The big news from the FCC/FTC SuperSession wasn’t necessarily what was said, but who wasn’t there: the FCC.
A week before CES, FCC Chair Ajit Pai pulled out of appearing at CES, likely fearing backlash from the FCC’s recent repeal of the 2015 Title II net neutrality rules. A bit more surprising was that none of the other FCC commissioners appeared in Pai’s place to discuss the controversial repeal.
As a result of Pai’s and the FCC’s opt-outs, the FCC/FTC session turned into simply “Insights from the FTC,” featuring FTC Acting Chair Maureen Ohlhausen. Shapiro and Ohlhausen still discussed a number of relevant regulatory and enforcement issues of consumer to the consumer technology market, including 5G and network priority issues, big data vs. privacy, and what separates good big companies from potential monopolies, and of course, net neutrality.
Shapiro immediately addressed the elephant not in the room: “Possibly no other session in CES history has gotten as much pre-show attention as this one,” Shapiro observed before even introducing his guest, then noting why Pai decided not to attend. “He’s faced some horrible situations involving some personal threats to his life and his kids and his home.”
As for CTA’s position on net neutrality, Shapiro noted, “This is a very complex issue in terms of nuance, under any scenario. Republicans and Democrats agree on the most fundamental basic principles of being able to get what you should get. No matter which laws evolve over time, there is the backup of the FTC, the backup of the Congress, and there is bipartisan agreement on the basic fundamental principals.”
Ohlhausen then noted that under repeal, the FTC will play a larger role in enforcing the remaining open internet regulations in place prior to the repeal of Title II classification.
“The FTC also has a common carrier exemption in our statute,” Ohlhausen explained. “When the FCC reclassified broadband as Title II common carrier service, that divested the FTC of authority. From the advent of the Internet until 2015, the FTC played an active role. Now that the open Internet order was put out, eventually the authority is going to come back to the FTC.”
“One of the things the open Internet rules has is a requirement of transparency,” she continued. “ISPs are going to have to provide information on how they manage traffic. If they don’t meet those promises, the FTC will get involved. Last month signed memoranda with the FCC to how we’re going to divide up these obligations,” noting that the Department of Justice had a role to play in protecting marketplace competition.
Shapiro then addressed one of the more sensitive issues surrounding internet neutrality regulations, prioritization of service, citing the greater importance of autonomous cars communicating with each other over someone downloading a movie from Netflix – even though last July, the FCC vastly expanded spectrum allocation dedicated to use for just this kind of autonomous car communication.
Ohlhausen, however, considered the prioritization of other data, such as real-time health, safety and security data, connecting this kind of data transmission, prioritized or not, to privacy and cyber security concerns, both bot net attacks from hackers and misuse by connected and IoT product makers.
“If you have a product, have you developed it appropriately, have you run the right tests, and then are you patching it appropriately?” Ohlhausen advised. “We’ve taken actions against companies that have neglected obvious flaws once they’ve become aware of them. Are you doing updates? Do consumers understand how long a certain product will be supported?”
Shapiro then asked about the difference between big companies that governments may cast suspicious eyes at for having too much power.
“You can’t say big as bad, and small is good across the board,” Ohlhausen observed. “You have to look at why is it big? Is it innovating? Is it providing products that consumers want at a good price point? Is it thinking way down the road and getting new products to market that consumers want to use? That’s wonderful, that’s good for consumers. We want that kind of dynamism and innovation.
“But sometimes companies are because there are big economies of scale, economies of scope, there’s a lot of efficiencies in a big company. Or is it becoming big because it’s buying competitors, it’s not really competing on its merits. Once a company has gotten a market power, we may look to see whether if it’s using distribution chain or vertical restraints to fence out competition – and were always looking at companies it they are colluding. That’s a traditional area of anti-trust.”
Finally, Shapiro asked Ohlhausen to better define privacy in an age of big data. “What are the guard rails for protecting companies and consumers?” Ohlhausen noted that the level of injury is one enforcement measure.
“I think everyone agrees that social security or account numbers taken to commit fraud or theft, that’s a substantial injury,” said Ohlhausen. “But what other type of injury would society agree are injurious to consumers?” Ohlhausen cited a settlement filed today for shutting down a revenge porn site, but also noted that the FTC is not a criminal agency, and can only deal with issues of commerce. “How do we measure what those harms are?”