FCC proposes pay-for-priority Internet standards

The agency also proposes to enhance government oversight of such deals to ensure that they don't harm competition or limit free speech, according to a post by FCC Chairman Tom Wheeler on the FCC blog.

"There has been a great deal of misinformation that has recently surfaced regarding the draft Open Internet Notice of Proposed Rulemaking that we will today circulate to the Commission," Wheeler wrote Thursday. He said his plan is to have enforceable rules in place by the end of 2014. "To be very direct, the proposal would establish that behavior harmful to consumers or competition by limiting the openness of the Internet will not be permitted."

So-called "net neutrality" rules have been hotly debated among policymakers, Internet providers and content companies such as Netflix (NFLX). Without regulation, say consumer advocates, giant conglomerates citing business or political reasons could limit consumers from freely accessing certain types of content.

Some policy analysts are unhappy with the FCC's current proposal. "The beauty of the Internet has always been its ability to serve as an unrestricted platform for all speech, giving users the ability to access the content that they choose without ISP-selected 'fast lanes' and 'slow lanes,'" said Sarah J. Morris, senior policy counsel at New America, a non-partisan think tank. "

The new rules are meant to replace the FCC's open Internet order from 2010, which was struck down by a federal appeals court in January. The U.S. Court of Appeals for the Washington, D.C., Circuit affirmed that the FCC had the authority to create open-access rules but said the agency failed to establish that its 2010 regulations didn't overreach.

While the older rules technically allowed for paid priority treatment, the practice was discouraged. The new rules spell out standards that such deals would have to meet to be considered "commercially reasonable" and are designed to survive a court challenge.

Under the proposed rules, if such a deal for priority access were challenged, the commission would look at its impact on competition, on consumers, on free speech and civic engagement. It would also try to determine whether a broadband provider was acting in good faith.

"The allegation that it will result in anti-competitive price increases for consumers is also unfounded," wrote Wheeler in the blog post. "That is exactly what the 'commercially unreasonable' test will protect against: harm to competition and consumers stemming from abusive market activity.

The new rules don't affect the exchange of traffic between networks that form the Internet's backbone. That means they won't have any bearing on Netflix's recent agreement to pay Comcast to improve the hand-off of traffic to its network. Netflix had called for the FCC to expand its definition of "net neutrality" rules to cover such connections and guarantee that they would be free of charge.

Internet access providers say they should be allowed to charge a content company when they have to deliver large amounts of data, such as video, to their broadband customers. Under the current system, a company like Netflix pays the provider on its end but doesn't have to pay the provider on the subscriber's end. The proposed rules would permit the subscriber's Internet service provider to start charging.

Some observers believe the FCC's proposed rules could benefit consumers in the long run. "Allowing higher charges for faster speeds is consistent with a policy of attracting more investment to the most important network in America and improving broadband for all users," said George Foote, a partner at the international law firm Dorsey & Whitney who works on policy matters on behalf of utility companies. "The technology that will deploy for the higher-price lanes and the technology that follows to duplicate it will accelerate better networks for all users. The FCC approach can work," he said.

The proposed rules would also restore a previous rule that prohibits Internet service providers from blocking access to websites, which is meant to help Internet startups succeed and foster the growth of the Internet economy.

The commission is also seeking to establish the minimum standard of service and will ask the public to help determine that. The FCC is not seeking to treat Internet providers as "common carriers" such as telephone companies, which would subject companies like Comcast and Verizon to even stricter rules, although it is keeping the option on the table. The draft rules kick off a policymaking process that involves commissioner votes and a public comment period before a final vote sometime this summer.