The Republican-led FCC’s effort to get out of the business of regulating broadband providers’ consumer practices took a step forward on Monday.  In an appeal that has been proceeding in parallel with the FCC’s “Restoring Internet Freedom” reclassification proceeding, the U.S. Court of Appeals for the Ninth Circuit issued an opinion giving the Federal Trade Commission (FTC) broad authority over practices not classified by the FCC as telecommunications services.  Specifically, the Ninth Circuit, sitting en banc, issued its long-awaited opinion in Federal Trade Commission v. AT&T Mobility, holding that the “common carrier exemption” in Section 5 of the FTC Act is “activity based,” exempting only common carrier activities of common carriers (i.e., the offering of telecommunications services), and not all activities of companies that provide common carrier services (i.e., rejecting a “status-based” exemption).  The case will now be remanded to the district court that originally heard the case.  Coupled with the FCC’s reclassification of Broadband Internet Access Services (BIAS) in the net neutrality/restoring internet freedom proceeding, the opinion repositions the FTC as top cop on the Open Internet and broadband privacy beats.

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On December 11, 2017, the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) released a draft Memorandum of Understanding (MOU) which will allocate oversight and enforcement authority related to broadband Internet access service (BIAS) between the two agencies.  The new MOU was announced three days before the FCC’s scheduled vote to reclassify BIAS as an “information service,” and is expected to be finalized simultaneously with that vote.  The MOU is part of an ongoing effort to address concerns that reversing the current “net neutrality” rules will adversely affect consumers, and provides a guide for Internet service providers (ISPs) and other stakeholders to understand which agency will be taking the lead on oversight and enforcement going forward.  However, the extent to which the MOU takes effect will depend upon, among other things, the pending case interpreting section 5 of the FTC Act that is before the Ninth Circuit Court of Appeals.

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By an Order issued late last week, the Wireline Competition Bureau (Bureau) provided important insight regarding determining the jurisdictional classification of private line revenues.  In ruling on long-pending petitions for reconsideration of Universal Service Administrative Company (USAC) audit findings regarding the classification of private line revenues, the Bureau explained that the longstanding Ten Percent Rule does not establish any presumption that a private line is jurisdictionally either intrastate or interstate.  Instead, the Bureau clarified that it is the jurisdictional nature of the traffic carried over private lines, not the existence (or nonexistence) of a customer certification, that determines the appropriate jurisdictional classification.  Moreover, carriers must conduct a good faith inquiry into the nature of the traffic carried on the private line when determining the jurisdiction of those line revenues.  Carriers that provide private line services should be sure to review the Order to ensure their private line jurisdictional classification methods will withstand any Bureau or USAC scrutiny.

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On October 13, 2016, the Federal Trade Commission (FTC) filed a petition in the U.S. Court of Appeals for the Ninth Circuit requesting a rehearing en banc of the court’s decision in the FTC’s case against AT&T alleging that the company dramatically reduced – or “throttled” – data speeds for certain customers on unlimited data plans once those customers had used a certain level of data.  A three-judge panel for the Ninth Circuit determined in August 2016 that the case should be dismissed because AT&T was not subject to an FTC enforcement action due to the company’s status as a common carrier.  As we noted in a previous blog post, this case could reset the jurisdictional boundaries between the FTC and the Federal Communications Commission (FCC) with respect to phone companies, broadband providers and other common carriers.

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On Monday, August 29, 2016, the Ninth Circuit Court of Appeals issued an opinion that may dramatically alter the boundaries between the Federal Trade Commission’s (FTC) and Federal Communications Commission’s (FCC) authority over phone companies, broadband providers, and other common carriers.  The Ninth Circuit dismissed a case that the FTC brought against AT&T over its practices in connection with wireless data services provided to AT&T’s customers with unlimited data plans.  The FTC had filed a complaint against AT&T for “throttling” the data usage of customers grandfathered into unlimited data plans.  Once customers had used a certain level of data, AT&T would dramatically reduce their data speed, regardless of network congestion.  The FTC asserted that AT&T’s imposition of the data speed restrictions was an “unfair act or practice,” and that AT&T’s failure to adequately disclose the policy was a “deceptive act or practice.”

The Ninth Circuit’s decision is the latest in a series of actions attempting to identify the jurisdiction over Internet access services and Internet-based services.  As providers and regulators have struggled to identify the proper regulations applicable to such services, the Ninth Circuit’s decision could force significant shifts by both the FTC and FCC for at least a large segment of the industry.


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This entry was drafted by Telecom Partner John Heitmann

Yesterday, the FTC testified before a Senate Subcommittee and recommended that proposed data security legislation introduced by Senators Pryor (D., AR) and Rockefeller (D., WV) (The Data Security and Breach Notification Act of 2010, S.3742) be modified so that its requirements and the FTC’s enforcement authority thereunder be extended to telecommunications common carriers.  

The FTC’s testimony – available here – is the latest in a series of FTC actions signaling the agency’s concern regarding the amount of personal information telecom common carriers handle and the FTC’s ability – or inability – to take enforcement action against such carriers.


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