How Will New Net Neutrality Rules Impact Advertisers?

February 6, 2015

The media is riveted on the news that, for the third time, the Federal Communications Commission (FCC) is poised to adopt net neutrality rules (its two previous efforts were overturned by the courts). The exact details of this latest effort are not yet available, but the information trickling out already raises red flags and issues of great interest to advertisers.

Apparently, FCC Chair Tom Wheeler contemplates -- for the first time -- applying, to some still not fully defined extent, traditional Title II (i.e., “common carrier”) regulation to Internet providers. Title II of the 1934 Communications Act has been applied over the years to telephone providers, and involves such issues as tariff filings, rate regulation, service requirements and the like. Wheeler is asking his fellow commissioners to apply certain parts of Title II that, e.g., retain the FCC’s ability to take action in the privacy area, ensure build-out opportunities, oversee the Internet backbone, and prevent paid prioritization (i.e., “fast lanes”). Any obligations that are applied could then, of course, be enforced against violators. As of now, it doesn’t seem that the proposal will apply to price regulation, require that tariffs be filed, or demand contributions to the fund that provides universal communications availability. But without doubt, many telecommunications companies are already signaling that they are adamantly opposed to this far-reaching regulatory expansion.

Among the potential issues raised by the proposed rules is the critical questions of whether they will preempt the authority of the Federal Trade Commission (FTC) to oversee broadband provider activities. In order to avoid duplicative regulation, the FTC Act precludes the agency from exercising jurisdiction over those regulated as “common carriers” by the FCC. If the FCC “cherry-picks” and imposes some common carrier regulations, the FTC’s authority will be thrown into doubt, as it will be unclear whether – and to what extent – the FTC would still have authority over Internet providers. This will create great uncertainty and could result in inconsistent or duplicative regulation. States that enforce “mini-FTC Acts” based on FTC’s jurisdiction could have their authority called into question, further muddying the waters for advertisers and their customers about state requirements. Local jurisdictions also might not have authority to continue some of their efforts. Advertisers and their customers could be left guessing as to what is required of them, or risk enforcement for undertaking activities that are required or permitted by one federal agency but not another. In short, if these proposed changes are not carried out extremely judiciously and carefully, they could create a regulatory mess.  

Among the many issues ANA will be watching as the net neutrality rules are spelled out are:

  • If there will be preemption of FTC authority on such issues as privacy, ads for service, and providers’ duty to inform customers about terms of agreements, promotions of additional services, and other outreach for companies regulated under Title II?
  • Will advertisers and Internet providers face duplicative or inconsistent obligations?
  • What will be the effect of the new rules on marketers’ ability to reach audiences quickly and efficiently?
  • How extensive will be the impacts of any potential additional federal, state and local fees (e.g., excise taxes, franchise fees) that may be imposed on telecommunications providers under Title II, and their subsequent effect on advertisers and consumers (including the amount and placement of advertising)? 

Stay tuned; this is potentially one of the bigger issues to confront the Internet since its inception, and is sure to generate responsive legislation, litigation and tremendous controversy. We’ll be in touch as the details emerge, and ANA members should be vigilant as well. ANA also will be covering these net neutrality and other FCC communications issues at our 2015 Advertising Law & Public Policy Conference.


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