• by Wendy Davis  @wendyndavis, October 25, 2017

A high-stakes but messy fight between the Federal Trade Commission and AT&T over its mobile broadband practices may have just become even more complicated.

Late last week, the Federal Communications Commission said in new court papers that it disagreed with a key contention made by AT&T at a hearing. On Tuesday, the appellate court refused to consider the FCC's new filing.

The battle dates to late 2014, when the FTC sued AT&T for allegedly duping people by selling them plans with unlimited data, but throttling their mobile broadband connections after they exceeded a monthly cap of 3-5 GB.

AT&T has argued that the case should be thrown out on the theory that the FTC lacks jurisdiction over telecom companies. A trial judge disagreed with AT&T, but a three-judge panel of the 9th Circuit Court of Appeals sided with the telecom and dismissed the case.

The 9th Circuit then agreed to review the case "en banc" -- meaning that 11 of the circuit's judges will vote on the matter.

Numerous outside groups -- including consumer advocates, lawmakers and the FCC -- weighed in against AT&T on the dispute. Among other arguments, they said that AT&T's theory would create a regulatory gap, meaning a situation where no agency can prosecute companies that offer common carrier services -- even if those services are only one component of a larger business -- for matters like deceiving consumers or violating privacy policies.

Last month, the 9th Circuit Court of Appeals held a hearing on the matter. At the hearing, Circuit Judge Alex Kozinski questioned AT&T's lawyer about whether a ruling in the company's favor would create a regulatory gap.

For instance, Kozinski asked, what would happen if Procter & Gamble purchased a common-carrier company specifically in order to avoid regulation by the FTC. "Do I say bye-bye FTC?" Kozinski asked.

AT&T's lawyer, Michael Kellogg, responded that the FCC could require Procter & Gamble to run its common carrier business as a separate subsidiary

On Friday, the FCC attempted to dispute AT&T's contention. The agency said in court papers that it could require not a company to separate a common-carrier service into a new subsidiary solely to ensure that the FTC can bring enforcement actions.

"AT&T’s argument that the FCC has the legal authority to require structural separation in order to facilitate FTC regulatory authority is baseless," the FCC wrote in a letter it unsuccessfully attempted to submit to the court.

"Even assuming it has the necessary authority, FCC imposition of structural separation requirements to allow the FTC to exercise jurisdiction over a carrier’s non-carrier activities would be unprecedented," the agency added. "The FCC has imposed separation requirements for one purpose only: to prevent abuses by carriers with market power."

It's not clear why the FCC waited four weeks to submit its letter, or why the 9th Circuit rejected the filing.