FCC Moves to Regulate Broadband, Looks to a Third Way

The FCC is taking a stand in regulating the Internet and broadband today by announcing a new approach which basically places the Internet under a ‘lite version of Title II’ regulation. The FCC is labeling this effort as a ‘Third Way.’ In so doing, the FCC will assert its regulating authority over broadband and the Internet, in much the same way it now has authority over telecommunications (or phone) services.

The Title references come from the current regulatory regime which classifies traditional telecom services (telephone, etc) as Title II services, subject to stricter regulation. Internet services have historically been classified as Title I, or information services, not subject to strict FCC regulations. All of this came to a head in a recent court decision that favored Comcast over the FCC, where the FCC said Comcast illegally blocked Bit Torrent access to some of its subscribers. The court overturned the FCC’s ruling.

According to the FCC, under this new regulatory approach, the Commission will:

• Recognize the transmission component of broadband access service—and only this component—as a telecommunications service;

• Apply only a handful of provisions of Title II (Sections 201, 202, 208, 222, 254, and 255) that, prior to the Comcast decision, were widely believed to be within the Commission’s purview for broadband;

• Simultaneously renounce—that is, forbear from—application of the many sections of the Communications Act that are unnecessary and inappropriate for broadband access service; and

• Put in place up-front forbearance and meaningful boundaries to guard against regulatory overreach.

“It is widely understood—and I am of the view—that the extreme alternatives to this light-touch approach are unacceptable. Heavy-handed prescriptive regulation can chill investment and innovation, and a donothing approach can leave consumers unprotected and competition unpromoted, which itself would ultimately lead to reduced investment and innovation,” says Chairman Genachowski.

The move is expected to create a firestorm, as large ISPs (Verizon, Comcast, AT&T, etc.) strongly oppose such actions. The reactionary statements from these companies today should prove to be quite interesting. While this ‘lite’ approach appears not to mandate controversial regulations like broadband tariffs or ‘line sharing’ of broadband circuits with competitors, it does appear that net neutrality, where ISPs won’t be allowed to favor one source of web content over another, is firmly on the table.

Expect fierce opposition from large broadband carriers, perhaps even a challenge in court. Generally speaking, web content companies like Amazon, Google, and Ebay, as well as consumer interest groups favor this approach.  Although some of them may criticize the effort as well, saying it does not go far enough. The process will take months to resolve with a public comment period before the actual rules have to be voted on by the full commission. It should be fun to watch.