FCC Wins Major Court Case, Gains Even More Regulatory Power

June 27, 2016

Earlier this month, in a 2-1 decision the D.C. Circuit Court of Appeals upheld the Federal Communications Commission’s (FCC) Net Neutrality Open Internet Order. This decision has major implications for the advertising industry, but faces further significant challenges in the courts. Opponents of Net Neutrality are likely to demand an "en banc" review of this decision, or they may appeal directly to the Supreme Court. There is a clear desire by telecommunications companies to strongly oppose this Order. AT&T general counsel David McAtee, for example, stated after the decision that, “We have always expected this issue to be decided by the Supreme Court, and we look forward to participating in that appeal."

The Open Internet Order impacts regulation of the entire spectrum of telecommunication commerce.  While the legality of the Order continues to be determined, the FCC is charging full steam ahead on two major new Notices of Proposed Rule Making (NPRMs) regarding broadband privacy and set-top box regulation.

If the Circuit Court had ruled against the FCC, the Commission would have had no authority to proceed with the privacy NPRM. But even if the Supreme Court rules that the Open Internet Order should stand, both of these NPRMs should still be overturned because they violate the Constitution and do not further the public interest.

The FCC is attempting to implement a bifurcated regulatory environment in which consumers, business, the internet ecosystem, and the U.S. economy will be seriously hurt. In the privacy NPRM, this is evidenced by the FCC’s failure to differentiate between sensitive and non-sensitive data collected by internet service providers (ISPs) and imposing a sweeping consumer opt-in regime. As a result, broadband ISPs and their advertising operations would become far more inefficient and far less effective without providing any benefits to the public interest. At the same time, the FCC’s set-top box proposal would rupture the contractual privity relationships between advertisers and Multi-Channel Video Programming Distributors (MVPDs). Clearly, these NPRM initiatives need to be substantially reconstructed or defeated.

Back in a February 2015 post to this blog, we outlined four major advertising community concerns raised by Net Neutrality. These include:

  1. 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?
  2. Will advertisers and internet providers face duplicative or inconsistent obligations?
  3. What will be the effect of the new rules on marketers’ ability to reach audiences quickly and efficiently?
  4. 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?

The potential full effects of the NPRMs and the Net Neutrality order on advertisers and the regulatory environment still remain to be answered. However, we now know that these threats continue to grow. The FCC needs to realize that even if it has the authority to create new rules and regulations, these rules still need to be both constitutional as well as meeting their public interest obligations. So far, the FCC has fallen far short of meeting these requirements. ANA pledges to continue to pursue these issues forcefully in the coming months.

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