Internet road rules near FCC vote

 (Reuters) - A controversial proposal for Internet traffic rules that would allow providers to ration access to their networks is scheduled to come before communications regulators for a vote on Tuesday.

The rules would ban high-speed Internet providers like Comcast Corp and Verizon Communications from blocking lawful traffic, but are expected to acknowledge their need to manage network congestion and possibly charge consumers based on Internet usage.

Federal Communications Commission Chairman Julius Genachowski's plan will likely attract the grudging support of his two fellow Democrats, analysts say, overcoming opposition from the agency's two Republicans.

Items on the FCC's agenda are sometimes withdrawn on late notice when agreement cannot be reached, but those following the issue think Democrats Michael Copps and Mignon Clyburn will decide imperfect rules are better than no rules at all.

Copps wanted the FCC to reclassify Internet traffic under tougher rules applying to telephone service, while Clyburn has said she is uneasy about giving wireless Internet providers more freedom to manage their networks than wireline services.

The Republican commissioners have said they prefer that Internet traffic remain free of regulation.

"But I still think it's more likely that they will work something out," said Rebecca Arbogast, an analyst with Stifel Nicolaus and a former division chief at the FCC.

Internet providers say they should be free to manage their networks for the benefit of all users, but content providers fear disruption of access and anti-competitive behavior.

The rules could help cable companies battling competitors who deliver competing video content over the same Internet lines the cable companies hook up to customers' homes.

Level 3 Communications, a company that helps Netflix Inc stream videos online, has accused Comcast of charging it unfair fees to deliver content to Comcast subscribers.

The FCC's ability to regulate the Internet has been in doubt since an appeals court in April said the agency lacked the authority to stop Comcast from blocking bandwidth-hogging applications.

Court challenges are expected over this latest rule-making effort, although senior FCC officials have said they will invoke new legal arguments not employed in the Comcast case.

WIRELESS FREEDOM

Genachowski has proposed giving wireless Internet providers even greater freedom to manage traffic, in recognition of wireless' status as a younger technology.

Supporters of the wireless portion of the plan say it recognizes the limited bandwidth available to support everything from telephone calls to movie downloads.

At stake is how quickly handheld devices, like Research in Motion Ltd's BlackBerry and Apple Inc's iPhone, can receive videos and other data-heavy content.

Some critics of Genachowski's proposal say it gives Internet providers too much power and fear it could harm consumers, stifle innovation and carve up the Internet in irreversible ways, contrary to "open" Internet concepts.

More than 80 groups sent a letter to the FCC on December 10, saying Genachowski's proposal was not "real" net neutrality.

They demanded a ban on paid prioritization of online content, which would prohibit Internet providers from charging websites for a "fast lane" to reach users more quickly.

"It is likely that there is going to be strong language disfavoring paid prioritization," said Andrew Jay Schwartzman, senior vice president and policy director of the Media Access Project.

Medley Global Advisors analyst Jeffrey Silva said Copps and Clyburn would likely vote to adopt the rules, but issue statements outlining where they believe the regulations fall short.

Specific details of the draft order have not been made public as the commissioners work to shape the final proposal.

Silva expects the final rules to stay close to Genachowski's December 1 outline of his proposal, to avoid angering the various Internet stakeholders currently backing his plan.

Arbogast said tougher rules would stir up these stakeholders and could prompt more aggressive challenges of the rules in court, particularly from wireless carriers like AT&T Inc and the cable television companies.

Schwartzman said everybody who is unhappy will go to court. "I would expect challenges from all directions -- people who think it's gone too far and people who think it hasn't gone far enough."

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