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The head of the thinks he has come up with a way to salvage his ambitious national broadband plans without running into legal obstacles that have threatened to derail him.

FCC Chairman Julius Genachowski said Thursday his agency has found a compromise in how it regulates high-speed Internet access: It will apply only narrow regulations to broadband companies. The FCC chairman said this delicate dance will ensure the agency has adequate authority to govern broadband providers without being too "heavy-handed."

Phone and cable companies reacted negatively to the news as did Republicans on the FCC.

The FCC needs that legal authority in order to carry out the sweeping national broadband plan that it released in March. Among other things, the plan is designed to give more Americans access to affordable high-speed Internet connections by revamping the federal program that subsidizes telephone service and using it to pay for broadband. Separately, Genachowski also wants to adopt so-called rules prohibiting phone and cable companies from prioritizing or discriminating against Internet traffic traveling over their lines.

(FCC chair’s statement: )

(FCC Republican reaction: )

Last month, a federal appeals court cast doubt on the FCC’s authority over broadband, forcing the agency to come up with a new approach that can pass legal muster. But the framework outlined Thursday figures to also face challenges in court as well from the FCC’s two Republican commissioners.

Genachowski described his proposal as a "third way" from two other options under consideration.

"A Third Way": Highlights as listed by Genachowski:

• Recognize the transmission component of broadband access service—and only this component—as a telecommunications service;

• Apply only a handful of provisions of Title II (Sections 201, 202, 208, 222, 254, and 255) that, prior to the Comcast decision, were widely believed to be within the Commission’s purview for broadband;

• Simultaneously renounce—that is, forbear from—application of the many sections of the Communications Act that are unnecessary and inappropriate for broadband access service; and

• Put in place up-front forbearance and meaningful boundaries to guard against regulatory overreach.

A "restrained approach," he says

The FCC currently treats broadband as a lightly regulated information service. Genachowski’s idea is to redefine it as a telecommunications service subject to "common carrier" obligations to treat all traffic equally. Similar rules apply to other common carrier networks that serve the public, including roads and highways, electrical grids and telephone lines. But Genachowski said he will refrain from imposing more burdensome mandates that also apply to traditional telecommunications companies.

The proposal is intended to strike a balance that can satisfy both Internet service providers, which oppose any new broadband regulations, and public interest groups that are demanding greater consumer protections.

In a statement, Genachowski painted the new framework as "a restrained approach to broadband communications, one carefully balanced to unleash investment and innovation while also protecting and empowering consumers."

The FCC will soon seek public comment on Genachowski’s proposal. It would have to be approved by three or more of the FCC’s five commissioners and Genachowski is expected to have the support of his two fellow Democrats at the agency.

Republicans: Crossing "a regulatory Rubicon"

The two Republicans on the commission, Robert McDowell and Meredith Baker, said they are disappointed with the chairman’s plan. "This dramatic step to regulate the Internet is unnecessary," they said in a joint statement.

"Today the Commission embarks on a journey to cross a regulatory Rubicon by classifying Internet access service as traditional telephone service under Title II of the Communications Act,"  they wrote.

"This proposal is disappointing and deeply concerns us. It is neither a light-touch approach nor a third way. Instead, it is a stark departure from the long-established bipartisan framework for addressing broadband regulation that has led to billions in investment and untold consumer opportunities. It also poses serious ramifications across the globe."

House Republican Leader John Boehner of Ohio called the plan "a government takeover of the Internet."

Telecom, cable stocks falter; Verizon attacks decision

The battle is likely to land in court if the big phone and cable companies decide to challenge the new framework. The companies already oppose Genachowski’s network neutrality proposal, warning that restrictions on what they can do with their networks will discourage them from investing in their lines.

Shares of phone companies Verizon Communications Inc. and AT&T Inc. slipped 2 percent Thursday. Cable stocks tumbled even more — reflecting the fact that cable companies have a larger share of the broadband market and no wireless operations to fall back on. Shares of Comcast Corp., the nation’s largest cable company, lost 6 percent, while Cablevision Systems Corp. fell 7 percent and Time Warner Cable dropped 8 percent.

Tom Tauke, Verizon’s top Washington official, said Genachowski’s new approach to regulation is "legally unsupported" and "could ultimately harm consumers and inhibit the innovation and investment he wants to encourage." AT&T echoed that point.

Comcast said that while it is disappointed with the FCC proposal, it is prepared to work with the agency. But Comcast may be more open to compromise because it needs FCC approval for its plan to take a controlling stake in NBC Universal.

Comcast vs. FCC: background

It was Comcast that helped set in motion the events leading to last month’s court ruling.

The case centered on the company’s behavior in 2007 when it interfered with subscribers using the online file-sharing service BitTorrent, which lets people swap movies and other big files. Comcast said the service was clogging its network, but public interest groups maintained that the company saw the swapping of video files as a threat to its cable business.

The FCC, then led by Republican Kevin Martin, ordered Comcast to stop blocking subscribers from using BitTorrent and based its decision on net neutrality principles it had adopted in 2005.

Comcast challenged the order in court. It argued that the order was illegal because the agency was seeking to enforce principles and not regulations or laws. That is one reason that Genachowski is now pushing the FCC to adopt formal net neutrality rules that would apply across the industry.

Comcast also had argued that the FCC lacked authority to mandate net neutrality because it had deregulated broadband by classifying it as an information service under the Bush administration. Now Genachowski’s next move could reverse course on that approach.