Jessica Rich is the vice president of policy and mobilization for Consumer Reports and was director of the Federal Trade Commission’s Bureau of Consumer Protection from 2013 to 2017.
If all goes as expected, the Federal Communications Commission will repeal its net neutrality rules Thursday by party-line vote. In doing so, the FCC will undermine the principles the Internet was built upon, freeing Internet service providers from the ban on blocking, throttling or prioritizing Internet content. And the proposed replacement to protect American consumers — who overwhelmingly support these rules — from these types of activities? A scaled-back "transparency rule" that only requires Internet providers to inform consumers before they engage in these anti-competitive activities.
Don’t worry, FCC Chairman Ajit Pai has said, because the Federal Trade Commission will step in to protect consumers from any bad acts that Internet providers might commit in the future. That may sound like a reasonable plan. After all, the FTC is a consumer protection agency that polices the marketplace for fraud and false advertising.
But as someone who spent more than 25 years enforcing the law at the FTC, I know there’s a serious problem with touting the FTC as a substitute for the soon-to-be-repealed net neutrality rules. Putting aside the question of whether the FTC has the resources and rulemaking powers to adequately address this important issue (it doesn’t), there’s the more fundamental question of whether the FTC even has legal authority over Internet providers.
Buried in the FTC’s founding statute is something called the “common carrier exemption,” which excludes from the FTC’s authority any company engaged in “common carriage” (think telephones, railroads, etc.). When the law was passed, these companies essentially did one thing — such as provide phone service — and the idea was that other federal agencies with industry-specific expertise, such as the FCC, would monitor this specialized activity.
In the digital age, however, the definition of “common carriage” has become increasingly murky. As telecom conglomerates have expanded their offerings beyond phone service, what does the common-carrier exemption now apply to — the telecom company as a whole or its individual product offerings?
For years, Republican and Democratic administrations, as well as the courts, generally said it was the latter, with the FCC having exclusive jurisdiction over phone service and the two agencies sharing jurisdiction over everything else a company provides, including broadband service. But when the FCC reclassified broadband service as common carriage in the 2015 Open Internet Order, providing the legal basis for the net neutrality rules, it eliminated FTC jurisdiction over those services. After all, broadband was now going to be governed by strong net neutrality rules.
Unfortunately, as the FCC chairman well knows, reversal of the 2015 order won't simply restore the FTC's broadband jurisdiction. That's because, separately, the question of whether the FTC has jurisdiction over any services offered by a telecom company is under serious challenge in the courts.
In 2014, the FTC sued AT&T before the current net neutrality rules were enacted — for advertising "unlimited" data plans to consumers but then "throttling" their data use if they reached a certain limit. AT&T argued that the FTC had no jurisdiction to sue because AT&T was a common carrier.
At the time of the lawsuit, though telephone voice service offered by AT&T was clearly a common-carrier service, broadband service wasn't and the FTC prevailed in the lower court. But in a surprise ruling last year, a three-judge panel from the 9th Circuit Court of Appeals overturned the lower court, deciding in favor of AT&T. It ruled that if you're a common carrier, you're exempt from FTC enforcement even if you offer non-common-carrier services.
What is the status of this case now? Unresolved. The 9th Circuit has agreed to rehear the case before the full appeals court. But its impact on the repeal of net neutrality can't be overstated. If the court again rules in favor of AT&T, then Pai's assurance that the FTC can and will protect consumers from Internet providers after the rollback of net neutrality is simply not true.
The current reality is that relying upon the FTC to assume enforcement power over Internet providers is a giant gamble. Depending on what happens in a courthouse in San Francisco, millions of broadband customers could be left without any regulator or enforcer to act on their behalf after the repeal of the current net neutrality rules. At the very least, wouldn’t prudence dictate we wait and see what happens in this case before charging forward with repeal?
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