Proposal could have tremendous impact on Hollywood

Google and Verizon outlined a joint set of proposed rules for the Internet on Monday — policies that could strongly impact Hollywood as it looks to new and better ways to deliver TV shows and movies to consumers.

Chief among the proposals is a prohibition on “discriminatory practices,” barring Internet providers from favoring one type of traffic over the other. This is seen as a way to alleviate fears that the Internet will develop into something resembling the tiered system of cable TV.

But the rules also are intended to allow for flexibility for the future. The “non-discrimination” rule would not apply to wireless services, as well as to what the companies called “additional, differentiated online services” of the future. These services could include new entertainment and gaming options, for example, but the companies said it was too soon to define how they would develop.

Their proposals, unveiled in a conference call with Google CEO Eric Schmidt and Verizon CEO Ivan Seidenberg, are intended to find common ground on the contentious issue of net neutrality, which for years has pitted online content companies and public interest groups against the cable and telecom companies that provide Internet service. The two CEOs said that they hoped their proposals would set the framework for the rest of the industry and the government.

“We are hopeful that this will move the debate forward,” Schmidt said.

That the two companies have been talking has not been much of secret, as it has been rumored for weeks. It also comes as the FCC has been attempting to establish a clear legal authority over the Internet — a move that would allow it to impose its own set of proposed net neutrality guidelines.

A plan to do this by reclassifying the Internet as a telecommunications service has met resistance not just from Internet providers, but from Republican and Democratic lawmakers alike on Capitol Hill. The FCC’s staff held recent talks with content companies and Internet providers but reached an impasse last week. The FCC has not commented on the Google-Verizon proposal.

Yet the fact that one of the chief corporate champions of net neutrality, Google, has formed the policy with one of its chief critics, Verizon, has raised suspicions among public policy groups that have argued for robust measures to guarantee that some sites and services don’t get favored over others, particularly by paying for prioritized traffic. They contend that the proposal merely sets up two different online worlds: A public one and a more desirable one featuring higher quality content and services from the companies most able to afford it.

Gigi Sohn, the president and co-founder of Public Knowledge, said the plan does “almost nothing to preserve an open Internet.”

“Most critically, it sacrifices the future of the mobile wireless Internet as this platform becomes more central to the lives of all Americans,” she said in a statement.

Both branches of the Writers Guild of America have been particularly vocal on the need for net neutrality rules, arguing that they will ensure that independent creators have the same access to an audience as the major networks and studios.

The WGAE issued a statement contending that the two companies “have split the online world into the ‘public Internet’ and ‘additional differentiated online services.'”

“This semantic sleight of hand seeks to prioritize online content, granting privilege and advantage to those content creators with deeper pockets who would like nothing better than to destroy the concept of net neutrality.”

Telecom and cable companies, however, have long argued that if the rules for online are too broad, they will stifle innovation, particularly in growing areas such as Web video for smart phones, or delivery of high quality 3-D. “The issue here is we have to be flexible,” Seidenberg said.

Seidenberg said wireless companies need to be able to do such things as prioritize voice traffic in an emergency, or help control spam. But he said they were not planning to block bandwith heavy applications, as long as they are lawful.

That is good news for Hollywood studios hoping to offer direct Web video — or eventually 3D programming — via wireless Internet, assuming Verizon sticks by this new corporate policy (and if other carriers follow suit). However, Seidenberg did not say whether the company would seek to charge more for that access.

Brian Dietz, a spokesman for the National Cable & Telecommunications Assn., said they had no comment on the specifics of the policy proposals. But he said, “The Google-Verizon announcement shows that it is possible for compromise and that we can reach a constructive solution.”

The Motion Picture Assn. of America had no immediate comment. But Hollywood studios have long harbored mixed opinions about net neutrality. The chief concern of the MPAA has been that any new rules apply only to legal content, and that Internet providers not be constrained from fighting piracy.

But as evidenced by Comcast’s proposed joint venture with NBC Universal, agendas also are shifting, and some studios are looking for ways to monetize their content beyond traditional online offerings.

Schmidt and Seidenberg were quick to point out that their proposals were a “joint statement” and not a deal. Schmidt characterized reports last week that Google was ready to pay Verizon for online access as inaccurate, and said that YouTube and other services would remain on the public Internet and not some other channel of delivery.

“There is no prioritization of traffic that comes from Google over the Internet, period,” Seidenberg said.

The proposal also calls for creating “transparency rules” for both land line and wireless Internet services, in which broadband providers would have to disclose their network management practices. They also call for the FCC to enforce the policies on a case-by-case basis, through a complaint process, with penalties of up to $2 million for “bad actors.”

Even though the companies called for flexibility among Internet providers to create “additional, differentiated online services,” they said that the new services could not be simply a way to “circumvent the rules” and should be monitored by the FCC as they develop. The Government Accountability Office, they said, should issue annual reports on the development of the wireless broadband marketplace.

(Chris Morris contributed to this report.)

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