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FTC Challenges Court Rejection of AT&T Throttling Action

As promised, the Federal Trade Commission has challenged a recent federal appeals court decision that the common carrier exception to its jurisdiction is status-based, not activities based, a decision that could leave edge provider privacy not only out of reach of the FCC, but the FTC as well, at least where the Ninth Circuit has jurisdiction.

The petition for en banc (full court) rehearing of the three-judge panel decision was filed late Thursday (Oct. 13) in the U.S. Court of Appeals for the Ninth Circuit.

FTC Chairwoman Edith Ramirez signaled the appeal was coming when testifying before a Senate Commerce Committee oversight hearing panel last month.

Ramirez said that the court's decision has "significant ramifications for our jurisdiction," adding:...I will note that we are going to seeking a re-hearing in that matter."

"As our filing makes clear, the decision in this case poses a threat to consumer protection and should be re-heard by the full court," said FTC spokesperson Peter Kaplan.

"The panel’s ruling creates an enforcement gap that would leave no federal agency able to protect millions of consumers across the country from unfair or deceptive practices or obtain redress on their behalf," the FTC said in its filing wiht the court. " Many companies provide both common-carrier and non-common-carrier services—not just telephone companies like AT&T, but also cable companies like Comcast, technology companies like Google, and energy companies like ExxonMobil."

"No other federal agency can fill this gap," the FTC says. "The Federal Communications Commission can address harms related directly to telephone or internet service, but it lacks authority over other products or services, such as email and e-commerce....The problem is especially severe in the area of consumer data privacy and security. As recent news reports make clear, data breaches can put vast troves of personal data from hundreds of millions of consumers at risk."

The FCC, which is addressing data privacy in a couple of proceedings--broadband privacy and set-top boxes--has cited FTC authority to assuage some stakeholders concerned about the FCC's approach to the items.

“We believe the appeals court’s ruling was correct, and that any reviews would agree," said AT&T in response to the filing.

A three-judge panel of the Ninth Circuit, in overturning the FTC's action against AT&T for throttling the speeds of unlimited data customers, ruled that the exception is not confined to common carrier "activity" by an entity that has the status of a common carrier, but to noncommon carrier activity by that entity as well.

That suggests that an edge provider, say, could skirt any privacy regs by merging with a common carrier--Yahoo! and Verizon, for example--because the FCC's reclassification of ISPs as common carriers triggered that exception, while the FCC says it does not have authority to regulate edge providers.

The FTC had claimed that the exemption was activity-based, so that it only applied to common carrier activities undertaken by common carriers. That left the FTC free, or so it thought, to regulate the mobile broadband of AT&T, which at the time of the action was classified as a non-common carrier service.

The district court, in refusing AT&T's request that the FTC case against it be dismissed, had concluded that the exemption applied “only where the entity has the status of common carrier and is actually engaging in common carrier" activity. The Ninth Circuit panel disagreed.

Ramirez pointed out at the Senate hearing that the FTC supports getting rid of the exemption altogether. She called it "absolutely outdated."

The Ninth Circuit decision is applicable in California, Oregon, Washington, Montana, Idaho, Nevada, Arizona, Alaska, Hawaii, and Guam.