Internet's Top Cop Under Trump May Struggle to Run at Web Speeds
Debate Rages Over FTC as Web Referee After Net Neutrality Gutted
(Bloomberg) -- Federal Communications Commission Chairman Ajit Pai’s plan to gut Obama-era net neutrality rules calls for handing off the job of policing broadband service to an agency with different powers and a different mandate.
Giving the Federal Trade Commission oversight for the web can make sense from Pai’s perspective: It’s a consumer-protection agency that already has taken action against high-speed internet providers.
But, there’s a key difference: The FCC sets rules designed to prevent bad behavior, while the FTC acts after wrongdoing has occurred. That distinction has become a flash point in the debate over Pai’s proposal, which would change the way the government regulates the internet with far-reaching implications for a host of industries.
Opponents say that reactive nature means the trade commission is too slow to oversee the rapidly evolving digital economy.
“It’s not adequate,” said Gigi Sohn, who helped write the current net neutrality rules as an FCC aide in 2015. “If you wait for a case to be through, you can be out of business.”
Others say Pai is bringing a powerful watchdog into the fray.
“There’s no doubt they can bring cases,” said Roslyn Layton, a visiting scholar with the American Enterprise Institute policy group in Washington. “The FTC has the right people” including economists “used to looking at all kinds of new arrangements” to enforce fair competition, Layton said.
Pai on Nov. 21 proposed killing the FCC’s 2015 net neutrality rules and allowing broadband providers such as AT&T Inc. and Comcast Corp. to block websites or charge more for faster speeds on their networks, as long as the companies disclose their practices. His proposal faces a Dec. 14 vote at the agency, and is likely to pass because Pai leads a three-member Republican majority.
The 188-page proposed order lays out disclosure requirements for broadband providers. The FTC could act to make sure the companies adhere to their promises, for instance by saying that failing to follow through as promised amounts to an unfair trade practice.
“Transparency amplifies the power of antitrust law and the FTC Act to deter and where needed remedy behavior that harms consumers,” according to the FCC’s proposed order.
“The FTC has great expertise in this issue” and has acted against companies that throttle data flows, Pai told Bloomberg Radio on Nov. 21. “They’ll be able to perform their consumer protection and pro-competition function.”
Both the FCC and FTC are run by bipartisan commissions made up of five commissioners, although the FTC is currently short three members. The president names one of the commissioners on each panel to serve as chairman while no more than three can be from the same political party. The FCC has a staff of 1,500 compared to the FTC’s 1,100 employees; both have budgets of about $300 million a year.
But the commissions have very different mandates and areas of expertise. The FCC, founded in 1934, has traditionally regulated industries such as cable television, telephone and broadcast companies. The FTC was created in 1914 and says it works “to protect consumers by preventing anti-competitive, deceptive, and unfair business practices” across a wide range of industries. Its recent actions have ranged from investigating multibillion dollar deals like Amazon.com Inc.’s takeover of Whole Foods Market to false advertising of dietary supplements.
Data Security
The FTC says it has brought over 500 cases as the leading U.S. agency enforcing privacy and data security, helping to safeguard health, credit and financial information. It’s currently investigating Equifax Inc.’s data security practices following the massive cyber attack against the credit-reporting company. It has “strong technical expertise” in areas including social media, online advertising and internet searches, the agency said in comments to the FCC.
“The FTC stands ready to protect broadband subscribers from anti-competitive, unfair, or deceptive acts and practices just as we protect consumers in the rest of the internet ecosystem,” Maureen Ohlhausen, a Republican who is acting chairman of the FTC, said in an emailed message after Pai released his proposal.
In a 2015 agreement with the agency, for example, America Movil SAB’s TracFone Wireless unit agreed to pay $40 million to settle claims that it deceived consumers when it sold unlimited data plans and then slowed speeds after customers used fixed amounts.
The FTC sued AT&T over the same issue. An appeals court panel ruled last year that the FTC lacked authority to go after the company because the FCC’s net neutrality rules at the time eliminated the FTC’s jurisdiction. The FTC has appealed to the full court. The FCC has said a loss for the FTC in that case could "immunize" AT&T from FTC oversight of the company’s broadband services.
The FTC is divided along partisan lines over Pai’s plan.
Democratic FTC Commissioner Terrell McSweeny told Congress Nov. 1 that the FTC has expertise in antitrust matters and consumer protection, but “very real and significant limits” in policing online competition.
“It does not possess specialized subject-matter expertise in telecommunications, data network management practices, or in detecting instances of data discrimination,” McSweeny said. “That expertise is housed at the FCC.”
The FTC doesn’t have jurisdiction over common carriers -- a designation assigned to broadband providers by the FCC’s 2015 rules, and one that would be lifted by Pai. Major providers still have common-carrier functions, such as voice telephone calls, and whether the FTC could regulate their broadband practices remains a topic of litigation, McSweeny said.
No ‘Wild West’
Broadband providers have said they have no intention of blocking lawful content or slowing rival sites. They will be pressured to keep their word by a combination of forces, including the FTC and competition among providers, Brendan Carr, a Republican FCC commissioner, said on a Nov. 22 broadcast on the C-SPAN cable network.
“We are not proposing to go to sort of a Wild West regime where broadband providers are free to run roughshod over consumers -- far from it,” Carr said. “I’m confident the FTC can handle this.”
The FTC’s McSweeny, in comments to the FCC, said a trade commission investigation would happen only after competitive harm already has occurred.
It can be costly and difficult to resolve a problem -- or even detect one, McSweeny said. “For example, how would a typical consumer be able to determine whether a slow or grainy download was caused by malfeasance or something routine and benign?”
Pai in a Nov. 22 interview on Fox News said the FTC may be just the agency to judge whether it’s harmful for a broadband provider to charge more for faster passage over its network.
"In some cases, you can imagine that kind of arrangement being pro-competitive, being good for startups and consumers. And in other cases it might not be so worthwhile,” Pai said. “And that’s exactly why the Federal Trade Commission is the better agency to investigate it."
To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net, David McLaughlin in Washington at dmclaughlin9@bloomberg.net.
To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Sara Forden at sforden@bloomberg.net, Elizabeth Wasserman, Mark Drajem
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