The Problem with FTC Regulation

As part of the decision to kill Title II regulation, the FCC largely ceded its regulatory authority over broadband to the Federal Trade Commission. FTC regulation is exceedingly weak, meaning that broadband is largely unregulated.

A great example of this is the recent $60 million fine levied on AT&T by the FTC. This case stretched back to 2014 when the company advertised and charged a premium price for an unlimited cellular data plan. It turns out the plan was far from unlimited and once a customer reached an arbitrary amount of monthly usage, AT&T throttled download speeds to the point where the broadband was largely unusable.

This is clearly an unfair consumer practice and the FTC should be applauded for fining AT&T. Unfortunately, the authority to levy fine for bad behavior is the practical extent of the FTC’s regulatory authority.

A strong regulator would not have taken five years to resolve this issue. In today’s world, five years is forever, and AT&T has moved far past the network, the products, and the practices they used in 2014. In 2014 most of the cellular network was still 3G, moving towards 4G. It didn’t take a lot of cellular data usage to stress the network. It was a real crisis for the cellular networks when people started watching video on their phones, and the cellular companies tamped down on usage by enforcing small monthly data caps, and apparently by capping unlimited users as well.

A strong regulator would have ordered AT&T to stop the bad practice in 2014. The FTC doesn’t have that authority. The regulatory process at the FTC is to bring suit against a corporation for bad behavior. Often companies will stop bad behavior immediately to soften the size of potential fines – but they are not required to do so. The FTC suit is like any other lawsuit with discovery and testimony. Once the FTC finds the corporation guilty of bad behavior, the parties often negotiate a settlement, and it’s routine for corporations to  agrees to never undertake the same bad practices again.

A strong regulator would have ordered the whole cellular industry to stop throttling unlimited data customers. The FCC fine applied strictly to AT&T and not to any other cellular carriers. T-Mobile has advertised unlimited data plans for years that get throttled at some point, but this FTC action and the fine against AT&T has no impact on T-Mobile and the other wireless carriers. AT&T got their wrist slapped, but the FTC doesn’t have the authority to tell other cellular companies to not engage in the same bad behavior. The FCC regulates by punishing bad corporate actors and hopes that similar companies will modify their behavior.

A strong regulator would develop forward-thinking policies to head off bad behavior before it happens. One of the bulwarks of regulation is establishing policies that prohibit bad behavior and that reward corporations for good behavior. The FTC has no authority to create policy – only to police bad behavior.

Even if they wanted to regulate broadband more, the FTC doesn’t have the staffing needed to monitor all broadband companies. The agency is responsible for policing bad corporate behavior across all industries, so they only tackle the worst cases of corporate abuse, and more often than not they go after the largest corporations.

At some point, Congress will have to re-regulate broadband. Unregulated corporations inevitably abuse the public. Without regulation, broadband prices are going to go sky-high. Without regulation there will be ISP policies that unfairly punish customers. Without regulation the big ISPs will eventually engage in all of the practices that net neutrality tried to stop. Having the FTC occasionally levy a big fine against a few big ISPs will not deter bad behavior across the whole ISP sector.

What we really need is an FCC that does what it’s supposed to do. If the FCC refused to regulate broadband – the primary product under its umbrella – then the agency is reduced to babysitting spectrum auctions, and not much else of consequence.

One thought on “The Problem with FTC Regulation

  1. “It was a real crisis for the cellular networks when people started watching video on their phones, and the cellular companies tamped down on usage by enforcing small monthly data caps, and apparently by capping unlimited users as well.”

    This is a crisis of the industry’s own making, promoting video content on all screens e.g. “mobilizing your world” as AT&T put it. Dumb and dumber.

    Like

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