U.S. communications regulators on Wednesday put off a controversial decision on Internet traffic rules, giving industry and consumer groups a chance to forge a compromise while avoiding a politically sensitive issue ahead of the November elections.

The Federal Communications Commission has been prodding phone, cable and Internet companies for months to find consensus on the thorny issue of net neutrality — a debate over whether high-speed Internet providers should be allowed to give preferential treatment to content providers who pay for faster transmission.

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Broadband and Internet companies have held a series of face-to-face and phone meetings this summer to craft a framework on how to treat the Internet data flowing through both home connections and wireless devices.

But those talks have failed to yield a deal due to big differences over the treatment of wireless broadband in particular. At stake is how quickly handheld devices, like Research in Motion’s BlackBerry and Apple’s iPhone, can receive and download videos and other content.

Rather than imposing stricter regulations that are opposed by broadband providers, FCC Chairman Julius Genachowski delayed a decision by calling for more public comment. He wants to know how companies and consumers will be impacted if wireless devices are treated differently from home broadband lines.

“We have made progress over the last year — but we still have work to do,” Genachowski said.

Analysts said Genachowski, who proposed a set of open Internet rules last year, wants to tread carefully before the elections.

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They also said it was unlikely the FCC would adopt draft proposals at the September 23 meeting or in October.

“The chairman could cite progress in the industry talks as grounds for delaying circulating a draft order, and postpone a decision until after the election,” said Nicolaus Stifel analyst Rebecca Arbogast.

Democrats are afraid that Republicans will portray any FCC action to voters as an attempt by President Barack Obama and his party to control and regulate the Internet, analysts have said.

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Some broadband providers are pointing to a proposal unveiled earlier this month by Google Inc and Verizon Communications Inc as a sign of progress. Their plan would give providers more flexibility to manage wireless broadband traffic and possibly create a fast lane.

“Even a proposal that accepts enforceable rules can be flawed in its specifics and risk undermining the fundamental goal of preserving the open Internet,” Genachowski said in a statement seeking another 55 day-comment period.

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Proponents of net neutrality, including public interest groups, argue consumers will be harmed if carriers create a two-tiered Internet, the top tier offering faster speeds at a premium.

Carriers such as AT&T Inc and Verizon say they need to prioritize traffic on wireless networks due to congestion and already do so on handsets to allow people to make and receive phone calls.

(Reporting by John Poirier; editing by Andre Grenon; Carol Bishopric)

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