Some of the nation's biggest Internet service providers are begging a court not to weaken the power of a major regulatory agency — the Federal Trade Commission — in a case that has implications for businesses and consumers nationwide and puts the companies at odds with another key industry player, AT&T.
The request earlier this week by Charter, Comcast, Cox and Verizon seeks to shore up the FTC's ability to regulate Internet providers, in a case about whether the FTC can punish AT&T for allegedly misleading consumers with its marketing of "unlimited" data plans. But the case also has other implications. It could create an undesirable regulatory environment for the companies, they say.
"At first glance, [our] position might seem surprising — four leading corporations are arguing in favor of restoring the FTC’s authority to regulate," the ISPs wrote. They added: "If the FTC is divested of jurisdiction," the companies wrote, "it is likely that a variety of federal, state, and local government agencies that lack the appropriate reach, perspective, and experience … will attempt to fill the perceived 'regulatory gaps,' thereby creating a patchwork of unreasonable, duplicative, and inconsistent rules." At issue is a ruling by the U.S. Court of Appeals for the 9th Circuit last year that held that any company that buys or sets up a telecom firm may fall under the Federal Communications Commission's jurisdiction rather than the FTC's. Critics of the decision said that it created an enormous loophole, one that could allow huge swaths of almost any corporation to evade federal oversight. Due to limits on the FCC's authority, America's top telecom regulator may only oversee telecom-related aspects of a company. So any firm that exercised the escape hatch might be answerable in part to the FCC, but its other operations would be free to engage in unfair or deceptive behavior without fear of FTC investigations or lawsuits, they said.
The 9th Circuit agreed this year to revisit the decision. If it stands, however, it will deal a "fatal blow" to consumer protections, according to oversight advocates.
In a separate court filing on the issue last month, the FCC said that the 9th Circuit ruling violated a "common-sense reading" of the law and risked creating unintended consequences.
"[It] could weaken or eliminate important consumer protections," the FCC wrote. "While AT&T may prefer to offer services in a regulatory no man’s land, the law does not dance to AT&T’s whims."
AT&T declined to comment for this story. In its court filings, the company has said that the Ninth Circuit's ruling is "narrow and unremarkable," and does not create any gaps in regulatory coverage.
Beyond this court case, there are broader reasons that explain the other Internet providers' support for FTC authority. The industry has been behind a wider push to transfer power from the FCC, whose net neutrality rules permitted the agency to impose tough regulations on ISPs, to the FTC, which can sue companies for misbehaving but does not generally write prescriptive rules.
Republican FCC Chairman Ajit Pai is weighing how to undo his agency's net neutrality rules — a move that many broadband providers have called for over fears that the FCC may use the regulation to directly set prices for Internet access, analysts say.
An alternative to the FCC's net neutrality rules, some critics of the regulation say, is oversight by antitrust agencies such as the FTC.
Supporters of this argument won a major victory in April when President Trump signed legislation rolling back the FCC's consumer protections on Internet privacy. Republicans and industry groups at the time said that the FTC, not the FCC, was the appropriate regulatory body for broadband privacy issues.
That argument itself has sparked a vigorous debate. But setting that aside, whether the FTC is capable of serving as an effective regulator — whether on privacy or other issues — in light of the 9th Circuit ruling has come into question after the decision gave businesses a way to bypass the FTC's authority altogether.
"This result would harm both consumers and industry," the ISPs wrote in their filing. "Consumers will not know where to look for help, and companies will not know what rules to follow, in such a crowded and disparate regulatory environment."