It is tough to be an Internet service provider (ISP) during the tenure of FCC Commissioner Tom Wheeler! Last year the Commission imposed utility-like Title II regulation on broadband Internet service providers which enables the agency to oversee all aspects of the Internet, including the specific business plans of ISPs. 

Moreover, by virtue of this reclassification of broadband Internet access from a Title I information service to a Title II telecommunications service, the Commission wrested regulatory control of ISPs from the Federal Trade Commission (FTC) and now under Section 222 of the Telecommunications Act proposes to use its new-found power to impose strict new privacy rules on ISPs.

On March 10, 2016, Chairman Wheeler circulated a draft Notice of Proposed Rulemaking to the other Commissioners which ensures that end users determine what data, if any, their ISPs share with marketing companies. As usual, the Chairman’s intent is noble, since few could argue that the customer should have the final say in how his or her personal data is used. 

However, like most recent Commission proposals, this latest one has spurred controversy because ISPs are treated differently (i.e., more strictly) then edge providers such as social media sites (Facebook) or search sites (Google) when it comes to customer data. These edge entities, which obviously collect at least as much personal data from customers, are still under the control of the FTC, and the FTC has only limited authority to create specific privacy regulation. That agency instead simply monitors company data collection practices to ensure there's no misuse or fraud.  ISPs argue that they should continue to be treated the same way.

Here is a summary of Wheeler’s privacy proposal which he released in a “Fact Sheet.”

Chairman Wheeler’s Proposal to Empower Consumers to Protect Their Privacy: It’s Your Data

To provide the tools consumers need to make smart choices about protecting their information – and enforce the broadband provider’s responsibility to do so – the Chairman’s proposal separates the use and sharing of information into three categories, and proposes adoption of clear guidance for both ISPs and customers about the transparency, choice and security requirements for that information.

• Consent Inherent in Customer Decision to Purchase ISP’s Services: Under the Chairman’s proposal, customer data necessary to provide broadband services and for marketing the type of broadband service purchased by a customer would require no additional customer consent beyond the creation of the customer-broadband provider relationship. For example, your data can be used to bill you for telecommunications services and ensure your email arrives at its destination, and a broadband provider may use the fact that a consumer is streaming a lot of data to suggest the customer may want to upgrade to another speed tier of service.

• Opt-out: Under the Chairman’s proposal, broadband providers would be allowed to use customer data for the purposes of marketing other communications-related services and to share customer data with their affiliates that provide communications-related services for the purposes of marketing such services unless the customer affirmatively opts out.

• Opt-in: Under the Chairman’s proposal, all other uses and sharing of consumer data would require express, affirmative “opt-in” consent from customers.

Upon release of the “Fact Sheet,” Republican Commissioner Michael O’Rielly immediately accused the Chairman of attempting to impose heavy-handed privacy rules on ISPs:

The “fact” sheet demonstrates that the FCC is doubling down on its misguided and broken Net Neutrality decision by imposing troubling and conflicting “privacy” rules on Internet companies, as well as freelancing on topics like data security and data breach that are not even mentioned in the statute.  While I will read the document, this direction does not surprise me given this agency’s reckless approach to an important topic, especially where it clearly lacks expertise, personnel, or understanding (O’Rielly March 10, 2016 Statement)."

AT&T lamented the fact that the proposed privacy rules for ISPs would be more stringent than for edge providers:

In the 1980’s telecommunications industry, when companies were required by law to stay in their lanes, it might have made sense to have rules that applied only to one set of providers in an industry. But that was 30+ years ago, and we are long past that stage in U.S. communications policy. An example: in 2009, the world’s leading text message providers were mobile phone companies; in 2015, WhatsApp was sending 10 billion more text messages per day than the entire mobile SMS ecosystem in total. Limiting ISPs’ ability to compete with ad supported business models – which are overwhelmingly favored by consumers – is bad for consumers and ultimately bad for broadband investment in this country.

But time and time again, the FCC appears to want to place its thumb on the scale in favor of Internet companies and against the companies that invest in broadband infrastructure in this country.  Last year, it was the Title II proceeding.  Last month, we were talking about set-top boxes, this month its privacy, next month it could be special access. I really hope I am wrong and reading too much into the Verizon consent decree. Asymmetric regulation which favors some competitors and disfavors others with no rational justification in law or policy distorts the marketplace and ultimately harms consumers (AT&T Public Policy Blog, March 9, 2016).

The entire FCC will vote on Chairman Wheeler’s proposal at its March 31^st meeting.  It will undoubtedly be approved 3-2 on a strict party vote   Once the NPRM text is released the industry will have the opportunity to provide its comments with an order expected later this year. Unfortunately for the industry, the results of this rulemaking are pre-ordained by the political party in power and not by any particular merits.

By Andy Regitsky, CCMI