On January 23, 2017, President Donald Trump named Ajit Pai as Chairman of the Federal Communications Commission (FCC). In his previous role as the senior Republican on the FCC under President Barack Obama, Mr. Pai was an outspoken critic of the agency’s decision to assert jurisdiction over Internet Service Providers (“ISPs”) and its rules governing broadband privacy. Pai’s appointment suggests that significant changes may be on the horizon.
In 2015, the FCC issued its Open Internet Order, which brought ISPs under the common carrier requirements of Title II of the Telecommunications Act. As a result, the FCC assumed sole authority to regulate ISPs as “an essential public utility.” The Open Internet Order also exempted ISPs from Federal Trade Commission (FTC) oversight, because they would be designated as “common carrier services” and the FTC’s authority to prevent unfair or deceptive acts or practices (under Section 5 of the FTC Act) does not extend to “common carriers subject to the Acts to regulate commerce.”
In October 2016, the FCC (in a 3-2 vote) approved new rules governing ISPs’ obligations to protect the privacy of broadband customers, including a requirement that ISPs obtain affirmative “opt-in” consent before using or sharing sensitive information with third-parties, which imposes a higher burden on broadband providers than the “opt-out” approach FTC mandates for websites like Google and Facebook.
On January 3, 2017, a collection of advertising trade groups—the Association of National Advertisers, American Association of Advertising Agencies, American Advertising Federation, Data & Marketing Association, Interactive Advertising Bureau, and the Network Advertising Initiative—filed a joint petition for reconsideration of the broadband privacy rules at the FCC. The petition argues that reclassifying ISPs as “common carriers” exceeds the FCC’s authority and “arbitrarily and capriciously” departs from the FTC’s more flexible approach to privacy, which does not have an opt-in mandate for sharing browsing information. The petition says the rules are “unnecessary, unjustified, unmoored from a cost-benefit assessment, and unlikely to advance the Commission’s stated goal of enhancing consumer privacy.” Last week, a number of advertising trade groups and carriers sent a letter to Congress seeking to invalidate the rules, and several ISPs filed papers with the FCC seeking a stay of the rules.
Chairman Pai appears likely to agree with critics of the FCC broadband privacy rules. In response to the Open Internet Order in 2015, then-Commissioner Pai issued a 67-page dissent criticizing the re-classification of ISPs as “common carriers.” And in 2016, he issued another scathing dissent to the broadband privacy rules. In both dissents, Pai argued that online privacy regulation should be technology-neutral and administered uniformly across the online ecosystem by the FTC, not the FCC. Pai questioned the FCC’s authority and expertise to regulate privacy and warned of confusion and harmful consequences that would flow from inconsistent privacy protections for ISPs and edge providers like Google and Facebook. Specifically, in his 67-page dissent, then-Commissioner Pai indicated that the Open Internet Order’s reclassification of ISPs “imposes intrusive government regulations that won’t work to solve a problem that doesn’t exist using legal authority the FCC doesn’t have.”
In December 2016, Pai wrote to industry groups that he will “seek to revisit . . . the Title II Net Neutrality proceeding more broadly, as soon as possible.” With his appointment as Chairman of the FCC, it seems likely he will try to make good on this promise. For now, the future of ISP regulation is very much on hold.