview.

Lawmakers in Washington, D.C., have taken notice and a growing number of both Republicans and Democrats, agree with the phone companies. In total, 282 Congressional leaders have signed letters to the FCC asking the agency to abandon its reclassification plans. These Congressional leaders say they should clarify the FCC's authority by revising the Telecommunications Act.

Genachowski said during the meeting that he fully supports efforts by Congress to revise the Telecommunications Act to clarify the FCC's authority. But he said in the meantime, the FCC must get moving on implementing the National Broadband Plan. He said the recent court decision has threatened the agency's ability to carry out these efforts.

Meanwhile, companies such as Google, eBay, Amazon, and Skype support the FCC's efforts to reclassify broadband services to ensure that the commission can enforce new Net neutrality regulations that it is currently drafting. Earlier this week, 32 Congressional leaders sent a letter to the FCC also supporting this effort.

Comments from the public are due on July 15, 2010, and reply comments are due on August 12, 2010. The Notice of Inquiry, as well as instructions for parties wishing to provide comments to the FCC, will be available at Broadband.gov.