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    Feds Mull Rules, Fees to Spur Net Access, WSJ Nov 18/09

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    WASHINGTON — Federal regulators are considering whether the government should take greater control of the Internet and ask consumers to pay higher phone charges in order to provide all Americans with cheaper access to broadband Internet service.

    The Federal Communications Commission Wednesday will lay out the case for expanding broadband Internet service, outlining current obstacles to making it widely available. The agency is considering whether to force Internet providers to share their networks with rivals and raise fees charged on consumer phone bills to pay for the broader access.

    The Federal Communications Commission is mulling whether to force Internet providers to share their networks with rivals and raise fees charged on consumer phone bills to pay for expanded broadband access. The proposals have drawn criticism from telecommunications and cable companies.

    The proposals, which have sparked criticism from telecommunications and cable companies, represent a reversal from the Bush Administration, when regulators cut back on government control of Internet and telephone service.

    The new commission, controlled by Democrats, is considering whether more government control is needed to ensure competition and more affordable Internet service.

    The FCC staff will float possible solutions in December and make formal recommendations in February, when it is set to release its National Broadband Plan, a blueprint for improving broadband speed and access. Congress asked the FCC for the plan earlier this year.

    FCC officials estimate it could cost anywhere from $20 billion to $350 billion to connect all American households to high-speed Internet service, depending on speed offered.

    They haven't yet said how much of that investment might come from taxpayers.

    The agency is looking at three politically charged proposals to reach its goal of universal broadband access.

    One is to as much as double a $7 billion federal phone-subsidy fund, called the Universal Service Fund, which subsidizes phone service in rural areas for low income Americans, and expand it to subsidize construction and operation of broadband networks in rural areas. Money for this fund comes from a small charge tacked on to consumer phone bills.

    Previous efforts to overhaul the fund have run into significant resistance in Congress, particularly among congressman and senators who represent rural areas where phone cooperatives and small phone companies don't want to lose the federal subsidies they get to provide service.

    FCC staff also are studying whether to revive "open access" rules, which would require Internet providers to lease their networks to rivals at government-regulated rates.

    [Feds Mull Rules, Fees to Spur Net Access]

    Similar rules are in place in Europe and some Asian countries — and some consumer advocates say open access is one reason why Internet service is cheaper and faster in those countries.

    FCC officials have made no decisions yet on whether to adopt any of these proposals. The five-member FCC board will be the final say and they haven't been presented with any options yet.

    Still, large phone and cable companies are against any effort to allow open access, arguing they will have little incentive to invest billions in networks if they are required to offer below-rate access to rivals.

    In recent weeks, they have resisted efforts by the FCC's staff to gather data for pricing models. They are concerned the data-gathering might be used to help justify government rate setting, according to industry executives. FCC officials say they wanted the data for different purposes.

    Consumer groups say open-access rules will spark competition and lead to more choice and lower Internet prices.

    "It provides a way to bring more competition into the broadband marketplace which could drive down prices for consumers," said Joel Kelsey, policy analyst at Consumers Union, publisher of Consumer Reports.

    The issue bubbled up last month, when Harvard University's Berkman Center for Internet & Society released an FCC-commissioned study which concluded that other countries have faster and cheaper Internet access because of open-access rules.

    I think that nationwide high speed Internet access is just as important today as rural electrification was in the 30's.— Rick Beesinger

    On Monday, AT&T told the FCC that the Harvard study's conclusion, "that open access is the talisman for success in broadband, is nothing short of astonishing."

    The Harvard study "seems to assume throughout that we should apply the lessons of the past to the future," wrote Link Hoewing, a Verizon assistant vice president for Internet issues, on the company's policy blog. He argued it didn't make sense for the FCC to look at applying old rules, which were designed for the traditional phone system, to the fast-evolving Internet. Verizon declined to comment.

    The National Cable & Telecommunications Association said the FCC shouldn't reach a "false and foregone conclusion" that such rules would increase the availability of high-speed Internet service "when a clear preponderance of empirical evidence reaches the polar opposite conclusion."

    The FCC's third option for broadening Internet access, floated last month, has already stirred controversy.

    The agency suggested that it might reclaim some airwaves from TV station owners and auction them off to wireless companies for more high-speed wireless Internet services.

    Broadcasters, including PBS executives and station owners from Texas and other states, have been up in arms, streaming into the FCC over the past two weeks to lobby against the plan.

    "The political realities of this are huge," said Gordon Smith, a former Senator from Oregon who recently became head of the National Association of Broadcasters on Tuesday. The FCC's proposal has "a long way to go," he predicted.

    Phone and cable companies are already concerned by a separate FCCinitiativewhich would prevent Internet providers from favoring some Internet traffic. These net-neutrality proposals are opposed by Internet service providers, who argue that they need flexibility to manage their networks and potentially offer premium services to customers willing to pay more for faster delivery.

    The FCC hasn't formally proposed any open-access rules, which require companies to lease space on their networks to competitors, and may decide not to do so. "We're looking at lots of things in the entire ecosystem. It would be premature to suggest we're moving in a particular direction," said Blair Levin, a former telecom analyst who's overseeing development of the National Broadband Plan for the FCC.

    He said that the Universal Service Fund, which is financed by fees charged on consumer phone bills, is flawed because it only covers phone service and not broadband as well.

    If the agency heads down the open-access road, it would be returning to policies the FCC adopted in the wake of the 1996 Telecommunications Act, which opened the local and long distance phone markets to more competition.

    Congress required phone companies to lease part of their networks to competitors, but it took the FCC the better part of a decade to write rules that withstood legal challenges from the telephone companies. The FCC exempted broadband lines from such regulation in 2002.

    Write to Amy Schatz at [email protected]

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