Net Neutrality: From Rules to Enforcement

Advertising Law

To say that strong passions have surrounded the recent Federal Communications Commission vote to reverse 2015’s net neutrality rules is putting it mildly. There are stories that FCC Chairman Ajit Pai has endured racist vitriol and that protestors have descended on his home with signs addressed to his children stating, “They will come to know the truth. Dad murdered democracy in cold blood.” Chairman Pai in turn has used his speaking opportunities to challenge various celebrities who have criticized the effects of his proposal, formally known as the Restoring Internet Freedom Order (RIFO).

Now that RIFO has been passed, it might be a good time to set aside the commentary on whether it’s good or bad, and instead try to figure out exactly how things have changed. RIFO essentially changes net neutrality from a regime based on rules to one based on enforcement. RIFO specifically states that “antitrust law and the Federal Trade Commission’s authority under Section 5 of the FTC Act to prohibit unfair and deceptive practices” will protect against potential consumer and competitor harm. Accordingly, the role of the Federal Trade Commission has been restored in the Internet service provider (ISP) arena—in fact, just days before the FCC vote, a memorandum of understanding between the FCC and the FTC was signed, acknowledging the expanded role for the FTC. Further, state attorneys general who are responsible for enforcing their “little FTC acts” can be expected to be just as involved in enforcement efforts.

So the question now is what exactly these new cops on the beat—the FTC and the state attorneys general—will be policing. RIFO states that it will “adopt transparency requirements that ISPs disclose information about their practices to consumers, entrepreneurs, and the Commission.” RIFO also requires ISPs to disclose any practices that block websites; throttle delivery speeds; prioritize delivery, either through “free” data usage where downloads don’t count against a plan or through “fast lane” delivery where an ISP provides data faster because of a fee-based arrangement; or deal with congestion management.

With RIFO’s structure now based on transparency, the onus will shift to enforcers to ensure that ISPs deliver what they promise. The remedies can lie in traditional FTC consumer protection statutes regarding deceptive statements (when, for example, an ISP states that it does not throttle when in fact it does) or unfair acts (such as a unilateral change in a material term of a contract). From a competition perspective, RIFO reopens the doors for antitrust enforcement. The FTC and the Department of Justice Antitrust Division have the power to prosecute ISPs under the Sherman Act for conduct that damages competition in markets that provide content to consumers. For example, if an ISP has market power and it restricts customers from accessing the content of a multichannel video distributor or online video distributor with which the ISP competes (which could be the case with large, vertically integrated ISPs, for example), the antitrust laws can provide the basis for an investigation and/or a possible enforcement action. The FTC also could challenge such conduct as an “unfair method of competition” under Section 5 of the FTC Act.

Consumers and companies should be mindful that unlike the FTC Act, many state “little FTC acts” provide private causes of action that can, at times, be used by competitors to bring an action against a company for unfair or deceptive practices that target consumers. Damaged competitors also could bring private antitrust actions that carry with them the significant threat of treble damages, and they could seek injunctions against certain types of market-restricting bandwidth management practices.

Chairman Pai’s fundamental rationale for the move was based on reports that Internet infrastructure investments have declined. While some commentators challenged these numbers, the RIFO fact sheet prepared by the FCC states that since the 2015 net neutrality rules were passed, “investment has fallen for two years in a row—the first time that that’s happened outside of a recession in the Internet era.” Whether RIFO will be the key to unlock the door to further investment in broadband or instead will fulfill the predictions of doom prophesied by its naysayers is a question that can be answered only with time. How much time such an answer requires—or even whether we get an answer—is an open issue. Already the attorneys general of New York, Massachusetts and Washington have indicated that they intend to challenge RIFO, and there are rumblings that members of Congress have shown an interest in the issue.

It is worth remembering that in 2006, in a comment that later caused considerable mirth in certain quarters, former Senator Ted Stevens of Alaska referred to the Internet as “a series of tubes.” He made these comments during a debate over a congressional proposal regarding (you guessed it) net neutrality. If past is prologue, it seems most likely that the back-and-forth over net neutrality will be with us for some time to come.



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