FCC says it will reclassify broadband to maintain 'net neutrality,' and phone company stocks drop

The Federal Communications Commission announced Thursday it would reclassify broadband Internet service as a telecommunications service. The change will give the FCC the authority it needs to implement its national broadband plan, which will require broadband companies to adhere to "net neutral" policies, "prohibiting phone and cable companies from prioritizing or discriminating against Internet traffic traveling over their lines." The plan will not exempt broadband companies from many other regulations that telecommunications services face, Joelle Tessler of The Associated Press reports.  The decision is expected to be challenged by Republicans and big telephone and cable companies.

FCC Chairman Julius Genachowski said the compromise of applying narrow rules to broadband companies would "ensure the agency has adequate authority to govern broadband providers without being too 'heavy-handed,'" Tessler writes. FCC previously classified broadband as a a lightly regulated information service, but a federal appeals court ruled last month the agency didn't have the authority to regulate broadband under that approach. The national broadband plan "aims to give more Americans access to affordable high-speed Internet connections by revamping the federal program that subsidizes telephone service in poor and rural areas and using it to pay for broadband," Tessler writes.

Internet companies such as Google Inc. and Skype Ltd. say net neutrality rules are "needed to prevent broadband providers from becoming online gatekeepers and blocking Internet phone calls, streaming video and other services that compete with their core businesses," Tessler writes. House Republican Leader John Boehner of Ohio called the plan "a government takeover of the Internet." Shares of phone companies Verizon Communications Inc. and AT&T Inc. dropped 2 percent after the announcement, and cable stocks "tumbled even more, reflecting the fact that cable companies have a larger share of the broadband market and no wireless operations to fall back on," Tessler reports. (Read more)