WASHINGTON -(Dow Jones)- The Federal Communications Commission on Friday voted 3-2 to cite Comcast Corp. (CMCSA, CMCSK) for throttling Internet traffic to customers using high-bandwidth file-sharing services.

FCC Chairman Kevin Martin wants the reprimand to set a precedent for how the owners of Internet pipes can control the flow of Web traffic to consumers.

Comcast, for its part, is reviewing its legal options. The cable giant believes it shouldn't be punished for actions that the FCC hasn't addressed through formal rules.

At an FCC meeting on the Comcast reprimand, Martin had harsh words for Comcast.

"Comcast was delaying subscribers' downloads and blocking their uploads. It was doing so 24/7, regardless of the amount of congestion on the network or how small the file might be," Martin said. "Even worse, Comcast was hiding that fact by making affected users think there was a problem with their Internet connection or the application. Today, the commission tells Comcast to stop."

Free Press, an open Internet advocacy group, accused Comcast of slowing peer- to-peer video sharing applications such as BitTorrent. The FCC order said Comcast's action isn't a reasonable network management practice and violates its Internet policies.

The FCC found that Comcast selectively discriminated against certain video applications, rather than treating them equally. The actions significantly impeded customers' ability to access content, the FCC said.

The FCC's order will require Internet service providers to disclose their network management techniques to consumers and regulators. The reprimand of Comcast is intended to send a signal to providers that they can't single out individual applications for delays to relieve Internet congestion.

Comcast is currently experimenting with a new method of managing Internet traffic that will prioritize users' traffic based on the amount of bandwidth they are using during congested times. The system is "protocol agnostic," meaning it won't make traffic determinations based on specific applications.

The two Democrats on the five-member commission, Michael Copps and Jonathan Adelstein, joined with Martin in the enforcement order. "This is a landmark decision for the FCC, a meaningful stride forward on the road to guaranteed openness of the Internet," said Copps.

Republican Commissioners Deborah Taylor Tate and Robert McDowell both voted against the order, saying the FCC's punishment goes too far. "The best way to fulfill our duties under the Internet policy statement would be to assume the role of a mediator or an arbitrator," Tate said.

McDowell said the FCC should have written a rule first. "In short, we have no rules to enforce. This matter would have had a better chance at appeal if we had put the horse before the cart," he said.

McDowell also said the FCC's citation is based on thin evidence. "The truth is the FCC does not know what Comcast did and did not do," he said, noting that the commission is relying on data presented by a handful of consumers who represent the plaintiffs.

"The rest of the record...consists purely of differing opinions and conjecture," McDowell said.

Martin responded that the FCC conducted an exhaustive review of some 6,500 comments filed in the case.

Consumer advocates who identified and complained about the Comcast problem said the FCC's reprimand shows regulators' willingness to act when consumers are harmed.

"What we wanted in general is to protect an open Internet through laws, through enforcement orders, through rules," said Free Press General Counsel Marvin Ammori, who authored the FCC complaint against Comcast.

"What the commission is giving us is a precedent setting order. ...This is a major, major decision in the history of the Internet," Ammori said. "It has shown that it will actually act when there's a violation."

Comcast spokeswoman Sena Fitzmaurice said the cable company is heartened that the FCC didn't slap it with a fine. But, she added, "We are disappointed in the commission's divided conclusion because we believe that our network management choices were reasonable, wholly consistent with industry practices and that we did not block access to Web sites or online applications, including peer-to-peer services."

The FCC also adopted an order to examine the regulatory fees paid by the telecom industry to help finance its operations.

- By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@ dowjones.com

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  08-01-08 1213ET
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