Policy

Net Neutrality Excluded From House Bill

4/28/2006 8:00 PM Eastern

Washington— The House Energy and Commerce Committee last Wednesday passed a bipartisan bill on national cable franchising, after defeating a proposal to prohibit broadband-access providers from imposing fees on Internet-based suppliers of search, shopping and information services.

The committee voted 34-22 to reject a “network-neutrality” amendment by Rep. Edward Markey (D-Mass.), who asserted nondiscrimination rules were needed to prevent broadband-network owners from milking innovative Web-based companies on their way to reaching millions of computer users.

The bill, not yet formally introduced, could reach the House floor May 4 or the week of May 8, giving Markey’s forces a chance to rivet national attention on an issue some view as a life-or-death matter for the kind of wide-open Internet consumers have known.

The Barton Bill, Under Construction
Provisions now include:
Source: U.S. House of Representatives
Phone companies may immediately obtain a national cable franchise from the Federal Communications Commission, bypassing local franchising requirements.
A cable operator must wait to obtain a national franchise in a franchise area until a phone company with a national franchise has initiated service in the same franchise area.
Cable incumbents do not have to wait in any franchise area which, on the date of enactment, is already served by a second cable company.
National cable franchisees may not deny service to any group of people based on income only. The geographic area on which an anti-discrimination complaint may be filed is, in general, the entire franchise area.
The FCC may enforce its broadband policy principles based on the receipt of at least one complaint, with a penalty of $500,000 per violation. No ban on broadband network owners seeking fees from Web-based content providers.
Cable’s digital phone services are entitled to the same interconnection rights as those of competitive local exchange carriers classified as telecommunications service providers.
Local governments may offer cable service, telecommunications service, or information services without permission from state legislatures.
Cable and phone companies offering broadband service must allow consumers to purchase that service unbundled from any cable or telecommunications service, including digital phone service.

At some point this year, the House Judiciary Committee is expected to enter the debate. Reps. Rick Boucher (D-Va.) and Zoe Lofgren (D-Calif.) are drafting a bill that would impose antitrust sanctions on broadband-access providers that attempt to turn the ends of the Internet they control into toll roads. Antitrust violations by cable or phone companies would be accompanied by criminal or civil penalties, ranging from prison terms to heavy fines.

“I can tell you that I am working with Zoe Lofgren and she and I have drafted some preliminary language. That’s as far as we have taken it,” Boucher said last Thursday. “We would simply make it an antitrust violation with normal antitrust enforcement if there were a violation of that provision.”

BRAND STAND

Markey’s amendment had the support of some of the Web’s biggest players, including Amazon.com Inc., eBay Inc., Google Inc., InterActiveCorp, Microsoft Corp. and Yahoo! Inc.

Cable and phone companies defeated Markey by arguing that regulation is unnecessary while business models are still evolving.

Boucher, who co-sponsored the Markey amendment, crystallized the issue for his side by claiming that cable and phone companies wanted to extract fees to extend their broadband access market power into Web content services that they took no part in developing.

“The handwriting is on the wall,” Boucher said. “This is the time to set the rules.”

Support for network-neutrality rules fell short because the majority of members appeared to believe that Internet commerce was dynamic enough to survive, without intrusive regulation at this time.

“I don’t think we will kill the Internet [without] this amendment,” said Rep. Gene Green, a Texas Democrat.

BARTON’S WIN

The House panel considered Markey’s amendment and a slew of others as part of a daylong debate on a telecommunications bill chiefly intended to expedite phone-company entry into local video markets and increase competition to incumbent cable operators.

The panel approved the bill last Wednesday evening by a vote of 42-12, in a legislative victory for Energy and Commerce chairman Joe Barton (R-Texas), the bill’s chief sponsor.

At its core, the Barton bill would allow phone companies to offer video anywhere in the country without obtaining approvals from local governments. Since 1984, Congress has required cable operators to secure such local approvals. AT&T Inc. and Verizon Communications Inc. have been lobbying aggressively for a law that would allow them to skip video franchising negotiations with thousands of local communities.

In general, cable companies are eligible to renounce their local franchises and opt for national ones in franchise areas where local phone companies have initiated cable service under a national franchise.

In another important development, Rep. Nathan Deal (R-Ga.) withdrew an amendment that called for changes to retransmission consent. This is the legal name given to the right of TV stations to demand compensation from cable- and satellite-TV providers who want to air their signals. Barton promised to hold discussions on the issue after Deal acknowledged that he wanted to research the program acquisition market further.

Deal’s amendment would have, among other things, allowed cable operators to take TV stations to arbitration in order to settle compensation disputes.

The National Association of Broadcasters launched an all-out assault on the Deal amendment in recent weeks.

“We expect this issue to arise again, and NAB asks all broadcasters to remain vigilant in educating Congress on an issue that benefits both consumers and preserves broadcasting’s vital role into the future,” NAB president David Rehr said in a prepared statement.

THE MARKET MATTERS

Barton’s panel adopted two amendments favorable to cable. One appeared to limit the right of phone companies to serve just affluent communities in a local video-franchising area. Refusal to serve homes based on income could cost a phone company up to $500,000 per day in fines until a remedy had been enacted.

Barton’s bill excluded explicit requirements that a phone company with a national franchise make its video facilities available to all households in a franchise area. An amendment to make that the norm was defeated with Barton’s strong support.

“You don’t need a buildout requirement. The market will take care of it,” Barton said.

Ironically, it was a Barton amendment that included the language that would deny phone companies the ability to carve out a portion of a franchise areas and declare that as the territory that they intend to service.

Later, cable lobbyists were optimistic that restrictions on cherry-picking of a franchise area would likely force AT&T and Verizon to extend video facilities into communities that they probably were not intending to serve in the near future.

Phone industry executives said they were reviewing the language to determine whether the Barton bill effectively included a buildout requirement.

A second amendment approved altered incumbent cable operators’ ability to seek a national franchise. Sponsored by Rep. Chip Pickering (R-Miss.), the amendment would ensure that cable companies could immediately obtain a national franchise if the franchise area includes a second cable-service provider.

As passed by the House Subcommittee on Telecommunications and the Internet three weeks ago, the Barton bill generally withheld a national franchise from a cable incumbent until a phone company had entered the same local market.

March