Neutrality to Change in Stevens Bill

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A Senate telecommunications bill sponsored by Commerce Committee chairman Ted Stevens (R-Alaska) will likely undergo changes to accommodate concerns about potential discriminatory conduct by cable, phone and other broadband-access providers, a Senate Commerce Committee source said Monday.

“I think it’s highly likely that it’s going to change,” said the Senate source, asking not to be identified by name.

Stevens is under pressure from Sen. Daniel Inouye (Hawaii), the Commerce panel’s top Democrat, to strengthen provisions related to network neutrality, which relates to the ability of broadband-access providers to use their market power to injure Web-based rivals by engaging in an assortment of activities, including blocking competitive services or demanding fees in exchange for priority delivery of their voice, video and software applications.

Yahoo! Inc., Google Inc., Microsoft Corp. and eBay Inc. are at the forefront of the coalition demanding a tough net-neutrality law. The Senate Judiciary Committee is holding a net-neutrality hearing on Wednesday, at which Comcast Corp. executive vice president David Cohen is expected to testify.

In his bill (S. 2686), including a revised draft released Monday, Stevens would order the Federal Communications Commission to study the Internet market for five years and file annual reports with Congress on the activities of broadband-access providers.

Inouye, in contrast, issued a draft bill that would impose stringent behavioral restrictions on broadband providers rather than having the FCC address problems as they arise through the adjudication of complaints.

The Senate source said it was “premature” to discuss areas where Stevens and Inouye might be able to close the policy gulf between them. But if Stevens yields, he’ll likely go along with net-neutrality rules with a consumer-protection orientation rather than with rules designed to referee commercial disputes, the Senate source added.

Stevens is holding a hearing Tuesday on the 151-page draft bill called the Communications, Consumer's Choice and Broadband Deployment Act of 2006. But a net-neutrality compromise is not expected to be unveiled until later this week at the earliest.

“A compromise takes two to tango, and we are not quite tangoing yet,” the Senate source said.

Last week, the White House went on record for the first time opposing any net-neutrality legislation, with the Office of Management and Budget saying that the FCC had sufficient authority under current law to rein in broadband-access providers. House legislation passed last week would beef up FCC authority, including the power to review complaints and mete out $500,000 fines.

Stevens is planning a June 20 committee vote on his bill.

Under the new draft Senate bill, phone companies could enter cable markets within 90 days under streamlined franchising rules and cable incumbents could opt in to the new licensing regime when existing agreements expire or when phone companies arrive in the market.

The House would let phone companies enter new markets within 30 days under a national cable-franchising regime that would also let incumbent cable operators opt in at some point.

But many net-neutrality proponents consider the House bill, sponsored by Energy and Commerce Committee chairman Joe Barton (R-Texas), insufficient because it would not let the FCC draft net-neutrality regulations to ensure fair competition.

With regard to cable franchising, Stevens altered his position some in response to concerns by local officials. His original bill would have allowed AT&T Inc. and Verizon Communications Inc. to begin offering video service within 30 days.

A Senate source said Monday that the bill tentatively includes language that would include home shopping commissions collected by video providers within the definition of gross revenue. Cities argued that the original bill would have cut franchise fees by up to 20% by omitting home shopping income.

While Stevens would not impose video-buildout requirements on phone companies, he would expose them to penalties for denial of service based on a group's income, race or religion. But phone companies could cite commercial infeasibility to defend against red-lining charges.

Under the Stevens bill, local governments would be required to use a simplified franchising procedure crafted by the FCC, in a concession to phone-company concerns that the current local franchising system is long, tedious and a barrier to competition.

On program access, the Stevens bill would immediately close the so-called terrestrial loophole, which allows cable operators to withhold terrestrially delivered affiliated program from competing pay TV distributors. That provision is aimed at forcing Comcast Corp. to sell Comcast SportsNet Philadelphia to competitors.

Stevens would also allow satellite carriers to file FCC complaints to gain access to regional sports programming not owned by cable operators but distributed exclusively by undefined "dominant" cable operators. But in a change made to the first Stevens bill, cable operators could not demand access to NFL Sunday Ticket, the National Football League's out-of-market package, to which DirecTV Inc. has exclusive rights.

On carriage of digital-TV stations, the draft bill was unchanged in requiring high-capacity cable operators, until Feb. 17, 2014, to ensure that the digital-TV signals of stations electing must-carry can be viewed on analog- and digital-TV sets. Signal downcoversion from digital to analog and from HD to standard definition is permitted at the cable headend.

The National Association of Broadcasters is opposed to allowing cable operators to downconvert HD signals to standard definition at the headend.

Stevens added similar downconversion authority for satellite carriers DirecTV and EchoStar Communications Corp.

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