Court Rules: Common-Carrier Status Won’t Protect ISPs From FTC Regulation

A federal court has ruled on an FTC vs. AT&T case that threatened to leave telecom providers free to conduct unfair business practices in their broadband services by letting them fall into a regulatory gap. This is now unlikely to happen, though, because the ruling affirms that the FTC has jurisdiction over the broadband services of telecom providers.

FTC v. AT&T No. 15-16585 is a court case at the heart of the net neutrality debate. The story began in 2014 when the FTC sued AT&T for throttling the data speeds on its unlimited data plans, which AT&T had been doing since 2011. The FTC won its case; however, in 2016, before any compensation was issued to affected customers, AT&T appealed the case and won.

The basis for the appeal hinged on the interpretation of the FTC’s jurisdictional authority over AT&T. It all boiled down to the definition of “common-carrier” services--something that the FTC cannot regulate. Although the broadband services that the FTC was targeting AT&T for weren’t classified as common-carrier, AT&T argued that because it provided telecom services, which are classified as common-carrier, that status applied to itself as a company and negated the FTC’s authority over them entirely.

In 2015, in the time between the initial case and its eventual appeal, net neutrality regulations re-classified broadband services as common-carrier. The FTC v. AT&T case was a dispute over AT&T’s past actions, so this didn’t directly play into the outcome of the 2016 appeal for that case.

However, the reclassification shifted authority over broadband services from the FTC to the FCC, which does regulate common-carrier services. The future of FTC’s jurisdiction over telecom providers, which are also the biggest broadband service providers, was already in question due to AT&T’s appeal, so the reclassification made it definitively clear that at least one body had full jurisdiction over all broadband services.

The net neutrality debate of 2017 threatened to undo all that by returning broadband services to non-common-carrier status. There was awareness that AT&T’s 2016 appeal case might carry precedent and drop telecom providers into a regulatory gap where their broadband services are unregulated, so the appeal decision was thrown out, and the case went back to court.

The FCC, however, went ahead with its plan to absolve itself of regulating broadband services before the outcome of the case was redetermined. Although it was expected that the court would rule again rule in favor of the FTC, unless and until that actually happened, there was still a risk of the regulatory gap scenario occurring.This argument was presented to the FCC in the lead up to the December 4 vote, but it clearly was not taken into consideration.

The ruling on the case has been made, and it is in favor of the FTC. The federal court affirms that regulative authority for common-carrier and non-common-carrier services remain activity-based, and not company-based. Therefore, the FTC maintains jurisdiction over AT&T’s non-common-carrier broadband services. Judge McKeown stated:

The phrase “common carriers subject to the Acts to regulate commerce” thus provides immunity from FTC regulation only to the extent that a common carrier is engaging in common-carrier services.

The judge admitted that although this case began as an effort by the FTC to target AT&T’s throttling of its broadband speeds, the outcome clearly plays a pivotal role in the net neutrality debate. Looking at McKeown’s words, it’s clear that the case is already expected to set precedent:

Permitting the FTC to oversee unfair and deceptive non-common-carriage practices of telecommunications companies has practical ramifications. New technologies have spawned new regulatory challenges. A phone company is no longer just a phone company. The transformation of information services and the ubiquity of digital technology mean that telecommunications operators have expanded into website operation, video distribution, news and entertainment production, interactive entertainment services and devices, home security and more. Reaffirming FTC jurisdiction over activities that fall outside of common-carrier services avoids regulatory gaps and provides consistency and predictability in regulatory enforcement.

To make the ruling, the judges looked at the FTC mandate, the original meaning of “common-carrier” when it was established in 1914, “decades of judicial interpretation,” and the opinions of the FTC and FCC. You can read it in full here. For now at least, it seems there is little risk of the regulatory gap scenario occurring.

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