Wednesday, May 28, 2008, 9:52 AM

LEGISLATION PROPOSED TO CURTAIL "ANTICOMPETITIVE" ISP PRACTICES

On May 6, 2008 the U.S. House of Representatives' Subcommittee on Telecommunications and the Internet held a hearing regarding proposed bill H.R.5353, the Internet Freedom Preservation Act of 2008 ("Act"). At the hearing, public witnesses close to the broadband telecommunications industry presented testimony both favoring and opposing the Act.

H.R. 5353, which was proposed in February of 2008, calls for the establishment of federal policy and regulations regarding broadband telecommunication network management practices. Such policies and regulations are intended to ensure freedom to use the Internet for lawful purposes against "unreasonable interference from, or discrimination by, network operators." The Act further charges the Federal Communications Commission with the duty to "conduct proceedings to assess competition, consumer protection, and consumer choice issues relating to broadband Internet access services."

Two days after the hearing, on May 8, 2008, a similar bill, titled the "Internet Freedom and Nondiscrimination Act of 2008" (H.R. 5994) was introduced to the U.S. House of Representatives. This bill is intended to "amend the Clayton Act with respect to competitive and nondiscriminatory access to the Internet." It proscribes certain practices currently in use by some Internet service providers ("ISPs") to the extent that those practices are unreasonable or discriminatory against certain types of Internet content.

The proposed bills have implications for both ISPs and companies using the Internet as a business tool because they have the potential to change the way content is distributed and accessed over the Internet. Currently, ISPs have the option and ability to determine the availability of specific content to their customers. Many commentators believe that the Internet Freedom Preservation Act of 2008 (H.R. 5353) would prevent ISPs from regulating, in any manner, the nature of the content an individual may distribute or access via an ISP’s network. And the Internet Freedom and Nondiscrimination Act (H.R. 5994) directly proscribes certain types of ISP interference with information accessibility.

The proposed legislation stems from a concern that large ISPs have the ability to block and control Internet content distributable and receivable over each providers individual network. Those concerned worry that, unless regulated, these practices may have an anticompetitive result on the broadband industry.

Critics, however, argue that legislation in this area could do more harm than good. One concern is that federal regulation of ISP network management practices will curtail investments in innovation and development of broadband technology, as well as discourage entry into the market.

The Internet Freedom Preservation Act (H.R. 5353), if passed into law, would require the FCC to conduct proceedings to assess, among other things, the current state of competition in the broadband telecommunications market.

In 2007 the Federal Trade Commission ("FTC") reported that its Internet Access Task Force could not come to a consensus with regard to the state of competition in the broadband Internet industry. On one hand, the rapid growth of the industry and the steady decline in service prices are tell-tale signs of a competitive marketplace. On the other hand, others argue that telephone and cable companies have a duopoly on the market, which could potentially allow for abuse of their market power.

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