Full 9th Circuit Revives Feds’ Data-Throttling Action Against AT&T

SAN FRANCISCO (CN) – A gambit to have the Ninth Circuit review en banc the Federal Trade Commission’s authority over telecommunications companies paid off in a major legal victory for the commission’s dispute with AT&T.

A roster of 11 judges vacated a prior decision by a three-judge Ninth Circuit panel which held the FTC can regulate AT&T even though the telecommunications giant said it was exempt due to its status as a common carrier.

A common carrier transports goods or people across state borders at set rates.

While the case dates back to 2007, when the FTC accused AT&T of arbitrarily creating network congestion to hurt cellphone customers with unlimited plans, the case before the Ninth Circuit quickly evolved into a legal fight over what agency has regulatory authority over telecoms under federal law.

AT&T argued that as a common carrier its activities belong under Federal Communications Commission purview, particularly as common carriers are explicitly exempt from FTC oversight by a 1914 law originally applied to the railroad industry.

“We’re happy to defend our practices to the FCC,” said AT&T attorney Michael Kellogg, during a hearing in front of the en banc court in September. “But we shouldn’t have to open up a second front.”

The FTC, on the other hand, argued that while AT&T is doubtless a common carrier, the data throttling it was accused of was not a common carrier activity and therefore falls firmly within FTC jurisdiction. According to the FTC, the exemption AT&T relied on applies to activities of common carriers, not the carriers themselves.

The case has major implications for the regulation of telecoms in a business landscape where their operations have branched out considerably from their former missions and are increasingly intertwined with the complexities of 21st century cellular communications infrastructure.

Circuit Judge M. Margaret McKeown acknowledged as much in a 34-page opinion issued on Monday.

“The transformation of information services and the ubiquity of digital technology mean that telecommunications operators have expanded into website operation, video distribution, news and entertainment production, interactive entertainment services and devices, home security and more,” McKeown wrote for the en banc court.

For this reason, tasking the FTC with oversight of AT&T’s non-common-carrier operations is “common sense.”

“Permitting the FTC to oversee unfair and deceptive non-common-carriage practices of telecommunications companies has practical ramifications,” McKeown wrote.

The ruling rates as a mild surprise in legal circles, given the three-judge panel’s finding that the 1914 federal law unequivocally stated that common carrier exemptions were status-based irrespective of the activities involved.

“The plain language of the common carrier exemption casts the exemption in terms of status, contrary to the FTC’s position,” Circuit Judge Richard Clifton wrote this past August.

Monday’s ruling does not decide whether AT&T is guilty of the FTC’s accusations of data throttling, which the FTC says began in 2011. Rather, AT&T’s efforts to have the case dismissed on jurisdictional grounds fails.

In its original complaint, the FTC said AT&T offered unlimited data plans but deliberately reduced data speeds of customers who surpassed certain data thresholds, making smartphone app services like GPS and video streaming difficult.

This was done independent of any network congestion and was not accompanied by appropriate disclosures, the FTC said. According to the agency, millions of customers were affected and data speed was throttled on as many as 12 days per billing cycle.

The en banc panel also held the FCC’s decision to reclassify mobile data service as a common carrier service in 2015 – a year after the FTC filed its action against AT&T – did not rob the trade commission of its authority to deal with prior conduct.

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