AT&T Fails In Bid To Kill FTC Authority Over Broadband Monopolies

Legal Issues

from the have-your-cake-and-eat-it-too dept

It can’t be overstated that the broadband industry isn’t just trying to kill net neutrality, it’s trying to gut most meaningful federal and state oversight of entrenched telecom monopolies. While Ajit Pai dismantled consumer protections at the FCC, his “Restoring Internet Freedom” order also ironically attempts to ban states from holding ISPs accountable for privacy, net neutrality, or other anti-competitive behavior. With neither adult regulatory supervision or healthy organic competition in place to keep bad actors in line, the end result will likely be even worse behavior than the kind of Comcast shitshows we’ve grow used to.

But there’s one part of this effort that just faced a notable setback.

Under Ajit Pai’s (read: the broadband industry’s) proposal, the FCC would take a step back from overseeing ISPs, ceding any remaining authority to the FTC. What Pai and his ISP friends didn’t mention is that the FTC’s authority over ISPs is severely limited, or that AT&T has spent the last four years in court trying to demolish what authority the FTC does have. That this would leave consumers almost entirely unprotected from monopoly behavior must have simply slipped Ajit Pai’s mind during his endless sales pitches for his unpopular repeal.

AT&T’s legal gambit began when the FTC sued AT&T back in 2014 for lying to customers about the company’s throttling practices. You’ll recall that AT&T had been waging a not-so-subtle war on unlimited data users as it tried to drive them to more expensive, metered plans. Amusingly, AT&T lawyers tried to argue in court that the company’s “common carrier” status — the same status it has fought viciously against on the net neutrality front — exempted it from FTC authority almost entirely under Section 5 of the FTC Act. As we noted at the time, it was a very absurd and Schrodinger-esque tap dance.

At the time, the FTC issued a warning stating that should AT&T lawyers be successful, any company with a common carrier component (from Google to oil conglomerates) could tap dance around FTC oversight. Those without such components could simply buy or merge with a small company with a common carrier component to nab the same benefit. This, the FTC warned, would create a massive accountability and enforcement gap regarding corporate America:

“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.”

Unfortunately for AT&T, things didn’t work out that way. This week the US Court of Appeals for the 9th Circuit ruled (pdf) AT&T’s dream scenario wouldn’t be coming to fruition, and that the lawsuit against AT&T for lying to its customers would be moving forward:

“We affirm the district court?s denial of AT&T?s motion to dismiss. Looking to the FTC Act?s text, the meaning of ?common carrier? according to the courts around the time the statute was passed in 1914, decades of judicial interpretation, the expertise of the FTC and Federal Communications Commission (?FCC?), and legislative history, we conclude that the exemption is activity-based. The phrase ?common carriers subject to the Acts to regulate commerce? thus provides immunity from FTC regulation only to the extent that a common carrier is engaging in common-carrier services.

While an important win for FTC authority, it’s important to note that on the broadband front this only retains the status quo: that is, the FTC’s existing, flimsy oversight of broadband ISPs. And that oversight doesn’t extend very far. Unlike the FCC, the FTC can’t create new guidelines when needed, and can only act against broadband ISPs after the fact — if it can be clearly illustrated that an ISP engaged in “unfair or deceptive” behavior. In the telecom sector, where anti-competitive behavior is often hidden behind claims of network security, that’s often difficult.

That said, FCC boss Ajit Pai was quick to issue a statement (pdf) declaring that this was a win for consumers (correct, sort of), and that the FCC would be working closely with the FTC to protect net neutrality better than before (not correct, and extremely unlikely):

“The Ninth Circuit?s decision is a significant win for American consumers. Among other things, it reaffirms that the Federal Trade Commission will once again be able to police Internet service providers after the Restoring Internet Freedom Order takes effect,? said FCC Chairman Pai. ?In the months and years ahead, we look forward to working closely with the FTC to ensure the protection of a free and open Internet.”

Again, the FTC’s authority over ISPs is extremely limited, and with no actual net neutrality rules to enforce it’s comical to think this will be the equivalent of keeping real net neutrality rules (and FCC authority) intact. The throttling lawsuit aside, the FTC pretty rarely actually takes action against ISPs for oceans of bad behavior despite ample opportunity (most notably on the false advertising front). That’s in part because the FTC’s already under-funded and under-manned, and is tasked with overseeing everything from washer and dryer manufacturers to accuracy in bleach labeling.

So while this ruling is important in terms of ensuring the FTC can police bad actors generally, for the broadband industry specifically it simply means what little authority it has over ISPs remains intact. The shorter version: while uncompetitive broadband monopolies have been successfully gutting most federal and state oversight of their regional monopolistic fiefdoms, their attempt to eliminate all oversight won’t be occurring just yet.

Filed Under: authority, fcc, ftc, net neutrality, oversight, regulations
Companies: at&t