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

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

“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.

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