When one door closes another (possibly) opens.
Last week the D.C. Circuit Court of Appeals rejected the Federal Communications Commission’s attempt to police Internet service. The panel ruled that the agency overstepped its authority when it told Comcast not to block access to some Web traffic.
The ruling was a blow to advocates of the wonkish “net neutrality” — the idea that Internet access providers should treat all content the same.
For the moment, the FCC is considering its next step. The agency lost in the D.C. Circuit because of its previous move to classify broadband as an information service. The agency could reclassify Internet access as a transport service, which would allow the agency to regulate the industry in the same way it does telephone lines.
But the Federal Trade Commission also has been itching for a chance to test net neutrality ideas against its regulatory framework. In 2007, it issued a report that made the case for its jurisdiction over broadband providers. But the agency has not made much headway, in part because it is barred from regulating transport services, known as common carriers.
The appellate ruling last week made clear that, under the current framework, broadband is not considered a transport service — an opportunity that might allow the FTC to try its hand at regulating broadband.
“The FTC has been precluded by statute from common carriers, but if broadband is not a Title II service, then it’s not common carriage,” said Glenn Manishin, an antitrust and technology policy partner at Duane Morris LLP. ”That gives the FTC the opening they were looking for.”
Under current federal law, the FTC has the authority to go after both unfair methods of competition and unfair or deceptive practices. Both those mandates could provide an opening for the FTC to look into net neutrality.
For example, the FTC could require a broadband provider to disclose how it manages its network and what speeds it offers. Both ideas are part of the FCC’s plan to bring high-speed broadband to every American home — aspects of the plan now in doubt because of last week’s ruling.
On the competition front, the FTC might have an easier case to bring than antitrust regulators at the Justice Department. While DOJ authority is limited to traditional antitrust theories, the FTC has the more broad “unfair methods of competition” mandate.
If a broadband provider owned some video content and slowed down access to other video content or sped up access to its own, Manishin said, it is easier to characterize that as unfair competition than to bring a traditional antitrust case.
Current and former government officials said a FTC move to regulate net neutrality would make sense given the FTC’s broader statute and the agency’s aggressive approach to its jurisdiction under Chairman Jon Leibowitz’s leadership.
The agency brought its case against chip-maker Intel, for example, under novel legal theories that seek to expand the FTC’s authority. The FTC usually brings antitrust cases based on the settled law of the Sherman and Clayton Acts. But it has independent authority under the FTC Act, and the Intel case uses that independent authority.
Since the recent approach has yet to be tested by the courts, any push into the broadband market might first have to cross a few hurdles.
Still the FTC could have a role to play, said Joel Kelsey, a policy analyst at Consumers Union, if it could prove that a broadband provider was discriminating against some traffic with a clear intent to foreclose or limit potential competition.
The agency could go after providers who were using the power of the Internet to protect legacy businesses and shut out Web-based products like Skype, Hulu, and Netflix that compete with traditional cable and phone subscriptions.
But when Comcast interfered with user access that led to the D.C. Circuit ruling, the company argued it was just managing traffic. For the government to prove that a similar case involved a competitive move rather than a business decision would be difficult.
“There may be some things that the FTC or the Justice Department could do by way of antitrust enforcement,” said Donald Russell, a DOJ antitrust veteran who is now a partner at Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP. “But the kinds of practices that often come up under the guise of net neutrality would rarely be a violation of the antitrust laws.”
“Conduct in terms of how you run your business or price your services and what kind of terms you offer, unilateral practices get wide leeway under antitrust law,” he said. “I think in order to achieve the broad objectives of people advocating net neutrality, you have to have congressional action or reclassification.”
“What the FTC could do is pretty minimal,” he added.
When Congress considered updating telecommunications law in 2005, some legislative drafts included language to make violations of net neutrality antitrust violations. According to a Hill aide, the changes never passed the staff level because it was too difficult to craft statutory language identifying what exactly would constitute an antitrust violation.
How successful such a theory might be is an open question. “People said that Microsoft was a crazy case,” the aide said, referring to the shaky start of what turned into the Justice Department’s landmark monopolization case against the software giant in the 1990s. “It would take an aggressive antitrust enforcer [willing to] break some eggs.”









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