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A ‘Third Way’ Introduced at FCC Hearing on Internet Regulation

The FCC hosted an open hearing todayto discuss how to seek the best legal framework for Internet regulation — the commission voted 3 to 2 to continue the re-regulation process.

It's now moving closer to Chairman Julius Genachowski's proposal for a "third way,"a selection of some of the stricter rules now regulating telecom.

The meeting was full of dissent and accusations about mis-handling of Internet policy and the right way to proceed; at stake are consumers, corporations, as well as investors. The FCC is juggling the need for transparency, the urgency of encouraging broadband growth, and the importance of providing enough of a plan to prevent uncertainty from tanking cable carriers stocks.

Today's meeting is a response to an April appeals court ruling on FCC vs. Comcast, finding in favor of Comcast , which limited the FCC's jurisdiction. Under this new ruling, the FCC could not mandate so-called "net neutrality." In May the FCC's chairman Julius Genachowski laid out his plans to establish the FCC's right to regulate the Internet, and a strategy that he hoped would serve all constituents.

The FCC's regulation options break down into three categories. Option one is leaving the current framework in place and option two is imposing the "title two" provisions that oversee telecom services. Genachowski has said that the former is insufficient and the latter is far too stringent. The cable and telecom companies that would be subject to that regulation have come out in vehement opposition of "title 2" rules which include the ability to regulate price and bundling.

Genachowski is pushing a "third way" — adopting select "title 2" regulations, but leaving out the ones the industry finds most loathsome, i.e. anything involving price regulation or the way services are packaged and sold. In today's hearing Genachowski made a point of emphasizing that while "title 3" might sound like a un-tested approach, it's actually based on a familiar model — this is the "deregulatory approach" as Genachowski called it, used to regulate the mobile voice market for years. Recognizing that this hearing was being watched closely by the likes of Time Warner Cable, AT&T and the satellite cable companies, he repeated that he gets the wisdom of leaving pricing to competitive markets.

Before Genachowski spoke, we heard a range of perspectives from the other commissioners. Meredith Attwell Baker criticized the entire process, saying that nothing requires the commission to revisit the broadband issue. She also called the outcome "pre-judged" since the Commissioner has been so vocal in his support of this "third way." On the other end of the spectrum Commissioner Copps said "title 2" reclassification would be the quickest way to remove question marks, and clear rules provide necessary clarity to businesses.

We'll see what happens on July 15, the deadline for initial comments on the broadband regulation proposal. The next date to watch is August 12, when the FCC's response to comments on the proposed broadband plan is due.

One business with a stake in the game, Dish Network released a statement indicating it's satisfied with the push towards both clarity and a light regulatory touch:

"DISH Network applauds the Commission's decision to release a Notice of Inquiry on the 'Third Way' legal approach. We strongly support Chairman Genachowski's leadership in moving this critical process forward," said Charlie Ergen, Chairman, President and CEO of DISH Network. "A sound legal framework is absolutely necessary to preserve a free and open Internet and encourage innovation and investment."

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  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.