Tales of the Sausage Factory

Ninth Circuit Knee-Caps Federal Trade Commission. Or: “You Know Nothing, Josh Wright.”

Back in October 2014, before the Federal Communications Commission (FCC) reclassified as Title II, both the FCC and the Federal Trade Commission (FTC) brought complaints against AT&T Mobility for failure to disclose the extent they throttled “unlimited” customers once they passed a fairly low monthly limit. You can see the FCC Notice of Apparent Liability (NAL) here. You can see the FTC complaint, filed in the district court for Northern California, here (press release here). As some of you may remember, the FCC was still debating whether or not to reclassify broadband as a Title II telecom service.  Opponents of FCC reclassification (or, indeed, of any FCC jurisdiction over broadband) pointed to the FTC enforcement action as proof that the FTC could handle consumer protection for broadband and the FCC should avoid exercising jurisdiction over broadband altogether.

 

In particular, as noted in this Washington Post piece, FTC Commissioner Maureen Olhausen (R) and then-FTC Commissioner Joshua Wright (R), both vocal opponents of FCC oversight of broadband generally and reclassification specifically, tweeted that the FTC complaint showed the FTC could require broadband providers to keep their promises to consumers without FCC net neutrality rules. Wright would subsequently reiterate this position in Congressional testimony, pointing to the FTC’s enforcement complaint under Section 5 of the Federal Trade Commission Act (FTCA) (15 U.S.C. 45) as an “unfair and deceptive” practice to prove that the FTC could adequately protect consumers from potential harms from broadband providers.

 

Turns out, according to the Ninth Circuit, not so much. As with so much the anti-FCC crowd asserted during the net neutrality debate, this turns out (pending appeal) to be dead wrong. Why? Contrary to what some people seem to think, most notably the usual suspects at Cable’s Team Rocket (who are quoted here as saying “reclassifying broadband means the FTC can’t police any practices of common carriers, at least in the Ninth Circuit” which is either an utterly wrong reading of the case or an incredibly disingenuous remark for implying that reclassification had something to do with this decision. You can see their full press release, which borders on the Trump-esque for its incoherence, here.)

 

As I explain below, the Ninth Circuit’s decision did not rest on reclassification of broadband. To the contrary, the court made it explicitly clear that it refused to consider the impact of reclassification because, even assuming mobile broadband was not a Title II service, AT&T Mobility is a “common carrier” by virtue of offering plain, ordinary mobile voice service (aka “commercial mobile radio service,” aka CMRS). The Ninth Circuit agreed with AT&T that because AT&T offers some services as common carrier services, AT&T Mobility is a “common carrier” for purposes of Section 5(a)(2) of the FTCA and thus exempt from FTC enforcement even for its non-common carrier services.

 

Given that Tech Freedom and the rest of the anti-FCC gang wanted this case to show how the Federal Trade Commission could handle all things broadband, I can forgive — and even pity — Tech Freedom’s desperate effort in their press release to somehow make this the fault of the FCC for reclassifying and conjuring an imaginary “gap” in broadband privacy protection rather than admit Congress gave that job to the FCC. After all, denial is one of the stages of grief, and it must come as quite a shock to Cable’s Team Rocket to once again see that Team PK-chu was right after all (even if it doesn’t make me particularly happy that we were, for reasons I will explain below). But this is policy, not therapy.  As of today, instead of two cops on the beat for broadband consumer protection access, we have one — the Federal Communications Commission. Fortunately for consumers, the FCC has been taking this job quite seriously with both enforcement actions and rulemakings. So while I consider it unfortunate that Ninth Circuit has cut out the FTC on non-common carrier related actions by companies offering a mix of common carrier and non-common carrier services, the only people who need to panic are Tech Freedom and the rest of the anti-FCC crowd.

 

OTOH, longer term, this does create a more general concern for consumer protection in more deregulated industries (such as airlines) covered by the exemptions in Section 5 of the FTCA. Yes, I know most folks reading this blog think the universe revolves around broadband, but this decision impacts airlines, bus services, private mail services like UPS, and any other company offering a common carrier service “subject to the Acts to regulate Commerce.” (15 U.S.C. 45(a)(2))  (Also meat packers and a few other named exceptions). So while I am hopeful the FTC appeals this to the full Ninth Circuit for en banc review (and even the Supreme Court, if necessary) from a general consumer protection perspective, the only direct result of this case for broadband policy is to underscore how important it is for the FCC to do its job despite the industry nay-sayers and their Libertarian cheerleaders.

 

More below . . .

 

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Tales of the Sausage Factory

Will Comcast/NBC Need FCC Approval? And How Would That Play Out?

The industry news is abuzz with the upcoming Comcast/NC Universal Deal. According to recent reports, Comcast would buy 51% of NBC Universal (assuming Vivendi, which owns 20% at the moment, agreed with the terms). But beyond this general framework, it’s unclear whether all the assets held by NBC Universal would be included in the deal. Whether or not the FCC has jurisdiction hinges on this question.

The FCC does not have general jurisdiction over deals pertaining to content. NBC Universal owns lots of radio and television stations. Transfer of the licenses to the new Comcast-controlled entity would require FCC approval. But if the deal does not include the licenses, the FCC would probably lack a jurisdictional hook. Review of the deal would lie strictly in antitrust — at either the DoJ or Federal Trade Commission (FTC). From an antitrust perspective, the deal raises some concerns given the concentration of content and Comcast’s position vis-a-vis other existing subscription television providers (e.g., FIOS, DIRECTV) and potential new competitors (e.g., Netflix and other “over the top” video providers)). It may also concern broadcasters, both NBC affiliates worried about the change in management and other broadcasters worried how this would impact Comcast’s retrans negotiations. Much of this will also depend on whether the deal includes the movie production studios, prior existing content, and a host of other details that impact the universe of content distribution these days.

Assuming the TV and/or radio stations are included, it’s not entirely clear what happens. The D.C. Circuit eliminated the FCC’s existing ban on cable/television cross ownership (which applied only to broadcast licenses in a cable system’s franchise area) in 2002 on the basis that the D.C. Circuit didn’t like it (Fox Television Stations, Inc. v. FCC, 280 F.3d 1027 (D.C. Cir. 2002). That decision does not directly impact the FCC’s general obligation under Section 310(d) to ensure that any transfer of a license serves the public interest. Comcast and NBC will certain push the Fox Television decision for all its worth, arguing that the DC Circuit decision to vacate the rule means that there are no circumstances under which the FCC could prevent a broadcast/cable cross-ownership rules. Opponents will argue that while the D.C. Circuit vacated a per se rule that any cable/broadcast combination was contrary to the public interest, that has zero impact on the Commission’s responsibility to resolve the question of whether transfer of these licenses to this cable company serves the public interest. I expect much confusion and argument on this point. Assuming the FCC has jurisdiction in the first place.

Stay tuned . . . .

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Tales of the Sausage Factory

It's Nice WhenThe FCC Listens — Sorta. Why I like The Proposed Resolution Of Comcast's Complaint Against Verizon But Why Some Of It Makes Me Uneasy.

Back in February, I blogged about Comcast’s complaint against Verizon for its “retention marketing” practices. That’s Verizon’s practice that, when they get a request from another carrier to terminate voice service and transfer the phone number of a customer who is switching from Verizon (a practice called “porting” the number), they make one last run at trying to persuade the customer to stay. At the time, I observed (as I have for well over a year now, since I first made this argument at the at the Federal Trade Commission’s 2007 workshop), that if we are going to rely on competition, then we cannot have rules that privilege one side over another. To cancel video service, you have to call the cable operator, who then gets a last chance to pitch you hard to stay and makes it as difficult as possible to terminate service. But to change telephone provider, the cable company can ask the telco provider and the telco provider isn’t allowed to try to keep the customer — but must wait to pitch the customer until after the customer has already switched. That’s crazy. It needs to be consistent, or it puts the telcos at a serious disadvantage against the cable cos.

Well, back in April, the Enforcement Bureau issued a recommended decision that adopts this same argument. (I’ve been a shade busy, or would have blogged on this earlier.) It strongly recommends that the Commission commence a notice of proposed rulemaking designed to harmonize the rules for switching video and voice. No surprise, as this also tracks a Verizon Petition for Declaratory Ruling — as noted by the Bureau in a footnote.

Needless to say, I wholeheartedly approve of such harmonization, having supported this approach for well over a year. So why does the recommendation make me uneasy?

Because of the legal reasoning around the facts of the instant complaint. The Bureau recommends a finding of no violation because number porting is not a Title II telecom service and cable providers offering voice over IP (VOIP) are not providing Title II services. Which means that the FCC can flit back and forth between Title I and Title II at will, depending on its policy needs of the moment. It also means that Title II telecommunications service has now been reduced to only the voice component of plain old telephone service. And even critical elements of POTS, like managing the phone number systems, no longer count as telecommunication services under Title II.

I’m even more queasy about this because it is probably right under the enormous deference shown to FCC definitional hair splitting thanks to the combination of the Brand X decision and the D.C. Circuit’s decision on CALEA in ACE v. FCC. Well, Scalia warned the Brand X majority, but they didn’t listen. And Michael Powell, by trying to put broadband services beyond the reach of FCC regulation, ended up enormously expanding the power of the FCC to regulate services on a whim.

More on what I’m talking about and what this means for the future (if adopted by the Commission) below . . .

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Tales of the Sausage Factory

Comedy Central Send An Omen: South Park and the Upcomming FCC Hearing (spoiler alert!)

As an inveterate procrastinator, I cannot complain too loudly that the Commission only just published the witness list for tomorrow’s (today’s) FCC hearing at Standford. Happily, it looks like I am the only lawyer on the panel. I am also amused to share the panel with George Ford, who took me to task after the last time we both testified in front of a federal agency about broadband — the Federal Trade Commission in February 2007 — for making my First Amendment arguments at the FTC under the guise of economics. My turn to remind him that we are in public interest land now, baby, where the Red Lion still rules the Jungle and maintaining the diversity of information sources is, according to Turner a government purpose of “the highest order.” Come to think of it, I’ll remind some of the Commissioners of that as well.

Meanwhile, on the flight in, I received an amazing omen from Comedy Central (which is why you should always fly Jet Blue if you can, so you can get 36 channels of omen potential). Tonight’s episode of South Park (spoiler alert!) had the internet getting “used up,” with the government rationing the internet for the internet refugees who came to Silicon Valley. But then Kyle, the little Jewish kid, shows them a better way. Rather than rationing users, you can just reboot the internet (which is kept by the federal government in an underground bunker) and try again. In the end, Stan’s father explains to everyone that it is the responsibility of users to manage their internet use respopnsibly rather than rely on others to ration it for them.

I choose to take this as an omen that I, the Jewish kid on the panel, will be sucessful in rebooting the Commission to get them to understand that it’s about the users, not about letting people in the middle ration the internet. Granted that Ben Scott actually looks more like Kyle, and I look more like Cartman. So perhaps I will just limit myself to making wise ass remarks and let Ben reboot the Commission. Either way is good.

Off to write some testimony.

Stay tuned . . . .

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Tales of the Sausage Factory

AT&T's $10 DSL and the Renomination of Commissioner Tate: What The Senate Confirmation Hearing Should Ask

The Consumerist runs this good but inaccurate report on AT&T’s offering its mandated $10 DSL intro rate for those who have not subscribed to DSL previously. AT&T accepted this as a merger condition when it acquired BellSouth last year. What Consumerist gets wrong is that this condition comes not from the FTC, which did not review the merger (regular readers will recall that it was the Department of Justice Anti-Trust Division that gave the merger a thumbs up with no conditions). The price control aspect came from the FCC, as part of the bucket ‘o concessions AT&T made after it failed to get McDowell unrecused and suddenly had to respond to Democrats rather than blowing them off with bogus concessions.

This matters for two reasons. First, it means that complaining to the Federal Trade Commission, as suggested by Consumerist, is not exactly effective. FTC had nothing to do with the condition and won’t enforce it under their merger authority. If AT&T makes it damn hard for people to order the cheap rate, then there might be a claim as an unfair or deceptive trade practice, but I think that is kind of a stretch.

No, the place to complain is at the Federal Communications Commission. While it doesn’t hurt to file a complaint with the FCC’s Enforcement Bureau, you will also want to make sure that you copy it to the FCC’s record in the AT&T/BellSouth merger via its Electronic Comment Filing System (ECFS). The relevant docket number is 06-74.

But, more importantly, this raises some serious questions that Congress needs to ask not merely about AT&T’s commitment to honoring the merger conditions, but also about the FCC’s willingness to enforce them — especially in light of statements made by Chairman Martin and Commissioner Tate at the time of the merger. Fortunately, President Bush’s decision to nominate Tate for a second term provides an excellent opprtunity for members of the Senate Commerce Committee to put these questions to Commissioner Tate directly.

Because while $10 DSL is important, this is also important to other AT&T merger conditions, such as network neutrality condition. And while, unlike many of my colleagues, I don’t think Martin or Tate are mindless Bellheads or wholly owned subsidiaries of AT&T, I do think it’s important to get them pinned down on the record that they will vigorously enforce the merger conditions and not allow AT&T to weasel out by “complying” in a way that deprives these conditions of meaning.

More below . . . .

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Tales of the Sausage Factory

Watch Me and My Public Interest Buddies Beat the Odds At FTC Network Neutrality Smackdown!

Back in the summer the Federal Trade Commission (FTC) decided to get in on the Network Neutrality game. As I observed at the time, I’m skeptical the network neutrality will get a fair shake under FTC Chairman Majoris.

But, like the gambler who comes to the crooked poker den because “it’s the only game in town,” you gotta show up to play even if you think the odds are stacked. So I and a number of other public interest folks and sympathetic academics will face off against a less-than-level playing field at the FTC’s Broadband Task Force’s Competition Policy Workshop on February 13 & 14.

Why I consider this playing field “less than level,” and why we will still kick butt, below . . .

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Tales of the Sausage Factory

DOJ — “Antitrust? What's That?”

The U.S. Department of Justice Antitrust Division approved the AT&T/BellSouth mereger without imposing any conditions. By law, the DOJ Antitrust division has no obligation to explain its decision to take no action. Nevertheless, Assistant Attorney General Thomas Barnett did issue a statement explaining the decision to take no action. Apparently, the market has gotten so much more competitive since the DOJ imposed (albeit wussy) conditions last year on the Verizon/MCI merger and SBC/AT&T merger last year that DOJ can’t imagine why this merger might be anticompetitive.

We now bounce over to the FCC, where Kevin Martin has placed approval of the AT&T/BellSouth on the agenda for tomorrow’s FCC meeting. But will the meeting take place? Can Martin get the merger through without conditions? And why didn’t DOJ at least pretend to care and enter into some wussy conditions — rather than just roll over like a good little industry lap dog begging for treats?

Some guesses below . . . .

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Tales of the Sausage Factory

What the FAA?

How the heck did the Federal Aviation Administration (FAA) get into regulating the wireless industry (both licensed and unlicensed)? The FAA has proposed requiring pretty much any wireless service with an antenna to fill out a form for every antenna and antenna change. Right now, only services with big antennas (like broadcasters) near airports fill out FAA paperwork.

As the FCC gently points out in its own filing, the FAA does not seem to understand just how much this would increase paperwork for the industry — and for the FAA to process. Given that the FAA does not seem to have any reason to think that these antennas will cause rampant interference and bring planes out of the sky, maybe the FAA wants to rethink this?

Other industry groups, such as the National Association of Broadcasters, the Cellular Telecommunications and Internet Association, and various professionals have all stopped by to politely sugest to the FAA that, perhaps, the FAA HAS LOST ITS BLEEDIN’ MIND AND DOES NOT KNOW WHAT THE HECK IT IS TALKNG ABOUT.

What’s interesting for me is that this is yet another demonstration of how the various components of the Bush administration just don’t seem to ever speak to each other. During Katrina, the FCC outshone just about every other federal agency in the competence department. But as the FCC’s Katrina Report (and testimony from my friends in the wireless community who came down to help in the crisis) shows, there were huge problems getting the other government agencies to respect FCC authorized damage control teams and FCC licensed services. Meanwhile, we have the Patent and Trademark Office negotiating a major overhaul of broadcaster rights at a WIPO treaty, with apparently no involvement from the FCC or any other potentially impacted agency. The Chair of the Federal Trade Commission has announced it will set up its own task force on net neutrality — again without any apparent involvement of the FCC.

And that’s just the stuff in my own little corner of the world. Look around Washington these days and you see little effort by the Bush administration to require any kind of cooperation among the various agencies. We get overlap, paralysis and turf wars galore. But we don’t seem to be getting much done.

It’s not all bad, of course. Traditional relationships, like between the FCC and the National Telecommunications Information Administration (NTIA) appear to be working just fine. But something is seriously wrong when the FAA just decides to issue a notice about all antenna structures in the United States, and apparently does not even think about picking up the phone first and calling someone at the FCC and saying “Hi there, we’re thinking of doing a rulemaking on stuff that impacts industries you closely regulate; can we get together and chat first so we don’t horribly embarass ourselves?”

Stay tuned . . . . .

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Tales of the Sausage Factory

The Federal Trade Commission Gets in on Network Neutrality

As widely reported, Federal Trade Commission (FTC) Chair Deborah Platt Majoras announced that the FTC will look at network neutrality. In the same paragraph, however, she also expressed her doubts on the need for network neutrality legislation. That, combined with her choice of forum (Progress and Freedom Foundation’s Aspen Summit; PFF is a vigorous opponent of NN), the FTC’s natural bias toward post-conduct remedies rather than prophylactic regulation, and Majoras’ decision to sign off on the Adelphia transaction without considering the voluminous evidence collected by the FCC make me suspect that the FTC will conclude that Congress should take no action and that antitrust solves everything.

A bit more analysis below.

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Tales of the Sausage Factory

Help Stop The Merger Madness

My friends at Free Press have set up this page to file comments opposing the AT&T/BellSouth Merger and the Comcast/Time Warner/Adelphia deal.

I won’t go over old ground again in detail here. You can read why I think the FCC should stop Comcast and Time Warner from dividing up the bankrupt Adelphia cable, the disappointing go ahead from the Federal Trade Commission, and my growing hope that the FCC will impose strong conditions or kill the deal. With a deadline for the companies to walk away from the deal fast approaching, you can help push the FCC to do the right thing.

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