WEDNESDAY, DECEMBER 8, 2010


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Pay-as-you-go Internet plan fromFCC is raising questions


Some say proposal


could limit access, hurt online video industry


BY CECILIA KANG As details emerge about the


Federal Communications Com- mission’s controversial proposal for regulating Internet providers, a provision that would allow companies to bill customers for how much they surf the Web is drawing special scrutiny. Analysts say pay-as-you-go In-


ternet access could put the brakes on the burgeoning online video industry, handing a victory to cable and satellite TV provid- ers. The practice is legal but had


been discouraged by the FCC and by protests from consumers and public interest groups. But wire- less companies aremoving rapid- ly in that direction — all major cellphone providers offer sub- scribers tiered data plans for Internet service. AT&T does not offer flat-rate wireless plans for new customers. And although FCC Chairman


Julius Genachowski said last week that his “net neutrality” proposalwould generally prohib- it broadband service providers from tampering with Internet traffic, he added that he is open to newbillingmodels that charge


by how much data a user con- sumes. Public interest groups say that


trend will lead to a widening gap in Internet use in which the wealthiest would have the great- est access. And it could place limits on how much consumers use Web video, which eats up an enormous amount of bandwidth and could carry higher costs under a tiered pricing plan. “The question is how this will


be enforced because it has the potential to do a lot of harm,” said Art Brodsky, communica- tions director for Public Knowl- edge. By blessing tiered pricing


practices, Genachowski said he wanted to strike a balance be- tween consumer protection and promoting “network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing.” An FCC official said in a state-


ment that it would be a “cop on the beat” for “arbitrary, anti-con- sumer, or anti-competitive tiered pricing plans.” The FCC will vote Dec. 21 on


the proposal, which could could tilt fortunes toward cable and telecom companies battling to keep users from abandoning paid television services for new Internet options such as Apple TV and Hulu.com, analysts say. Those providers are struggling to manage overburdened networks


Post Tech CECILIA KANG Excerpt from voices.washingtonpost.com/posttech


Microsoft to offer anti-tracking feature Microsoft said Tuesday that a new version of its Internet Explorer


browser will come with technology that can block third-party firms from tracking a user’s activity on theWeb. The announcement comes after the Federal Trade Commission last


week recommended a blanket anti-tracking mechanism that would protect users’ privacy online. The FTC’s proposal, called “Do Not Track,” recalls the popular “Do Not Call” registry administered by the agency to block telemarketing calls.However, unlike “Do Not Call,” the do-not-track system would not be a centrally maintained list or registry. Rather, the technology would consist of browser tools that allow users to prevent companies from collecting information on the sites they visit and what they do on thoseWeb sites. “Today, consumers share information with moreWeb sites than


the ones they see in the address bar in their browser,” said Dean Hachamovitch,Microsoft’s corporate vice president for Internet Explorer. “This is inherent in the design of theWeb and simply how theWeb works, and it has potentially unintended consequences.” Microsoft’s anti-tracking technology will be available next year


with the release of its IE9 browser. It would let users set up a Tracking Protection list ofWeb sites that would be barred from collecting information.However, users would have to proactively set up the list. The default setting would allowWeb sites—including third-party firms—to gather information about users as they do today.


Advertisers are currently able to gather information about a user’s


activity and create user profiles based on that behavior. That information is then used to aim specific advertising at users, a practice that privacy groups have urged federal regulators to curb. “This is a step in the right direction, but we still need new privacy


laws in the United States that reflect the 21st-century digital world we are living in,” said James Steyer, chief executive of Common Sense Media, which advocates for child safety on theWeb and in the media. “We hope this is a sign that the industry is taking the online privacy of consumers—especially kids—more seriously than they have been, and that they will do the right thing and work with policymakers on privacy legislation that puts enforceable consumer protections in place.”


that are seeing a surge in stream- ing video traffic from sites such as Netflix, which alone occupies 20 percent of all peak broadband traffic in the United States. “If people are forced to pay per


kilobit it’s like they are forced to pay per word of a book,” said Todd Weaver, chief executive of Ivi, a Seattle-based video stream- ing company. Craig Moffett, an analyst at


Bernstein Research, wrote in a note to investors Tuesday that the impact of pay-as-you-go broadband access “can’t be over- stated.” “Usage-based pricing will pre-


serve, and even enhance, the economics of cable’s infrastruc- ture . . . even if consumers even- tually get some, or even all, of their video content over the Web,”Moffett wrote. At a UBS investors conference


Tuesday, Comcast chief executive Neil Smit said the cable and Internet giant doesn’t have plans to move to usage based pricing. The firm, which is seeking regu- latory approval for its merger withNBCUniversal, has a cap on Internet use to 250 gigabytes — enough data to provide hours of streaming video viewing. Kyle McSlarrow, president of


trade group theNation Cable and Telecommunications Associa- tion, wrote in a blog post that usage-based pricing gives cable companies the flexibility they need to experiment with new businessmodels. “A usage-based pricing model,


for instance, might help spur adoption by price-sensitive con- sumers at the lower end of the socioeconomic ladder,” he wrote. It is also a way for cable firms


to prevent users from “cutting the cord,” or canceling their tele- vision services, analysts say. Genachowski’s draft proposal


is vague on language about how broadband providers could charge partners to serve up their sites faster, according to one source at the FCC who has seen a draft of the rules. Known as “paid prioritization,” the FCC’s proposal couldmake it easier for TimeWarner Cable, for example, to strike a deal to serve up faster downloads of Hulu.com. With tiered usage caps, that could lead to higher Internet charges for subscribers of bandwidth hog- ging sites such as Netflix. “Usage-based pricing is a clear


positive for cable, telecom, and wireless providers, but it also might be a concern for Netflix,” saidMF Global analyst Paul Gal- lant. “Depending on where the tiers were set, usage-based pric- ing onwire line broadband could end up deterring some people fromdropping cable for over-the- top video.” Netflix has argued against


paid prioritization of services over theWeb. In its third-quarter conference call, chief executive Reed Hastings said the company is watching usage pricing with concern. “We have some vulnerability


depending on cap usage and what happens,” he said. kangc@washpost.com


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Economy & Business A15 E.U. supports tougher stress tests


BY GABRIELE STEINHAUSER AND PAN PYLAS


brussels—TheEuropeanUnion insisteditsbailoutpothas enough money to handle the continent’s governmentdebt crisis—but con- ceded its earlier bank stress tests were not tough enough and that Greece will need more time to repay its bailout loans. While E.U. officials in Brussels


sought to calmmarkets by stress- ing that their anti-crisismeasures were enough to support the euro’s credibility, the government in bailed-out Ireland announced a brutally tight budget and more taxes for next year as protesters banged drums and blew whistles outsideParliament’s gates. The budget cleared a first hur-


dle by an 82 to 77 vote. The mea- sures proposed by the Irish gov- ernment are the harshest in the country’s history — requiring manylower incomepeopletostart paying income tax — but are re- quired in return for a $90 billion rescue package from the Europe- an Union and the International MonetaryFund. Germany, the euro’s economic


and financial heavyweight, is re- fusing to increase the $1 trillion financial backstop set up to help euro members that run out of money, and the Netherlands and AustriaarebackingBerlinonthat. The three — among euro gov-


ernments with still-solid finances —are also against proposals to go evenfurther andstart apan-Euro- pean bond to help governments borrowmoremoney. Instead, Germany says it’s time


to implement the decisions taken in recent months — agreements for governments to cut back, toughen rules against overspend- ing and set up new bailout rules that insome cases couldaskbond- holders to take losses. “It doesn’t make sense to con-


stantly start new debates,” said German Finance Minister Wolf- gang Schaeuble following a two- day meeting with his European counterparts. European governments are


struggling to keep government fi- nances in heavily indebted coun- tries fromcollapsing. Jittery bond investors have been raising the interest rates theydemandtoloan to those countries as the dire state of their financeshasbecomeclear-


PETER MORRISON/ASSOCIATED PRESS


Irish police officers monitor protesters. Ireland's Parliament backed tax increases and austerity measures in its proposed 2011 budget.


er. Ireland andGreecewere bailed out after rising bond interest yields effectively shut themout of creditmarkets. The pressure on the E.U.’s fi-


nanceministers has abated some- what as the euro has recovered lost ground and the cost of bor- rowing incountries suchasPortu- gal has come down from record euro-era highs. Despite that re- cent stabilization,market interest rates remainprohibitivelyhigh. Giventherefusalofanumberof


countries tobackfresh“shockand awe”measures—raising the ante by putting up new money to deal with the crisis — the E.U. is now counting on highly indebted states such as Ireland, Spain and Portugal to press aheadwith deep austeritymeasures. Many analysts have warned


that theregion’sexistingemergen- cy rescue fundwould be too small to save Spain, whose economy is much larger than Ireland’s or Greece’s. EvenDominiqueStrauss-Kahn,


theheadof theInternationalMon- etary Fund, weighed into the de- bate Tuesday during a visit in Greece, arguing that Europe needs to find a “comprehensive solution” to the debt crisis rather than dealing with every country ona case-by-case basis. Strauss-Kahn warned “there is


ariskofbigdifficulties”becauseof thedifferences ingrowthbetween themembers of the eurozone.The weaker ones needmore growth to be able to pay their debts, yet all the cutbacks undermine growth by withdrawing the stimulus of government spending from the economy. He said the IMF was backing


more time for Greece to pay back its bailout loans, and E.U. officials indicatedtheywould, too. Greece is negotiating terms of


repayment for thethree-year,$150 billion bailout loan that saved the debt-ridden country from default inMay. The loan package ends in 2013, but analysts and officials have been concerned over Greece’s ability to cope with the large debt repayments it would face afterward, in2014 and2015. Meanwhile, the E.U. is working


to boost confidence in the banks, which hold much of the bonds fromshaky governments. Olli Rehn, the E.U.’s top mone-


tary official, said stress tests in Februarywouldbe“morerigorous and more comprehensive” than those conducted on 91 banks in Julyandwillassessabank’sability to access money quickly under stress, as the earlier testsdidnot. July’s stress tests have come


under criticismafter thebailoutof Irelandlastmonthwaspredicated largely on revelations of worse fi- nancial problems afflicting its banks.All the Irishbanksassessed in July were given a clean bill of health as only seven of the 91 banks testedfailed. As a result, investors continue


to fret about the health ofmany of Europe’s financial institutions andwhether theywill causemore bailout costs forgovernments.Eu- ropean officials say they will deal with future crises, as long as gov- ernments shapeuptheir finances. “The best defense against any


contagion effect is improving our budgetary positions to meet the agreed fiscal targets and reduce publicdebt,”Rehnsaid. —AssociatedPress


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