What’s the Big Deal About Internet Privacy? (Part 1)

If you follow the news, you might be aware that the 115th Congress just changed some rules around internet privacy.  If you’re aware of the potential implications for consumers you’re probably in the minority.  If you’re able to explain what exactly happened and what it means for the stakeholders involved, you’re in a small group indeed. The lack of public understanding of this issue is forgivable: Broadband internet regulations are a complex issue, and truly understanding the policy implications of this move requires time and effort that most people simply don’t have. But it’s also a shame, because this rule change will impact everyone, whether we realize it or care.

In order to really understand what just happened and what it means, we need to consider the following:

  • Historical context – how did we get here?
  • The FCC rule and current policy – why does it matters?
  • Stakeholder concerns – who are the winners and losers?
  • The future of the industry – what happens next?

This post is the first of a four-part series in which we examine these questions one at time, beginning with a brief overview of the historical context for the FCC rule.

Historical Context – How did we get here?

The Communications Act of 1934

To understand where we are, we need go all the way back to the Communications Act of 1934, which established the Federal Communications Commission (FCC). This act effectively consolidated prior regulatory frameworks and created a single enforcement body to “regulate interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States a rapid, efficient, nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges….”

The Communications Act of 1996

The Communications Act stood largely unaltered until 1996, when Congress updated the law. It’s safe to say that the 1996 update is where our current internet policy has its roots: In addition to addressing local and long distance telephony and cable regulations, the act addressed for the first time how internet services companies would be treated. At the time the internet was still largely a novelty, and it would have stretched the imagination to call it an essential service. Ultimately lawmakers, heavily shaped by the telecoms industry but also not wrong, decided to reduce regulatory barriers on internet service providers in order to increase competition and accelerate private sector innovation and investment.  They executed this goal by creating a separate class of communication services company: the “information services” provider.  This action released internet service providers from the stricter regulations governing telephony and traditional telecoms companies.

Times changed…quickly

Do you remember what the internet was like in 1996?  The world changed quickly over the past twenty years.  As a result, the FCC began considering reclassifying ISPs as common carriers under Title II as far back as 2010.  Proponents for change argued that individuals and businesses had come to rely on broadband services for all manner of public and private communications of varying sensitivity: email, banking, commerce, and even government functions like license renewal and tax filings.  None of this was top of mind for lawmakers in 1996, although it was foreseen by some in industry.

Common carriers

As the shift in use began to accelerate, so did discussions of how policy should evolve.  The industry fought this shift, ramping up lobbying spending over the course of the past decade.  Despite fierce opposition from service providers, in February 2015 FCC Commissioners voted 3-2 to designate Broadband ISPs as “common carriers” under Title II of the Communications Act. This meant broadband ISP would be required to act in the public interest on issues of privacy, security, and fair access. The shift manifested in new rules requiring ISPs to:

  1. Get permission from customers to collect, use, and sell their personal data
  2. Strengthen broadband network security

Following the FCC rule change, ISPs launched a legal challenge that was rebuffed in a 2015 appellate court decision which agreed with the FCC majority view that broadband is an essential service.

A side note: ISP trade groups have fueled a misperception that the FCC rule change would treat broadband like a “utility”. The 2015 FCC rule did NOT classify broadband as a utility. “Common carrier” status is different from “utility” status, and Title II governs both. Common carriers are not subject to regulation of price, service quality, and customer service responsiveness, unlike utilities.  Common carriers are regulated on privacy, security, and fair access.  It’s an important distinction, and the misrepresentation of the FCC rule change has distracted from real debate on the merits of the policy.

Congressional action

The rule change provided for a transition period, essentially giving ISPs until 2018 to meet requirements.  As such, the rule hadn’t even taken effect when the 115th Congress convened, and in March used its powers under the Congressional Review Act to dismiss the FCC rule.

Recap

To sum up, the FCC has owned regulation of ISPs since such regulation began.  Initially, the FCC correctly decided to limit regulation of ISPs in order to accelerate investment and innovation.  The world changed, and the FCC attempted to update policy to reflect the role that the internet plays in our lives and in the economy.

Part 2 builds on this historical primer and explore the merits of arguments for and against the 2015 FCC rule change.

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