FTC Can Prosecute AT&T Over Mobile Broadband Slowdowns

In a closely watched case, a federal appellate court on Monday restored the Federal Trade Commission's authority to prosecute AT&T for allegedly duping wireless consumers by promising them unlimited data, but throttling their speeds after they hit a monthly data cap.

The ruling reverses an earlier decision by a three-judge panel of the 9th Circuit Court of Appeals, which said in 2016 that the FTC couldn't prosecute AT&T because the agency lacks the authority to police common carriers. Many observers interpreted that earlier ruling as depriving the FTC of the ability to bring any consumer protection cases against some broadband providers -- including cases for privacy violations or failure to honor net neutrality promises.

In the new decision, 11 appellate judges unanimously ruled that the FTC may prosecute common carriers like AT&T and other telecoms, provided the prosecution deals with a non-common carrier service.

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"We conclude that ... the FTC may regulate common carriers’ non-common-carriage activities," the judges wrote in the 34-page opinion.

The ruling grew out of the FTC's 2014 lawsuit alleging that AT&T duped more than 3.5 million people by selling them unlimited data plans, but slowing their connections after they exceeded monthly allotments ranging from 3 GB to 5 GB. (AT&T has since revised its practice.)

AT&T argued that the lawsuit should be dismissed on the grounds that the FTC lacks authority to prosecute common carriers. A trial judge rejected AT&T's argument, noting that mobile broadband wasn't considered a common carrier when the FTC filed suit. (In 2015, the Obama-era FCC reclassified mobile broadband as a common carrier service; last year, the FCC voted to repeal that classification.)

In 2016, a three-judge panel of the 9th Circuit reversed the trial judge and dismissed the FTC's case. That panel ruled that the FTC lacked jurisdiction based on AT&T's "status" as a common carrier -- regardless of whether the agency's complaint concerned a common-carrier activity.

The FTC then asked the court to reconsider its ruling. Consumer advocacy groups like Public Knowledge, some lawmakers and others -- including the FCC -- backed that request. In a rare move, Charter, Comcast, Cox and Verizon also sided against AT&T. The companies argued to the 9th Circuit that Internet service providers like themselves should be subject to the FTC's authority.

The 9th Circuit on Monday specifically rejected the idea that a company's "status," as opposed to its "activities," determines whether the FTC has jurisdiction over a particular practice.

The judges said that previous decisions had established that controversies about whether a company was a "common carrier" turned on the nature of the disputed activity -- and not the company's status. "AT&T provides no persuasive argument for why we should overturn these precedents and adopt a novel, status-based interpretation," the court wrote.

The judges acknowledged that the ruling left open the possibility that two different agencies would have authority over telecoms and other common carriers, but said that scenario was not problematic. "In the administrative context, two cops on the beat is nothing unusual," the judges wrote.

Harold Feld, senior vice president at Public Knowledge, praised the new ruling. "On the whole, we think this is a good decision," he said.

Feld added that the decision ensures that there is no regulatory gap -- meaning a situation where no agency has oversight over companies. "For the things that are clearly common carriage, the FCC exercises jurisdiction," he says. "For things that are not clearly common carriage, the FTC exercises jurisdiction."

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