FTC is the New Cop on the Broadband Beat

On December 14, 2017, the Federal Communications Commission (FCC) voted 3-2 to adopt the Restoring Internet Freedom Order and in doing so, scrapped its net neutrality rules that were put in place in 2015.

Net Neutrality is a principle that allows for an open and free internet.  The Internet Service Providers (ISPs”) are the gatekeepers to all content on the internet.  Net Neutrality rules prohibited ISPs from unfairly discriminating against others by speeding up, slowing down, throttling, or blocking the delivery of internet traffic.  Net Neutrality is what gives users the freedom as they browse through web pages, apps or any other content available on the internet.

By scrapping the FCC’s Net Neutrality rules, ISPs will be free to act without burdensome regulations, which imposed substantial costs, chilled investment, and lessened innovation. ISPs, however, will be required to disclose information about their practice to consumers, entreprenuers, and the Commission, including any blocking, throttling, paid prioritization, or affiliated prioritization.  While the FCC is returning to a light touch approach, its action restores the FTC’s jurisdiction to act when ISPs or broadband providers get out of line through unfair, deceptive, or anticompetitive acts.

With the light framework, the ISPs could very well surprise us by providing us with better and less expensive service.  For instance, we pay a high fixed price to stream content and browse the internet.  This may all change as ISPs will have more control without any preemptive rules to burden themselves with so they will innovate and provide us with better service at lower costs.

It reminds some about how our local incumbent cable company offers packages of channels that you do not want to watch?  The ISPs will be in control and will have the ability to innovate and offer us cheaper and better service with bundles of web pages that we may or may not want.  Will the overall cost that we pay for ISP services go down or up?  Prices may go down, but it could be more confusing in terms of what web pages are you purchasing, which sites can you visit, what streaming services will work better with your ISP service?  It is too early to tell whether the FCC’s action today is good or bad, but there are strong opinions on both sides.

If the FCC is not going to regulate the free and open internet, who will police the broadband beat going forward?  The answer appears to be the FTC, but can antitrust be an effective safeguard?  Probably not.  What is really required will be legislation.  That being said, the FTC must be prepared to enforce the antitrust laws against any ISP mischief.  Acting Chair Ohlhausen put out a statement after the Order was adopted saying that “the FTC is ready to resume its role as the cop on the broadband beat.”

The FTC-FCC issued a Memorandum of Understanding (“MOU”) which discusses how the FTC and FCC will allocate enforcement of ISPs.  The FCC will investigate and take actions against any violations of the order’s transparency requirements, under which ISPs have to disclose any blocking, throttling, paid prioritization or congestion management. That means if they don’t disclose what they are doing, the FCC’s Enforcement Bureau will handle it.  The FTC will investigate ISPs for any divergence from what they say they are, or are not, doing, as well as any other practices the FTC deems unfair or deceptive.  That unfairness could include anticompetitive blocking or throttling or paid prioritization.

FCC Chairman Ajit Pai said in a statement that “instead of saddling the Internet with heavy-handed regulations, we will work together to take targeted action against bad actors. This approach protected a free and open Internet for many years prior to the FCC’s 2015 Title II Order and it will once again following the adoption of the Restoring Internet Freedom Order.”

FTC Chair Ohlhausen says that: “The FTC stands ready to protect broadband subscribers from anticompetitive, unfair, or deceptive acts and practices just as we protect consumers in the rest of the Internet ecosystem.” But, Commissioner McSweeny warns that the FTC may not be up to the task.  She says that the FTC lacks the tools, the expertise, and the resources to carry out such a charge on its own.

Today is a new day as the FCC scraps the 2015 net neutrality rules.  The FTC must be ready to quickly step up to the plate to protect consumers from any anticompetitive conduct or bad behavior by ISPs if and when it is discovered.   If and when, the ISPs engage in any anticompetitive acts to undermine the open and free internet, let’s hope that the FTC uses its dusty tools that have been left on the shelf for so long, the wealth of experienced competition and privacy lawyers, and its vast resources to be the new strong cop on the broadband beat.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com