If you ever worked in government you know there is a fierce rivalry between the various agencies. These rivalries rarely become public however (other than in Congress of course, where the Senate and the House of Representatives usually compete rather than work together). That is why it was such a shock in recent days to see the Federal Trade Commission (FTC) openly warn the FCC not to reclassify broadband Internet access as a telecommunications service, because such a classification would remove any FTC authority over unlawful practices of Internet service providers (ISPs).

The FTC made its unhappiness clear in its September 19, 2014 comments to the FCC in Docket 14-126. The FTC strongly asserted that it has the authority to impose obligations on broadband Internet service providers through the Federal Trade Commission Act (FTC Act). The FTC Act prohibits broadband service providers from making deceptive claims in their representations to consumers about privacy and data security and it imposes a variety of other requirements on providers that seek to protect consumers

Specifically, Section 5 of the FTC Act prohibits “deceptive” or “unfair” acts or practices in or affecting commerce. According to the FTC,

A company engages in unfair acts or practices if its practices cause, or are likely to cause, substantial injury to consumers that is neither reasonably avoidable by consumers themselves nor outweighed by countervailing benefits to consumers or to competition. Section 5’s prohibition against deceptive or unfair practices plays an important role in protecting consumers: put simply, it requires companies to market their products truthfully and to refrain from engaging in harmful business practices. Section 5 also promotes competition on the basis of truthful claims and provides an incentive for companies to act responsibly and fairly in providing their products and services. (See FTC Comments, p. 2-3.)

The FTC notes, however, that Section 5 contains an exemption forbidding its authority over “common carrier” activities, such as providing telecommunications services. For example, the FTC would have no jurisdiction over an ILEC or CLEC providing plain old telephone service (POTS). Only the FCC would have jurisdiction to police such “common carrier” activities.

Broadband Internet access, which is currently classified as an information service is arguably under FTC jurisdiction. That is because the Section 5 exemption does not apply to the provision of non-common carrier services, even if offered by common carriers. Thus, according to the FTC, “a broadband provider that makes commitments – either expressly or implicitly – regarding its privacy or security practices, and fails to live up to such commitments, risks violation of Section 5 of the FTC Act.”

Now the logical question you may be asking is why has the FTC so openly warned the FCC not to reclassify broadband Internet access? The answer is quite simple. The FTC believes that regulating broadband Internet access service as an information service is the best future for Internet regulation because it allows both agencies jurisdiction over the behavior of Internet Service Providers. The FCC would regulate specific commercially approved Internet agreements under Section 706 of the Telecommunications Act, with the FTC acting as a regulatory backstop under Section 5 of the FTC Act. This would allow both agencies to work in concert and protect both the open Internet and consumers. 

Of course the FCC may be loathe to give up any regulatory control of the Internet to another government agency. Therefore, it could react negatively and choose to reclassify broadband just to retain control. As we’ve said before, we believe that this would be the wrong path to choose for the industry and consumers. However, at this point no one seems to know exactly what the FCC will do, including the folks at the FTC, hence their warning.

By Andrew Regitsky, President, Regitsky & Associates

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