Final FCC Privacy Rules Expected to Largely Track Disputed NPRM

Rosenworcel, in particular, has expressed some concerns about the complexity of the rules, though she supported the NPRM. Former FCC officials said because Wheeler is unlikely to get support from Republicans Ajit Pai and Mike O’Rielly, as has been the case on other big-ticket items, the two Democrats wield substantial power. Neither Democrat is expected to demand the kinds of material changes that would mitigate the concerns of ISPs, the officials said.

Neither Rosenworcel nor Clyburn has a demonstrated history of fundamentally breaking with the chairman on any orders that are important to him, said a former FCC official: Their "modus operandi" has been initially to appear to question some of the details around the edges of Wheeler's proposals and eventually vote yes.

A lawyer who represents ISPs on privacy issues said the gap between Wheeler and the two Republicans is so wide on privacy there will be no discussions. “I would expect Clyburn and Rosenworcel to be putting together a ‘checklist of changes’ in return for their votes,” the lawyer said. “Neither will want to be seen as holding up the item, but make no mistake, Wheeler’s office needs them on board and sooner rather than later. The clock is ticking.”

Rules are likely to closely track the NPRM, unless Wheeler gets objections from his Democratic colleagues, said ex-Rep. Rick Boucher, D-Va., now at Sidley Austin. “I doubt that on this subject [Wheeler] is going to be soliciting much in the way of comments from the two Republican commissioners,” he said. A 3-2 vote seems inevitable, Boucher said. Wheeler “will do what he needs to do in order to get three votes,” he said.

Public Knowledge staff attorney Meredith Rose defended Wheeler and the FCC majority. “We see the comprehensive scope of the current NPRM as a good thing,” she said. “Rather than stumbling into it, the FCC wants to cover as many bases, and address as many ‘what ifs,’ as possible. The breadth and depth of the questions displays that the commission has clearly given an enormous amount of thought to the issue, and is prepared to tackle it from all angles. It is nothing if not prepared for this proceeding.”

Nothing in the NPRM is “particularly technically challenging,” especially for an FCC proceeding, Rose said. “ISPs would rather have a very basic NPRM so that they could insist on endless ‘clarifying’ follow-ups and eventually kill it or run out the clock on Chairman Wheeler’s tenure.” The big ISPs' fundamental objection is that the FCC never should have reclassified broadband as a Communications Act Title II service, Rose said. “Unfortunately for them, that ship has sailed, and barring a court reversal, it’s not coming back.”

Most eyes are on Rosenworcel. Her “concerns about the complexity of the proposal are certainly justified, and the chairman’s insistence on trying to put his personal stamp on this and other complex issues just before the impending presidential election isn’t going to make it any easier for him to address her concerns,” said Fred Campbell, executive director of Tech Knowledge. “These are novel issues with a lot at stake, and the chairman is the only one who has a reason to rush rather than try to get it right.”

The FCC is starting to lose in court, Campbell said, citing the 3rd U.S. Circuit Court of Appeals rejection last week of the FCC joint sales agreement attribution rule (see 1605250073). “Wheeler’s way of playing fast and loose with the law and regular procedures isn’t playing well in the courts, which indicates going along with his plans to rush major decisions could wind up being another waste of the agency’s time and credibility,” Campbell said.

FCC Needs To Listen

AT&T Senior Vice President-Federal Regulatory Bob Quinn unloaded on the privacy proposal in a blog post: “Although ISPs are one type of company involved in that flow of online information (the ISP ‘connected’ you to WebMD.com), the inescapable fact is that information about your web browsing activity is collected, used and exchanged by countless online companies (websites, apps, operating systems etc.) for marketing purposes.”

But Quinn questioned whether industry comments will make a difference. “As the FCC appears to have already made up its mind about most if not all of these rules, these concerns will probably fall upon deaf ears,” he said: “It’s striking” that the NPRM “neither referenced nor cited” research by Peter Swire (see 1602290047) that counters conventional wisdom that ISPs have comprehensive visibility and unique insight into consumers. At the FCC, “They seem to not want to hear what they don’t want to understand,” Quinn wrote. The FCC didn't comment Friday.

“The twin proceedings regarding unbundling rules for cable set-top boxes, combined with broadly written privacy rules for ISPs, create a dramatic imbalance between what privacy rules apply to ISPs versus edge providers,” said former Commissioner Robert McDowell, now at Wiley Rein. “Privacy law experts are starting to reach consensus that the commission is trying to reshape the privacy legal landscape, and therefore the Internet ecosphere, to such an extent to where their new construct can't be sustained. If the proposed new regime were to survive, it would be horribly confusing for consumers and market players alike throughout the net."

“It is disappointing that the comments do not seem to have an impact on the decisionmaking process,” said Roger Entner, analyst at Recon Analytics. “The proposed rules needlessly distort the market disadvantaging further regulated competitors in favor of unregulated competitors without any tangible advantage to consumers."

Focus on Rosenworcel

Debate continues about whether Rosenworcel, who voiced concerns about the NPRM even while voting for it, will in the end translate those concerns into changes to what Wheeler proposed. Rosenworcel's office didn't comment.

Rosenworcel has “a much better grasp on the Internet economy than the other two Democrats, as we see in her speeches and in the comments she made on the NPRM,” said Richard Bennett, free-market blogger and network architect. “It would be entirely appropriate for her to take the lead in converting the rambling, inconsistent, scattershot NPRM into a coherent framework. That’s a big job that will require months of work to do properly. … Privacy is a hard topic for the election year scenario.”

Others aren't sure Rosenworcel's concerns will make a difference on the final rules. Entner said he finds it "unlikely that we will see any further dissension from Chairman Wheeler's position by Democratic commissioners, regardless of the concerns they have voiced.”

Regardless, small changes to the rules won’t help, said ITTA President Genny Morelli. “There’s a fundamental problem with the proposal that can’t be cured by tweaking the NPRM,” she said. “The commission relies on Section 222 of the [Communications] Act for its authority to adopt the proposed rules, but the plain language of Section 222, its legislative history, and the commission’s own holdings over nearly 20 years confirm that Section 222 authority is limited to CPNI [customer proprietary network information]. The NPRM’s new expansive interpretation of Section 222 will not withstand judicial review.”

A wireless industry lawyer said carriers would have been more comfortable applying the FTC privacy guidelines to ISPs. “The 10 companies that currently control a 70 percent share of the online advertising market are not ISPs and thus will continue to operate under the FTC’s rules, which offer a much better and flexible notice-and-choice framework providing companies with the freedom to innovate,” the lawyer said. “The FCC’s proposal will not provide any more protections for consumer data, since most of the data is in the hands of edge providers anyway.”