FTC Testifies on Broadband Internet Access Services

The Federal Trade Commission today told the Senate Judiciary Committee that as the Committee considers legislation to amend the Communications Act, it should preserve the FTC's existing authority to protect consumers and maintain competition in the broadband services industry.
Delivering the FTC testimony, Commissioner William E. Kovacic said the agency believes it has jurisdiction over most broadband Internet access services. “For nearly a decade, the FTC has investigated and brought enforcement actions against Internet service providers for allegedly deceptive marketing, advertising, and billing of Internet access services.”

“For example, in 1997, the FTC separately sued America Online, Compuserve, and Prodigy, alleging that each company had offered 'free' trial periods that resulted in unexpected charges to consumers,” the testimony states. More recently the FTC filed a complaint charging Cyberspace.com with mailing supposed “rebate” or “refund” checks for $3.50 without disclosing that by cashing the checks, consumers were agreeing to monthly charges on their phone bills for Internet access services. “Following a trial . . . the court ordered the defendants to pay more than $17 million to remedy the injury caused by their fraudulent conduct.” The case is currently on appeal.

The testimony notes that under the antitrust laws, the agency has taken law enforcement actions regarding access to content via broadband and other Internet access services. “For example, the Commission challenged the merger between AOL and Time Warner, and entered into a consent order that required the merged company to open its cable system for all content on a nondiscriminatory basis to competitor Internet service providers, including those offering broadband.”

According to the testimony, the FTC has urged Congress to “eliminate the gap in its jurisdiction created by the telecommunications common carrier exemption,” noting that the exemption is outdated. As the telecommunications and Internet industries continue to converge, the common carrier exemption is likely to frustrate the FTC's ability to stop deceptive and unfair acts and practices and unfair methods of competition with respect to interconnected communications, information, and entertainment services.”

“Apart from the issue of the common carrier exemption, as Congress considers legislation to amend the Communications Act, the Commission believes that any new legislation should clearly preserve the FTC's existing authority over activities currently within its jurisdiction,” the testimony states.

The FTC vote to approve the testimony was 5-0.

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com