By Leila Abboud and Alina Selyukh
BARCELONA/WASHINGTON (Reuters) - New rules to tighten regulation of U.S. broadband providers are not too invasive and are needed to defend consumers' interests and openness on the internet, the chairman of the U.S. telecommunications industry watchdog said on Tuesday.
Some telecom and cable companies exaggerated when they complained the moves would harm them or cripple innovation on the web, Tom Wheeler, the head of the U.S. Federal Communications Commission (FCC), said at the Mobile World Congress in Barcelona.
Last Thursday, U.S. regulators approved the strictest-ever rules on internet providers, who in turn pledged to battle the new restrictions in the courts and Congress, saying they would discourage investment and stifle innovation.
The new policy reclassifies broadband, both fixed and mobile, as a more heavily regulated "telecommunications service", more like a traditional telephone service.
The rules aimed to protect "net neutrality", Wheeler said, referring to the concept that all traffic on the internet must be treated equally regardless of content or source.
"One of the tragedies" of the debate has been people invoking "imaginary horribles", he said, adding that the FCC would not interfere in telecom or cable groups' businesses.
"There are only four rules in here, plus the yardstick for us to judge what is just and reasonable," said Wheeler.
"There are no broad strokes ordering companies on how to do things. We want network operators to be as innovative as possible, and have revenue streams from consumer services that are unchanged so they can invest and build better networks."
Wheeler said the FCC would look at issues on a case-by-case basis, acting as a referee to ensure that the internet remained open and free.
Net neutrality has become a hot button issue in recent years because of disputes between network operators and bandwidth-hungry services such as Google's YouTube and Netflix and attempts by some telecom and cable companies to block services like Skype and Facebook's Whatsapp.
Wheeler showed an audience that included executives from AT&T a slide with the main points of the rules passed last Thursday.
Internet providers will be banned from blocking or slowing any traffic and from striking deals with content companies, known as paid prioritization, for smoother delivery of traffic to consumers.
But telecom and cable groups will still be able to set aside capacity for so-called "specialized services" - providing connectivity to a smart meter or connected car for example - as long as they do not disadvantage normal internet services for homes and businesses.
That exception is important to industry because they think such services could one day be a big earner as everyday objects are increasingly connected to the web.
European policy makers are working on a net neutrality law as well, which could be finalised this spring. The chief executives of Vodafone and Deutsche Telekom have urged a similar pragmatic, flexible approach to "specialized services" as the FCC.
The European Parliament, which passed net neutrality rules last April and are being negotiated with member states, tried to build in protections to ensure that specialized services do not become a loophole for industry to exploit. But those are likely to be watered down in the final version of the law, experts say, under pressure from industry.
Separately, Wheeler said the U.S. will hold its next spectrum auction in first quarter of next year.
"We will hold for the first time in the world an incentive auction in which we seek to buy back 600 megahertz spectrum from broadcasters and repackage it to sell to the wireless industry," he said.
(Editing by Harro Ten Wolde and Susan Thomas)