WASHINGTON-The mobile-phone industry, despite having shed many state and federal telecom regulations in recent years, is about to be swept into a bold new regulatory regime as wireless and Internet technologies converge.
In this new digital landscape, the Federal Trade Commission will reign supreme.
The FTC, owing to existing authority and sweeping oversight of e-commerce extended by the Financial Services Modernization Act, will oversee everything from privacy to identity theft to Web scams to Internet auction fraud to advertising and marketing fraud to rules governing prompt delivery of products sold on the Net.
Officials at the FTC and Justice Department are even rethinking antitrust oversight in this era of technological convergence and sophisticated business relationships among digital players.
On April 7, the two agencies issued antitrust guidelines for collaborations among competitors. “Competitive forces of globalization and technology are driving firms toward complex collaborations to achieve goals such as expanding into foreign markets, funding expensive innovation efforts and lowering production costs,” the FTC stated. “The increasing varieties and use of collaborations by rivals have yielded requests for improved clarity regarding their treatment under the antitrust rules.”
While e-commerce regulatory issues may appear remote to the wireless industry today, the FTC is well on its way to laying the foundation to have far-reaching oversight of the wireless Internet.
The FTC, chaired by Robert Pitofsky, is expected to implement e-commence privacy rules of the Financial Services Modernization Act later this month. Those rules, which give the FTC broad jurisdiction over how firms treat customer data, will become effective in October.
After much research since the mid-1990s, the FTC appears convinced that self-regulation of Internet privacy will not work. Another online privacy report is due out in May.
Still, FTC commissioners, like Orson Swindle, are using the bully pulpit to appeal to companies’ commercial self-interest.
“Consumer privacy is important. A failure on the part of businesses to ensure consumer protection in personal privacy will dampen the growth of electronic commerce and result in the loss of customers,” Swindle said in a speech last November.
For sure, privacy issues in the nascent wireless Internet sector already are popping up.
When it first introduced its wireless Web service, Sprint PCS caught flack after it was revealed that telephone numbers were used to track Web browsing behavior of subscribers. Sprint PCS has pledged to discontinue the practice.
“The emergence of the Internet-type services, including 3G services, introduces a whole new set of regulatory issues,” said Daniel Phythyon, a communications lawyer and former head of wireless policy at the Federal Communications Commission.
Phythyon said the wireless industry got a glimpse of things to come when Rep. Edward Markey (D-Mass.) inserted privacy safeguards into the wireless 911 bill that President Clinton signed last year.
Despite the fact that Congress limited information gleaned from 911 position location to emergency situations, there are high hopes in the wireless industry to exploit location data for advertising and other commercial purposes.
But the only way this can be accomplished without violating the law is through an opt-in approach whereby wireless subscribers agree to let their locations be known.
That is precisely the approach employed by GeePS.com Inc., which earlier this month started testing a location-based wireless online shopping portal in New York City and San Francisco.
The Federal Communications Commission pushed for protection of consumer data, but was overruled by the 10th Circuit Court of Appeals on First Amendment grounds. In late February, the Supreme Court was asked to restore protections for customer proprietary network information.
“The wireless industry has some very interesting policy battles coming and issues will be fought on unfamiliar territory,” said Phythyon.
The regulatory paradigm shift is coming fast and furious, but it is unclear whether the wireless industry is adjusting.
“To some decree, the industry is little behind the curve,” said Phythyon.
Indeed, Cellular Telecommunications Industry Association President Thomas Wheeler said his trade group is not involved in any FTC e-commerce proceedings at this time. But he said that could change.
“Clearly, in a growth industry like the Internet, there are going to be a growth of policy issues,” said Wheeler.
Phythyon predicted well-honed wireless industry arguments previously used to deflect state and federal telecom regulations will have little impact in the new regulatory environment where state consumer laws and regulations set by the FTC, the Securities and Exchange Commission and others kick in.
With little fanfare, the FTC first began investigating online issues five years ago. In the policy world of official Washington, the FTC has played second fiddle to the Justice Department and other federal agencies. It now appears the FTC is seizing the opportunity to shine in the era of e-commerce.
