FCC Stay of Broadband Privacy Rules Foreshadows Deregulatory Measures

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As anticipated, the Republican members of the Federal Communications Commission are taking steps to pare down the 2016 Broadband Privacy Order now that they are in the majority. The FCC has released an order staying the data security requirements of the Broadband Privacy Order. The FCC’s partial stay and ultimate reconsideration of the Broadband Privacy Order bring to the forefront questions about whether there will be any federal oversight of broadband internet access service (BIAS) privacy at all in light of a 2016 court case that curtailed the Federal Trade Commission’s jurisdiction over common carriers. These actions present a related question for the broadband industry: Which agency, the FCC or the FTC, would the industry prefer as its new privacy regulator?

FCC’s Stay of Data Security Requirements

On March 1, 2017, a divided FCC voted on partisan lines to stay the data security measures contained in the Broadband Privacy Order that had been scheduled to become effective on March 2, 2017. The stay will remain in effect until the FCC acts on petitions for reconsideration of the Broadband Privacy Order. It does not, however, affect the non-controversial parts of the Broadband Privacy Order that became effective earlier this year, nor does it address the more controversial notice and consent requirements that are scheduled to become effective later this year.

In the 2016 Broadband Privacy Order, adopted shortly before the presidential election, then-Commissioner Pai and Commissioner O’Rielly had previewed potential challenges to the order in their dissents, arguing that the FCC should have tracked the FTC’s existing data security framework. Now, the stay order gives observers the first official confirmation of what Chairman Pai will seek to do to the Broadband Privacy Order going forward. In the recent stay order, the FCC found that the petitioners are “uniquely likely to succeed on their claim” that the Broadband Privacy Order’s data security requirement swept too broadly and too vaguely, with the effect of “substantially widening the uncertainty and compliance burdens imposed upon ISPs relative to all other Internet entities and heightening the risks of different interpretations.” In other words, the Pai FCC remains particularly concerned that the now-frozen data security requirements would have imposed obligations on BIAS providers that exceeded the obligations imposed by the Federal Trade Commission on other actors in the internet ecosystem.

Although the stay does not affect the implementation of other aspects of the 2016 Broadband Privacy Order, such as new notice requirements, customer approval requirements, and data breach notification requirements, these requirements remain delayed pending review by the Office of Management and Budget under the Paperwork Reduction Act. Chairman Pai stated that FCC expects to resolve the petitions for reconsideration before those requirements become effective, and it is reasonable to expect those requirements will be revised to more closely align with existing Federal Trade Commission requirements.

Jurisdictional Uncertainties

Concurrently with release of the stay order, FCC Chairman Pai and FTC Acting Chairman Maureen Ohlhausen also released a joint statement in which they expressed their desire for “jurisdiction over broadband providers’ privacy and data security practices [to] be returned to the FTC[.]” The statement said the FCC “stripped broadband consumers of FTC privacy protections” two years ago when the FCC promulgated the net neutrality rules and reclassified broadband as a common carrier service under Title II of the Communications Act. Based on this joint statement, it appears that Chairman Pai will continue to work to reverse the Title II reclassification with the support of the FTC.

However, as FCC Commissioner Clyburn noted in her dissent from the stay order, all common carriers (including reclassified BIAS providers) are currently exempt from FTC authority under a recent opinion from the U.S. Court of Appeals for the Ninth Circuit, which held that the FTC could not bring enforcement actions against any company regulated as a common carrier under Title II (which would include BIAS providers), regardless of whether the entity was acting in a common carrier capacity. FTC v. AT&T Mobility LLC, 835 F.3d 993 (9th Cir. 2016). Commissioner Clyburn argued that the effect of the FCC’s stay combined with the Ninth Circuit decision essentially creates a vacuum in which consumers have little regulatory recourse, at least with respect to data security measures. The FTC has petitioned the Ninth Circuit to reconsider the decision en banc. There still seems to be disagreement—both in industry and in government—over (1) whether the FCC should regulate broadband privacy, (2) the appropriate contours of the FTC’s jurisdiction over common carriers, and (3) whether the FCC should retain broadband privacy jurisdiction provided that it closely aligns with the FTC’s broader guidance for the internet ecosystem. The resolution of these questions may depend on developments in the pending appeal of AT&T Mobility case, as well as possible legislation affecting the FCC’s Title II reclassification decision, the FTC’s jurisdiction over common carriers, and future regulatory actions by the Pai FCC concerning net neutrality and broadband privacy regulation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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