Analysis: U.S. broadband fix looks beyond reach this year

By John Poirier

WASHINGTON (BestGrowthStock) – A flurry of recent meetings among broadband negotiators have failed to bridge wide gaps over how U.S. authorities should regulate access to high-speed Internet services, wiping away chances for a fix this year and threatening billions of dollars in industry investments.

Since the start of closed-door meetings in June, broadband and Internet company lobbyists, regulators, consumer groups and congressional staff moved no closer to a regulatory fix or a legislative work-around to empower the FCC to regulate access to broadband services.

The window of opportunity is now closing, as congressional elections draw closer.

“It is very, very difficult if not unlikely that a compromise will be reached this year,” said Jeffrey Silva, a telecommunications policy analyst with Medley Global Advisors.

A lot is at stake. If the parties are unable to settle their differences behind closed doors, the Federal Communications Commission is in for a big courtroom battle and a difficult rehash of telecommunications law in 2011. Failure to resolve the dispute over broadband regulation also delays the FCC’s 10-year plan to bring high-speed Internet access to every American.

Stakeholders appear to be earnestly looking for agreement, despite having little progress to show for it.

“People are clearly looking to try to find a reason for agreement,” said Andy Schwartzman, who heads the Media Access Project, one of several public interest and consumer groups who participated in meetings with congressional staff.

But the longer it takes, the less likely a quick legislative solution becomes. Instead, Congress could opt to reopen the 1996 Telecommunications Act, a much lengthier and certainly more contentious process that would involve lobbyists and lawmakers tinkering with communications laws en masse.

Congressional elections in November also weigh in favor of delay, as industry lobbyists stall in hopes of Republicans gaining ground to help their cause.

“Republican gains could give the Bells more leverage after the election,” Stifel Nicolaus analyst Dave Kaut said about the major phone companies.

“The prospect of Republicans taking over the House — the Senate seems more unlikely at this point — could cut either way, and the additional time raises the risk that ‘targeted’ legislation gets bogged down in other issues,” Kaut said.

“But if the legislation moves in a direction that Bells and cable don’t like, they would be able to stop it.”

The biggest risk from the perspective of telephone and cable companies — who have complained that the regulatory uncertainty could put billions of dollars of investments to their infrastructure on hold — is reclassification of broadband to monopoly-era phone rules.

“It would be strategically better if nothing happened,” Silva said.

The negotiations follow an April ruling by a U.S. appeals court that found the FCC had failed to show it had the authority to stop Comcast Corp (CMCSA.O: ), the biggest broadband provider, from blocking online applications that distributed television shows and other bandwidth-hogging files.

To put its authority on sounder legal footing, the FCC decided to regulate broadband access as a telecommunications service instead of as an information service.

MAP, Free Press and Public Knowledge are among a few groups who stand in support of the FCC’s recent move to reclassify broadband under existing phone rules and the FCC’s pledge to regulate lightly.

Those groups are supported by Google Inc (Read more about Google Stock Analysis) (GOOG.O: ), online phone provider Skype and other Internet companies who want to avoid having to pay more fees to the companies who control broadband pipes for having their sites reach customers faster than other sites.

Opposed to FCC rules are phone and cable companies AT&T Inc (T.N: ), Verizon Communications Inc (VZ.N: ) and Comcast.

Trying to shield their burgeoning wireless broadband businesses from more regulation, the phone companies will not accept current assurances of light regulation at the expense of potential over-regulation in the future as an increasing number of consumers cut their fixed-line services in favor of mobile devices.

(Editing by Kristin Roberts and Tim Dobbyn)

Analysis: U.S. broadband fix looks beyond reach this year