A US federal appeals court has prevented the country from falling into a telecoms black hole – by asserting that the Federal Trade Commission (FTC) does have the authority to fine phone giant AT&T for misleading subscribers.
The decision today marks a significant shift in how telecommunications companies will be regulated in future – to put it bluntly, the FTC can crack down on telcos that misbehave.
It all kicked off when, in 2014, the FTC took AT&T to a US district court for failing to tell customers that their "unlimited" mobile internet connections would be severely throttled – by up to 90 per cent – once they reached a certain per-month download cap.
The telecoms giant was ultimately fined $100m. However, that wasn't the end of it. The phone company argued in front of a ninth circuit appeals court in 2016 that the FTC had no authority over it because it was legally designated as a "common carrier," and the Federal Communications Commission (FCC), not the FTC, is the only regulator with jurisdiction over common carriers.
AT&T won the argument. The decision also created a potential black hole for US citizens, because around the same time, the FCC decided to scrap its data privacy rules, and also said it would axe net neutrality safeguards that designated internet service providers as "common carriers."
In effect, with the court ruling that the FTC did not have the authority to punish the telco, and the FCC discarding its responsibilities over telcos, telecoms giants would have nobody to answer to when it came to how it treated people and their complaints.
And so both the FTC and FCC desperately appealed to the ninth circuit to hold a full "en banc" review of the decision. This week, the court unanimously agreed to reverse the earlier judgment, allowing the FTC to regulate telecommunications companies – and push ahead to get that $100m from AT&T.
“I welcome the ninth circuit’s ruling as good news for consumers," said acting FTC boss Maureen Ohlhausen. "It ensures that the FTC can and will continue to play its vital role in safeguarding consumer interests including privacy protection, as well as stopping anticompetitive market behavior.”
If the 11-strong panel of judges had decided in the other direction, it would have put both regulators – and especially FCC boss Ajit Pai – in a very difficult position where they were not only powerless to do their jobs but had actively undermined their own authority.
Unsurprisingly, Pai was relieved. "The ninth circuit’s decision is a significant win for American consumers," he said in a statement. "Among other things, it reaffirms that the Federal Trade Commission will once again be able to police Internet service providers after the Restoring Internet Freedom Order takes effect."
The Restoring Internet Freedom Order – which dismantles the US's net neutrality safeguards – was formally published in the Federal Register last week, and is due to kick in on April 23, with some parts delayed due to this pending appeal. Now that's out of the way, we can expect to learn when the net neutrality rules will be formally and fully dissolved, subject to the inevitable lawsuits.
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Today's ninth circuit decision [PDF] left no room for misinterpretation. It directly addressed the FCC's net neutrality shenanigans, noting that "the en banc court held that the prospective reclassification order did not rob the FTC of its jurisdiction or authority over conduct occurring before the order."
And just for good measure, it ruled that: "In reaching this conclusion, the en banc court looked to the FTC Act’s text, the meaning of 'common carrier' according to the courts around the time the statute was passed in 1914, decades of judicial interpretation, the expertise of the FTC and Federal Communications Commission (FCC), and legislative history."
In effect, the court is stating that it is fully aware of everything that has happened, as well as all the implications and the context of its decision. In other words: AT&T, you're welcome to try appealing this to the Supreme Court but you aren't going to get anywhere.
Still, with $100m on the line, it wouldn't surprise anyone if AT&T kept pushing the issue up the legal system. A spokesman for the US telco told us: "Today’s decision on jurisdiction does not address the merits of the [FTC's] case. We are reviewing the opinion and continue to believe we ultimately will prevail." ®