Why the FCC Broadband Privacy Order Deserves to Be Thrown on the Scrap Heap of Telecom History

Doug Brake February 17, 2017
February 17, 2017

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In the waning days of the Obama administration, the Federal Communications Commission passed a set of rules that effectively shut broadband providers out of new data-driven business models. It is important that broadband consumers have choice and control over how their data is used, but the overly restrictive defaults imposed by the recent FCC rules come at a real cost to the economy and do not align with an average consumer’s best interest. Thankfully, the change in administration now provides an opportunity to revisit these flawed rules.

The FCC’s privacy rulemaking was initiated in part because of the classification of broadband as a common carrier under Title II of the Communications Act—a step taken to implement the particular net neutrality rules the FCC wanted. This common carrier status prevents the normal privacy cop, the Federal Trade Commission (FTC), from pursuing its usual privacy oversight duties when it comes to broadband providers. But sector-specific privacy rules for broadband providers are fundamentally misguided; broadband privacy belongs with the FTC. Under the FTC’s enforcement of best practices and broadband provider policies, privacy protections are already well balanced with other values, such as cost, usability, and innovation.

The FCC’s sector-specific rulemaking underappreciated the impact of increasingly prevalent privacy-protecting technologies like encryption and virtual networks. What’s more, all major broadband providers already allowed consumers to control how their information is used—a fact the FCC appears to have ignored. It is unfortunate that the FCC was convinced to dispose with FTC-style privacy oversight, as it comes with numerous benefits. The greater flexibility under the FTC enforcement framework allows room for new business models that could support expensive, next-generation networks with revenue other than consumers’ monthly bills.

The FCC’s deviation from the historical privacy protections of the FTC framework has the potential to significantly disrupt ongoing dynamic competition in innovative new uses of Internet data, ultimately slowing the rate of growth of broadband deployment and adoption and also degrading the broadband users’ online experience. Beyond the obvious opportunities to put downward pressure on broadband prices through more targeted advertising, data is increasingly becoming a key fuel for innovation. Recent breakthroughs in artificial intelligence are predicated on “training” algorithms on large pools of data, so to effectively shut data collected by broadband providers out of this burgeoning field would be a mistake.

The FCC’s rulemaking set a poor precedent for privacy rules touching other sectors of the economy, undermined the U.S. position when negotiating privacy issues abroad, dramatically deviated from the usual consensus-driven multistakeholder model of developing Internet rules, and unnecessarily expanded the scope of utility-style regulation of broadband. Indeed, it was an unfortunate step toward a European-style privacy regime based on the precautionary principle. It’s no coincidence that the EU has stringent privacy rules but few global Internet leaders of its own.

Thankfully there is now opportunity to revert from these mistaken regulations. There are a couple different paths to achieve this. On the Hill, there could be a Congressional Review Act (CRA) resolution of disapproval or a broader reworking of the FCC’s jurisdiction in this space. The FCC also has the opportunity to revisit these rules on its own initiative. The CRA approach may well be the cleanest and most straightforward, but what is important at the end of the day is that these rules should be scrapped.