Why Comcast and Verizon are suddenly clamoring to be regulated

Some of the nation's biggest internet service providers are begging a court not to weaken the power of a major regulatory agency — the Federal Trade Commission — in a case that has implications for businesses and consumers nationwide and puts the companies at odds with another key industry player, AT&T.

The request last week by Charter, Comcast, Cox and Verizon seeks to shore up the FTC's ability to regulate internet providers, in a case about whether the FTC can punish AT&T for allegedly misleading consumers with its marketing of "unlimited" data plans. But the case also has other implications. It could create an undesirable regulatory environment for the companies, they say.

"At first glance, [our] position might seem surprising," the companies wrote. But if the FTC loses jurisdiction, "it is likely that a variety of federal, state, and local government agencies that lack the appropriate reach, perspective, and experience … will attempt to fill the perceived 'regulatory gaps,' thereby creating a patchwork of unreasonable, duplicative and inconsistent rules."

At issue is a ruling by the U.S. Court of Appeals for the 9th Circuit last year that held that any company that buys or sets up a telecom firm may fall under the Federal Communications Commission's jurisdiction rather than the FTC's.

Critics of the decision said that it created an enormous loophole, one that could allow huge swaths of almost any corporation to evade federal oversight. Due to limits on the FCC's authority, America's top telecom regulator may only oversee telecom-related aspects of a company. So any firm that exercised the escape hatch might be answerable in part to the FCC, but its other operations would be free to engage in unfair or deceptive behavior without fear of FTC investigations or lawsuits, they said.

The 9th Circuit agreed this year to revisit the decision. If it stands, however, it will deal a "fatal blow" to consumer protections, according to oversight advocates.

AT&T declined to comment for this story. In its court filings, the company has said that the 9th Circuit's ruling is "narrow and unremarkable" and does not create any gaps in regulatory coverage.

Beyond this court case, the industry has been behind a wider push to transfer power from the FCC, whose net neutrality rules permitted the agency to impose tough regulations on ISPs, to the FTC, which can sue companies for misbehaving but does not generally write prescriptive rules.

Fung writes for the Washington Post