FTC Warns AT&T Court Victory On Throttling Could Screw Consumers For Decades

from the not-so-free-markets dept

AT&T stopped selling unlimited wireless data plans back in 2011, and instead started pushing more expensive capped and metered plans. Existing unlimited users at the time were “grandfathered,” but AT&T went out of its way to make life as unpleasant as possible for these users, ranging from blocking them from using Facetime unless they subscribed to metered plans, to throttling these “unlimited” users after only consuming a few gigabytes of data. Ultimately AT&T faced a $100 million fine by the FCC (currently being contested by AT&T), and a 2014 lawsuit by the FTC for misleading consumers and dramatically changing the terms of service while users were under contract.

But AT&T being AT&T, its lawyers got right to work contesting the FTC lawsuit, arguing that the very Title II common carrier FCC classification it had been fighting tooth and nail against exempted it from the FTC’s jurisdiction. As it turned out, AT&T didn’t need to engage in this Schrodinger-esque legal tap dance at all, with a court ruling back in August that the FTC never truly had authority over AT&T in the first place:

“The common carrier exemption in section 5 of the FTC Act carves out a group of entities based on their status as common carriers. Those entities are not covered by section 5 even as to non-common carrier activities. Because AT&T was a common carrier, it cannot be liable for the violations alleged by the FTC. The district court?s denial of AT&T?s motion to dismiss is reversed, and the case is remanded for entry of an order of dismissal.”

The FTC isn’t particularly pleased with this ruling, and this week it filed a petition for a rehearing in which it stated that the ruling could potentially let any company dodge FTC authority — just as long as some component of its business has common carrier status. This could, the FTC warns, result in companies buying select companies they may not even want just to avoid regulatory scrutiny:

“The panel?s ruling creates an enforcement gap that would leave no federal agency able to protect millions of consumers across the country from unfair or deceptive practices or obtain redress on their behalf. Many companies provide both common-carrier and non-common-carrier services?not just telephone companies like AT&T, but also cable companies like Comcast, technology companies like Google, and energy companies like ExxonMobil (which operate common carrier oil pipelines). Companies that are not common carriers today may gain that status by offering new services or through corporate acquisitions. For example, AOL and Yahoo, which are not common carriers, are (or soon will be) owned by Verizon. The panel?s ruling calls into question the FTC?s ability to protect consumers from unlawful practices by such companies in any of their lines of business.”

And again, while light touch regulation may work in healthy markets, that’s simply not the case in telecom, where AT&T all but owns state legislatures and the lion’s share of Congress, and the lack of last-mile competition leaves regulators as the last defense for frustrated consumers stuck in monopoly or duopoly markets. The FTC continues to warn that this new enforcement gap, if allowed to become precedent, could have a notable impact on user privacy:

“The FTC is the nation?s primary protector of consumer data privacy, but under the panel?s ruling it could be powerless against any company that provides a common-carrier service. Consumers would have no protection from breach or misuse of their personal information or practices like false advertising or improper billing.”

And that’s kind of a big deal for an industry in which misleading billing and sneaky fees are already a huge problem. And while the FCC is considering some basic new privacy rules for broadband subscribers, the collective lobbying power of the telecom, advertising, and content industries (Google is also quitely opposing the FCC’s new rules), there’s not a great chance that they ever see the light of day while retaining any teeth. No regulatory oversight is a problem in a sector where ISPs are flirting with charging users more just to protect their own privacy.

The FTC argues that the appeals court panel ruling conflicts with prior decisions of the 9th Circuit and other appeal courts. But should these efforts fail, one of the least ethical companies in telecom in one of the least naturally competitive industries in America could suddenly face less regulatory oversight than ever before. And while those that falsely believe telecom is a free market and all regulation is inherently bad may applaud that outcome, the resulting regulatory capture AT&T would enjoy would be almost total, resulting in higher prices, worse service, and potentially more anti-consumer behavior than ever before.

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Comments on “FTC Warns AT&T Court Victory On Throttling Could Screw Consumers For Decades”

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Ninja (profile) says:

And while those that falsely believe telecom is a free market and all regulation is inherently bad may applaud that outcome, the resulting regulatory capture AT&T would enjoy would be almost total, resulting in higher prices, worse service, and potentially more anti-consumer behavior than ever before.

Sometimes the cure for a problem is to make it so bad that people start actively working to solve it. I think this will be the case at least in the telecom market and possibly elsewhere as the FTC notes. Let them do as they please, pass legislation to firmly put them in monopolistic positions, make all laws more draconian than ever. People will either start ignoring the law (as many already do with copyright for instance) or will actively protest against the practices turning them toxic and making push back initiatives benefit the politicians. Chaos I tell you.

Anonymous Coward says:

As the resident anti-regulationist here

Yes, I hate almost all regulation! But regulation that deals with anti-trust and anti-monopoly I can get behind. Regulatory-Capture winds up creating the very problem “The People” were trying to avoid… “We often meet our destiny down the path we took to avoid it.”

But because of that, I do not feel sorry for the poor saps that stay with AT&T.

The market is still free enough that we could make AT&T pay, but no one will. Instead everyone just resign apathetically about it and ask their corrupted politicians to “do something” as if they have not already sold their souls to big telecom.

The government and business are just simply already in bed with each other people. Go ahead, keep asking for the fox to continue guarding the hen house! This is the result!

Here is a bit of prophecy on this subject!
“I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it.”

~T. Jefferson

art guerrilla (profile) says:

Re: As the resident anti-regulationist here

“The market is still free enough…”
oh, just eat shit and die already: there is virtually NO PLACE -other than few urban markets- where i have a REAL choice… i know i am like most where i can get my internet through THE PROTECTED RACKETEERS, or i can go pound sand… IF i actually try to use a competing svc, they LITERALLY connect me to my local monopolist as soon as i input my zip code…
you are at least ignorant, apparently stupid, and possibly a shill…

Anonymous Coward says:

Re: Re: As the resident anti-regulationist here

Here is how it works since your little mind cannot comprehend things.

The people boycott the worst “no real choice” company in the space. They make it clear that we will rotate and target the worst company in existence when the bastard falls.

This occurring once will be enough to put everything on notice long enough for once again forget we can still do that.

Yes, you are right that there is NO real choice in this market, which is why it is NOT a free market, but you are the most ignorant because you keep going to the drug dealer in an attempt to get off the drugs. That is regulation in a nut shell, the FATE you picked up by hand while running your mouth that you did not want it!

But this is not possible because people like you, that cannot get your over sized heads out of the sand. I think you rather like having your asses nailed by random businesses since you keep putting them in the air when while they pass by!

Anonymous Coward says:

It’s interesting, as soon as TWC merged with charter our bill increased by $5/month. That’s the real reason these companies keep merging, to stick us with higher prices, and it’s sad that our bought politicians keep allowing these mergers while limiting newcomers from entering the market.

If anti-trust laws meant anything the government would be breaking up these companies not allowing them to keep merging.

Anonymous Coward says:

Re: Re:

This is why I keep calling for anti-trust laws… but no one is buying them.

Instead everyone just asks for regulation… and they get it… just not the regulation they wanted. People have to get off their duffs and ask for specifics, but we never do, and then several others berate those of us that do ask for them.

Every Nation gets the Government it Deserves!

We did this to ourselves and everyone keeps thinking or saying we didn’t!

Anonymous Coward says:

Re: Re: Re:

The problem is that no matter who runs for office there is always going to be some issue that many people disagree with given enough media criticism and hype.

If you are a politician and your agenda is to fix ISP trusts there are going to be other issues that the media can berate you for. If you are in favor of healthcare the media will berate you for that. If you are against it they will berate you for that. If they can’t pin you down on a position on the issue they will berate you for that. There is always something they can berate you for while supporting the politicians that plan to give them their monopolies. In this way they derail the entire conversation by changing the subject on anyone that wishes to fix things and finding something to berate them with.

Anonymous Coward says:

Re: Re: Re: Re:

But those issues never go away no matter what anyone says or does. There will always be a difference in opinion and there will always be someone willing to berate you for it as well.

People just need to get some thik skin an handle it or better yet, avoid running for office, because it is clear they will not be helping anything.

Anonymous Coward says:

Re: Re: Re:2 Re:

You still miss the point. The point is that those issues never go away but the media selectively berates those that won’t give them their monopolies. Consequently those people that want to fix things don’t get elected not because they don’t have thick skin but because the media’s selective criticism against them deters voters from voting for them.

David says:

Fix that headline

> FTC Warns AT&T Court Victory On Throttling Could Screw Consumers For Decades

scans mainly as “FTC warns AT&T that a court victory on throttling could screw consumers for decades” which AT&T would be more than happy about.

Presumably what you want this to read is “FTC warns that an AT&T court victory on throttling could screw consumers for decades”.

This would be easy enough to become comprehensible by adding an actual object, like

“FTC warns court that an AT&T victory on throttling could screw consumers for decades”.

I mean, so many ways to let the headline make actual sense without an advanced meaning sleuth degree.

TimeWillTell says:

Its Gonna Take a New Congress

YOU, reading this, you’re tech savvy. Run for congress!

Not to burst the bubble of hopefuls, I just think that it’s going to take a decade or more to get members of congress elected that have grown up in the digital age and understand the issues having lived and suffered through them to make effective change.

The FTC and FCC need congress to fund them, to select members of both agencies that understand what needs to happen.

I fear that by the time these members get into government, the ISP and Media companies that own them or will soon own them (see ATT’s current play for Time Warner) will have locked in state and county governments creating another decade or more of litigation before throttles, paywalls, caps and all the horrendous business models that suck money out and return little in return will get pushed aside for what many consider better options.

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