Introduction

On February 26th, the Federal Communications Commission is scheduled to vote on its third net neutrality proposal. Net neutrality is the principle that requires broadband Internet Service Providers (“ISPs”), to treat all Internet traffic the same way regardless of source. The proposal relies on the FCC’s authority under Title II of the Communications Act of 1934. Invoking Title II as the basis for regulating net neutrality matters has broader implications for the Federal Trade Commission because the FTC’s enabling statute exempts Title II services from FTC jurisdiction. If approved, the FCC’s proposal could shut out the FTC from policing net neutrality.

FCC Commissioners Ajit Pai and Michael O’Rielly asked FCC Chairman Tom Wheeler to delay the vote and to release the proposal so that the public has an opportunity to weigh in.1 Typically, the FCC does not release proposed regulations prior to implementing them.

Background

The FCC has struggled to find the right statutory authority to support net neutrality regulation. In 2005, the FCC relied on ancillary jurisdiction under the Communications Act to promulgate a rule to regulate broadband Internet access (internet access provided by cable, phone, and wireless providers).2 When the FCC tried to enforce the rules against Comcast Corporation, the D.C. Circuit struck down the rules because the FCC lacked statutory authority to enforce them.3

In December 2010, the FCC released the Open Internet Order 4(“2010 Open Internet Order”) relying on the Communications Act and the Telecommunications Act of 1996. The 2010 Open Internet Order regulated broadband providers by (1) requiring transparency regarding broadband provider practices; (2) prohibiting broadband providers from “blocking” lawful content, applications, services, devices, or websites that compete with their services; and (3) prohibiting broadband providers from unreasonable discrimination in transmitting lawful network traffic.5  Verizon Wireless challenged the FCC’s authority to implement the Order. The D.C. Circuit affirmed the FCC’s authority to regulate broadband providers’ treatment of Internet traffic, but struck down the provisions on blocking and unreasonable discrimination.6 In particular, the D.C. Circuit noted that strict prohibitions on traffic discrimination can be applied to “common carriers,” but not to companies classified as “information services.”7

Earlier this month, the FCC released a third proposal. Currently, Title I of the Communications Act classifies broadband companies as “information services.” The FCC’s proposal would re-classify broadband companies as “common carriers” or telecommunications services under Title II. In addition to reclassifying broadband providers, the new proposal has three main prohibitions that would apply to broadband companies: (1) a ban on blocking access to legal content, applications, services, or non-harmful devices; (2) a ban on “throttling” (or slowing down) lawful Internet traffic; and (3) a ban on paid prioritization (i.e. no “fast lanes”).8

Implications for FTC Oversight of ISPs

If the FCC is successful in reclassifying ISPs as common carriers, it could eliminate the FTC’s ability to correct anticompetitive ISP behavior on a case-by-case basis. Accordingly, FTC Chairwoman Edith Ramirez and others have called on Congress to repeal the provision that prohibits the FTC from regulating common carrier services.9 According to Ramirez, the exemption is “outdated” and unnecessarily limits the FTC’s ability to protect consumers. In particular, Congress enacted the common carrier exemption in 1914 when communications carriers were monopolies regulated by the government rather than private companies, as they are now.10 Repealing the common carrier exemption would allow the FTC and FCC to work together to monitor net neutrality matters.

Commissioners Maureen Ohlhausen and Joshua Wright, on the other hand, have argued that existing antitrust laws are sufficient to regulate net neutrality matters without the need for broad policies. They have emphasized that the FTC’s dual missions as an antitrust enforcement and consumer protection agency make it an ideal agency to monitor net neutrality.11In addition, both commissioners expressed concern that net neutrality rules could have a chilling effect on procompetitive behaviors. They argue that existing antitrust laws, backed by rigorous consumer welfare-driven analysis, are sufficient to regulate net neutrality matters.12

For example, in October 2014, the FTC sued AT&T for allegedly throttling service it had advertised and billed to wireless customers as “unlimited”.13While the investigation is ongoing, this case demonstrates the FTC’s ability – and willingness – to deal with potentially anticompetitive behavior. It also illustrates the need to end what has evolved into an FCC/FTC net neutrality “tug of war.” AT&T recently moved to dismiss the FTC’s case on grounds that the FTC has no jurisdiction because AT&T qualifies as a Title II common carrier,14notwithstanding AT&T’s resistance to that classification with respect to the FCC’s net neutrality proposal.15

Commissioner Wheeler’s reclassification proposal would leave the FTC with authority over some areas of the Internet, including privacy and data security. However, the FTC’s continued jurisdiction to regulate potential anticompetitive behavior and unfair and deceptive practices by ISPs hangs in the balance pending approval of the FCC’s net neutrality proposal and any subsequent congressional action.