Broadband Regulation is in Limbo

We have reached a point in the industry where it’s unclear who regulates broadband. I think a good argument can be made that nobody is regulating broadband issues related to the big ISPs.

Perhaps the best evidence of this is a case that is now in Ninth Circuit Court of Appeals in San Francisco. This case involves a 2014 complaint against AT&T by the Federal Trade Commission based on the way that AT&T throttled unlimited wireless data customers. The issue got a lot of press at the time when AT&T started restricting data usage in 2011 for customers when they hit some arbitrary (and unpublished) data threshold in a month. Customers got shuttled back to 3G and even 2G data speeds and basically lost the ability to use their data plans. The press and the FTC saw this as an attempt by AT&T to drive customers off their grandfathered unlimited data plans (which were clearly not unlimited).

AT&T had argued at the FTC that they needed to throttle customers who use too much data as a way to manage and protect the integrity of their networks. The FTC didn’t buy this argument ruled against AT&T. As they almost always do the company appealed the decision. The District Court in California affirmed the lower court ruling and AT&T appealed again, which is the current case in front of the Ninth Circuit. AT&T is making some interesting claims in the case and is arguing that the Federal Trade Commission rules don’t allow the FTC to regulate common carriers.

There are FTC rules called the ‘common carrier exemption’ that were established in Part 5 of the original FTC Act that created the agency. These exemptions are in place to recognize that telecom common carriers are regulated instead by the FCC. There are similar carve-outs in the FTC rules for other industries that are regulated in part by other federal agencies.

The common carrier exemption doesn’t relieve AT&T and other telecom carriers from all FTC regulation – it just means that the FTC can’t intercede in areas where the FCC has clear jurisdiction. But any practices of telecom carriers that are not specifically regulated by the FCC then fall under FTC regulations since the agency is tasked in general with regulating all large corporations.

AT&T is making an interesting argument in this appeals case. They argue since they are now deemed to be a common carrier for their data business under the Title II rules implemented in the net neutrality order that they should be free of all FTC oversight.

But there is an interesting twist to this case because the current FCC filed an amicus brief in the appeal saying that they think that the FTC has jurisdiction over some aspects of the broadband business such as privacy and data security issues. It is this FCC position that creates uncertainty about who actually regulates broadband.

We know this current FCC wants to reverse the net neutrality order, and so they are unwilling right now to tackle any major issues that arise from those rules. In this particular case AT&T’s throttling of customers occurred before the net neutrality decision and at that time the FCC would not have been regulating cellular broadband practices.

But now that the FCC is considered to be a common carrier it’s pretty clear that the topic is something that the FCC has jurisdiction of today. But we have an FCC that is extremely reluctant to take on this issue because it would give legitimacy to the net neutrality rules they want to eliminate.

The FCC’s position in this case leads me to the conclusion that, for all practical purposes, companies like AT&T aren’t regulated at all for broadband issues. The prior FCC made broadband a common carrier service and gave themselves the obligation to regulate broadband and to tackle issues like the one in this case. But the new FCC doesn’t want to assert that authority and even goes so far as to argue that many broadband related issues ought to be regulated by the FTC.

This particular case gets a little further muddled by the timing since AT&T’s practices predate Title II regulation – but the issue at the heart of the case is who regulates the big ISPs. The answer seems to be nobody. The FCC won’t tackle the issue and AT&T may be right that the FTC is now prohibited from doing so. This has to be a huge challenge for a court because they are now being asked who is responsible for regulating the case in front of them. That opens up all sorts of possible problems. For example, what happens if the court rules that the FCC must decide this particular case but the agency refuses to do so? And of course, while this wrangling between agencies and the courts is being settled it seems that nobody is regulating AT&T and other broadband providers.