Net Neutrality Rules Approved by OMB; Stage Set For Litigation and Legislative Challenges

In a major step forward for what one telecom observer called “the defining saga” of Federal Communications Commission Chairman Julius Genachowski’s tenure, the Office of Management and Budget approved the information collection requirements of the controversial 2010 Open Internet Order. The approved provisions concern new network management disclosures required from broadband service providers and formal complaint procedures under the net neutrality rules. The new rules are expected to be published in the Federal Register in one to three weeks and will go into effect 60 days later.

While the OMB’s approval marks the final regulatory hurdle before implementing the Open Internet Order, the publication of the rules is expected to set off a flurry of long-awaited legal and legislative challenges to the net neutrality rules. Both Verizon and MetroPCS are expected to refile their appeals of the Open Internet Order challenging the FCC’s authority, which were dismissed without prejudice by the D.C. Circuit earlier this year because they were filed before publication of the rules in the Federal Register. The net neutrality rules would prohibit Verizon and other fixed broadband providers from slowing or discriminating against the delivery of content (a process known as “throttling”) from third-party content websites such as Netflix. Reports indicate that online video issues will become more heated over the next few years as more viewers forgo traditional cable and satellite television services.

On the legislative side, opposition to the Open Internet Order reached its peak last April, when the House of Representatives passed a Resolution of Disapproval under the Congressional Review Act seeking to invalidate the net neutrality rules while also attempting to limit the federal funds available to enforce the new regulations. The disapproval resolution followed months of hearings and criticism regarding the initial delay in publishing the net neutrality rules. Republican opponents of the net neutrality rules on the House Energy and Commerce Committee, led by Chairman Rep. Fred Upton (R-MI), are expected to continue questioning the FCC’s jurisdiction to regulate broadband traffic.

While opposition to the net neutrality rules increases, the FCC has already taken steps to notify companies affected by the Open Internet Order of their compliance obligations, releasing draft guidance last July on the network management transparency disclosures required from broadband service providers once the rules become effective.