Federal Communications Commission Chairman Ajit Pai reportedly wants to get rid of the FCC’s net neutrality rules and replace them with “voluntary” commitments from ISPs. The theory goes something like this: as long as ISPs commit to protecting net neutrality in their terms of service, the FCC can eliminate its rules while the Federal Trade Commission would punish ISPs that fail to comply with their net neutrality promises.
Under ideal circumstances, this could prevent ISPs from committing egregious violations of net neutrality principles. But “voluntary” isn’t just a euphemism—ISPs would only be bound by net neutrality requirements as long as they promise to follow them.
Even if all ISPs put the promise into their terms of service agreements, it’s not clear what would stop them from removing the promise later. If any new ISPs enter the market, it’s also unclear what would compel them to make the same promises. And those aren’t the only problems that would make net neutrality enforcement more difficult under Pai’s proposal.
Unlike the FCC, the FTC isn’t able to create hard-and-fast rules that ISPs must follow. But the FTC does have authority to prevent deceptive and unfair practices so that the agency can force companies to live up to the promises they place in their terms of service. If an ISP promises a neutral network and then fails to deliver, the FTC can then step in.
FTC Commissioner Terrell McSweeny believes net neutrality enforcement should be left to the FCC.
“I think it’s important to have the expert regulator that understands the industry, technology, networks etc. be making decisions using its authority,” McSweeny, a Democrat, told. Besides having greater expertise in Internet service than the FTC, the FCC’s “authority is broader than ours,” she said.
“We are a very hard-working agency but we’re not a very big agency,” McSweeny said. “The FTC doesn’t have a lot of expertise in network engineering. We’re not the FCC in that regard.” The FTC receives “millions of consumer complaints every year” across all industries under its jurisdiction, and “we can’t act on every single complaint.”
Pai, a Republican who was appointed FCC chairman by President Donald Trump, laid out his plan in a private meeting with broadband industry trade groups last week, according to multiple news reports.
“To preserve the basic tenets of net neutrality, the plans would require broadband providers to pledge to abide by net neutrality principles such as no blocking or paid prioritization of Internet traffic,” The Wall Street Journal wrote. “That would allow the FTC to go after violators for deceptive or unfair trade practices.”
Pai has not confirmed or denied this publicly, and he could make changes before issuing a formal proposal. But he has repeatedly made it clear that he wants to overturn the FCC’s classification of ISPs as common carriers under Title II of the Communications Act, the legal authority used by the FCC to protect net neutrality. Pai has also claimed that the FCC overstepped its legal authority with the 2015 Title II net neutrality decision, but the entire net neutrality order was upheld last year by a federal appeals court, which rejected legal challenges from ISP lobby groups.
FCC Commissioner Mignon Clyburn, a Democrat, said last week that Pai’s plan would “ask for unenforceable commitments instead of looking out for the best interests of competitors and consumers.”
There are good legal reasons to be concerned, according to law professor Blake Reid, director of the Samuelson-Glushko Technology Law & Policy Clinic at the University of Colorado Boulder.
If ISPs put net neutrality requirements in their terms of service and then break those commitments, “the FTC can bring an enforcement action under Section 5 of the FTC Act which prohibits deceptive trade practices,” he said. “If you want to, you can promise your consumers that you’re going to follow these rules and the FTC can enforce them. But what’s the lever that forces that promise to happen or to stay in place? I have no idea, and we haven’t seen it as part of Chairman Pai’s plan.”
The FTC’s privacy protection authority already stems from promises made by companies. “When companies tell consumers they will safeguard their personal information, the FTC can and does take law enforcement action to make sure that companies live up these promises,” the FTC says. But even in the privacy area, the FTC is limited by its own authority. “The FTC has repeatedly called for Congress to pass additional laws to strengthen the privacy and security protections provided by all companies,” FTC staff said last year.
Instead of strengthening privacy laws, Congress last month eliminated FCC rules designed to protect ISP customer privacy.
If net neutrality were shifted to the FTC, ISPs would only be bound by the specific promises they make. They might agree to the core net neutrality rules of no blocking, no throttling, and no paid prioritization, but Pai isn’t likely to insist on much, if anything, beyond that.
The FCC net neutrality rules in place today also impose some limitations on zero-rating (i.e. data cap exemptions) and network interconnection payments, and they require ISPs to make more specific public disclosures about prices, fees, and data caps. Based on early descriptions of Pai’s plan, it doesn’t appear that the zero-rating, interconnection, and billing disclosure provisions would be included in ISPs’ promises.
Voluntary schemes work better in competitive industries
Voluntary schemes backed by FTC enforcement can work in “a competitive industry that’s got some kind of market pressure to actually do right by consumers,” Reid said. (The advertising industry’s self-regulation provides one such example.) But there is very little broadband competition in the US, especially in the market for home Internet service.
Even though promises in companies’ terms of service are enforceable, it also matters “what the scope of the promise is and what’s to prevent it from being explicitly revoked later,” Reid said.
New ISPs that enter the market after Pai’s plan is implemented might not make those promises at all. And when existing ISPs decide to implement new practices that violate earlier promises, “I don’t see any reason ISPs wouldn’t just tell people, ‘hey, we’re no longer going to abide by net neutrality in this particular way,'” he said. “You have ISPs saying, ‘we support net neutrality,’ but these are the same ISPs that do zero-rating schemes that raise serious questions about whether they comply with the rule.'”
Economist Hal Singer, who opposed the Title II reclassification of broadband providers, offered a “conservative critique” of Pai’s net neutrality plan. “Economists fought the ban on paid priority because we understood some arrangements could be beneficial to all parties, including users,” Singer wrote on Twitter. “Pai’s proposal asks ISPs to commit to never offering priority handling of a packet for a fee, and I’m wondering, ‘What were we fighting for?’ A better policy would permit payment for priority, but would allow such plans to be challenged by edge companies if done in a discriminatory way.”
The limits of FTC authority
If the FCC reverses its 2015 classification of ISPs as common carriers, that could in theory provide jurisdiction over ISPs to the FTC, which is barred by statute from regulating common carriers. But Congress might also need to take action to complete that shift because of a federal appeals court decision last year that let AT&T escape FTC oversight entirely as long as it has some type of common carrier business. Landline phone and mobile voice service are both treated as common carriage, so it’s up to Congress to make it clear that the FTC can regulate phone companies that offer Internet service.
“In order to make sure that this isn’t just a no-cops-on-the-beat plan, the FTC Act would actually have to be amended by Congress to eliminate the common carrier exemption,” McSweeny said.
McSweeny, an attorney, served as chief counsel for competition policy at the US Department of Justice’s antitrust division prior to becoming an FTC commissioner in 2014. McSweeny noted that Pai has not revealed the details of his plan, and “the details do matter. But generally speaking, I’m troubled by what I hear is being proposed.”
The FTC plays an important role in protecting consumers from deceptive acts and practices, and the lawsuits it files against companies can obtain refunds for consumers and injunctions preventing companies from continuing their bad behavior, McSweeny said. But the agency’s authority is limited in ways that might be bad for net neutrality.
“I think we’re really good at that, but we have to be mindful of the limitations of a system that relies on ex post enforcement,” she said. A system based solely on ISPs’ promises and FTC enforcement would raise “issues with detection. How would consumers know this is happening and when would they know to complain?” she said.
While the FTC could pursue ISPs after they break their terms of service agreements, the FCC can lay out rules of the road that ISPs must follow going forward—as it did with the net neutrality rules that Pai wants to eliminate.
“Moving from a clear ex ante rule around the open Internet and requirements that maintain an open Internet, and moving to this ex post enforcement kind of world is going to strongly tilt everything in favor of the incumbents,” McSweeny said. “It will be harder potentially for innovators and edge providers to make sure that they are being treated fairly and in a nondiscriminatory way.”
Under today’s net neutrality regime, it’s clear that either customers or businesses can complain to the FCC about violations and behavior that harms either ISPs’ customers or competitors. But unlike individual Internet customers, online content providers wouldn’t necessarily have contractual agreements with those ISPs. That would limit the FTC’s ability to respond to complaints filed by businesses whose websites are blocked or throttled by ISPs or who believe that other companies are getting priority treatment.
“Anybody can complain to the FTC, but to use our authority we would have to look at whether consumers were deceived,” McSweeny said. “If [online businesses] are worried about discrimination, we would obviously take complaints seriously, but that tends to be something that falls more into the antitrust framework.”
However, “there can be a lot of harmful discrimination or harm to innovation that isn’t always an antitrust violation,” she said. “Antitrust case law in this area is challenging.”
McSweeny: Let the experts do their jobs
When Republicans in Congress eliminated privacy rules for ISPs last month, they claimed the FCC’s privacy rules were “duplicative” because the FTC also regulates privacy. But there are plenty of cases where the FTC partners with agencies that have expertise in a particular industry.
“We don’t draft car safety guidelines,” McSweeny said. “NHTSA does that. We partner with NHTSA to help them understand privacy and security concerns of connected vehicles.” Similarly, the FTC doesn’t draft medical device guidelines or rules for energy networks, which are handled by the FDA and FERC, respectively, she said.
McSweeny said the current FCC rules should be preserved to protect the so-called “virtuous circle,” in which online companies are guaranteed fair access to broadband networks so that they can provide new content and applications over the Internet, which in turn increases demand for broadband.
Besides, if ISPs are willing to make net neutrality commitments in their terms of service, “I don’t really understand… why we are backing off a clear rule around these issues,” she said. “Those two things don’t fit together for me.”
Reid agreed. “If we care enough about net neutrality principles,” he said, “we codify the values in those principles into the rule itself so the ISPs don’t get to make a decision.”