AT&T has been dealt a blow in its attempt to avoid all regulatory oversight from the Federal Trade Commission, and the court decision could also play an important role in the debates over net neutrality and broadband privacy rules. Federal Communications Commission Chairman Ajit Pai yesterday welcomed the court decision and said it strengthens his argument that net neutrality rules should be overturned.

The background of this one takes a little explaining, but Ars readers are probably familiar with the details. The FTC sued AT&T in October 2014, seeking refunds for customers who paid for unlimited data but were throttled once they used either 3GB or 5GB each month. The FTC is barred from regulating common carriers, a classification that has applied to AT&T's phone service for more than 80 years under Title II of the Communications Act. But AT&T has various lines of business, some of which are not classified as common carriage, and the FTC said it could punish AT&T for transgressions related to its non-common carrier businesses. (Internet service was not yet classified as common carriage when the FTC sued AT&T.)

AT&T's argument was accepted in an August 2016 ruling by a three-judge panel of the US Court of Appeals for the Ninth Circuit, which said that "Because AT&T was a common carrier, it cannot be liable for the violations alleged by the FTC." The ruling could have had effects beyond AT&T, as it called into question the FTC's ability to regulate any company that offers at least some common carrier services.

Pai: “Big win for American consumers”

But yesterday, judges announced that the case will be reheard in front of the entire court in an en banc hearing and that "The three-judge panel disposition in this case shall not be cited as precedent by or to any court of the Ninth Circuit." AT&T could theoretically win the case again in front of a larger group of judges, but en banc hearings only happen when there is a strong possibility of overturning the original decision. The case is scheduled to be reheard on September 18.

Ultimately, this means the FTC likely will keep its ability to protect consumers from unfair or deceptive practices when companies like AT&T offer non-common carriage services. Pai issued a statement yesterday saying this boosts his argument that the FCC should reverse its classification of ISPs as common carriers and that the FTC should be allowed to take a larger role in regulating Internet service:

Today’s action by the Ninth Circuit is a big win for American consumers. Now that the court’s prior decision is no longer effective, it will be easier for the FTC to protect consumers’ online privacy. The court’s action also strengthens the case for the FCC to reverse its 2015 Title II Order and restore the FTC’s jurisdiction over broadband providers’ privacy and data security practices. Indeed, it moves us one step closer to having the consistent and comprehensive framework for digital privacy that the American people deserve.

Pai objected to the FCC's February 2015 decision to reclassify Internet service as a Title II common carrier service, and now that he is chairman he has proposed reversing that classification. Reversing the Title II classification would also undo the current net neutrality rules that prevent ISPs from blocking or throttling Internet traffic or prioritizing content in exchange for payment.

Under its previous Democratic leadership, the FCC also used its Title II authority over ISPs to write privacy rules for broadband providers that were stricter than the FTC's privacy enforcement. When Republicans in Congress voted to eliminate those broadband privacy rules this year, they said that the FTC should regulate ISPs' privacy practices once Pai achieves his goal of eliminating the common carrier classification of ISPs. The AT&T court ruling would have made this difficult, but that obstacle has been removed because of yesterday's decision that "the case shall not be cited as precedent."

FTC helps consumers, but it isn’t a full substitute for FCC

In sum, it would be good for consumers if the FTC is able to continue regulating companies like AT&T regardless of what happens at the FCC. Pai was already moving ahead with plans to gut net neutrality and other consumer protection rules long before yesterday's court decision.

But FTC enforcement isn't a perfect substitute for the FCC. As the FCC is the expert agency for telecommunications and can create specific rules to protect telecom customers, the FTC isn't able to create hard-and-fast rules that ISPs must follow. The FTC can prevent deceptive or unfair practices, but this depends in large part on ISPs promising not to do bad things. If companies make promises in their terms of service and then fail to deliver, the FTC can step in.

"We are a very hard-working agency, but we’re not a very big agency," FTC Commissioner Terrell McSweeny recently told Ars. "The FTC doesn't have a lot of expertise in network engineering. We're not the FCC in that regard." The FTC receives "millions of consumer complaints every year" across all industries under its jurisdiction, and "we can’t act on every single complaint."