ANALYSIS-US FCC's slow pace on Internet rules puzzles some

Thu Jun 9, 2011 2:16pm EDT

* Internet rules not likely to take effect until fall

* Some wonder if FCC intentionally delaying

* FCC says Paperwork Reduction Act slowing process

By Jasmin Melvin

WASHINGTON, June 9 (Reuters) - The U.S. communications regulator has been oddly slow in unleashing new powers to police the Internet, six months after finalizing the controversial rules.

The delay has kept the rules in a glass box, both preventing the Federal Communications Commission from cracking down on unwarranted blocking of Internet content and keeping legal challenges at bay.

The rules, adopted last December, give the FCC power to ensure consumer access to huge movie files and other content while allowing ISPs like Verizon Communications (VZ.N) and Comcast Corp (CMCSA.O) to manage their networks to prevent congestion.

It is the latest twist in the so-called net neutrality debate, which pitted content providers who wanted protection against the blocking or degrading of their services against Internet service providers that wanted to "control the pipeline."

Some accuse the FCC of intentional foot-dragging on what it knows is a hot potato, because as soon as the rules are implemented they are sure to be challenged in court by corporations. In order for the rules to take effect, the agency must publish them in the Federal Register.

Industry sources and former regulators are scratching their heads about what they call an extraordinarily long time between the FCC's adoption of the rules and publication to put them into effect.

The FCC, however, claims that any delay is not intentional.

Analysts could not pinpoint a reason for the delay in unleashing the new powers, but did not rule out the idea the FCC was stalling court and congressional challenges.

"If to a degree the order is vulnerable from a judicial standpoint, it'll push out that much into the future any decision on whether the rules are going to be upheld or not," said Stifel Nicolaus analyst Rebecca Arbogast.

The order cannot be challenged in the courts until it is published in the Federal Register. Lawmakers eager to overturn the rules are also held at bay as the Senate cannot expedite consideration of a measure passed in the House to throw out the regulations.

The delay in implementation has not caused major disruptions, but it prevents the FCC from considering complaints that companies may be unfairly limiting Internet access.

Public interest groups accused low-cost wireless carrier MetroPCS Communications Inc PCS.N of violating the FCC's order in January after the company unveiled tiered pricing data plans that excluded certain applications at different price points.

The groups sent a letter to the agency, but without the rules in effect there is no clear complaint process.

The FCC blames paperwork for the holdup, specifically the Paperwork Reduction Act (PRA) which requires the Office of Management and Budget (OMB) to sign off on rules involving data collection.

An FCC spokesman said the PRA review process usually applies only to a small portion of an FCC order, delaying only that portion. In this case, it applies to the transparency and enforcement rules of the open Internet order.

"The Commission determined that we would not have a sensible rule if neither transparency nor enforcement was in place, so it made the entire open Internet order effective following OMB approval," the spokesman said.

NO PUBLICATION TILL FALL

This decision perplexed a former senior FCC official who saw no reason for the agency to stray from its usual process of doing Federal Register publication before seeking OMB approval.

"It appears that the FCC has made a strategic decision to delay Federal Register publication and thereby delay judicial review," said the former official, who spoke on condition of not being named.

An FCC spokesman said the agency's general counsel's office explored options with the Office of the Federal Register's legal staff for publishing the rules ahead of OMB clearance, but this was the only option meeting the Federal Register's publication regulations.

The bewildering sequence of comment periods and publication rules means the order may not go into effect until the fall.

The order was adopted by a divided FCC in a 3-2 vote, and would prevent network operators from blocking lawful content but still let them ration access to their networks. It highlighted a huge divide between those who say the Internet should flourish without regulation and those who say the power of high-speed Internet providers to discriminate against competitors needs to be restrained.

"It's difficult to measure the urgency with which these rules were voted on and the delays in publication. Now five months out, everything still seems to be working perfectly fine, but there's no rules in place to enforce," Verizon spokesman Ed McFadden said.

Verizon Communications has been a vociferous opponent to the order, and McFadden renewed the company's pledge to take the FCC to court as soon as the rules are published.

A U.S. federal appeals court threw out Verizon as well as MetroPCS's earlier challenges to the net neutrality rules, dismissing their lawsuits as premature.

(Reporting by Jasmin Melvin, editing by Matthew Lewis)

((jasmin.melvin@thomsonreuters.com; + 1 202 354 5880; Reuters Messaging: jasmin.melvin.thomsonreuters.com@reuters.net)) Keywords: USA INTERNET/REGULATION

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