Implications of the ruling will be debated for months and are expected to see fierce court challenges over whether the FCC has the authority to regulate the Internet. If it passes muster in the courts, it is likely to face a trial in the marketplace as the agency tries to enforce the ruling's sometimes general and untested terms.

A copy of the ruling has yet to be publically issued. A final draft was released to commissioners just before midnight last night, raising ire from two Republicans on the five-member panel who voted against the plan.

"My office did not receive a copy until 11:30 last night, and it had significant changes [from the previous draft]—it's inexcusable," said Meredith Attwell Baker, one of the dissenting commissioners.

The ruling was essentially based on the so-called Waxman compromise draft by Rep. Henry Waxman (D, Calif.).

In broad terms it states wired Internet service providers cannot block any lawful content, services, devices or applications from running on their networks. They must disclose their network management practices on their Web sites and at the point of sale.

Rules for wireless carriers are less rigorous, in part in recognition of the still-emerging nature of wireless broadband. They are not allowed to block competing voice or video services, but they have more latitude about use of applications on their networks.

One of the most significant areas addressed in the ruling speaks to whether carriers can charge different fees for different levels of service, called paid prioritization. The ruling suggests tiered pricing plans won't be rejected out of hand but may come under close FCC scrutiny for whether they are discriminatory.

"There is significant concern about pay for priority being unreasonable, but it's not ruled out," said one FCC staffer at a press conference after the vote.

The area is particularly sensitive for chip and system vendors supporting increasingly popular deep-packet inspection capabilities. DPI technology is used to determine the content of traffic flows so it can be optimally routed. It also enables carriers to define and tag services for which it could charge higher fees.

Finally, the FCC defined a class of emerging so-called specialized services that it will monitor but not regulate.

The ruling allows any consumer to lodge for free a complaint against a provider on the FCC's Web site.

The FCC's legal staff will use several aspects of Section 706 of the 1996 Telecom Act as its authority to enforce the rules. One part of that law calls for the FCC to take action if it finds deployment of broadband is not proceeding at a reasonable pace. The FCC made such a finding in July 2010, said an FCC attorney.

Dissenters such as Commissioner Robert McDowell said the approach will likely be struck down by appeals courts as was a prior ruling in 2008. The ruling "plays gamesmanship" with the Section 706 law, he said.

McDowell characterized the ruling as "regulatory hubris" inspired by President Obama's "misguided campaign promises." Existing law has worked in policing a handful of broadband concerns in the past decade, and new rules will only harm the market, he said.

He criticized the process for failing to include a market study and predicted the ruling will raise broadband prices and investment uncertainty. "Nothing has been holding back Internet investment--until now," he said.

He pointed to the heavy use of the term 'reasonable' in the ruling. "'Reasonable' is a subjective term, and one of the most litigated terms," he said.

McDowell said the ruling could spawn a "global regulatory Internet pandemic," pointing to news reports of initiatives in China and Saudi Arabia.

Commissioner Baker said the ruling was motivated more by speculation about future market harms rather than real harms. It could actually cause damage to business models and network management techniques, she said.

"Paid prioritization has been turned into a dirty word--to me it is quality of service," Baker said. "Net management is viewed [in the ruling] as a potential field for misconduct, not as an engineering marvel," she added.

Chairman Julius Genachowski praised the commission for passing the ruling by a three-to-two vote after 14 months of debate. He defended the process noting the FCC had received more than 100,000 public comments and consulted with the Department of Justice and Federal Trade Commission.

"I am proud of the process that has been one of the most transparent in FCC history," Genachowski said.

"These rules will increase certainty in the market, spur investment and be a 21^st century job creation engine," keeping a promise with future entrepreneurs who have yet to create new companies, he added.

Reaction outside the FCC was similarly split. Carrier-based interests said there is no need for Internet regulations. Consumer advocates said the new rules should have been more extensive, detailed and specific.

By: DocMemory
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