US Federal Communications Commission chairman Julius Genachowski yesterday announced the regulator was moving to adopt a formal network neutrality framework that would apply to fixed and mobile operators alike. The proposal boils down to banning traffic discrimination based on applications, services or file types, and are based in part on four contentious “principles” issued four years ago along with two new planks:

• Operators must allow consumers to access any legal Internet content they wish;
• Operators must allow consumers to use any networked application or service they wish;
• Operators must allow consumers to use any safe wireless device they wish;
• Consumers are entitled to competition among local service providers;
• Operators may not discriminate against Internet applications or content beyond “reasonable” network management; and
• Operators must publicize their network management practices.

Adopting formal rules would give the FCC expanded authority over network car- riage complaints. The agency is currently wrestling with Comcast over whether it had the legal right to prohibit the cable operator from allegedly blocking P2P traffic offering services in competition with its own video products.

But the real target is mobile networking, currently under the iron grip of operators who have been quite open about their refusal to allow competitive services run on their networks. The formal rules come just weeks after AT&T re- portedly asked Apple to keep Google Voice off the App Store and some months after it banned Skype and Slingbox from its wireless infrastructure. Consumers have grown increasingly vocal about locks on mobile Internet services in the wake of iPhone mania, which for the first time gave subscribers a true wireless terminal for the same Internet experience as enjoyed at home. Suggesting mobile networks be subject to the same rules as their terrestrial counterparts marks a sea change in US telecoms and federal policy.

The rules would also seemingly end a long tradition of handset exclusivity, potentially upsetting the US handset landscape as consumers for the first time come face to face with unsubsidized pricing for smartphones.

GOODBYE $99 IPHONE. HELLO MOBILE VOIP. FAREWELL OPERATOR MARGINS?

In comments at the Brookings Institution, Genachowski said it was time to formally establish ‘Net neutrality rules. “The Internet is an extraordinary platform for innovation, job creation, investment, and opportunity. It has unleashed the potential of entrepreneurs and enabled the launch and growth of small businesses across America. It is vital that we safeguard the free and open Internet.”

He attempted to head off critics by dismissing inaction as a viable route. “I recognize that if we were to create unduly detailed rules that attempted to address every possible assault on openness, such rules would become outdated quickly,” he said. “But saying nothing and doing nothing would impose its own form of unacceptable cost.”

He elaborated on his plans in an editorial for the Huffington Post. “We’ve already seen some clear examples of deviations from the Internet’s historic openness. We have witnessed certain broadband providers unilaterally block access to VoIP applications and implement technical measures that degrade the perform- ance of peer-to-peer software distributing lawful content. We have even seen one service provider deny users access to political content.”

Genachowski said the FCC would henceforth “be the smart cop on the beat when it comes to preserving a free and open Internet” and said the six ‘Net neutrality principles “would apply to the Internet however it is accessed, though how they apply may differ depending on the access platform or technology used. Of course, network operators will be permitted to implement reasonable network management practices to address issues such as spam, address copyright infringement, and otherwise ensure a safe and secure network for all users.”

But he warned operators ability to use their incumbent heft to keep competition at bay was nearing its end. “The great majority of companies that operate our nation’s broadband pipes rely upon revenue from selling phone service, cable TV subscriptions, or both. These services increasingly compete with voice and video products provided over the Internet. The net result is that broadband providers’ rational bottomline interests may diverge from the broad interests of consumers in competition and choice.”

Genachowski is expected to unveil further details of his ‘Net neutrality plan next month. A competing ‘Net neutrality push is underway in Congress, where Democratic lawmaker Edward Markey hopes to introduce a bill shortly.

PREDICTABLE RESPONSE: Few operators were willing to risk elaborating on carefully crafted statements, although AT&T spokesperson Michael Balmoris noted the carrier “basically support[s] making the broadband principles [into] rules – as applied to wireline broadband. We raise concerns about applying [those] to wireless broadband.” He directed CommsDay to a canned statement by chief lobbyist Jim Cicconi.

“AT&T has long supported the principle of an open Internet and has conducted its business accordingly,” Cicconi said in a statement likely to send the eyebrows of would-be iPhone tetherers and Google Voice users rocketing skyward. He said the carrier supported ‘Net neutrality principles for fixed networks “despite any compelling evidence of abuses that need correction.” Even the Comcast squabble, presumably.

The bewildering claims continued: “American consumers enjoy the broadest array of innovative services and devices, the highest usage levels, the lowest prices, and the most competitive choices of any wireless market in the world.” Cicconi argued‘Net neutrality as a concept was “rooted in an assumption that broadband networks are instantly expandable, to an infinite extent, at little or no cost. To base policy assumptions on such fallacies is to conduct a risky experiment with American broadband investment, nearly all of which is private.” Those private operators could refuse to invest in their networks should the FCC impose neutrality rules, he warned.

The statements appear at odds with comments Cicconi made to the Washington Post last year. “The same principles should apply across the board,” he told the paper in its November 14 edition. “As people migrate to the use of wireless devices to access the Internet, they ... certainly expect that we treat these services the same way.”

Balmoris brushed off the seeming contradiction. “The context was that Jim was at a panel discussion about ‘Net neutrality,” he told CommsDay. “He stated that the FCC principles are about keeping in place an open Internet and that consumers, as wireless service evolves, would some day expect the principles to ap- ply to wireless. Thus, it would be difficult to argue against their application to wireless. But he clearly noted that wireless networks were not at that point yet.”

When pressed, Balmoris declined to speculate on when AT&T believed that point would arrive, nor outline what benchmarks the carrier was using to formulate its determination.

Speaking for AT&T, Cicconi complained enforcing ‘Net neutrality on wireless networks amounted to a bait and switch in light of a recent 700MHz spectrum sale. “To apply ‘Net neutrality requirements to wireless only a year after completing the 700MHz auction, and only months after delivering licenses to winning bidders, is to raise questions as to why such policies were not implemented in advance of the auction,” he said. “Indeed, only the C block was encumbered with requirements of the sort suggested in today’s speech; the other spectrum was auctioned with specific assurances that it was not encumbered with such regulations. As a result, that unencumbered spectrum was sold for many billions more than the C block.”

Other wireless players contacted by CommsDay refused to veer from their blanket statements, which unsurprisingly warned against any move to regulate mobile data services. CTIA regulatory affairs vice president Chris Guttman-McCabe said the industry group was “concerned about the unintended consequences Internet regulation would have on consumers considering that competition within the industry has spurred innovation, investment, and growth for the US economy.” He too pointed to the 700MHz auction as justifying operators’ right to block services as they see fit, and questioned whether the FCC should interfere “just as carriers are facing a brewing spectrum crisis.”

Telecommunications Industry Association president Grant Seiffert pushed to be included in any rule-making process, while Verizon Wireless spokesperson John Taylor directed CommsDay to a blanket statement it had yet to release as of press time. Only Sprint Nextel offered an unqualified endorsement of Gena- chowski’s comments: “Put simply, Sprint wants customers to be able access the applications and the Internet sites they want, when they want to. We look forward to working with the chairman and the rest of the commissioners as they work to establish these new policies in a way that meets the expectations of consumers, recognizes the limits of wireless technology and preserves the obligations of carriers to operate networks in a reasonable and responsible manner.”

Cable operators cheered the proposal, claiming it was high time mobile players were subject to the same rules when it came to Internet access. Comcast said it supported the principles, while Time Warner Cable said the proposal had “nothing in the contents of it that we disagree with. We look forward to being an active participant in the process to determine what ‘reasonable network management’ is.”

LEGAL ROADBLOCK: Operators were no doubt more receptive to a competing proposal unveiled yesterday. Republican senator Kay Bailey Hutchison responded to Genachowski’s speech with a bill that would preclude the FCC from investing in new regulatory mandates, effectively killing off chances for any ‘Net neutrality push that didn’t originate in Congress. “I am deeply concerned by the direction the FCC appears to be heading. These new regulatory mandates and restrictions could stifle investment incentives,” she said in a statement. The bill, co-sponsored by five other Republican lawmakers, was added to an Interior Appropriations bill yesterday afternoon.

The push also ran into opposition from Republican commissioners Robert McDowell and Meredith Baker, who issued a joint statement warning Genachowski could have unwittingly given Comcast legal grounds to resume its alleged ban on P2P traffic. “Today’s speech appears to admit that the commission did not have enforceable rules at the time of last year’s Comcast/BitTorrent decision while the commission simultaneously files its appellate brief defending that decision.”