At least as important, though, are the video service’s subscriber numbers. Here investors were looking for 24.3 million domestic streaming subscribers, 9.1 million DVD subs, and 3.7 million subscribers from Canada, Latin America and the U.K., and Netflix didn’t quite get there: 23.9 million domestic, 9.2 million DVD and 3.6 million international.

Wall Street is unhappy with something here: NFLX has plummeted 14 percent since the release hit the wires.

As always, here’s a cheat sheet from Citi’s Mark Mahaney, so you can play along at home (click to enlarge). Pay attention to guidance from Netflix on boths subs and financials, as this has been a flashpoint in the past.

Here’s a possible warning flag for investors on Q3: Netflix is saying that the summer Olympics could impact growth. That’s the first time I believe I’ve heard them warn about that.

Here’s CEO Reed Hastings in his investor letter:

For Q3 quarter-to-date, our domestic net additions are very nearly the same as Q3 2010 over the comparable partial period. In that quarter two years ago, we finished with 1.8 million domestic net additions. However, in the middle of that quarter, we launched Netflix on the iPhone to great reception, and we don’t have an equivalent launch this quarter. Moreover, this quarter the Olympics are likely to have a negative impact on Netflix viewing and sign-ups. So, our Q3 guidance is 1 million to 1.8 million domestic net adds. If we finish Q3 in the high end of that range, we would remain on track for 7 million domestic net additions for the year; otherwise it would be challenging to achieve that goal by year end.

That said, the guidance that Netflix is offering for Q3 would seem to be what investors were looking for: Up to 25.7 million streaming subs, 4.4 million international and 8.7 million DVD subscribers.

Another heads up: Netflix says it will launch a new international market in Q4, which will put the company in the red that quarter.

What about competition from the likes of Amazon, and, soon, Verizon? Still not a problem, Hastings says:

We have yet to see HuluPlus or Amazon Prime Instant Video gain meaningful traction relative to our viewing hours, but as we continue to build a domestic profit stream they are likely to increase their efforts to gain viewing share. Redbox Instant by Verizon, once they launch, will face a big challenge to break into the top 3 of subscription streaming services.

And here’s a bouquet for HBO. Wonder if it will sway Jeff Bewkes: “While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work together – just as we do with other networks.”

In short, Comcast is moving from a flat cap to usage-based billing.

It is scrapping its 250-gigabytes a month cap and trying a couple different plans in its place. One version will introduce a 300-gig cap and offer additional tiers of service, with bigger caps, along with the ability to buy more chunks of data. Another version also uses a 300-gig cap and the ability to buy incremental blocks of data as needed.

Comcast, which has more than 18 million high-speed data customers, says it will experiment with the two plans in some of its territories.

It also says that in markets where it’s not trying the new plans, it will scrap its data cap entirely until it settles on a new plan.

The move comes as Comcast has taken heat about the way it treats data on some of its proprietary video services, in particular the Xfinity app for Microsoft’s Xbox console.

Netflix CEO Reed Hastings has argued that because Comcast doesn’t count data delivered via that service against its usage caps, it is violating “net neutrality” principles. Comcast says it’s in the clear because that data isn’t delivered via the public Internet but on its own network, and doesn’t plan on changing its policy.

Comcast executives referenced the debate as they introduced the new plans today. “There has been a little bit of noise along with the Xfinity Xbox plan,” said Comcast EVP David Cohen. But Comcast also insists that only a small handful of its users come close to using the 250-gig cap today. The company says median usage runs around 8 gigabytes to 10GB a month.

Other broadband providers, notably Time Warner Cable, have also moved to usage-based pricing. If you take the companies at their word, they’re doing it because they need to charge more money to provide more bandwidth because “our network is not an infinite resource, and it is expensive to build it,” as Cohen says.

But usage-based pricing is also a useful tool to have available if cable TV users really do stop subscribing in large numbers, and replace their pay TV packages with Web video. That gives the cable (and telco) guys a way to replace the video revenue they lose with more broadband dollars. A bonus for them: Broadband subscriptions are much more profitable than video subscriptions.

[Shutterstock/Janos Levente]

Today’s blast is similar to last month’s in both form and content.

Hastings is once again accusing Comcast of violating “Net neutrality” principles by favoring its own Web video service over those from Netflix, HBO and Hulu, when it comes to data usage. (Last month Hastings also complained that he couldn’t watch HBO GO on his Xbox, but that’s been resolved.)

Here’s the text (you can also see a screenshot, below):

Comcast no longer following net neutrality principles.
Comcast should apply caps equally, or not at all.
I spent the weekend enjoying four good internet video apps on my Xbox: Netflix, HBO GO, Xfinity, and Hulu.
When I watch video on my Xbox from three of these four apps, it counts against my Comcast internet cap. When I watch through Comcast’s Xfinity app, however, it does not count against my Comcast internet cap.
For example, if I watch last night’s SNL episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all.
The same device, the same IP address, the same wifi, the same internet connection, but totally different cap treatment.
In what way is this neutral?

Reminder: Hastings has all sorts of ways to complain/lobby Comcast and/or regulators (see, for instance, the new Netflix PAC). I continue to find it fascinating that he’s taken to posting on Facebook for this stuff. (Another reminder: Hastings is a Facebook board member).

Last month, I asked Hastings and Netflix PR if they wanted to expand on his comments, but never heard back. I’ll let you know if that changes.

It was a significant victory for opponents of net neutrality rules because the court has been skeptical of the FCC’s authority to enforce such rules in the past.

“The FCC stands ready to defend its open Internet order in any court of appeals,” an FCC spokesman said Thursday.

Read the rest of this post on the original site »

On Wednesday public interest group Free Press filed a lawsuit against the Federal Communications Commission rules in a Boston-based federal appeals court, saying they didn’t protect wireless Internet users enough.

In the complaint, the group argued the FCC acted arbitrarily when it decided to “adopt one set of rules for broadband access via mobile platforms and a different set of rules for broadband access via fixed platforms.”

The rules take effect November 20.

Read the rest of this post on the original site »

The U.S. Court of Appeals for the District of Columbia on Monday dismissed lawsuits filed by Verizon Communications Inc. and MetroPCS Communications Inc., saying the companies had to wait to challenge the rules until they were published in the Federal Register.

In December the FCC adopted new rules prohibiting Internet providers from deliberately blocking or slowing Web traffic, but the agency hasn’t formally published them.

Read the rest of this post on the original site »

Diller expressed a love for SXSW’s Web technology entrepreneurs, earning applause for his comments on net neutrality, chuckles for his stories of Segway tour hijinks, and belly laughs for a story about his wife, Diane von Furstenberg, playing Angry Birds while talking on the phone with him.

“What I like so much about this place is that so many people here are essentially following their curiosity,” Diller said.

As for another technology bubble, “we’re puffing it up pretty nicely,” he said. But, “the fact that money chases it isn’t really that interesting. What is interesting is how much sheer invention is going on.”

Diller said he’s not worried about a technology bubble, but the prices are too high for him personally. As he put it, “All the money that’s going to be lost is going to be lost by people who can lose money. So who cares?”

The IAC chairman restated a deeply held belief in net neutrality. “We need an unambiguous rule–law–that nobody will step between the publisher and the customer. Full stop,” Diller said. Charging a company like Netflix for bandwidth, he added, “would be like asking the toaster to pay for the electricity.”

Diller also made fun of News Corp’s The Daily–don’t release a product “unless you can actually use it”–said he thinks the age of Internet TV is just three years away, and urged content creators to think about longer-form Internet video and micropayments.

Image from a fake Twitter account for Barry Diller, who doesn’t seem to have his own.

Republicans are targeting the “net neutrality” rules, which would bar Internet providers from blocking or slowing Internet traffic and services, as well as new regulations in such areas as health care and the environment, as unnecessary and overly burdensome on industry.

“Why would you put the government in charge of the Internet?” asked Rep. Fred Upton (R., Mich.), who chairs the House Energy and Commerce Committee.

FCC Chairman Julius Genachowski, a Democrat, defended the new rules during the hearing, saying the FCC “did the right thing” and that it is “pro-job and pro-investment” for the U.S. economy.

Read the rest of this post on the original site

The event is set to kick off shortly and Mobilized will have live coverage here.

1:05 pm: Well, despite timely warnings to get in our seats beginning at 12:45, it’s now five minutes after and the techno is still pumping.

1:11 pm: Okay. Getting started. Loud music gets louder. Cue video.

Tony Melone and Marni Walden take the stage and CEO Daniel Mead (at least I think it is Mead) is doing an intro.

1:15 pm: Another video now playing with partners. Since HTC CEO Peter Chou is in there, I think it is probably safe to say their oft-rumored LTE smartphone will make an appearance.

1:16 pm: Samsung and Ericsson execs also in the video.

1:17 pm: Verizon exec now touting the advantages of its 4G network including its spectrum, which it says will give it the best in-building coverage.

Also talking about how it is sharing its spectrum with rural service providers.

1:18 pm: Mead: “We’re very pleased to be part of bringing broadband to rural America.”

1:21 pm: Mead hands off to CTO Tony Melone to talk 4G and LTE.

Melone says that the company knows there is a lot of skepticism of the company’s move to go straight to LTE but that the bet is paying off with more networks and running faster than planned.

“The customer feedback we are getting is everything we had hoped for and then some,” Melone says.

Melone talks about 4G LTE plans.

Thirty-six months from now we will have the nation covered with LTE, Melone says. Two-thirds of the population will be covered in 2012. This year alone, he says, Verizon will add 140 new markets, including places like Little Rock, Detroit and Sioux Falls.

1:26 pm: On to devices.

Ten devices coming by mid-year being shown on stage: Four smartphones, two tablets, two notebooks and two mobile hotspots.

1:33 pm: LG CEO shows off the LG Revolution, what appears to be a slimmish smartphone.

Next up, Skype’s CEO talks about a new partnership that will allow for Skype to be always on and integrated into the address book of all of Verizon’s LTE smartphones,

1:34 pm: He’s followed by HTC CEO Peter Chou, who introduces the HTC Thunderbolt.

Chou says he’s been personally testing and using the Thunderbolt, which features the new Skype video chatting along with HTC’s Sense user interface.

“Let me tell you, it’s blazing fast,” Chou says.

Other features include a built-in 4G hotspot and a 4.3-inch Super LCD screen.

1:37 pm: He thanks Qualcomm and Google engineers that worked together to create the device, so guessing this one isn’t using Nvidia’s Tegra chip.

Next up is Electronic Arts VP Travis Boatman. EA’s mobile games lineup ranges from Monopoly and Tetris to Need for Speed and the FIFA 11 soccer game.

The new mobile version of Rock Band for Verizon’s LTE network lets people form a band and remotely jam over the network.

Samsung executive goes onstage to show off three devices for the LTE network, One is a mobile hotspot, one is a smartphone and the other is a 4G version of the Galaxy Tab.

Phone packs 4.3-inch Super Amoled Plus display, which is said to boost colors and offer improved display. It’s got an 8-megapixel rear-facing camera with HD video and a 1.3-megapixel front-facing camera for video chat.

The tablet has a 1.2GHz processor developed by Samsung, while the hotspots provide connections to up to five users at a time.

Most impressive is the fact that the Samsung executive pulled all three devices out of various pockets.

Marni Walden shows off the remaining devices–a Novatel MiFi hotpot that works with both 3G and 4G networks.

There is also a Compaq Netbook, an HP notebook, as well as the previously announced Motorola Xoom and Motorola Droid Bionic.

1:47 pm: On to Q&A (hoping laptop No. 2 holds out through the end of question time.)

First question has to do with LTE speeds, which often exceed the 5- to 12-megabit speeds promised. Mead says that the company’s goal is to meet the promised speed range once the network is fully loaded, something that is not the case today.

Next question is on battery life. Melone says the company believes it will be able to meet customer expectations in that regard.

The company says it won’t announce pricing or rate plans for the 4G products, beyond noting its current prices for 4G laptop cards and service.

As for simultaneous voice and data, Walden says the company intends that at least some of its 4G launch devices will support talking and accessing data at the same time.

“It could be on some devices and not all,” Walden says.

Walden also confirms all the phones it showed Thursday are running Android.

1:55 pm: Asked about net neutrality, Mead says that what the industry needs is “unfettered development.”

“We think the free market system works very well, and we don’t need a lot of heavy intervention.”

Now we have a full text of the actual rules, weighing in at a voluminous 194 heavily footnoted pages, which just became public on the FCC’s Web site. As with some of the other documents relating to this, I’ve uploaded this one to Scribd and embedded it below. This is the document that corporate lawyers, lawmakers and other policy wonks at think tanks and trade associations will be combing through in the coming weeks and months in hopes of either watering down or strengthening the rules, depending on your point of view. Others will be looking through this text for provisions they can challenge in court. And congressional Republicans have already promised to hold hearings next year and will probably try to find a way to legislate these rules out of existence.

FCC-10-201A1

The reactions are all over the map, and no one is exactly happy. I’ve collected a few of the reaction statements below.

President Obama:

“This decision is an important component of our overall strategy to advance American innovation, economic growth, and job creation. As a candidate for President, I pledged to preserve the freedom and openness that have allowed the Internet to become a transformative and powerful platform for speech and expression. That’s a pledge I’ll continue to keep as President. As technology and the market continue to evolve at a rapid pace, my Administration will remain vigilant and see to it that innovation is allowed to flourish, that consumers are protected from abuse, and that the democratic spirit of the Internet remains intact.”

Rep. Fred Upton, R-Michigan, incoming Chairman of the House Energy and Commerce Committee

“The FCC’s hostile actions toward innovation, investment and job creation cannot be allowed to stand. We must use every resource available, including the Congressional Review Act, to strike down the FCC’s brazen effort to regulate the Internet. … Despite FCC claims that these are just rules of the road that everyone agrees with, anyone can recognize that what the Commission claims to be statements of broad industry support are really cries of ‘uncle’ resulting from threats of even more onerous regulation.”

Rep. Greg Walden, R-Oregon, incoming Chairman of the Subcommittee on Communications and Technology

“More troubling than the substance of the network neutrality rules are the legal theories underpinning them. If left unchallenged, this power grab will allow the Commission to regulate any interstate wired or wireless communication on barely more than a whim. For all these reasons, we plan to look at all legislative options for reversing the decision. We also plan to hold a series of hearings early next year on the substance, process and claims of authority underlying this proceeding.”

Sen. John Kerry, D-Massachusetts

“The FCC’s Democratic Commissioners should be applauded for reaching a consensus on rules that will protect network neutrality on the Internet. As Commissioner Copps, a lifelong champion of open communications and democratic discourse, said in his statement today, vigilant and vigorous implementation of the rule is critical to its success.”

Dish Network CEO Charlie Ergen

“DISH Network applauds Chairman Genachowski and Commissioners Copps and Clyburn for adopting critically important net neutrality rules. The Commission’s Order is a solid framework for protecting the open Internet. The new rules give companies, including DISH Network, the framework to invest capital and manpower in Internet-related technologies without fear that our investment will be undermined by carriers’ discriminatory practices. While we wish the Commission would have gone further to expressly prohibit discrimination on wireless platforms, we are pleased that there will be ongoing Commission oversight and enforcement authority.”

Kyle McSlarrow, President and CEO, National Cable and Telecommunications Association

“Our consistent view has been that the current ‘openness’ of the broadband marketplace can be preserved while simultaneously fostering the innovation and massive private investment needed to ensure the future growth and vitality of the Internet. While we agree entirely with Commissioners McDowell and Baker that new regulation is not necessary to accomplish that goal, it has been clear for some time that there were three votes at the Commission for rules that would go much farther than those adopted today. Thus, the question before us has been whether rules could be drafted in a manner that avoids a raft of unintended consequences and that preserves broadband providers’ ability to innovate and invest in a marketplace that justly represents a great American success story.”

J. Scott Holladay, Economics Fellow, Institute for Policy Integrity

“Today, the FCC voted on a batch of tepid new rules. Some net neutrality protection will be provided, but the exclusion for wireless will create barriers to new start-up content providers and chill content innovation over wireless Internet.”

“The new but not-yet-properly-defined ‘managed service’ exemption may amount to the first step down a slippery slope of non-neutral Internet service. The exemption should be carefully tailored to address only a small number of special categories of applications that cannot operate under the existing open framework.”

“The FCC rests these decisions on shaky legal ground. Rather than invoke its more robust regulating powers, FCC bases the new rule on legal authority that was called into serious doubt by court decision earlier this year making the long term prospects for the rule quite poor.”

The Writers Guild of America, East

“A compromise means the parties to a dispute reach agreement. Here, no one has agreed to anything. These tepid rules will be challenged in court and in Congress, and they fail in the most fundamental ways – permitting paid prioritization and all manner of discrimination in wireless. Our members write most of what people watch on television and in the movie theaters and increasingly, online. Today’s FCC vote will diminish our members’ ability to create and distribute innovative content and audiences’ ability to watch the content of their choice.”

Even those who are voting in favor are doing so holding their noses. Of the five voting members of the commission, only one, Democrat Michael Copps, had been considered remotely likely to vote with the two Republicans who had pledged to vote against it. When he announced he would vote in favor yesterday he said he was doing so with reservations.

Republicans, both on the commission and in Congress, sense an opportunity, the size of which you can discern by the size of the headlines topping the Drudge Report during the last few days. Genachowski is being portrayed in 80-point type as the villain “Julius Seizure” out to ruin the freewheeling Internet by shackling it with a list of bureaucratic rules and regulations. The irony is that the current proposal on the table is a dramatic step back from a far more ominous one: Immediately after losing a court case brought by the cable company Comcast over the extent of its legal authority to regulate the Internet, Genachowski considered reclassifying the Internet under the FCC’s Title II authority, which governs regulation of the phone system. This was an extreme response, thankfully abandoned, that would have certainly warranted the nickname. The current proposal is by no stretch of argument so extreme that it amounts to a seizure.

But rules they are, and no one likes new rules where none existed before, least of all multibillion dollar corporations like Comcast and Verizon. Having established in the courts that they have the right to control the use of certain applications that impact the performance of their network–or, more precisely, the fact that the FCC has no legal authority to tell them not to exercise such control–they’re now going to be required to disclose how and why they exercise such controls.

The rules allow for “reasonable network management” by service providers, which is a squishy phrase. Internet companies like Amazon and Skype, which aren’t service providers themselves, argue that the new rules are weak and don’t protect them from service providers that may “reasonably manage” their products and services out of existence. Get your stopwatches ready, because there will almost certainly be several lawsuits over what constitutes “reasonable network management.”

The scenario is easy to imagine: Embittered broadband customers band together in a class-action lawsuit complaining that their provider refuses to allow them to experience the latest video streaming or video chat application. They argue that the provider favors another inferior application that it happens to own. The provider argues that it’s only engaging in “reasonable network management” allowed under FCC rules, leaving judges to tease out what that means. Lawyers are probably already shining up their Ferragamos as they polish their legal briefs.

These cases are already appearing. Comcast and Level 3 Communications are sparring over the terms under which Comcast conveys to its customers video streaming traffic sent by Level 3 associated with its relationship with Netflix. Level 3 has turned to the FCC and the U.S. Department of Justice at a delicate time for Comcast: It wants federal approval for its takeover of NBC Universal, and wants it now.

The FCC’s new rules, rightly or wrongly, make Comcast and companies like it more vulnerable to similar threats by regulators in response to actions taken in their own reasonable self-interest. Until today, this sort of dispute between companies would normally be worked out by negotiators in private, not regulators on the public dime. No matter whose side you tend to favor, the prospect of government gumming up the work with endless busywork isn’t a happy side effect.

The rules themselves may also be challenged. There’s still a huge question–as FCC commissioners Meredith Atwell Baker and Robert McDowell have both argued in recent newspaper op-eds (one in yesterday’s Wall Street Journal, the other in today’s Washington Post)– about the FCC’s legal authority over the Internet. House Republicans are already making noise about jumping into the policy fray, and another court challenge is probably likely.

The one overarching mission concerning the Internet that the FCC can undertake with some measure of agreement is that of widening the availability of the network to places it doesn’t adequately reach and to people who don’t have broadband access for economic or other reasons. In an age where so much of daily public business–from applying for a job to becoming an informed voter in the presidential election–all but requires a broadband link, far too many remote and rural areas are the victim of market forces where the investment to build infrastructure in sparsely populated areas outweighs the potential for a reasonable return.

Genachowski has argued that by adapting the Universal Service Fund (which helped the telephone network penetrate these same underserved areas) for broadband, providers could get this otherwise impossible job accomplished. Extending broadband availability was one of President Obama’s campaign promises, but the $7.8 billion in federal stimulus funds awarded under the auspices of the National Telecommunications and Infrastructure Administration and the Department of Agriculture’s Rural Utilities Service have not and will not make a significant dent in the problem.

Why not focus on what is clearly the more important problem and without question in the national interest, and leave the finer points of how service providers and Web companies carry content to sort themselves out? Like it or not, a new, more legally complicated Internet is here.

Democratic Commissioner Mignon Clyburn said in a separate statement that she plans to vote in favor of the rules, while Republicans Robert McDowell and Meredith Attwell Baker have both promised to vote against them.

Copps’s statement is below.

“These past three weeks have been devoted on my part to intensive discussions about ensuring the continued openness of the Internet and putting consumers, not Big Phone and Big Cable, in maximum control of their online experiences. I have been fighting for nearly a decade to make sure the Internet doesn’t travel down the same road of special interest consolidation and gate-keeper control that other media and telecommunications industries–radio, television, film and cable–have traveled. What an historic tragedy it would be to let that fate befall the dynamism of the Internet. The item we will vote on tomorrow is not the one I would have crafted. But I believe we have been able to make the current iteration better than what was originally circulated. If vigilantly and vigorously implemented by the Commission — and if upheld by the courts–it could represent an important milestone in the ongoing struggle to safeguard the awesome opportunity-creating power of the open Internet. While I cannot vote wholeheartedly to approve the item, I will not block it by voting against it. I instead plan to concur so that we may move forward. I do thank the Chairman for his engagement, and I owe a special debt of gratitude to Commissioner Mignon Clyburn for her thoughtful and creative work to improve this item.”

Reactions are quickly coming from net neutrality advocates. First out of the gate is FreePress, a nonpartisan advocacy group. Its Managing Director Craig Aaron isn’t happy.

“We are deeply disappointed that this Commission appears to be moving forward with deeply flawed rules that don’t live up to the promises of the president or the FCC chairman to protect the free and open Internet. These rules appear to be flush with giant loopholes, and the FCC chairman seems far more concerned with winning the endorsement of AT&T and the cable lobbyists than with listening to the millions of Americans who have pleaded with him to fix his proposal. This short-sighted decision is all too familiar to those who have watched the Obama administration and its appointees squander the opportunity for real change in favor of industry-written compromises that reward the biggest players from Wall Street to health care and now the Internet. There is overwhelming public support for real Net Neutrality, and this setback won’t stop those fighting to save the Internet.”

Next up is Gigi Sohn, president of Public Knowledge–another advocacy group:

The actions by the Federal Communications Commission fall far short of what they could have been. Instead of a rule that would protect everyone, from consumers to applications developers from predatory practices of telephone and cable companies, the Commission settled for much less. Instead of strong, firm rules providing clear protections, the Commission created a vague and shifting landscape open to interpretation. Consumers deserved better. The FCC should have fought for consumers, not put the burden on them to fight for their rights.

There are of course a lot of moving pieces surrounding this debate, and however the chips fall, it’s going to have a long-term effect over how the Internet operates over the next several years.

Earlier this year, FCC Chairman Julius Genachowski was dealt an important setback when the U.S. Court of Appeals ruled that the FCC doesn’t have the legal authority to impose net neutrality rules on broadband providers. In hopes of still finding a way to rein in the providers, he’s since circulated new proposed rules that would require providers to disclose what kind of traffic they intend to throttle and why, giving consumers a little more information so they can make a more informed choice when picking a provider. And in a speech on Dec. 1, Genachowski also expressed support for “usage-based pricing,” which would essentially allow providers to charge variable pricing plans where consumers would pay higher fees for using higher amounts of bandwidth.

Certain Internet companies that aren’t providers, but who rely on having unfettered pipes through which they can deliver their services, aren’t happy with the proposed rules either. Companies like Amazon, Skype and Netflix, want stronger rules that would prevent the providers from slowing down traffic from their sites or blocking them altogether. They’ve even pushed the FCC to reconsider regulating the Internet outright as a telecommunications service, as it does the telephone system today, an idea that Genachowski briefly considered, then abandoned.

No surprise, they’ve been lobbying the FCC heavily, as have the telecom providers. According to Capital Business, a Washington Post publication, 150 organizations have hired 118 lobbying firms to try to influence the outcome of tomorrow’s vote.

The pressure isn’t stopping there. Republican commissioner Robert McDowell has pledged to vote against the rules, saying, as he did in a Wall Street Journal op-ed today, that imposing regulations would threaten everything that makes the Internet a source of innovation. Commissioner Meredith Baker Attwell, also a Republican, has attacked the proposal and similarly pledged to vote against it, arguing that only Congress, not the FCC, has the authority to regulate the Internet.

Congressional Republicans, with their heads full of steam after their November electoral wins, are rushing into the fray. Michigan’s Republican Representative Fred Upton, who will chair the House Energy and Commerce Committee when the new Congress comes into session early next year, wrote Genachowski and called his proposal “the most controversial item the FCC has had before it in a decade.”

Meanwhile, Congressional Democrats are pressing fellow Democrat Michael Copps to vote for Genachowski’s rules, fearing that a vote against them would hurt President Obama politically, as Sara Jerome wrote in Hillicon Valley. In the end, he is expected to fall in line and vote in favor.

Perhaps a harbinger of things to come is the spat between Level 3 Communications and Comcast. Level 3, which operates much of North America’s fiber-optic network, last month accused Comcast of “trying to set up a toll booth” by charging Level 3 recurring fees whenever a Comcast subscriber streamed content that got delivered by Level 3. This happened right after Level 3 cut a deal to become the primary delivery network for Netflix.

The dispute has reached sufficient intensity for Level 3 to ask federal regulators to impose conditions on Comcast in its efforts to acquire NBC Universal, arguing that Comcast’s demand for the fees “adversely changes the nature of the Internet.” The FCC may yet get serious about reviewing the merger, as Politico reported last week.

Comcast for its part has argued that Level 3 is gaming network peering rules, and has “demanded unlimited capacity at our cost.”

Whatever the outcome of tomorrow’s vote, expect lots of unhappy people.

AT&T dropped off about 127 dozen cupcakes throughout the agency, according to a delivery list acquired by Public Knowledge, a digital-rights public interest group that’s been heavily lobbying on the net neutrality issue this week.

That’s roughly $3,700 worth of cupcakes from Georgetown Cupcake, a gourmet cupcake store.

“We’re pro-open Internet and pro-cupcake,” and FCC spokeswoman said.

Read the rest of this post on the original site

Yes, that Steve Largent. For those who have been in a dead zone for the past two decades, the former Seattle Seahawks wide receiver went on to become a congressman and has spent the last seven years heading up the wireless industry’s trade association–a 90-person group with an annual budget of nearly $50 million.

It was a fun talk, though he did deflect some of the more divisive questions, including whether the carriers’ differing definitions of 4G is leading to customer confusion. In general, though, Largent showed the same soft hands he had during all those years on the gridiron.

Largent began by talking about his top priorities (spectrum, spectrum and more spectrum, plus a need for no new wireless taxes) and then I jumped in. Here’s an edited transcript of our talk:

On the need for more spectrum: It really is the lifeblood of the industry. It fuels the virtuous cycle….We’ll work with any interested party to get more spectrum. It really is the most critical element to the service that we provide.

What a lot of people forget about is how long the process takes to get spectrum to the marketplace. The last two spectrum auctions that we had took somewhere between eight and 11 years to come to market. We simply can’t wait that long. The FCC and the president called for 500 MHz in the next 10 years and 300 MHz of that in the next five years. That is a laudible goal. We’re seeing if we can’t even get more spectrum and get it quicker.

That really is priority 1, 2 and 3 for us as a trade association. It has been this year and it will be until we see that spectrum auctioned.

(Largent then went on to talk about the group’s actual No. 2 and No. 3 priorities, which I will summarize. No. 2 is to keep downward pressure on taxes, such as pushing for a five-year ban on new wireless taxes. No. 3 is all the warm-fuzzy stuff like environmental friendliness and those commercials that tell you to hang up and drive.)

Mobilized: Your organization opposes the extension of net neutrality into wireless broadband. Won’t this eventually mean the end of net neutrality as a whole since everything is heading wireless?

Largent: To me, this all goes back to the first point I was making and that’s this spectrum issue. The reason wireless is unique is because of the limited amount of spectrum we have today. To alleviate that, we have to have more spectrum and the more spectrum we have, the more services we have and the necessity of managing our network becomes less severe.

Until we get to that point–and we are not there yet–we have to have the ability to manage our network. If we don’t, you could have 911 calls blocked or people’s calls from their kids in college blocked or emergency alerts blocked and that’s not the system anyone wants to see.

You’ve been at the group since 2003, so you have seen some generation shifts. How would you say the 3G to 4G transition is going, relative to past transitions?

I think it is going very well. I think it is actually going faster. This is a quantum leap, going from 3G to 4G, and it takes an incredible amount of investment. We’ve seen the first of the 4G technologies with Sprint. We see Verizon coming on very quickly this year. AT&T is following closely on their heels. T-Mobile, they have some real spectrum constraints and yet they are coming on very quickly as well.

What do you make of the fact that different companies are using different definitions of 4G. Do you think there is some risk that if your members don’t use that term to mean the same thing that consumers won’t understand the benefits of true 4G?

No. What I would tell you is this is a highly competitive marketplace. What these individual companies do in terms of marketing their plans for 4G and their services and how quickly they are available to customers, that’s a competitive practice and a competitive field. I’m not going to weigh in on that. That’s a place I am not going to go.

Obviously wireless is one of the most competitive areas, with customers looking for new services and devices every couple of years, and a lot of money is spent driving to retain and attract new users. It seems like attacks have gotten sharper in the past few years. Do you think there is more energy going into attacks, or is that just the way the game is played?

There’s a lot of sharp elbows in any competitive industry like ours and that’s not something I am embarrassed about. I’m actually very proud of the fact of how competitive our carriers are with each other. It goes beyond the carriers to handset makers to application providers. There is a lot of competition going on in this space.

The other thing to look at is the amount of money that they are spending to advertise their services. I think three of our four carriers are in the top ten of advertising. It’s very competitive, and those elbows do get sharp.

Since, I’m new to the wireless beat, I asked some of my colleagues to come up with some good, topical questions. Here’s what one came back with: The 1983 playoff win against the Dolphins was one of the most exciting and surprising games ever played. Do you agree?

I can tell you that 1983 was when this trade association came into existence….That game was very exciting–Dan Marino was a rookie that year.

Everyone has something to say about today’s speech by FCC Chairman Julius Genachowski on the subject of net neutrality (video below). Having been blocked in the courts from imposing sanctions on Comcast for throttling users of BitTorrent, the commission has been spinning its wheels trying to find a way to nudge the broadband industry in a direction toward treating all Internet content fairly.

To Genachowski and network neutrality proponents, a bit is a bit is a bit, and your broadband service provider should have nothing to say in blocking you from using the services and applications that you choose and saying what you want to say so long as you’re not breaking any laws.

It makes sense until you hear rebuttals from the providers who spend billions to build the networks, arguing that they should have some right to protect their networks from cases where the heaviest users–video-downloading BitTorrent users are the classic example–can degrade the experience of other users. Think of it as “My network, my rules.”

Without the legal authority to force net neutrality on the providers, Genachowski has circulated draft rules that would instead require them to disclose what they intend to throttle and why, so that consumers can more intelligently choose whom they’re going to do business with. If there are going to be rules, put them on a sign where all can see them before walking in the door, he’s saying here.

Gone is the talk of reclassifying broadband, which some had described as a sort of “nuclear option” that would potentially give the FCC the authority to force net neutrality on the carriers, and would have probably led to more pointless, expensive lawsuits.

The big shift came when Genachowski said he’d be open to “business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing.”

That means broadband providers can start creating variable price plans under which consumers will pay more for using more.

Oh, and the wireless Internet? It’s too early in its lifetime to impose any rules on it. The FCC, he said, “would closely monitor the development of the mobile broadband market and be prepared to step in to further address anti-competitive or anti-consumer conduct as appropriate.”

The reactions have been predictable:

It’s “not perfect,” but it’s reasonable, says Kyle McSlarrow, president of the National Cable & Telecommunications Association. If the order changes materially, however, the group reserves the right to fight it.

It’s a step in the right direction but needs to be “strengthened,” says Gigi Sohn of Public Knowledge, a Washington, D.C., public interest group.

Tyrone Brown of the Media Access Project says he is “very disappointed.” By taking the reclassification option off the table, the FCC loses a key piece of the legal authority it would otherwise need to require service providers to extend broadband service to people who don’t currently have access, which has been a key objective of the Obama administration.

Josh Silver, president of FreePress, another policy organization that advocates for net neutrality, called it “fake Net Neutrality” and said that “Genachowski is taking the same exact approach to splitting the open Internet into fast and slow lanes that Verizon and Google proposed last summer.”

Republican FCC Commissioners Robert McDowell and Meredith Attwell Baker essentially promised to vote against the proposal when it comes before the commission on Dec. 21. Only Congress, Baker said, should decide if the Internet is to be regulated. Unlikely with the GOP taking control of the House in less than a month. “We don’t have authority to act,” he said.

After all that: Comcast stock is up 4 percent today; Verizon shares up one percent; Time-Warner shares are up more than two percent; Cablevision shares are up about 1.5 percent. This news will be a boon to broadband providers, says Sanford Bernstein analyst Craig Moffett in a research note issued today.

Usage-based broadband plans are probably soon to follow, which would be good for business because consumers would probably embrace them. One question for all the critics: Would that be so bad?

Here’s the video of the speech:

Level 3 Communications Inc., which this month unveiled a deal to help Netflix store and stream its movies, accused Comcast of imposing new fees for delivering videos and other content to the cable giant’s customers. Comcast quickly fired back that Level 3 was seeking to burden it with extra Internet traffic without compensation.

The dispute fans the flames of the so-called net neutrality debate over how to handle Internet traffic. Federal regulators, who have yet to adopt rules that require Internet service providers to treat similar types of traffic equally, are set to decide this week whether to vote soon on proposed new guidelines.

Read the rest of this post on the original site »

Google (GOOG) has long been a supporter of net neutrality–the idea that Internet providers can’t deliberately block or slow data traffic–however the company’s recent legislative proposal with Verizon (VZ) prompted some activists to suggest the search giant had sold out on the issue.

The Google-Verizon proposal would have given the FCC limited authority to police Internet lines. But it would have allowed Verizon and other Internet providers to create special prioritized lanes of Internet traffic for companies willing to pay extra. It also wouldn’t have imposed net neutrality rules on wireless Internet networks.

Read the rest of this post on the original site

The opening line of the classic J.M. Barrie book “Peter Pan” reads, “All children, except one, grow up.”

Actually, that one grew up, too, and now the whole Internet is angry at Google (GOOG) and taking shots, because of the Silicon Valley search giant’s recent joint public-policy proposal with Verizon (VZ) over net neutrality.

Many are claiming Google–in the most cynical of ways–sold out its long-standing commitment to the open Internet to make a corporately favorable deal.

Thus, Google–in this case, Richard Whitt, Washington Telecom and Media Counsel–took to the corporate blog yesterday to explain it all away in a post titled “Facts About Our Network Neutrality Policy.”

It practically begs for translation, so BoomTown shall not disappoint:

Google wrote: Over the past few days there’s been a lot of discussion surrounding our announcement of a policy proposal on network neutrality we put together with Verizon. On balance, we believe this proposal represents real progress on what has become a very contentious issue, and we think it could help move the network neutrality debate forward constructively.

We don’t expect everyone to agree with every aspect of our proposal, but there has been a number of inaccuracies about it, and we do want to separate fact from fiction.

Translation: Wait, the hypnotic multicolored letters aren’t working anymore? What about the cute logos on the homepage–didja see our whimsical “Wizard of Oz” montage? Hey, our founders still wear wacky shoes!

And look over here at the Googleplex: Segways with wings and coconut-water lattes for all!

Okay, we’ll come clean: This band of Lost Boys–and Wendy who runs search–didn’t want to grow up, either.

But Sheryl Sandberg did an Indian talent raid and convinced Tinkerbell to take all her fairy dust to work on magical social-marketing features at Facebook. Also, Captain Hook and that alligator are working up some geo-location thing with the ticking clock over at Foursquare.

In other words, that’s Mr. Peter Man to you now.

Google wrote: MYTH: Google has “sold out” on network neutrality.

With that in mind, we decided to partner with a major broadband provider on the best policy solution we could devise together. We’re not saying this solution is perfect, but we believe that a proposal that locks in key enforceable protections for consumers is preferable to no protection at all.

Translation: We caved. In fact, we spelunked. All right, we journeyed to the center of the earth. Second to the right and straight on till morning, times a google.

But it is not technically selling out, since we got no money in the deal. I mean, not yet.

That comes later, when we and Verizon control all the tolls on the private and exclusive Schminternet, named for Fearless Leader and CEO Eric Schmidt (pictured here), coming to you in 2020!

We’re not saying the solution is perfect. But we believe that a proposal that locks in key moneymaking fees for us is preferable to having to struggle later–like those losers at Microsoft (MSFT) do today–when the search business goes the way of boxed software.

Google wrote: MYTH: This proposal represents a step backwards for the open Internet.

* Newly enforceable FCC standards
* Prohibitions against blocking or degrading wireline Internet traffic
* Prohibition against discriminating against wireline Internet traffic in ways that harm users or competition
* Presumption against all forms of prioritizing wireline Internet traffic
* Full transparency across wireline and wireless broadband platforms
* Clear FCC authority to adjudicate user complaints, and impose injunctions and fines against bad actors
* Verizon has agreed to voluntarily abide by these same requirements going forward–another first for a major communications provider. We hope this action will convince other broadband companies to follow suit.

Translation: Did you ever do the Hokey Pokey? Jockeying for political power in Washington is like that, except someone always loses an eye.

You put your eternal soul in,
You put your ethics out;
You put your corporate standards in,
And you shake them all about.
You do the Hokey-Pokey,
And you turn yourself around.
That’s what it’s all about!

Which is why they say you should never watch sausage being made.

Google wrote: MYTH: This proposal would eliminate network neutrality over wireless.

It’s also important to keep in mind that the future of wireless broadband increasingly will be found in the advanced, 4th generation (4G) networks now being constructed. Verizon will begin rolling out its 4G network this fall under openness license conditions that Google helped persuade the FCC to adopt. Clearwire is already providing 4G service in some markets, operating under a unique wholesale/openness business model. So consumers across the country are beginning to experience open Internet wireless platforms, which we hope will be enhanced and encouraged by our transparency proposal.

Translation: By transparency, we mean a backroom deal so covered in the fog of compromise that it was like the Smoke Monster in “Lost.”

And you know what happened when he (she? it?) showed up. Not pretty.

Neither was the fact that we had to throw wireless–the most promising of networks–under the bus right now. While there is likely to be some crushing of competition and mangling of the bones of this little baby, you can be sure Congress can always step in to protect consumers’ interests with regard to wireless broadband.

In fact, Congress just hired Kate and Jon Gosselin to give parenting tips on how not to completely take advantage of the wired Internet’s most valuable offspring.

Google wrote: MYTH: This proposal will allow broadband providers to “cannibalize” the public Internet.

So we believe there would be more than adequate tools in place to help guard against the “cannibalization” of the public Internet.

Translation: Yes, the very same government that protected its citizens from the sub-prime mortgage mess by monitoring those giant, risk-mad banks so well.

The same government that was making sure oil giants like BP adhered to strict safety standard for its offshore wells.

The same government…well, you get the general idea, but you should have no fear of cannibals.

Of sharkish telcom companies, yes. Of man-eating lions from the cable business, certainly.

But of multicolored, letter-decorated piranhas who look harmless with their big squishy balls and organic guava smoothies but will cut you as soon as you stick one consumer finger in the digital pond?

Let’s just say: Don’t go in the water.

Google wrote: MYTH: Google is working with Verizon on this because of Android.

FACT: This is a policy proposal–not a business deal. Of course, Google has a close business relationship with Verizon, but ultimately this proposal has nothing to do with Android. Folks certainly should not be surprised by the announcement of this proposal, given our prior public policy work with Verizon on network neutrality, going back to our October 2009 blog post, our January 2010 joint FCC filing, and our April 2010 op-ed.

Translation: Rachel, are you in London or back in Mountain View? Please ring us up asap, as you need to come up with some fancy new talk. I don’t think they are buying this policy-proposal-not-a-business-deal pablum.

In fact, I am even giggling every time I write it.

Google wrote: MYTH: Two corporations are legislating the future of the Internet.

We hope this helps address some of the inaccuracies that have appeared about our proposal. We’ll provide updates as the situation continues to develop.

Translation: Indeed, two corporations are not legislating the future of the Internet.

In point of fact, there were at least a half-dozen of us on the G5 on the way back from divvying up the Web in D.C.

And we’re not so presumptuous to think that any two businesses could–or should–decide the future of this issue.

We are planning on including at least six or seven more businesses, since it will cost an awful lot of money to peddle all that influence in D.C.

Of course, that Mark Zuckerberg over at Facebook seems to be holding out and even criticizing our Verizon bear hug.

That kid has some guts all right–but he can’t live in Neverland forever.

At some point, you’ve got to grow up. You can’t clap your hands and believe you can fly. Even pixie dust eventually runs out.

And that’s something we at Google know very, very well by now.

And until the magic returns, please relish the incomparable Mary Martin in the famous stage version of “Peter Pan” singing “Never Never Land.” As Peter Pan described himself, “I’m youth, I’m joy. I’m a little bird that has broken out of the egg.” Martin is all that and more:

"Never Never Land"
Uploaded by computergirl07. – Music videos, artist interviews, concerts and more.

An alphabet soup of entertainment-industry groups submitted briefs to the Federal Communications Commission today as part of its request for comment on a framework for broadband services.

Specifically, whether or not to reclassify the Internet as a telecommunications service, which would trigger all kinds of juicy regulatory power.

The Internet has been classified as an information service and not a phone service–a problem now, since a court ruling earlier this year said the FCC has no legal authority over an information service.

Rut-roh!–especially since FCC Chairman Julius Genachowski has wanted power to push for net neutrality and faster broadband.

There are all kinds of complex issues at stake, from net neutrality to piracy to open Internet to broadband access–and Hollywood groups have conflicting interests, all related to content distribution.

But everyone’s obvious concern is copyright infringement and how to create rules around it without also having too much regulation or not enough freedom.

Oh, so vexing to explain and so many lawyers clearly involved, so just read this pair of briefs–one a joint filing from AFTRA (American Federation of Television and Radio Artists), DGA (Directors Guild of America), IATSE (International Alliance of Theatrical and Stage Employees), SAG (Screen Actors Guild) and the MPAA (Motion Picture Association of America); and the other a different take from the WGAW (Writers Guild of America, West):

Broadband Reply Comments

And here is Genachowski talking about a lot of this in an interview with Walt Mossberg at the eighth D: All Things Digital conference in June: