FCC said to debate Web traffic fees

New Internet traffic rules, proposed by Federal Communications Commission Chairman Tom Wheeler, will allow Internet providers to charge content companies, such as Netflix Inc., for faster service to customers, media reports said Thursday.

Analysts are divided on how the plans would affect Little Rock-based Windstream Holdings Inc.

“It sounds like it’s probably positive for the carriers because it would allow them to charge large content companies … slightly more to get improved services,” said Donna Jaegers, a senior analyst with D.A. Davidson and Co. “So it looks like it would be a small positive for Windstream.”

The proposal, which has not been made public, was shared with commissioners Thursday so they can review it before the commission meets May 15, Bloomberg News reported. The WallStreet Journal also reported details of the proposal. The proposed change in regulation is part of the FCC’s effort to enforce “net neutrality” and protect an open Internet.

The FCC did not return phone calls or emails Thursday for comment.

When asked how the proposed rules could affect Windstream, company spokesman David Avery said it was “premature to speculate” until the plan was public and the company could review it.

For a company such as Windstream, the proposed rules “appear to give them a lot of room to charge,” said Martyn Griffen, government affairs associate for Public Knowledge, a nonprofit in Washington, D.C.

“In reality, it’s probably going to be more beneficial to larger [Internet service providers],” he said, adding that Windstream’s Internet service is smaller compared with companies such as Comcast. “The online service is probably more inclined to do a deal with Comcast … rather than Windstream because [Comcast has] a larger consumer base.”

Barry McCarver, an analyst for Stephens Inc., said he didn’t think the plan, if approved, would have a significant effect on Windstream.

“What they are doing [Thursday] and voting on May 15 is really dealing with the residential side,” he said.

McCarver said some major networks have been limiting the amount of bandwidth access to sites such as Netflix or Google, which would cause delays in streaming for consumers.

Netflix did not return phone calls for comment.

In its first-quarter report, Netflix officials said AT&T’s U-verse Internet service is slower than other providers, such as Windstream and CenturyLink.

“This reinforces our view that connectivity to the broader Internet is critical to the quality of experience consumers receive,” the company said in its quarterly earnings report. “It is free and easy for AT&T to interconnect directly with Netflix and quickly improve their customers’ experience, should AT&T so desire.”

Netflix accounts for almost a third of Internet activity in the United States, McCarver said.

The “Internet faces a longterm threat from the largest [Internet service providers]driving up profits for themselves and costs for everyone else,” Netflix said.

In a statement, AT&T said: “We’re in discussions with Netflix to establish a more direct connection between our networks, similar to agreements we can have with others, so that AT&T broadband customer who use Netflix can enjoy an even better video experience.”

The company said it could not comment on the FCC’s proposal because it has not seen it.

The FCC’s proposal has already come under fire from consumer advocates who say the plan does not promote an open Internet.

“Consumers could potentially see an increase in the online service they use,” Griffen said. “It may result in an increase in price and decrease in choice.”

He said it would also discriminate against startup companies who may not be able to pay Internet charges.

Tom Wheeler, the commission’s chairman, responded to criticism in a blog post Thursday. He said the plan would not allow the blocking of lawful content and “no unreasonable discrimination among users.”

“To be very direct, the proposal would establish that behavior harmful to consumers” that limits “the openness of the Internet, will not be permitted,” Wheeler said in the post. “The allegation that it will result in anti-competitive price increase for consumers is also unfounded.”

Wheeler said the proposed plan will require Internet service providers to disclose to subscribers its policies and prevent them from favoring traffic from a certain company.

Wheeler said in his blog post that he plans to have “enforceable rules by the end of the year.”

Business, Pages 29 on 04/25/2014

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