United States: Reading The Tea Leaves: What Lies Ahead For Broadband Privacy Regulation?

On April 3, 2017, President Trump signed into law a rare Joint Resolution of Congress under the Congressional Review Act ("CRA"), which disapproved the Broadband Privacy Rules adopted late last year by then-Chairman Wheeler's Democratic-led Federal Communication Commission ("FCC"), making final the rollback of the controversial rules adopted during the last months of the Obama Administration.  Beyond nullifying the rules themselves, the Congressional disapproval provides little clarity and leaves many questions unanswered regarding the privacy framework that will remain applicable to providers of Broadband Internet Access Services, and with numerous moving parts still in play, the question of who will regulate those privacy practices and under what rubric, is very much an open question.

The FCC's Broadband Privacy Order (the "Order"), which we discussed in detail following its release in October, applied a sweeping new privacy framework to be administered by the FCC upon not only traditional  telecommunications carriers and interconnected VoIP providers offering voice services, which had been subject to the Commission's former Customer Proprietary Network Information ("CNPI") rules, but also upon providers of Broadband Internet Access Services ("BIAS"), which the Commission previously had found were common carrier services under its 2015 Open Internet Order.  The reclassification, the Commission concluded, subjected BIAS providers to Section 222 of the Communications Act, a provision that prior to the Wheeler FCC, had been focused almost exclusively on the use of CPNI by voice providers, but in which the Commission now found far broader authority to more generally regulate the privacy and cybersecurity practices of broadband Internet access providers.

The Order implemented new protections for CPNI, and added specific protections for personally identifiable information ("PII") and the content of communications under a provision of Section 222 which the Wheeler Commission found imposes an independent duty on carriers to protect the confidentiality of customer proprietary information, beyond Section 222's CPNI requirements.  Web browsing and mobile application usage history were designated sensitive customer proprietary information ("customer PI") subject to heightened protection, including customer opt-in for use of the data for third party marketing purposes, beyond what the Federal Trade Commission ("FTC") has concluded is customer PI.  In addition to those new protections, the Order also eliminated certain CPNI regulations for common carriers, such as the annual CPNI certification and record-keeping requirements. 

It is clear that enactment of the CRA resolution means that these new broadband privacy rules will no longer be effective, and any aspects of the rules that had not yet become effective will never become so.  Congress's CRA rejection of the broadband privacy rules also has continuing effect: it bars the FCC from reissuing any substantially similar new rules as the broadband privacy rules that Congress has disapproved, absent new Congressional authorization.  Less clear is the extent to which broadband providers will remain subject to Section 222 in the absence of implementing rules.  The Wheeler Enforcement Bureau had used Section 222 to bring several high profile and controversial enforcement actions against carriers for alleged data breaches when no specific rules were in place, and shortly after adoption of the Open Internet Order released an Enforcement Advisory on broadband provider privacy practices under Section 222, pending adoption of formal rules.  Both actions suggest that Section 222 could remain a residual source of authority for the FCC to regulate BIAS privacy practices, even in the absence of specific rules.

It is virtually certain, however, given prior statements by Chairman Pai and Commissioner O'Rielly critical of Chairman Wheeler's expansive view of the FCC's Section 222 authority, that the current FCC Republican majority will avoid allowing the FCC to replace the FTC as a general regulator of all personal data handled by broadband providers.  Moreover, there is significant question as to whether the new FCC, under Chairman Pai, has any intention of bringing enforcement actions against broadband provider privacy practices under Section 222, to which, as a Commissioner during the Wheeler regime, Chairman Pai vociferously objected.

While Section 222 continues to apply (at least in theory) to broadband providers, since they remain currently regulated under Title II, the absence of implementing regulations makes ongoing regulatory obligations of broadband providers unclear.  For the time being, enforcement of broadband privacy protections of consumers will have limited and unclear authority and virtually no clear boundaries.   FCC enforcement activities, if any, will likely be limited to literal CPNI violations, as statutorily defined under Section 222(c), with the Republican-led FCC refusing to enforce any breaches of data security under Section 222(a), as the FCC had done in high profile Enforcement Bureau actions brought under Chairman Wheeler.

The elephant in the room, however, is that if the current FCC leadership does decline to police broadband privacy practices under Section 222 – either because Section 222 does not provide such authority (particularly after the CRA rejection of the FCC's broadband privacy rules) or simply as a discretionary matter it declines to apply what authority it does have – then the privacy practices of broadband providers, at least at present, will be subject to no federal oversight.  This is because post-reclassification, broadband Internet access services are outside the scope of the FTC's unfair and deceptive practices oversight authority, under the communications common carrier exemption to Section 5 of the FTC Act.  To further complicate matters, the FCC's reclassification of broadband Internet access services as a common carrier service, while initially sustained by the D.C. Circuit, remains unsettled, pending resolution of petitions for an en banc rehearing of the DC Circuit order, and any subsequent petitions for certiorari to, or review by, the Supreme Court.  Moreover, a decision en banc overturning the broadband common carrier classification would only clarify matters for providers that are not otherwise providers of common carrier services, such as some cable operators and stand-alone providers of mass market high-speed Internet access services.  These providers would, once again, become subject to the FTC's Section 5 jurisdiction.

But for wireless carriers and phone companies that provide broadband services, even if broadband Internet access services are reclassified as a non-common carrier offering, the FTC's hands will continue to be tied with regard to common carriers.  This is because its jurisdiction to regulate common carriers for even non-common carrier activities remains in question pending resolution of the 9th Circuit's ruling in FTC v. AT&T Mobility LLC that the common carrier exemption in Section 5 of the FTC Act is a status-based exemption barring any FTC oversight of common carriers.  The FTC has a pending petition for rehearing en banc of the 9th Circuit decision.

Regardless, the talk in Washington is of ways to fill this regulatory void.  Acting FTC Chairman Ohlhausen has urged Congress to give back the FTC's power to actively police broadband providers' privacy practices by rescinding the reclassification of broadband Internet access or lifting the FTC's common carrier exemption.   Moreover, a group of Democratic Senators, led by Senator Markey (D-Mass.) recently introduced a bill that would give the FCC explicit authority to adopt broadband privacy and cybersecurity regulations.  In addition, Senator Blumenthal (D-Conn.) separately introduced a bill, the pointedly named "Managing Your Data Against Telecom Abuses (MY DATA) Act," to restore FTC jurisdiction over broadband provider privacy practices.  So far, however, there is no indication of bipartisan support to fill the gap, and, in the absence of Republican support, the odds are long that either of these measures will pass in a Republican-controlled Congress, or be signed into law by President Trump.  At the same time, according to a recent report of the National Council of State Legislatures, states may be stepping in to fill the gap:  at least 12 states are considering legislation to adopt broadband privacy protections for consumers following the CRA disapproval of the FCC's broadband privacy rules  and in the absence of clarification at the federal level, state broadband privacy regimes may take on increased significance as the only game in town.

For those keeping score, the CRA is obviously a big win for broadband providers (Verizon, AT&T, and other large broadband providers, especially those with edge provider affiliates), which argued strongly that such privacy rules should be adopted uniformly across the Internet ecosystem, not advantaging one set of providers (edge providers) over another (broadband providers), by imposing opt-in requirements for use of consumer PI for digital advertising for some but not for others.  These providers are now free from the FCC's broadband privacy regulations and, at least in the short term, from FTC regulation until the FTC common carrier exemption is conclusively addressed by the courts or Congress.  On the other hand, the CRA may be considered something of a loss for the leading edge providers such as Google and Amazon, since the decision will likely mean more formidable competition from broadband providers for a piece of the profitable online advertising revenue pie.

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