The FCC’s just-passed, 3-2 unequal ISP privacy policy spotlights how badly the FCC has lost its way.
In prioritizing the equality rights of inanimate digital bits above the equal protection and equal opportunity rights the American people enjoy under our constitutional republic, the FCC is discriminating in favor of open cronyism over equal consumer protection and equal competitive opportunity.
Moody’s Investors Service has done everyone a service in exposing the FCC’s Title II reclassification and privacy policy for what it really is – arbitrary unequal treatment under the law.
When the FCC proposed these ISP privacy rules three weeks ago, Moody’s called the FCC’s proposal as it saw it in a Sector Comment March 14 entitled: “FCC’s broadband privacy proposal credit negative for linear TV and wireless providers – Over half a trillion in rated debt affected.”
Moody’s clearly explains how applying rules unequally, requiring ISPs to get consumer permission to use data for advertising that Google, Facebook and edge advertisers do not have to get permission to use, creates unequal protection for users’ privacy and starkly unequal opportunity to fairly compete for digital advertising revenues going forward.
Moody’s explained:
“We believe this proposal will have a negative impact on both fixed and mobile broadband providers. If approved, the ability to compete with digital advertisers such as Facebook and Google (Aa2 stable), who are able to collect the same type of data from consumers who access their websites and those of others, will be severely handicapped in the future as the old guard ecosystem evolves to become more competitive. We believe this to be a long-term risk to the current TV advertising business model, as well as all broadband providers whom also have ad sales exposure to the present linear video ecosystem… An open question is how this proposal may impact the FCC's other recent proposal regarding unbundling the provision of the set top box from the ISP, which is also negative for broadband providers…”
“Absent an alignment of rules between the FTC and FCC regarding these privacy laws, a distinct competitive advantage will be given to online digital advertisers…”
“The FCC's proposal also has the potential to derail efforts by wireless carriers to cultivate mobile video advertising revenues. Wireless carriers have the potential to generate significant advertising revenues due to their ability to precisely target ads to wireless subscribers. But, if the FCC restricts the carriers' ability to collect this data, the advertising revenue opportunity will be reduced. Without a robust mobile video advertising market, the product could lose relevance due to its higher cost to consumers and a potential for fewer content choices.” [bold added for emphasis].
3 Takeaways from Moody’s Analysis of the FCC’s unequal ISP privacy policy
First, it spotlights the FCC’s unequal consumer privacy protection policy, because the information the FCC is regulating is not private-protected information to anyone but ISPs, who are the only entities in the U.S. that have to treat this otherwise non-private information privately by getting a consumer’s permission for the ISP to use it for advertising.
Second, its spotlights the FCC’s unequal competitive opportunity policy. Every business in America that is not an ISP can use a consumer’s FCC private information without their permission to serve them ads or offer them new personalized products and services, while the FCC applies its purported “permissionless innovation” policy in an unequal manner that arbitrarily limits only ISPs to permission-dependent innovation.
Third, it effectively debunks the FCC’s claim that its reclassification of broadband ISP service has no effect on broadband investment. Moody’s Investor Service is one of the leading credit and risk analysis providers in the world, and they clearly see the FCC Title II privacy policy as “credit negative” or bad for investment for the half of trillion dollars in U.S. broadband ISP debt.
They also clearly explain how the U.S. broadband providers’ businesses and competitive opportunity are at a distinct competitive disadvantage to Google, Facebook and other edge digital platform providers. The FCC needs to rethink its silly claim that unequal “strongest possible” utility regulations don’t adversely affect infrastructure investment.
Overall, it is critical to remember that the FCC staff and Chairman originally did not want Title II reclassification and by extension, Title II section 222 privacy policies, to only apply to ISPs in the Open Internet order.
Remember that this unequal protection and unequal opportunity legal positions were a direct result of an arbitrary, self-serving, eleventh-hour ex parte from Google that pressured the FCC to reject as wrong Judge Tatel’s entire understanding and legal analysis of common carrier service in his Verizon v. FCC decision.
In Verizon v. FCC Judge Tatel described an obvious implicit service between a broadband provider and an edge provider like Google as a potential Title II telecommunications service. The Google ex parte directly challenged Judge Tatel’s common carrier legal expertise by repeatedly dismissing the existence of the service Judge Tatel described by calling it an: “imagined edge provider access service”… “a non-existent edge provider service”… and “without reference to any evidence, that “broadband providers furnish a service to edge providers”…”
If the FCC had not been politically forced to adopt Google’s self-serving legal analysis to self-exclude Google’s dominant edge platform service from Title II classification, the FCC’s Title II ISP privacy NPRM would not have created unequal protection for consumers or unequal opportunity for competitors.
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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.
