Title II Reclassification Said Risky to FTC Consumer Protection, Competition Jurisdiction in ISP Cases

Reclassification of broadband as a telecom service could hamper FTC consumer protection enforcement efforts against ISPs and other access providers, several key players in the debate said in interviews. Classifying broadband as a common carrier service under the Communications Act, as FCC Chairman Tom Wheeler has proposed, would make it harder for the FTC to assert its authority over unfair and deceptive practices, FTC Commissioner Maureen Ohlhausen said Tuesday. It could also make it tougher for the FTC to win the right to review certain transaction cases, said a consumer protection lawyer. Public Knowledge Vice President Michael Weinberg, however, said the FCC is perfectly competent to handle consumer protection issues.

The FTC common carrier exemption means that it has no jurisdiction over an entity that's engaging in common carrier activities, said Ohlhausen, who stressed she spoke personally. If a broadband provider engages in non-common carrier acts -- such as in recent cases involving AT&T's bill-cramming and wireless broadband access throttling -- the agency claims jurisdiction, she said. But if broadband were defined as a common carrier service, it would be "more challenging for us to assert our authority," because ISPs could argue that they're common carriers, she said. It would be harder for the agency to contend that an ISP or cable company is engaging in unfair practices that somehow weren't common carrier-related, said Ohlhausen. The FTC would lose authority over a large part of ISPs' activities, although not over the companies, she said. The agency has never sued a phone company over what it says about how it provides its services, such as speed, because telcos are common carriers, she said.

Ohlhausen said she's concerned about the impact of reclassification on consumers, because the agency is an active enforcer of their interests. Once the definition of common carrier is expanded, it will be harder for the FTC to bring the kinds of cases it does now, something that's not necessarily in consumers' interest, she said. The agency secured $80 million in consumer redress in the AT&T cramming case, while the FCC received only $5 million, which went to the U.S. Treasury, she noted.

Reclassification could also have an impact on the competition side, said the consumer protection attorney. Now, the FTC and the U.S. Department of Justice, which review transactions across all industries, decide who will handle each case, she said. The agencies coordinate, but they also compete for the cases, particularly high-profile ones, she said. Under reclassification, the FTC could argue that it has some basis for handling high-tech and similar deals, but it would be a difficult argument, she said. The problem is that when an agency handles matters in a particular area it gains experience. If that experience is then lost as the FCC takes over broadband matters under common carriage rules, it will become more difficult for the FTC to convince DOJ that it should lead a review, the attorney said.

Nearly all observers believe making broadband a common carrier would divest the FTC of jurisdiction, said Free State Foundation President Randolph May. This divestiture would be one of the many effects of reclassification, he said. The FTC is better qualified to go after allegations of unfair and deceptive practices, so it's unclear why this particular market segment should be exempted from FTC jurisdiction, May said. It's possible consumers could end up without as much protection as under FTC oversight, but that's not an inevitable result, he added.

Reclassifying broadband as a common carrier wouldn't have much impact on the FTC's role, said Consumer Watchdog Privacy Project Director John Simpson. That agency has FTC Act Section 5 authority to act against unfair and deceptive practices, he said. "I don't see how that would change if the FCC regulates under Title II of the Communications Act."

As to whether the FCC is capable of similar enforcement actions, Ohlhausen said the FTC is an enforcer, with the experienced staff and track record to put it in the forefront of issues such as privacy, data security and fraud. "We have effective tools," she said. "I hate to see us lose some of those abilities." Many people now focused on net neutrality consider only the FCC and don't know much about the FTC, something she's trying to remedy, Ohlhausen said. The FCC should look at the tools already in place at the FTC, DOJ and FCC itself before bringing in new rules, she said.

The FCC has proved completely capable of policing consumer issues related to phone services, said Weinberg. Public Knowledge backs reclassification, he said. The FCC is "reasonably effective" at this sort of thing, and both agencies seem to be able to coordinate well on the issues, he said. The FCC's decades of experience mean the change wouldn't be a "major loss to consumer protection," he said.