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FTC Seeks More Authority Over Telcos

In testimony before a U.S. senate subcommittee on Wednesday, the Federal Trade Commission requested expanded authority over the telecommunications industry.

The commission, which oversees fair trade practices, suggested the elimination of the FTC Act's exemption for communications common carriers. The Federal Communications Commission currently regulates the telecom industry, which because of the exemption escapes the FTC's monitoring of unfair and anticompetitive business practices.

The testimony alleged that the FTC Act exemption has proven to be a barrier to effective consumer protection, both in common carriage and in other telecommunication businesses.

"Congress and the Federal Communications Commission (FCC) have dismantled much of the economic regulatory apparatus formerly applicable to the industry (and) Telecommunications firms also have expanded into numerous non-common carrier activities," said FTC Chairman Timothy J. Muris. "Oversight by the FTC of telecommunications firms' activities thus has become increasingly important."

The testimony also issued questions over the agency's ability to address anticompetitive behavior in diversified market segments such as cable and Internet that have emerged from large telecom companies such as AT&T and Verizon.

"The mix of common carrier and non-common carrier activities within particular telecommunications companies frequently precludes FTC antitrust enforcement for much of the telecommunications industry," said the chairmen. "Further, because of the expansion of telecommunications firms into other high-tech industries and the growing convergence of telecommunications and other technologies, the common carrier exemption increasingly limits FTC involvement in a number of industries outside telecommunications."

Ron Cowles, principal analyst for the Gartner Group, noted that the involvement of the FTC would probably be a good thing for the industry, so long as it doesn't overstep it bounds.

"If the FTC is getting involved with deceptive advertising and billing, it is they're right," said Cowles. "If they're inclined to encroach into picking up accounting problems, that really belongs to the SEC."

According to FTC Commissioner Sheila F. Anthony, the exemption made sense when it was adopted in the early Twentieth Century.

At that time, telecommunications services were provided in the U.S. by single service, monopoly firms, highly regulated by the Interstate Commerce Commission first, and then by the FCC. With regulation by a specialized agency and a non-competitive marketplace, there was little need for the FTC's additional oversight.

Commissioner Anthony agreed with Muris about the changes that have lead to the current state of the industry noting in a prepared statement:

"We are now at the dawn the Twenty-First century and the state of affairs in the telecommunications industry is vastly different. Ma Bell's tightly regulated monopoly has given way to competition and a largely deregulated market. In addition, the business activities of telecommunications firms have now expanded far beyond common carriage and into fields including internet services and cable television."

The recommendation from the FTC are being considered as lawmakers continue to debate legislation renewing the agency's authority.