Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes.
The Federal Communications Commission plans to put forth its rules on Thursday. The proposal marks the FCC's third attempt at enforcing "net neutrality"—the concept that all Internet traffic should be treated equally.
Developed by FCC Chairman Tom Wheeler, the proposal is an effort to prevent broadband Internet providers such as Comcast Corp. , Verizon Communications Inc., VZ -2.53% and Time Warner Cable TWC +0.29% from blocking or slowing down individual websites served up to the consumer. The idea is that consumers should be able to access whatever content they choose, not the content chosen by the broadband provider.
But it would also allow providers to give preferential treatment to traffic from some content providers, as long as such arrangements are available on "commercially reasonable" terms for all interested content companies. Whether the terms are commercially reasonable would be decided by the FCC on a case-by-case basis.
This latest plan is likely to be viewed as an effort to find a middle ground, as the FCC has been caught between its promise to keep the Internet open and broadband providers' desire to explore new business models in a fast-changing marketplace. It likely won't satisfy everyone, however. Some advocates of an open Internet argue that preferential treatment for some content companies inevitably will result in discriminatory treatment for others.
The proposal would open the door to new products from companies such as Apple Inc., which has explored the idea of offering a video service that would rely on a dedicated portion of the broadband pipe. Like the FCC's previous open Internet rules, the proposal wouldn't apply to wireless carriers, which aren't governed by any net-neutrality rules.
The FCC will circulate the proposal on Thursday ahead of a vote to move forward with the proposal at its May 15 meeting. Moving forward would represent a milestone in the long fight over rules governing how service providers treat different kinds of content.
Net neutrality was a key part of President Barack Obama's campaign platform in 2008. The U.S. Court of Appeals, District of Columbia Circuit threw out the FCC's last two attempts to implement an open Internet rule after challenges from broadband providers.
On a consumer level, the plan would probably not affect users' Internet experience immediately but over the long term it could spawn new products that use broadband connections in a variety of ways for home and business communications—for an additional fee.
If the rule is adopted, winners would be the major broadband providers that would be able to charge both consumers and content providers for access to their networks. Companies like Google Inc. GOOGL +0.07% or Netflix Inc. NFLX -2.76% that offer voice or video services that rely on broadband could take advantage of such arrangements by paying to ensure that their traffic reaches consumers without disruption. Those companies could pay for preferential treatment on the "last mile" of broadband networks that connects directly to consumers' homes.
Startups and other small companies not capable of paying for preferential treatment are likely to suffer under the proposal, say net neutrality supporters, along with content companies that might have to pay a toll to guarantee optimal service.
One top cable executive said, "I have to say, I'm pleased." The executive noted that big Internet companies like Google already pay middlemen carriers to deliver their content efficiently to the doorstep of cable operators' networks; only the last mile connecting to customers' homes has been treateddifferently by regulators.
Major technology companies including Google, Facebook Inc., Microsoft Corp., Amazon.com Inc., Yahoo Inc. and eBay Inc., either didn't respond to requests for comment or referred requests to the Internet Association, a trade group representing Web companies including Google and Yahoo. The Internet Association didn't respond to requests for comment.
The executive said new business models coming out of such rules could help cable operators better invest in their broadband networks. "Somebody has to pay for this, and if they weren't going to let companies pay for enhanced transport and delivery…it just seemed like this was going to come back to the consumer."
A spokesman for Verizon, which successfully challenged the commission's original open Internet rules, said the broadband provider remains "publicly committed to ensuring that customers can access the Internet content they want, when they want and how they want."
"Given the tremendous innovation and investment taking place in broadband Internet markets, the FCC should be very cautious about adopting proscriptive rules that could be unnecessary and harmful," he said.
John T. Nakahata, an attorney with Wiltshire & Grannis LLP who works on telecom and Internet policy, said Wednesday the FCC's potential opening of preferred broadband access "follows exactly the path left open by the courts."
In Silicon Valley, there has been a long-standing unease with owners of broadband pipes treating some content as more equal than others. Large companies have been mostly silent about the FCC's moves regarding broadband service, but some smaller firms or investors in startups have said the FCC needs to tread carefully so Internet policies don't disadvantage young companies that can't afford tolls to the Web.
"For technologists and entrepreneurs alike this is a worst-case scenario," said Eric Klinker, chief executive of BitTorrent Inc., a popular Internet technology for people to swap digital movies or other content. "Creating a fast lane for those that can afford it is by its very definition discrimination."
Some consumer advocacy groups reacted strongly against the proposal. The American Civil Liberties Union said, "If the FCC embraces this reported reversal in its stance toward net neutrality, barriers to innovation will rise, the marketplace of ideas on the Internet will be constrained, and consumers will ultimately pay the price." Free Press, a nonpartisan organization that is a frequent critic of the FCC, said, "With this proposal, the FCC is aiding and abetting the largest ISPs in their efforts to destroy the open Internet."
The proposal doesn't address the separate issue of back-end interconnections, or peering, between content providers and broadband networks. Netflix CEO Reed Hastings recently called for the FCC to regulate peering as part of net neutrality, but Mr. Wheeler has said the two issues are distinct.
Netflix declined to comment.
As part of the rules, the FCC would significantly increase the amount of information broadband providers must disclose about their networks, which could include details such as the speed and congestion of their service along the last mile. The proposal would also ask whether mobile broadband providers should be subject to a similar commercially reasonable standard when striking deals with content providers.
Mr. Wheeler said he planned to issue new open Internet rules in February after the D.C. Circuit court decision.
The court's ruling sketched out a legal pathway through which the FCC could try to achieve the same goals, and Mr. Wheeler said he plans on following that road map.
The court said in January that the FCC has authority to regulate broadband-company practices under a section of the 1996 telecommunications law that gives it broad authority to encourage U.S. broadband service. The court also indicated that the FCC could impose a "no blocking" rule if it found a different legal justification.
Asked about the new proposal, an FCC spokesman said details like the construction of a "commercially reasonable" standard, and the manner in which disputes would be resolved, are all "among the topics on which the FCC will be seeking comment."
The commission has decided for now against reclassifying broadband as a public utility, which would subject ISPs to much greater regulation. However, the commission has left the reclassification option on the table at present.
Thanks for the author Shalini Ramachandran, Shira Ovide, Drew FitzGerald and Rolfe Winkler contributed to this article.