U.S. communications regulators sought to calm fears they will heavily regulate Internet services, but shares in major U.S. cable companies fell and industry analysts predicted a prolonged legal battle.
The Federal Communications Commission issued a statement on Thursday saying it would retain its light touch with Internet regulation, after a court ruling last month threw into doubt its authority over broadband.
The FCC said it plans to regulate broadband access as a telecommunications service -- instead of as an information service -- but said the industry should trust that it will not apply the most burdensome price controls and competition mandates that come with that framework.
We have never gone back on forbearance, the FCC's top attorney, Austin Schlick, told reporters. We have a very strong track record.
Nevertheless, shares of the No. 1 U.S. cable company Comcast Corp were down more than 5 percent in afternoon trading. Shares of No. 2 operator Time Warner Cable Inc shares were off over 7 percent. Cablevision Systems Corp shares were down nearly 8 percent.
Investors fear Internet providers will be restricted in how they manage their networks, limiting their profits.
But content providers stand to benefit from the FCC's promise that its regulations will encourage a free and open Internet to carry their programs and services.
The shares of online search giant Google Inc, online auction site eBay Inc, and Internet movie provider Netflix Inc outperformed broad stock indexes that were weighed down by Greece's debt problems.
Extending affordable Internet access to all Americans is a key priority of the Obama administration and for FCC Chairman Julius Genachowski, a Democrat seeking to preserve the agency's ambitious National Broadband Plan laid out earlier this year.
Genachowski called the reclassification of the FCC's broadband authority an interim approach and said he would welcome congressional action to clarify the agency's powers.
Analysts questioned whether the FCC's approach will allow the agency to move forward with its broadband policy.
It is extremely unclear whether reclassification will survive judicial review, Bernstein Research analyst Craig Moffett said.
Comcast issued a statement on Thursday saying it was disappointed in the FCC's plans and continues to believe the existing framework gives the agency sufficient authority.
Verizon Communications Inc warned of a pending legal challenge. The regulatory and judicial proceedings that will ensue can only bring confusion and delay, Verizon executive vice president Tom Tauke said in a statement.
The FCC was forced to revamp its Internet authority after a U.S. appeals court ruled in April that the agency had failed to show it had the authority to stop Comcast from blocking online applications for distributing television shows and other large, bandwidth-hogging files.
That FCC had acknowledged the April ruling created a serious problem for its National Broadband Plan. That plan would upgrade Internet access for all Americans and shift spectrum from television broadcasters to wireless carriers with burgeoning smart phone products.
Genachowski is now seeking a middle-of-the-road approach that gives FCC clear authority over broadband, but does not make the FCC an active cop policing the Internet.
He said it would treat only the transmission component of broadband access service as a telecommunications service while not regulating Internet content.
The goal is to restore the broadly supported status quo consensus that existed prior to the court decision on the FCC's role with respect to broadband Internet service, Genachowski said in a statement.
Markham Erickson, executive director of the Open Internet Coalition, which represents online companies such as Google, Facebook, TiVo Inc and Amazon.com Inc, called the FCC decision a major step for consumers.
The FCC has taken a simple, third-way approach that will protect both consumer choice, innovation, and investment on the Net, he said.
(Reporting by Yinka Adegoke and John Poirier; Editing by Robert MacMillan and Tim Dobbyn)