FTC Comment Before the Federal Communications Commission Concerning the National Broadband Plan

The American Recovery and Reinvestment Act of 2009, H.R. 1, 111 Cong. (2009), Pub. L. 111-5	th	1
– Tax, Unemployment, Health, State Fiscal Relief, and Other Provisions, Title VI – Broadband Technology
Opportunities Program § 6001(k)(1)-(2) (Feb. 17, 2009) [“Recovery Act”].
Federal Communications Commission, A National Broadband Plan for Our Future, Notice of2
Inquiry [“FCC NOI”], 24 FCC Rcd 4342 (Apr. 8, 2009).
FTC ST A FF, BRO A DBA N D CO MPET IT IO N CO N NEC T IVIT Y PO LIC Y (2007) [“FTC Broadband Report”],3
available at http://www.ftc.gov/reports/broadband/v070000report.pdf; Broadband Connectivity Competition Policy
workshop, http://www.ftc.gov/opp/workshops/broadband/index.shtml.
See generally FTC Broadband Report, supra note 3, at 98-105 (discussing the current and future4
state of broadband competition); FCC, HIGH-SPEED SERVIC ES FO R IN T ERN ET AC C ESS: ST A T US A S OF JUN E 30, 2008
11, 22, Tables 6 & 16 (2009) [“FCC High-Speed Services Report”], available at
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-292191A1.pdf; PEW IN T ERN ET & AMERIC A N LIFE PRO JEC T ,
HOME BRO A DBA N D AD O PT IO N 2009 (2009) [“Pew Study”], available at
http://www.pewinternet.org/~/media//Files/Reports/2009/Home-Broadband-Adoption-2009.pdf.
Before the
FEDERAL COM M UNICATIONS COM M ISSION
Washington, D.C. 20554
In the Matter of )
)
A National Broadband Plan for Our Future )
)
GN Docket No. 09-51
COM M ENTS OF THE
FEDERAL TRADE COM M ISSION
Introduction
The Federal Trade Commission (“FTC”), which shares jurisdiction over broadband Internet
access and related content and applications with the Federal Communications Commission (“FCC”),
appreciates this opportunity to contribute to the development of the Nation’s Broadband Plan. This1
comment responds to the FCC’s Notice of Inquiry (the “Notice”) and is based on the FTC’s2
extensive competition and consumer protection law enforcement experience involving the Internet as
well as the FTC’s 2007 Broadband Report.3
Policies that promote competition and consumer protection can foster new and innovative
offerings, lower prices, and greater consumer use of those services. This insight applies forcefully to
the broadband access and Internet content and applications markets at issue in the Notice.
Regarding the provision of broadband, significant questions exist about the extent to which
broadband access markets are competitive. To evaluate those competitive conditions and to tailor4
appropriate regulatory policies that could encourage additional competition, the FCC may wish to
rely on the competition analysis framework used by the FTC that is contained in the FTC/DoJ
Horizontal Merger Guidelines. Consumer protection policy works hand-in-hand with competition

The FTC enforces laws prohibiting unfair methods of competition and unfair and deceptive acts or5
practices in or affecting commerce. 15 U.S.C. § 45(a). The FTC has wide-ranging responsibilities concerning nearly
all segments of the economy and is the only federal agency with both competition and consumer protection
jurisdiction in broad sectors of the economy. The FTC is well-versed in consumer protection and competition issues
raised by the offering of Internet access services and related online content and applications.
FTC competition actions in the area of broadband and other forms of Internet access include: In the Matter
of Cablevision Systems Corp., Dkt. No. C-3804 (1998) (consent order); In the Matter of AOL, Inc. and Time
Warner, Inc., FTC Dkt. No. C-3989 (2001) (consent order); and Time Warner/Comcast/Adelphia (Jan. 31, 2006)
(FTC File No. 051-0151) (closing statements).
FTC consumer protection actions in the area of broadband and other forms of Internet access include, for
example: FTC v. Cyberspace.com LLC, 453 F.3d 1196 (9 Cir. 2006); FTC v. Pricewert LLC (No. C-09-2407	th
RMW) (N.D. Cal. 2009); In the Matter of Am. Online, Inc. & CompuServe Interactive Servs., FTC Dkt. No C-4105
(Jan. 28, 2004).
For FTC privacy initiatives see FTC, Privacy Initiatives, http://www.ftc.gov/privacy/index.html.
2
policy to promote broadband adoption. For example, consumers are likely to make more informed
choices when broadband providers make meaningful and timely disclosure of material terms of
service. Further, strong data security policies by the providers, which safeguard sensitive consumer
information, may ease consumers’ privacy concerns and also facilitate their adoption of broadband.
Broadband access and related Internet content and applications markets present both
competition and consumer privacy concerns as well. For example, in the provision of content and
applications over the Internet, concerns stem from recent technological advances that allow
broadband providers to identify the source and content of much of the data they handle, and to
manage that data in increasingly sophisticated ways. Using this technology, broadband providers
may be able to track a consumer’s online activities to deliver targeted advertisements. They also
might advantage or disadvantage certain content or applications. These practices have the potential
to benefit consumers, but also pose some risks. Accordingly, this comment outlines questions that
may lead to useful empirical information regarding whether these practices are occurring and their
impact on both consumers and competition.
As described below, the FTC has committed substantial research and law enforcement
resources to the Internet, broadband, and consumer privacy. The FTC pledges continued vigorous5
law enforcement and consumer education to protect consumers and foster competition in these
markets. It welcomes the opportunity to directly assist the FCC as it develops the Broadband Plan.
I. Advancing Consumer Welfare by Promoting Competition and Consumer Protection
The Recovery Act directs the FCC to “analy[ze] the most effective and efficient mechanisms
for ensuring broadband access by all people of the United States” and to develop “a plan for the use
of broadband infrastructure and services in advancing consumer welfare” and other national

See Recovery Act, supra note 1. The National Broadband Plan shall also include:6
(a) an analysis of the most effective and efficient mechanisms for ensuring broadband access by all people of the
United States;
(b) a detailed strategy for achieving affordability of such service and maximum utilization of broadband infrastructure
and service by the public;
(c) an evaluation of the status of deployment of broadband service, including progress of projects supported by the
grants made pursuant to this section; and
(d) a plan for use of broadband infrastructure and services in advancing consumer welfare, civic participation, public
safety and homeland security, community development, health care delivery, energy independence and efficiency,
education, worker training, private sector investment, entrepreneurial activity, job creation and economic growth, and
other national purposes.
Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978) (emphasis added); accord,7
FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 423 (1990).
An act or practice is deceptive if it involves a representation, omission, or practice that: (1) is likely8
to mislead consumers acting reasonably under the circumstances, and (2) is material. Cliffdale Assocs., Inc., 103
F.T.C. 110, 164-65 (1984). An act or practice is unfair if it causes injury to consumers that: (1) is substantial; (2) is
not outweighed by countervailing benefits to consumers and competition; and (3) consumers themselves could not
reasonably have avoided. 15 U.S.C. § 45(n); see also Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1363-66
(11th Cir. 1988).
3
purposes. The FTC respectfully submits that measures to promote competition and consumer6
protection should be the foundation on which the Broadband Plan is built.
Consumers – including consumers of broadband-related products and services – benefit from
market competition. The U.S. Supreme Court has recognized that the benefits of competition go
beyond lower prices: “The assumption that competition is the best method of allocating resources in
a free market recognizes that all elements of a bargain - quality, service, safety, and durability -
and not just the immediate cost, are favorably affected by the free opportunity to select among
alternative offers.”7
Competition and consumer protection enforcement naturally complement each other, and
they mutually reinforce elements of the larger goal of benefitting consumers. Competition pressures
producers to offer consumers the most attractive array of choices with respect to price, quality, and
other options. Competitive firms are constantly searching for superior profit opportunities as they
seek to win the favor of customers, who effectively vote for preferred products and services with
their dollars.
At the same time, consumer protections promote informed consumer decision-making and
require sellers to uphold representations made about their offerings in the course of trying to win the
favor of customers. In other words, strong consumer protection policies reinforce competition by
clarifying consumer choices and prohibiting firms from engaging in unfair or deceptive acts or
practices.8
These well-established policies form a critical part of the foundation on which to build a

FTC Broadband Report, supra note 3, at 120-37.9
Pew Study, supra note 4, at 9.10
FCC High-Speed Services Report, supra note 4, at 11, 22, Tables 6 & 16.11
Pew Study, supra note 4, at 2412
Id. at 23-4.13
See FCC, Annual Report and Analysis of Competitive Market Conditions with Respect to14
Commercial Mobile Radio Services, Thirteenth Report, 24 FCC Rcd 6185, ¶¶ 15-19 & Table A-4 (Wireless
Telecom. Bur., released Jan. 16, 2009) (Verizon Wireless, AT&T, Sprint, T-Mobile, and carriers affiliated or
acquired by these four companies served approximately 93% of mobile subscribers in the country as of the end of
2007).
4
sound Broadband Plan to benefit consumers. The fundamental principles of antitrust and consumer
protection law and economics are as relevant to broadband as they are to other industries in our
economy. Thus, the Broadband Plan should facilitate the operation of the free market process to9
the greatest extent possible consistent with the Recovery Act. It should maximize incentives for
businesses to enter, deploy risk capital, and compete for customers, keeping barriers to entry as low
as possible. At the same time, the FTC will continue vigorous enforcement of competition and
consumer protection laws in the context of broadband Internet access, so that consumers receive the
benefits of competition.
II. Encouraging Additional Competition Among Broadband Infrastructure Providers
A. Broadband Internet Access Infrastructure - Competition Issues
Consumer demand for broadband Internet has grown significantly. A recent survey finds
that between 2008 and 2009, home broadband adoption has increased to 63 percent of adult
Americans in April 2009, up from 55 percent in April 2008.10
Consumer choice among broadband providers, however, remains limited as more than 80
percent of consumers have a choice of only one or two providers. Moreover, urban and suburban11
consumers typically have more choice than rural consumers. In those areas with greater choice,12
prices for broadband service are lower. This same survey found that of the 15 percent of consumers
reporting that they have four or more broadband Internet access choices at home, they paid
approximately 18 percent less than the average monthly bill.13
Currently, relatively large market shares for fixed, wireline broadband services are typically
held by a single incumbent cable operator and a single incumbent telephone company in each
geographic area and relatively large market shares for mobile broadband services held by the four
largest wireless carriers. Nonetheless, a variety of other technologies are beginning to compete in14

See FTC Broadband Report, supra note 3, at 98-105.15
See generally id; FCC High-Speed Services Report, supra note 4.16
Recovery Act, supra note 2, at Division B, Title VI § 6001(l).17
The FCC has taken varying approaches to analyzing competition in the same general market18
segments. In some cases, it conducted a rigorous competition analysis consistent with the Merger Guidelines. See,
e.g., Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, 18 FCC Rcd
16978, ¶¶ 73-74 (2003) (“Triennial Review Order”), modified, 18 FCC Rcd 19022 (2003), aff’d in part and rev’d
and remanded in part on other grounds, United States Telecom Ass’n, 359 F.3d 554 (D.C. Cir. 1994), subsequent
history omitted. By contrast, in other non-merger policy decisions, the FCC did not conduct a rigorous economic
analysis consistent with the framework of the Merger Guidelines. See, e.g., Appropriate Framework for Broadband
Access to the Internet Over Wireline Facilities, 20 FCC Rcd 14853, ¶¶ 47-62 (2005) (“Wireline Broadband
5
that market. The “narrowband” dial-up Internet access services introduced in the mid-1990s have15
largely been supplanted by much faster broadband connections, as consumers have demanded faster
access to increasingly sophisticated and data-rich content and applications.
Consumers obtain last-mile broadband Internet access services through fixed wireline
technologies such as digital subscriber line (“DSL”) service, coaxial cable, and fiber lines. A
substantial number of consumers also now have high-speed Internet access via wireless technologies,
including: fixed wireless technologies such as Wireless Fidelity (“Wi-Fi”); mobile wireless
technologies such as third-generation (“3G”) mobile cellular service; and satellite. Increasingly,
new technologies such as Wi-MAX and other fourth-generation (“4G”) wireless technologies are
expected to be deployed as well. Broadband Internet access providers offer these services in a16
variety of different formats.
These general market observations, however, do not reflect the degree of broadband
competition in every local market in the United States. Without a thorough review, it is difficult to
determine the extent to which consumers in markets throughout the United States have a choice of
broadband Internet providers. Accordingly, the FTC welcomes the learning to be gained from the
development of a nationwide broadband inventory map by the National Telecommunications and
Information Administration (“NTIA”), as directed by the Act. The development of such a17
broadband inventory map is an essential step toward better understanding the extent and nature of
competition among broadband Internet access providers in different relevant markets in the United
States.
1. Competition Policy Guidance Can Assist the Development of
Regulatory Policies Governing Broadband Internet Access.
Although a nationwide broadband inventory map is a necessary first step, the mere counting
of providers does not answer how competitive broadband markets are or how well consumers are
served. The FTC suggests that the Broadband Plan follow a consistent and economically sound
analytical framework to evaluate those questions. Such a framework for competitive market
analysis could be used as the foundation for the development of ongoing regulatory policies
governing broadband Internet access.18

Order”), aff’d, Time Warner Telecom, Inc. v. FCC, 507 F.3d 205 (3d Cir. 2007); Petition of AT&T Inc. For
Forbearance from Title II and Computer Inquiry Rules with Respect to Its Broadband Services, 22 FCC Rcd 18705,
¶¶ 18-27 (2007) (“AT&T Broadband Forbearance Order”).
See generally USTelecom, High-Capacity Services: Abundant, Affordable, and Evolving, (July19
2009); National Regulatory Research Institute, Competitive Issues in Special Access Markets, (rev’d ed. Jan. 21,
2009). Both reports suggest additional data collection is necessary to engage in a competitive market analysis.
U. S. Dept. of Justice and Federal Trade Comm., HO RIZON T A L MERG ER GUID ELIN ES (Apr. 2,20
1992, rev’d Apr. 8, 1997), reprinted in 4 Trade Reg. Rep. (CCH) ¶ 13,104 [hereinafter Merger
Guidelines].
See, e.g., In the Matter of AOL, Inc. and Time Warner, Inc., FTC Dkt. No. C-3989 (2001) (consent21
order).
6
An analysis of price and market share information for broadband services in properly defined
product and geographic markets (as discussed below) can help illuminate existing entry barriers and
identify appropriate regulatory responses to protect against the exercise of market power that harms
consumers. In this type of competitive analysis, the key question is whether there are constraints19
on a broadband provider’s ability potentially to exercise market power in a relevant market. Market
power is typically defined as the ability of a firm to profitably raise price above the competitive
level.
The Merger Guidelines provide a competitive analysis approach that can help evaluate the
extent of broadband Internet access competition in any given relevant product and geographic
market. The Merger Guidelines provide extensive guidance on how to identify relevant product20
and geographic markets and to determine which providers compete in or could enter those markets.
The FTC has used the Merger Guidelines in merger reviews and other investigations in broadband
and Internet access markets.21
2. Identify Relevant Product and Geographic Markets
The first step in this analysis is to identify the relevant markets for broadband services.
Under this analysis, a relevant market for a service would consist of services sold in competition
with any other such service, such that a provider could profitably increase price without customers
switching to another provider. If customers would switch to another service (thereby preventing the
provider(s) from increasing the price in the first place), then those services would be included in the
definition of the relevant product market as well.
In the case of broadband Internet access, the analysis of last-mile competition frequently
centers around cable, DSL, and (more recently) fiber wireline technologies. Services need not
necessarily be perfect substitutes for each other to be included in the same relevant market. If a
wireless broadband service appeals to a sufficient number of marginal cable modem or DSL
broadband consumers to constrain the provider’s pricing activity, for example, then the wireless
broadband service may be considered a competitive alternative and counted as part of the relevant
product market. The critical question is to determine the services to which consumers would turn if

The FCC has taken varied approaches to product market definition in the context of last-mile22
broadband facilities. For example, in some cases the FCC has defined product markets to separately identify
different capacity levels (e.g., voice grade, DS-1, DS-3, and OC-3 and higher level circuits). See, e.g., Unbundled
Access to Network Elements; Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange
Carriers, 20 FCC Rcd 2533, ¶ 166 (2005) (“Triennial Review Remand Order”), aff’d, Covad Communications
Corp. v. FCC, 453 F.3d 528 (D.C. Cir. 2006). By contrast, in other cases the FCC has conflated all of these
capacity levels for last-mile access and treated them as a single product market, with no Merger Guidelines-type
analysis of the extent to which buyers would shift between these different capacity circuits in the event of a price
increase. See, e.g., SBC Communications, Inc. and AT&T Corp. Applications for Approval of Transfer of Control,
20 FCC Rcd 18290, ¶ 27 n.90 (2005) (“SBC/AT&T Merger Order”).
Past FCC decisions have assessed competition in broadband markets using different geographic23
definitions without explaining the differences. See, e.g., SBC/AT&T Merger Order, ¶ 28 (defining each individual
customer premise as a separate geographic market); Triennial Review Remand Order, ¶¶ 80, 156 (defining
geographic markets based on individual routes between particular ILEC central office buildings for competitive
assessment of transport or middle-mile facilities, but based on all locations within each wire center service area for
purposes of competitive assessment of loop or last-mile facilities); Petition of Qwest Corp. For Forbearance in the
Omaha Metropolitan Statistical Area, 20 FCC Rcd 19415 (2005) (defining geographic markets based on
metropolitan area for purpose of assessing “dominant carrier” status of retail broadband services provided to mass
market consumers, but based on wire center service areas for purpose of assessing need for of unbundled network
element requirements); Wireline Broadband Order (applying policy change nationwide, without any attempt to
define geographic market); AT&T Broadband Forbearance Order, ¶ 20 (same).
7
their existing providers increase price or reduce quality.22
Competition analytics also can be applied to properly define the nature of competition in
middle-mile and long-distance market segments. These are the market segments that do not serve
end-user consumers but rather include backhaul, special access services, or interconnection of a
provider’s network to the larger Internet. These segments can be critical to enable new end user
providers to provide broadband service in a particular geographic area. Competition in these
segments ultimately can affect competition in the last mile, for example, by affecting the entry of
new providers of last-mile services. New last-mile technologies, such as fixed wireless, typically at
some point require a connection to longer-distance transport services in order to provide users with
access to the broader, global Internet. Thus, the nature of competition in middle-mile and backbone
connections may affect the ability of a provider of last-mile wireless service to enter and compete.
Once the relevant product market is identified, the inquiry then turns to the relevant
geographic market. The relevant geographic market is the area within which a broadband Internet
access provider could profitably raise price, without consumers switching to other access providers.
The relevant geographic markets for consumer broadband Internet access services could be local or
regional. In middle-mile markets, the relevant geographic area would be one in which the provider
offering the relevant product (e.g., DS-1 circuits) could profitably raise price without customers
switching to another provider inside that area. Again, the critical question is to whom would
customers turn if their current providers increased price or reduced quality.23
Once the relevant product and geographic markets are identified, the next step is to identify

E.g., FTC v. Cyberspace.com LLC, 453 F.3d 1196 (9th Cir. 2006) (affirming finding of more than24
$17 million in liability for violation of FTC Act for mailing false or misleading purported rebate refund checks
without disclosing that cashing checks would prompt monthly charges for Internet access services on customers'
telephone bills); FTC v. Pricewert LLC (No. C-09-2407 RMW) (N.D. Cal. 2009) (securing preliminary injunction
for likely violation of FTC Act for recruiting, distributing, and hosting harmful electronic code or content, including:
child pornography, botnet command and control servers, spyware, viruses, trojans, and phishing-related Internet
sites); In the Matter of America Online, Inc. & Compuserve Interactive Servs., Inc., FTC Docket No. C-4105 (Jan.
28, 2004) (consent order); In the Matter of Juno Online Servs., Inc., FTC Docket No. C-4016 (Jun. 25, 2001)
(consent order); In the Matter of WebTV Networks, Inc., FTC Docket No. C-3988 (Dec. 8, 2000) (consent order); In
the Matter of America Online, Inc., FTC Docket No. C-3787 (Mar. 16, 1998) (consent order); In the Matter of
CompuServe, Inc., 125 F.T.C. 451 (1998) (consent order); In the Matter of Prodigy, Inc., 125 F.T.C. 430 (1998)
(consent order).
8
the current suppliers into the relevant markets. Market share statistics can then be used to calculate
concentration levels in each relevant market. The analysis of market share information, however, is
often just the starting point for a more sophisticated analysis of the competitiveness of the relevant
market(s) and an examination of whether existing business practices in those markets facilitate or
retard competition.
An important part of this competitive analysis is to examine the ease with which firms can
increase supply to the market. Such responses may occur in several ways, such as by entry of new
firms, the switching or extension of existing assets to production or sale in the relevant market, or by
the construction or acquisition of assets that enable production or sale in that market. Some firms
not currently serving consumers may constrain conduct by incumbent firms, through the threat of
potential entry. If entry is easy, it likely will deter or counteract any competitive concerns. But if
entry is difficult, competitive concerns will increase. Factors such as large sunk costs and long lead
times tend to make entry difficult. Generally, only those entry alternatives that can be achieved
within two years from initial planning to significant market impact will be considered as likely to
counteract competitive concerns.
In sum, the Merger Guidelines can provide useful principles for assessing competition in
broadband Internet access services in any relevant market. A fact-based competition analysis,
including attention to entry barriers, can be used to fashion appropriate regulatory policies to
maintain or increase competition among broadband providers.
B. M eaningful Consumer Disclosures and Strong Data Security Policies Promote
Broadband Adoption and Usage
To ensure consumers benefit from competition among broadband providers, the Broadband
Plan should address two consumer protection issues: (1) truthful, clear and conspicuous disclosure
of material terms of service; and (2) data security. Current federal consumer protection law can
address both sets of concerns. The FTC has used its full range of law enforcement authority
(including redress where appropriate), regulation, consumer and business education, and policy
initiatives to address both issues, and will continue to do so in the broadband Internet access24

Because the provision of broadband Internet access is not a common carrier service, see, e.g., Nat’l25
Cable & Telecommunications Ass’n v. Brand X Internet Servs., 545 U.S. 967 (2005), the FTC and FCC have
concurrent jurisdiction over the provision of broadband service. So that consumers can benefit from the FTC’s
competition and consumer protection expertise, national broadband policies should preserve the FTC’s jurisdiction
over broadband Internet access.
See, e.g., Letter from Lydia B. Parnes, Director, Federal Trade Commission, Bureau of Consumer26
Protection, to Sprint/Nextel Corporation (Aug. 8, 2007) available at
http://www.ftc.gov/os/closings/staff/070808sprintnextelclosingltr.pdf.
Cliffdale Assocs., 103 F.T.C. 110, 175 (1984) (appending FTC Policy Statement on Deception).27
9
arena.25
1. Clear and Conspicuous Disclosure of Material Terms of Service
Without truthful marketing and clear disclosure of material terms, consumers will lack the
information they need to make informed decisions regarding broadband Internet access services,
which will affect competition on the merits. As a result, consumer purchase decisions will be
distorted, and competition will be harmed. Accurate disclosure of material terms allows consumers
to compare similar services offered by one or more providers and to weigh the different terms being
offered in making decisions about what services to purchase.
Advertising is one way in which broadband access providers raise consumer awareness of
their products and services. Under the FTC Act, advertisements must be truthful and not mislead
consumers in ways that affect consumers’ behavior or decisions about the product or service. An
advertisement claim can be misleading if it contains a misrepresentation or omission that is likely to
mislead consumers acting reasonably under the circumstances to their detriment. For example, it
might be deceptive to represent to consumers that they will receive unlimited Internet access when,
in fact, there are specific usage limitations. In addition, advertising claims must be substantiated,26
especially when they concern performance attributes of the product or service.27
Certain claims common to Internet service contracts are “material,” such as those relating to
price, contract duration, and service purchase (e.g., bundling of broadband Internet access with other
services like video and telephone). Depending on the context and usage, other terms may be
material, including: data transmission speeds, use limitations, broader network management
policies, and the existence of any preferential business arrangements with content or applications
providers.
These additional terms of service may become more important to consumers over time, as
increasingly powerful network management tools allow network operators to monitor, aggregate,
and analyze data from Internet traffic. Even if data are encrypted, such techniques may allow a
network operator to modify its service based on the consumer’s use patterns. These types of
practices may be material to reasonable consumers and, thus, may require meaningful consumer
disclosure.

See James M. Lacko & Janis K. Pappalardo, Federal Trade Commission, Bureau of Economics28
Staff Report, THE EFFEC T O F MO RTG A G E BRO KER CO MPEN SA T IO N DISC LO SURES O N CO N SUMERS A N D CO MPET IT IO N:
A CO N T RO LLED EXPERIMEN T (Feb. 2004), available at http://www.ftc.gov/os/2004/01/030123mortgagefullrpt.pdf;
James M. Lacko & Janis K. Pappalardo, Federal Trade Commission, Bureau of Economics Staff Report, IMPRO VIN G
CO N SUMER MO RTG A G E DISC LO SURES: AN EMPIRIC A L ASSESSMENT O F CURREN T A ND PROT O T Y PE DISC LO SURE FORMS
(June 2007), available at http://www.ftc.gov/os/2007/06/P025505mortgagedisclosurereport.pdf.
For example, in the context of lifetime service contracts used by an exterminator, the Commission29
challenged unilateral changes of material terms of the contract by the company as unfair trade practices. See Orkin
Exterminating, 849 F.2d at 1363-66; see also FTC v. Certified Merch. Servs., Inc., No. 4:02:cv44 (E.D. Tex. Dec.
30, 2002) (final judgment and order), available at http://www.ftc.gov/os/2003/01/cms.pdf.
10
The question becomes whether currently available disclosures by providers of broadband
service provide clear and meaningful information to consumers. And if not, how these types of
information can be disclosed clearly and conspicuously so that they are meaningful to consumer
purchase decisions. Given the complex, multi-dimensional nature of Internet service offers,
consumers frequently may find it difficult to understand key features and costs of broadband options.
Those who do not understand Internet service offers may pay more than necessary, or select
contracts with inappropriate features for their circumstances. If consumer confusion in this market
is substantial, then uniform disclosure of key terms and features should be considered. Any such
analysis should include consideration of whether the benefits of uniform disclosure would outweigh
its costs.
In other contexts, for example, in evaluating mortgage disclosures, FTC research
demonstrates that well-designed disclosures can improve consumer understanding. At the same
time, the research also demonstrates that disclosures must be developed carefully, because even
well-intentioned disclosures can actually harm consumers. To be most effective, uniform
disclosures should be tested with real consumers, using controlled, quantitative, objective tests of
consumer understanding.28
Disclosure of the terms of service also is especially important where discount offers are made
or other promotional periods are set to end. Consumers who subscribe to such offerings are likely to
expect a consistent baseline level of service throughout the contract period. The FTC and the courts
have found that a unilateral change of contract terms can be an unfair practice. Thus, the potential29
for last-mile broadband Internet access providers to change the nature of their services over time
may raise important questions relating to the nature of their disclosures and consumers’ ability to
understand them.
2. Strong Consumer Data Security Policies Promote Consumer
Confidence and Broadband Adoption.
Inadequate protection of personal information and data security in the broadband Internet
context could hamper consumer confidence and undermine the benefits of broadband Internet
service. To combat these harms, privacy has been one of the FTC’s highest consumer protection

See generally FTC, Privacy Initiatives,30 http://www.ftc.gov/privacy/index.html.
See generally FTC, Spyware, Enforcement Actions,31
http://www.ftc.gov/bcp/edu/microsites/spyware/law_enfor.htm and FTC, Spam, Press Room,
http://www.ftc.gov/bcp/edu/microsites/spam/press.htm (providing lists of enforcement actions in these areas).
See generally FTC, Fighting Back Against Identify Theft,32
http://www.ftc.gov/bcp/edu/microsites/idtheft (the FTC’s identity theft site).
16 C.F.R. Part 310.33
The Do Not Call Registry was established by amendments to the TSR. Id. For information on the34
Do Not Call Registry, which is enforced jointly by the FTC and the FCC, see generally FTC, National Do Not Call
Registry, http://www.ftc.gov/donotcall.
For example, the FTC hosted a Town Hall on the privacy and security issues associated with35
contactless payment mechanisms and a Town Hall and staff report on mobile marketing. See FTC Workshop
Information Page, “Pay on the Go: Consumers and Contactless Payment,” available at
http://www2.ftc.gov/bcp/workshops/payonthego/index.shtml; Workshop Information Page,
FTC, “Beyond Voice: Mapping the Mobile Marketplace,” available at
http://www2.ftc.gov/bcp/workshops/mobilemarket/index.shtm.
See, e.g., United States v. Rental Research Svcs., No. 09-CV-00524-PJS-JJK (D. Minn. Mar. 5,36
2009); FTC v. Navone, No. 2:08-CV-001842 (D. Nev. Dec. 30, 2008); United States v. ValueClick, Inc., No. 2:08-
CV-01711 (C.D. Cal. Mar. 13, 2008); United States v. American United Mortgage, No. 1:07-CV-07064 (N.D. Ill.
Dec. 18, 2007); United States v. ChoicePoint, Inc., No. 1:06-CV-0198 (N.D. Ga. Feb. 15, 2006); In the Matter of
CVS Caremark Corp., FTC Docket No. C-4259 (June 18, 2009); In the Matter of James B. Nutter & Co., FTC
Docket No. C-4258 (June 12, 2009); In the Matter of Genica Corp., FTC Docket No. C-4252 (March 16, 2009); In
the Matter of Premier Capital Lending, Inc., FTC Docket No. C-4241 (Dec. 10, 2008); In the Matter of The TJX
Cos., FTC Docket No. C-4227 (July 29, 2008); In the Matter of Reed Elsevier Inc., FTC Docket No. C-4226 (July
29, 2008); In the Matter of Life is good, Inc., FTC Docket No. C-4218 (Apr. 16, 2008); In the Matter of Goal Fin.,
LLC, FTC Docket No. C-4216 (Apr. 9, 2008); In the Matter of Guidance Software, Inc., FTC Docket No. C-4187
(Mar. 30, 2007); In the Matter of CardSystems Solutions, Inc., FTC Docket No. C-4168 (Sept. 5, 2006); In the
11
priorities for more than a decade. The FTC has addressed privacy issues through law enforcement30
actions, including numerous actions to reduce the incidence of spam and spyware; a multi-faceted31
war on identity theft; promulgation and enforcement of the Telemarketing Sales Rule (“TSR”),32 33
including the maintenance and enforcement of the Do Not Call Registry to respond to consumer34
complaints about unsolicited and unwanted telemarketing; and numerous workshops and other
research to examine privacy issues raised by emerging technologies and business practices.35
A critical component of privacy is data security. If companies do not protect the sensitive
consumer information they collect and store, that information could fall into the wrong hands,
resulting in fraud or other harm. Important questions raised in this context are whether companies in
practice live up to the privacy and security policies that they announce to consumers and whether
their handling of sensitive consumer data is unfair. Since 2001, the FTC has brought over two
dozen law enforcement actions that challenged businesses that allegedly failed to adequately protect
consumers’ personal information. These cases emphasize the importance of protecting consumers36

Matter of Nations Title Agency, Inc., FTC Docket No. C-4161 (June 19, 2006); In the Matter of DSW, Inc., FTC
Docket No. C-4157 (Mar. 7, 2006); In the Matter of Superior Mortgage Corp., FTC Docket No. C-4153 (Dec. 14,
2005); In the Matter of BJ’s Wholesale Club, Inc., FTC Docket No. C-4148 (Sept. 20, 2005); In the Matter of
Nationwide Mortgage Group, Inc., FTC Docket No. 9319 (Apr. 12, 2005); In the Matter of Petco Animal Supplies,
Inc., FTC Docket No. C-4133 (Mar. 4, 2005); In the Matter of Sunbelt Lending Servs., Inc., FTC Docket No. C-
4129 (Jan. 3, 2005); In the Matter of MTS Inc., d/b/a Tower Records/Books/Video, FTC Docket No. C-4110 (May
28, 2004); In the Matter of Guess?, Inc., FTC Docket No. C-4091 (July 30, 2003); In the Matter of Microsoft Corp.,
FTC Docket No. C-4069 (Dec. 20, 2002); In the Matter of Eli Lilly & Co., FTC Docket No. C-4047 (May 8, 2002).
U.S. Department of Agriculture, Rural Utility Service and the U.S. Department of Commerce, National37
Telecommunications and Information Administration, Notice of Funds Availability, 74 Fed. Reg. 33104, 33110-11
(Jul. 9, 2009).
The FCC’s Policy Statement contains the following principles:38
• To encourage broadband deployment and preserve and promote the open and interconnected
12
against common security threats and the need for businesses to evaluate their security procedures on
an ongoing basis. In addition, the FTC generally recommends that all companies operating in the
broadband area, including last-mile providers, closely review their privacy policies and actual
practices to make sure that they are consistent with each other.
The FTC recognizes that there is no one-size-fits-all data security plan. Rather, data security
plans must be adapted to the size and nature of the business, the sensitivity of the information, the
nature of the tools available, and the security risks the business is likely to face. Like other
companies that have access to large amounts of sensitive personal data, broadband providers have a
serious obligation to take reasonable steps to protect that data.
III. Consumer Access to Online Content and Applications: Competition and Consumer
Privacy Issues
The broadband infrastructure platform itself and the demand for the content and applications
that it enables are linked to each other. Since the Internet’s privatization and associated
commercialization in the mid-1990s, market competition has spurred the development of an ever-
expanding universe of content and applications. Today, the Internet allows millions of users to
communicate with each other almost instantaneously through e-mail, instant messaging, chat rooms,
commercial Web sites for purchasing goods and services, social networking sites, Web logs
(“blogs”), music and video downloads, political forums, voice over IP (“VoIP”) telephony services,
streaming video applications, and multi-player network video games, among other ways.
Improvements in Internet access infrastructure, in turn, have enabled increasingly sophisticated and
data-rich content and applications.
To further this development, the FTC suggests that the Broadband Plan take into account the
interconnection and non-discrimination requirements outlined in the Notice of Funds Availability
that apply to infrastructure funded by the Recovery Act. These requirements, which are subject to37
law enforcement and reasonable network management practices, include:
1. Adhering to the principles in the FCC’s Broadband Policy Statement;38

nature of the public Internet, consumers are entitled to access the lawful Internet content of
their choice.
• To encourage broadband deployment and preserve and promote the open and interconnected
nature of the public Internet, consumers are entitled to run applications and use services of their
choice, subject to the needs of law enforcement.
• To encourage broadband deployment and preserve and promote the open and interconnected
nature of the public Internet, consumers are entitled to connect their choice of legal devices that
do not harm the network.
• To encourage broadband deployment and preserve and promote the open and interconnected
nature of the public Internet, consumers are entitled to competition among network providers,
application and service providers, and content providers.
FCC, Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, Policy Statement on
Broadband Internet Access, 20 FCC Rcd 14986 (2005).
Joseph Farrell, Open Access Arguments: Why Confidence is Mis-Placed, in NET NEUT RA LIT Y OR
39
NET NEUT ERIN G, SHO ULD BRO A DBA N D IN T ERN ET SERVIC ES BE REGULA T ED? 195 (Thomas M. Lenard & Randolph J.
May eds., 2006) (discussing the uncertainty surrounding the economic incentives of broadband network platforms in
relation to the content and applications that they enable). See also Joseph Farrell & Philip J. Weiser, Modularity,
Vertical Integration, and Open Access Policies: Towards a Convergence of Antitrust and Regulation in the Internet
Age, 17 HA RV. J. L. & TEC H. 85 (2003) (discussing more generally the economic incentives that platform providers
have relative to the products and services that they enable).
13
2. Not favoring any lawful Internet applications or content over others;
3. Displaying network management policies in a prominent location on the service
providers’ web page and providing notice to customers of changes to these policies;
4. Connecting to the public Internet directly or indirectly; and
5. Offering interconnection, where technically feasible, at reasonable rates and on
reasonable terms to be negotiated with requesting parties.
A. Competition Issues: Vertical Integration, Discrimination, and Blockage
The network management policies used by broadband providers have become increasingly
important to ensuring consumer satisfaction with broadband services. At the same time, competition
concerns about these network management practices have arisen regarding the interaction of
networks with the content and applications that travel over them.
For example, recent advances in packet inspection technologies allow network operators to
identify the source and content of much of the data traffic they handle and to manage its
transmission in increasingly sophisticated ways. Economic theory suggests that a network platform
with significant market power and a vertical interest in related content or applications may have an
incentive to use network management as a way to degrade or block competing content or
applications delivered over its network. Such an incentive may be heightened when network
resources are scarce, as during a period of congestion.39
At the same time, last-mile broadband Internet service providers also have countervailing
incentives to maximize the value of their network platform to users. As such, network management

See id.40
See FCC NOI supra note 1, at ¶ 65.41
FTC Broadband Report, supra note 3, at 130.42
FTC, FTC Staff Report: Self-Regulatory Principles for Online Behavioral Advertising [“FTC43
Behavioral Advertising Staff Report”] (Feb. 2009) at 23-24.
For example, some industry organizations have developed new self-regulatory principles covering44
businesses engaged in online behavioral advertising. Also, a number of companies have developed new policies and
procedures to inform consumers about online tracking and provide additional protections and controls over the
practices. Such developments include new tools to allow consumers to opt out of receiving targeted online
advertisements, as well as new versions of Internet browsers that allow users to not save browsing and search
14
practices that reduce consumer welfare also generally would be expected to reduce consumer
demand for their own network, to their financial detriment.40
Competition among several broadband Internet access providers likely would reduce
competitive concerns. More competition among broadband Internet access providers is likely to
check many of the potential network management practices that might reduce consumer welfare,
through the threat of losing customers to another network operator. Again, however, the mere
counting of providers or different technologies does not, by itself, answer the question of how well
consumers are being served. Rather, an analysis of the alternatives available to consumers, as
discussed above, could help illuminate the likely effects on consumers of various network
management practices in relation to content and applications.
B. Online Consumer Privacy Issues
Strong privacy protections for consumers are critical to facilitating the development and
consumer use of the content and applications enabled by broadband infrastructure. We suggest41
that the Broadband Plan acknowledge the importance of safeguarding consumer privacy so that the
promise of broadband access benefits consumers.
The FTC recognizes concerns about the collection of consumer data while online, especially
when consumers may not understand how the information could be used because such practices are
not clearly explained to them. Consumers justifiably expect clear and truthful information relating
to their use of the Internet, including their online activities. To the extent that truthful marketing
and clear disclosure relating to consumer privacy, personal information, or the protection of related
data is lacking, consumer confidence in Internet-related services may be hampered.42
A significant number of consumers appear to be particularly concerned about the tracking of
their online activities for the purposes of, for example, delivering targeted advertisements. It43
appears consumers generally maintain these concerns even where the data collected is not personally
identifiable. Several companies, industry organizations, and privacy groups have taken steps to
address some of the concerns raised by online behavioral advertising. Nonetheless, the FTC44

histories, cookies, form data, or passwords, and which will automatically clear the browser cache at the end of each
session. Other steps being taken include educational programs to inform consumers about online tracking and new
policies to reduce the length of time companies store personal data collected about online searches.
See FTC Behavioral Advertising Staff Report, supra note 43.45
An example of how behavioral advertising might work is as follows: a consumer visits a travel web46
site and searches for airline flights to New York City. The consumer does not purchase any tickets, but later visits
the website of a local newspaper to read about the Washington Nationals baseball team. While on the newspaper’s
site, the consumer receives an advertisement from an airline featuring flights to New York City.
FTC, Securing Personal Data in the Global Economy,47
http://www2.ftc.gov/bcp/workshops/personaldataglobal/index.shtm.
15
remains vigilant in this area and is committed to vigorous law enforcement in connection with unfair
and deceptive practices involving consumers’ online activities.
For example, earlier this year the FTC staff released a report containing principles designed
to serve as the basis for industry self-regulatory efforts to address the privacy and data security
concerns raised by behavioral advertising. Behavioral advertising is the practice of tracking an45
individual’s online activities in order to deliver targeted advertising tailored to that individual’s
interests.46
Although behavioral advertising may benefit consumers with advertising that is more
relevant to their interests and free online content, it also raises substantial privacy concerns.
Consumers may be uncomfortable about being tracked. Further, without adequate safeguards,
consumer tracking data – which may include sensitive data about children, health, or a consumer’s
finances – could fall into the wrong hands or be used for unanticipated purposes.
To address these concerns, the FTC staff principles call for transparency, consumer control,
and reasonable security for consumer behavioral data. They also call for companies to obtain
affirmative express consent from consumers before they: (1) use data in a manner that is materially
different than promised at the time of collection; and (2) collect and use “sensitive” consumer data
for behavioral advertising.
Further, the FTC recognizes that, as more data flows across geographic borders, protecting
that data will require international cooperation. Earlier this year, the FTC staff held a two-day
international conference to address how companies can manage data security in a global
environment where data can be stored and accessed from multiple jurisdictions. The FTC will47
continue to partner with its foreign counterparts and other international organizations to maintain
data security across borders without restricting information flows that benefit consumers.
In addition, the FTC is examining “cloud computing,” which is defined broadly as the
provision of Internet-based computer services. Cloud computing allows businesses and consumers
to use software and hardware located on remote computer networks operated by third parties.

For example, the FTC is currently considering a petition submitted by the Electronic Privacy48
Information Center that raises data security concerns about Google’s provision of cloud computing services to
consumers. EPIC Complaint Before the FTC, In the Matter of Google, Inc. and Cloud Computing Services (Mar.
19, 2009), available at http://epic.org/privacy/cloudcomputing/google/ftc031709.pdf.
See generally Howard A. Shelanski, Network Neutrality: Regulating With More Questions Than49
Answers, 6 J. TELECO MM. & HIGH TEC H. L. 23 (2007) (exploring several unanswered questions in this area and
discussing their implications for broadband Internet policy).
16
Because cloud computing reduces the need for businesses and consumers to purchase, operate, and
maintain software and hardware themselves, it may be a less costly way for them to manage, store,
and use data. Cloud computing is an emerging business model, and the FTC is analyzing the
privacy and data security implications for consumers.48
C. The Need for Additional Learning
The extent to which network management practices may affect competition and consumers is
likely to vary, depending on the particular factual circumstances. The FTC suggests that the49
Broadband Plan affords an opportunity to develop a firmer understanding of the facts relevant to
network management practices and their effects on consumers. Empirical data to answer the
following questions, among others, may help illuminate the competitive and consumer impact of
these practices.
1. What network management practices are used when network capacity is not
constrained? What benefits or efficiencies are associated with these practices?
2. What network management practices are used when network capacity is constrained,
due to congestion or other factors? What benefits or efficiencies are associated with
these practices?
3. Are there alternatives, other than network management (e.g., increasing network
capacity), to remedy capacity constraints? To what extent are such alternatives
practical and economically feasible?
4. Do network operators have incentives to limit network capacity, for example, in
order to sell prioritized data transmission or other types of quality of service
assurances?
5. To what extent have network management practices been used to block or degrade
data transmission, either when capacity is constrained or under other circumstances?
6. How do providers of online content and applications currently compensate network
operators for Internet access and the transmission of their data?
7. What network management practices are required to ensure that network operators
can provide services to online content and applications providers? Are there services
that can be provided only by network operators in conjunction with network
management?

17
8. Are there ways that some content and applications providers may obtain preferred
transmission of their data, beyond best-efforts transmission, either when network
capacity is constrained or unconstrained? What are these techniques? To what
extent are they used?
9. How are content and applications providers that do not obtain preferential
transmission of their data affected by those that might obtain such treatment?
10. How do consumers become aware of whether the content and applications they use
are transmitted by a network on a basis other than best-efforts? To what extent are
consumers, in fact, aware of such treatment?
11. What are consumers’ expectations about the collection, use, and security of their
personal information when they browse the Internet, purchase products online, and
participate in social networking sites? What are the best ways to measure such
expectations?
12. What are the most significant threats to the privacy and security of consumers’
personal information in the broadband Internet context?
13. What privacy and data security protections are currently provided for data obtained
from behavioral advertising? Are additional protections needed?
14. What new data security, access, and control issues are presented by cloud computing
platforms that may house applications and personal data?
IV. Conclusion
The FTC encourages the FCC to incorporate sound competition and consumer protection
principles as the foundation for the Broadband Plan. The Broadband Plan provides an ideal
opportunity to perform a competitive market analysis that can be used as the foundation for the
development of ongoing regulatory policies governing broadband Internet access. It also can be
used to gather additional empirical information about the impact of network management practices
on consumers and competition.
The FTC has been involved in the Internet access area for over a decade and will continue to
do so. The FTC Act is sufficiently flexible to allow the FTC to enforce the antitrust and consumer
protection laws in this industry. The FTC will continue to devote substantial resources to
maintaining competition and protecting consumers from deceptive or unfair acts or practices in the
area of broadband Internet access, using a variety of tools.
By Direction of the Commission.
Donald S. Clark
Secretary