FCC Incurs Net Loss in Battle for Net Neutrality

The FCC’s mission of promoting Internet neutrality suffered a significant setback yesterday when the D.C. Court of Appeals ruled in Comcast Corp. v. Federal Communication Commission  that the FCC lacked authority to prohibit Internet service providers from monitoring and restricting their subscribers’ use of certain peer-to-peer applications.

The controversy arose in 2007 after Comcast subscribers noticed that the company was impeding their use of BitTorrent, an open source, peer-to-peer networking protocol that has rapidly grown in popularity due to its speed and efficiency, but has notoriously been exploited for the unlawful exchange of copyrighted material.  Read more »

FTC Revises Endorsement and Testimonial Guidelines

The Federal Trade Commission today announced that it has approved revisions to its Guides Concerning the Use of Endorsements and Testimonials in Advertising.  The Guides were last updated in 1980. Among the changes,

• in situations where an advertised consumer’s experience with a product or service is not typical, advertisers now must clearly disclose the results consumers can generally expect – rather than simply include a disclaimer that “results are not typical,” as per the 1980 version;
• the revised Guides address disclosure of important connections (e.g., compensation) with respect to bloggers and other “word of mouth” marketers;
• the revised Guides make clear that celebrity endorsers may indeed be liable alongside advertisers for false, misleading or unsubstantiated claims made in an endorsement; and
• the revised Guides emphasize that celebrities may have a duty to disclose their relationships with advertisers in non-traditional advertising settings (such as talk shows or social media websites).

The revised Guides will be available on the FTC website.

If you have any questions about the FTC guidelines or other advertising/marketing law issues, please contact Jeff Greenbaum at jgreenbaum@fkks.com or 212.826.5525 or Michael Schiffer at mschiffer@fkks.com or 212.705.4827 or any other member of the Frankfurt Kurnit advertising group.

FCC Proposes “Net Neutrality” Rule

Federal Communications Chairman Julius Genachowski is proposing to make it a formal rule that Internet service providers and wireless carriers cannot discriminate against certain types of traffic (e.g., file sharing or gaming) by degrading service.  The proposal, if made effective, may force US phone companies to open their wireless networks to rival internet services (e.g., Skype, Google Voice).  Senate Republicans are moving to prevent the rules.

The idea of “net neutrality”, the principle that internet access should be unencumbered, seems pro-consumer in spirit.   But what are the likely implications in the marketplace?  Assuming, as other commentators have pointed out, that there’s really “no such thing as voice or text or music or TV shows or video”, and that “[t]hey are all just data”, then the flat fee pricing models currently offered by service providers will probably need to change, and soon.  

For example, we expect customers will no longer pay $30 per month for internet, $40 per month for phone, and another price for cable television.  Instead, they will be charged a single price for accessing their data.  The question that remains unanswered:  Will data plans be priced to be unlimited or based on usage?  At the moment, customers that make only occasional phone calls and make slight use of the internet (e.g., minimal web browsing or occasional e-mailing) are effectively subsidizing other customers who consume an enormous amount of bandwidth accessing multimedia content (e.g., downloading movies or playing games).  But as technological innovation continues, and ever larger amounts of data are delivered to customers in widely diverging degrees, it seems highly likely that, if companies cannot discriminate in their delivery of certain types of data, they will eventually start charging customers based on the amount of data that customer actually consumes.

How Do You Define “Broadband”?

As the Federal Communications Commission works to create a plan to expand broadband access to Americans, it is trying to come up with a new definition for broadband.  AT&T recently submitted  its vision of broadband to the agency, a vision that ranks gaming as a lesser priority than, say, basic e-mail access.  Microsoft and other game makers, perhaps unsurprisingly, disagree with that view, arguing that the volume of online gaming activity suggests that consumers believe that, if they have internet access, they should be able to access what they want, whether via the web or via gaming consoles.