FCC Reverses Course, Shifts ISP Customer Privacy Back to FTC

The wheel that is U.S. policy on “net neutrality” has taken another turn with the release of the FCC’s draft Internet Freedom Order, which, when effective, will reverse the Commission’s 2015 Open Internet Order (the “Title II Order”). As a reminder, the Title II Order moved broadband internet access service, or “BIAS,” from an information service governed by light touch regulation under Title I of the Communications Act to a “telecommunications service” subject to “common carrier” regulation under Title II of the Communications Act. 

Included with the Title II Order’s reclassification of BIAS were a number of regulatory obligations that contradicted almost 15 years of FCC and Supreme Court precedent that specifically exempted BIAS from Title II regulation. With the draft Internet Freedom Order, the FCC has returned to its pre-2015 conclusions:  it reinstates BIAS as an information service and jettisons many of the regulatory obligations established by the Title II Order. You can read about all of the changes here, but to find out how it affects (or does not affect) consumers’ online privacy and how ISPs use and share customer data, read on.

When BIAS was reclassified as a Title II telecommunications service in 2015, the FTC Act’s common carrier exemption shifted consumer privacy protection from the FTC to the FCC.  As a result, in 2016 the Commission, relying on its authority under the Customer Proprietary Network Information (“CPNI”) provisions in 47 U.S.C. § 222, adopted detailed privacy rules governing the provision of BIAS. Shortly after the change in administration this year, the Commission stayed those CPNI rules, which were ultimately repealed under the Congressional Review Act, thus prohibiting the FCC from implementing “substantially similar” rules in the future.

Many consumer advocates have argued that the repeal of the FCC’s privacy rules created a regulatory “gap” in online consumer privacy. However, in the absence of specific rules, broadband privacy has remained subject to the general protections in Section 222, which the FCC committed to enforce so long as BIAS remained classified as a Title II telecommunications service. By now moving BIAS back to a Title I information service, the Commission has stated its intent to “return jurisdiction” to the FTC “to apply its extensive privacy and data security expertise to provide the uniform online privacy protections that consumers expect and deserve.”  However, the privacy protections of Section 222 and the formerly reinstated CPNI rules will continue to govern traditional Title II voice services, as well as interconnected VoIP service.

In restoring the FTC’s jurisdiction, the FCC also rejects arguments that a recent 9th Circuit decision “precludes FTC oversight of non-common carriage activities of common carriers” which would prevent the FTC from overseeing activities of ILECs and other entities that provide common carrier services in addition to BIAS. That panel decision has been vacated and is awaiting a decision of the full court following argument on rehearing en banc last September.

In the event the full court reverses the panel decision, 9th Circuit law will be consistent with precedent from the 2nd and 4th Circuits that precludes FTC jurisdiction over common carriers only with respect to the actual provision of common carrier services.  If not reversed, the Circuit split would make the case ripe for Supreme Court review. Another wrinkle that will need to be ironed out in coming months is the effect of the draft Internet Freedom Order’s preemption of any and all “state and local laws that interfere with the federal deregulatory policy restored in this order.” In reaction to Congress’ repeal of the FCC’s rules, many state and local governments attempted to impose similar privacy rules in their respective jurisdictions.

Most of the bills introduced in 2017 were brought as emergency measures or were introduced late in the state legislative sessions, and failed as a result of their rushed nature. It is widely expected that the 2018 legislative season will see renewed state efforts, which will have to be reconciled with the FCC’s preemption language, the grant of rights to state and local authorities in other statutes (including within other sections of the Communications Act), and will likely trigger litigation.

Although released as a draft, we expect that it will be adopted by the FCC with few, if any, changes. To the extent that any changes are made to the draft Internet Freedom Order between now and final release, we will update this blog accordingly.