Ohlhausen Concerned Title II Reclassification Would Strip FTC of Authority

The FTC made a quiet foray into the Title II debate last week in comments filed at the FCC. The commission said broadband Internet providers are currently subject to FTC-enforced laws, but reclassifying them as common carriers under Title II might defang the FTC’s Section 5 enforcement ability (http://1.usa.gov/1vpZdq6).

Ohlhausen didn’t back down in her more visible remarks. “I do worry about” Title II reclassification, she said in the interview. “The FTC has been a very active enforcer in the broadband space.” Classifying broadband providers as common carriers “would seriously call into question the ability of the FTC to bring those kind of actions.” Ohlhausen said if the FTC “is taken out of the picture,” she worries that “consumers on balance won’t be better off.”

The FCC has been considering a new net neutrality strategy after the D.C. Circuit Court’s decision striking down the open Internet order (CD Jan 15 p1). In the ruling, Ohlhausen said, it was “interesting” the court upheld the order’s transparency requirement. That requirement maintains the FTC’s role in this area, she said. “Companies have to say how they're doing traffic management, how they're going to manage these kinds of issues.” If they don’t adhere to what they promise to do in these areas, “that’s a very straightforward consumer protection issue, a deception issue,” Ohlhausen said. That’s the FTC’s “important role” in net neutrality, she said.

Advocates opposing reclassification voiced their support. “This would not be good for consumers because I think the FTC can play an important role in protecting consumers against unfair or deceptive practice,” Free State Foundation President Randolph May told us. “This would be another adverse effect of Title II classification.” Ohlhausen’s remarks reflect a forward-looking understanding that “the future of broadband is mobile,” where the FTC is better suited than the FCC to regulate, said Richard Bennett, a visiting fellow at the American Enterprise Institute’s Center for Internet, Communications and Technology Policy. “There is clearly enough competition in the mobile space for the FTC to take over from the FCC,” he told us. “The facts imply that the FTC is the more appropriate overseer.” Numerous organizations like Public Knowledge have taken the opposite stance, pushing for reclassification.

But Ohlhausen thinks the jury is still out on the FCC’s controversial plan to allow Internet fast lanes for certain services (CD May 16 p1). “What if consumers are asking for that?” she asked. Right now, we cannot categorize traffic prioritization as “good” or “bad,” she said. Some consumers might be saying, “I'm a big gamer or I have a medical app and I want to be sure that my medical information is transmitted at a high priority,” she said. “Are we denying them the ability to even have that offer in the marketplace?"

Bitcoin Action ‘Very Routine'

Ohlhausen also made the commission’s first public comments about bitcoin following the FTC’s decision to file a lawsuit against a bitcoin hardware manufacturer. The FTC is alleging the manufacturer, Butterfly Labs, delayed delivery or failed to deliver already-purchased bitcoin mining computers. “It’s an interesting case because of the technology that is involved,” she said, also commenting: “What makes it actually very routine is that the allegation is that they weren’t providing the machines to the people that had ordered them."

Her sentiment dovetails with that of bitcoin executives we spoke with after the suit. The lawsuit has “less to do with bitcoin and more to do with a specific company behaving badly,” said Jeremy Liew, a partner and Internet company investor with Lightspeed Venture Partners. Jiten Melwani, CEO of bitcoin payment company Bitgame Labs, told us: “This latest FTC action has no impact whatsoever” on bitcoin and bitcoin mining, where increasingly complex algorithms are used to unlock remaining bitcoins. “Mining remains an important component of preserving the health of the network, and miners too are unaffected."

Over the weekend, the FTC filed a cache of documents with new allegations that Butterfly Labs used purchased bitcoin mining machines for its own purposes before shipping them out. “Once Defendants got around to producing Bitcoin mining machines using what were essentially interest-free loans from consumers, their first actions were not to benefit their long-suffering customers, but to pad their own bottom line,” the FTC said in a Saturday filing (case No. 14-cv-00815) (http://bit.ly/1DSu98c). The FTC moved Monday to extend the temporary restraining order on the company’s business. “We looked at their shipping records and they had taken money, they had taken orders and they hadn’t shipped them out,” Ohlhausen said. Butterfly Labs did not immediately comment.