Consumer groups have jumped on what they claim is a major disagreement between the FCC and the Federal Trade Commission (FTC) regarding whether the blocking, throttling or paid prioritization of Internet traffic is an antitrust violation on its face and subject to FTC penalties.  These groups argue that the FTC, which recently stated that violations of the so-called “bright-line” Internet rules are not patently unlawful, has effectively debunked the FCC’s rationale for eliminating net neutrality.

One of the main arguments the FCC made for eliminating Title II utility-style regulation of the Internet is that any unlawful blocking, throttling of paid prioritization of Internet traffic would be subject to FTC antitrust law.  For example, in 2017, when the FCC was about to release its “Restoring Internet Freedom” Order, Commissioner Brendan Carr wrote:

Section 1 of the Sherman Act renders anticompetitive agreements illegal.  So, if ISPs reached agreements to act in a non-neutral manner by unfairly blocking, throttling or discriminating against traffic, those agreements would be per se unlawful.  Moreover, Section 2 of the Sherman Act makes it illegal for a vertically integrated ISP to anti- ­competitively favor its content or services over that of an unaffiliated business. (Washington Post op-ed, November 30, 2017).

However, in a March 26, 2019, FTC Chairman Joseph Simons seemed to directly contradict the FCC.

But blocking, throttling, or paid prioritization would not be per se antitrust violations. Paid prioritization is a type of price discrimination, which is ubiquitous in the economy. For example, think about when you walk into grocery store. Some customers get lower prices because they cut out coupons. Others might get a seniors discount. Others might get 2% off with their credit card. Yet others get discounts because they have a loyalty card with that supermarket.
Those of us who go to the afternoon movie matinees will generally pay less, and those of us willing to show up at a restaurant before 6 pm might get the benefit of a lower priced menu. And of course, let’s not forget Happy Hour discounts.
For those of you who live locally, think about the express toll lanes on interstates 95 and 66. Or think about Amtrak’s Acela service to New York, which is faster and more expensive than the local trains. Clearly, our transportation authorities think that allowing people to pay more for faster service is at least sometimes beneficial.
Now, of course not all ISP conduct, including paid prioritization, is benign or procompetitive—some may very well be anticompetitive. Where an ISP excludes certain content, applications, or services, we would engage in a fact-specific analysis to see whether that foreclosure harmed competition through raising rivals’ costs or excluding competitors.  (March 26, 2019 Remarks of Joseph Simons at Free State Society).

After this speech, net neutrality advocates immediately claimed this was proof that the FCC was simply lying when it asserted that the FTC would enforce antitrust laws against bright-line rules violations.

With a member of his own party now debunking his argument for repealing net neutrality—a key agency official, no less, whom Carr assured us would safeguard internet users in his place—Carr’s op-ed for the Post can finally be seen by everyone for what it always was: propaganda aimed at helping ISPs engage in discriminatory practices absent the fear of regulatory reprisal.  (Gizmodo March 29, 2019 on-line).

Don’t be fooled: In their attempts to reinstate the net neutrality rules, consumer advocates—intentionally or otherwise—are misleading the American public.  Significantly, and what these advocates refuse to accept, is that discrimination in telecommunications under both the Title I and Title II rules is legal if it is not unlawful.  This means that parties can charge different prices for the same service if there are economic justifications for such actions.

For example, under the onerous Title II regulations, carriers that purchase special access services for longer terms pay lower prices than carriers that purchase on a month-to-month basis.  This is discrimination, but it is lawful because it is cheaper for the providing company to have a service in place for years rather than having to keep personnel on board to potentially add or remove services each month for single month contracts.

In addition, with guaranteed revenues over a period of years, a company can use such revenues to streamline their services and reduce their costs. Such examples have existed for years in the telecommunications industry without any suggestion that they constitute antitrust violations.

Yes, it would be best for Congress to agree to net neutrality rules that forbid blocking, throttling or unlawful paid prioritization of traffic, but that is unlikely to happen.  Moreover, net neutrality advocates are right in that since the FTC investigates on a case-by-case basis, and after specific violation claims, it almost surely would be less effective than the FCC in policing the Internet.

To prevent this, it is important for the public to understand that the FCC requires ISPs to make all their blocking, throttling and paid prioritization rules public and transparent.  Therefore, complaints that ISPs are deviating from their public pronouncements must be investigated thoroughly by the Commission.  Consumer groups can have their greatest impacts here by publicizing such complaints.

It is also important that consumers have a choice of broadband providers so the market can effectively force ISPs to live up to their practices. The FCC needs to do a much better job to ensure competitive broadband is available to all.

Finally, when the FTC does find anti-trust violations it needs to make an example of the offending party by inflicting severe authorities.  Regardless of whether the Internet is regulated under Title I or II, there will always be cheaters and they need to be effectively punished.