FTC wants fraud enforcement powers over telecom

WASHINGTON – The U.S. Federal Trade Commission (FTC) is seeking broader powers to investigate consumer fraud cases involving telecommunications carriers under a request brought before the U.S. Congress this week.

The FTC asked Congress to end an exemption that “common carrier” telephone services have against FTC prosecution for consumer fraud and deception, while also asking in hearings Wednesday for more powers to track down fraudulent spammers.

Until now, the FTC has not had jurisdiction over prosecuting consumer fraud related to telecommunications services such as phone service, although it can prosecute Internet service providers (ISPs) for the same offenses. The FTC argues the telecommunications road map has changed since phone carriers were big, government-regulated monopolies, and competition between telecommunications carriers requires someone looking out for customers.

But critics, such as the United States Telecom Association, argue that the Federal Communications Commission already has jurisdiction over telecommunications companies and additional FTC oversight isn’t needed.

FTC Commissioner Thomas Leary argued before a Senate subcommittee Wednesday that providers of telecommunications services, which have expanded their offerings to include Internet services, should be subject to the same fraud enforcement as are ISPs. Confusion exists over who should investigate fraud cases involving telephone carriers that also provide Internet and other services, he said.

“A … common carrier may engage in deceptive practices that we see all the time, that do the same consumer harm, and for which we have special remedies,” Leary told the Senate Commerce Committee’s Subcommittee on Competition, Foreign Commerce, and Infrastructure. “But we are paralyzed by the jurisdictional barrier.”

Asked in the hearing to give examples of telecommunications carrier activity that was going unchecked because of the FTC’s limitations, Leary declined, saying it wouldn’t be fair to single out companies.

Countering Leary’s testimony at the Senate hearing was Lawrence Sarjeant, general counsel for the United States Telecom Association (USTA), who argued that telecom companies already have a U.S. agency watching over them, and giving the FTC jurisdiction would cause confusion among telecom companies and the public. “There is no absence of regulation — there is no regulatory void to fill,” he testified. “Carriers would not know which agency to rely on for advice or which agency’s compliance standards to follow.”

The FCC’s mission allows it to take enforcement actions against unjust, unreasonable or deceptive practices, Sarjeant noted.

Telephone service providers also are regulated by state public service commissions and state attorneys general, added Sarah Deutsch, vice president and associate general counsel of Verizon Communications. The FTC already has jurisdiction over most non-phone-related telecommunications services, she said.

“All of these entities are already enforcing laws against common carriers,” Deutsch said. “We don’t think the answer is to create yet another tier of regulation.”

While Deutsch and Sarjeant said the FTC’s request would create regulatory confusion with the FCC, Leary promised the subcommittee the FTC would work with his sister agency to iron out any issues.

“We want to cooperate with the FCC, and we have no ability or desire to intrude into the FCC’s core mission as gatekeeper into the limited communications spectrum,” Leary testified before the Senate subcommittee. “We are not concerned with the qualifications of companies that compete or the nature of services they can provide. The core mission that you have assigned to us, is to see that any company, whatever it does, conducts its business with fairness and honesty.”

Lisa Hone, an FTC staff attorney, said enforcement gaps now exist between the FCC and FTC in cases where telephone carriers are engaged in fraudulent activities. “We think it makes sense for consumers to have some protections,” she said.

The FTC asked the Senate Commerce, Science and Transportation Committee for similar powers about a year ago. The committee approved the request but the FTC proposal wasn’t acted on in the full Senate.