The FCC’s Sprint to a Broadband Privacy Rulemaking: Discounts for Data, the Ninth Circuit Decision, and What Comes Next

ITIF gathered a panel of experts to discuss the Federal Communications Commission’s (FCC) proposed broadband privacy regulations, which would result in an unwise departure from the Federal Trade Commission’s (FTC) flexible privacy framework. A recent Ninth Circuit Court decision has thrown a wrinkle into the jurisdictional boundary between the FCC and FTC, significantly heightening the need for the FCC to harmonize its approach with the FTC. What's more, the FCC’s privacy proposal has emboldened advocates to seek a wrong-headed ban on Internet service providers offering discounts in exchange for permission to use consumer data commercially.

There was general agreement amongst the panelists on the value of the FTC’s regulatory framework. The FCC proposal, which departs from the FTC approach most significantly in requiring opt-in rather than opt-out consent for most uses of broadband data, is likely to chill beneficial uses of data without providing countervailing gains to consumer welfare. As ITIF’s Doug Brake explained, many consumers are happy to share their data if they see a concrete upside; policymakers should encourage sharing of data to promote diffuse benefits of additional data-fueled innovation throughout the economy, as long as there is a fallback opt-out available for privacy-sensitive consumers.

Neil Chilson, attorney-advisor to FTC Commissioner Maureen Ohlhausen, described the FTC’s approach to privacy oversight. He framed the debate around two different choice architectures: the FTC model, which bases the level of care expected of companies on the sensitivity of the consumer data and their relationship with consumers on the one hand, and the FCC proposal that requires more stringent opt-in based purely on who holds the data. He added that the classification of sensitive vs. nonsensitive data is descriptive not normative, and can change in response to consumer expectation.

According to Nancy Libin, former chief privacy officer at the Department of Justice, the FCC proposal does not reflect the dynamic realities of our current Internet ecosystem. Because the FTC framework is based on the sensitivity of the data with a default opt-out expectation, it focuses on the relationship between the provider and the consumer. Libin says that over the evolution of the Internet, this regulatory approach has been “fundamentally sound” and “protected consumers while the Internet has remained an open and dynamic marketplace where innovation can flourish.”

Doug Brake argued that the FCC’s rules on consumer data will inhibit business model innovation around offering discounts to users in exchange for participating in data collection programs. The general concern amongst panelists was that a prohibition on such deals would undermine consumer choice to make decisions around privacy and other values. Regulations with a choice-centered, ex post enforcement regime—like the FTC’s—will allow for business model flexibility and innovation throughout the Internet ecosystem.

The panelists also discussed a recent Ninth Circuit Court decision, FTC v AT&T, which has raised further questions about the FTC-FCC jurisdictional boundary when it comes to common carriers. Moving forward, panelists suggested it would be right for the opinion to be revisited. Dr. Nicol Turner-Lee, vice president of the Multicultural Media, Telecom and Internet Council, expressed concern about undermining the FTC’s extensive consumer protection efforts in this space.

Overall, the panel concluded that a privacy framework that simultaneously builds trust and maximizes choice for the consumer in the entire Internet ecosystem will provide the best platform for future innovation.