Emerging Technologies Washington Update

This Week: Court affirms FCC’s broadband classification decision in net neutrality order, FTC hosts workshop to weigh potential COPPA updates, House Subcommittees to examine Section 230, OECD publishes digital tax proposals ahead of presentation to G-20 finance ministers, NHTSA to examine whether cameras can replace rearview mirrors in vehicles.

Week in Review

The House and Senate were in recess again this week; lawmakers will return to Washington next week following the Columbus Day holiday. On Tuesday, President Trump awarded the Medal of Freedom to former Attorney General Edwin Meese.

House Appropriations Committee Chairwoman Nita Lowey (D-NY) announced today that she will not seek reelection in 2020. Last week, House Armed Services Committee Ranking Member Mac Thornberry (R-TX) also announced that he will retire at the end of this Congress.

Meanwhile, in Europe, Commissioner for Competition Margrethe Vestager appeared before a joint meeting of four European Parliament Committees in Brussels in support of her appointment to also serve as the European Commission’s Executive Vice President for Digital. California Attorney General Xavier Becerra also released proposed regulations this afternoon to implement the landmark California Consumer Privacy Act (CCPA), which goes into effect on January 1, 2020. The Office of the Attorney General will hold four public hearings on the proposed regulations and accept comments until December 6.

Looking Ahead

When lawmakers return to Washington next week, National Defense Authorization Act (NDAA) conferees will aim to bring a final package up for floor votes in each chamber by mid-October. Facing a November 21 deadline, Congressional leaders and the White House will also resume discussions around FY20 government spending.

Two House Energy and Commerce subcommittees will hold a joint hearing next Wednesday on Section 230 of the Communications Decency Act (see below for additional details). With the Satellite Television Extension and Localism Act (STELAR) set to expire at the end of the year, the Senate Commerce, Science, and Transportation Committee is planning a hearing later this month on the satellite law. To date, reauthorization legislation has not been introduced in either chamber.

Court Affirms FCC’s Broadband Classification Decision in Net Neutrality Order

On October 1, the U.S Court of Appeals for the District of Columbia Circuit issued its decision upholding the Federal Communications Commission’s (FCC) decision to reclassify broadband internet access service as an information service under Title I of the Communications Act of 1934, as amended by the Telecommunications Act of 1996. The court also upheld the Commission’s decision to pursue a “light-touch” regulatory structure for overseeing the Internet. At the same time, the court struck down the Commission’s preemption provision, raising the specter of state and local regulation that runs counter to the so-called “light touch” approach. 

Underpinning the Court of Appeals decision is a reaffirmation of Chevron deference for agency action interpreting ambiguous provisions of statutes they administer. Noting that the Commission has “switched its tack” on the question of classification, the Court nevertheless deferred to the FCC, explaining that definitions of “telecommunications service” and “information service” are ambiguous and thus the expert agency is left to determine the issue based on a reasonable policy choice.

The Court remanded to the Commission three areas for further consideration, noting that the Commission had failed to justify its decision sufficiently. Those areas are public safety, pole attachments, and preemption. Regarding preemption, the Court, in a two to one decision, struck down the Commission’s “sweeping preemption” provision finding a lack of statutory authority. Having disclaimed authority to regulate broadband, the Court notes that “it equally lacks the power to preempt state law.” The Court further explained that because Title I is an ancillary source of Commission authority, not mandatory like the authorities provided in other titles covering telecommunications, radio, and cable, Title I cannot be a basis for preemption. 

Judge Millett issued a concurrence stating that while she is willing to give the Commission deference, she believes that the Commission has “drifted far beyond the statutory design and exceeded its interpretive discretion.” Millett’s concerns, as she described it, stem from the Commission’s decision to re-craft the determination of what is an information service from one focused on functional integration and consumer perception to a data transmission “designed” to facilitate access to information services.

In dissent, Judge Williams argued that the Commission’s preemption determination should have been upheld. He asserted that the Commission’s reliance on the “impossibility doctrine” meets the standard the courts have set out for its use. To find otherwise, Judge Williams writes, would be to allow states to step in where the federal government has established a deregulatory structure, thus negating the FCC’s decision to deregulate.

The parties have 45 days to seek rehearing by the panel or en banc, and 90 days to petition for writ of certiorari.

FTC Hosts Workshop to Weigh Potential COPPA Updates

On Monday, the Federal Trade Commission (FTC) held a workshop entitled “The Future of the COPPA Rule” that analyzed the efficacy of the Children’s Online Privacy Protection Act (COPPA) in today’s online marketplace. The workshop featured lectures by several industry and academic stakeholders, as well as four panel discussions that analyzed the rule in comparison to standards within the EU and California.

Prior to the workshop, Senators Markey (D-MA), Blumenthal (D-CT), Hawley (R-MO), and Blackburn (R-TN) sent a letter on October 4 to the FTC Commissioners urging the agency not to weaken existing protections for children’s online privacy. “Even though the COPPA Rule was not scheduled to be reviewed until 2023, the FTC decided to review the rule early because of ‘changes in technology’,” the senators wrote. “We agree that the Rule warrants updating, but we are concerned that the FTC is choosing to update the rule at a time when the Commission appears insufficiently appreciative of the threat some giant tech companies pose to children and parents.” However, in opening remarks at the workshop, FTC Commissioner Wilson underscored the event is not an attempt to relax existing regulations, but rather to analyze what changes should be made given the state of digital platforms today.

During the event, panelists discussed whether the FTC should adopt stronger protections similar to the EU’s General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA). Similar to previous events on data privacy, consumer advocates strongly urged for increased protections and consumer control while industry representatives cautioned that the existing law already creates significant burdens for companies. Several panelists noted the difficulty COPPA compliance presents with regard to improving products for consumers. Industry representatives noted that many app developers who do not collect data on children lack the analytics necessary to make better content. Other panelists suggested that anonymized data should be acceptable for developers to use, as it does not link personal information to specific uses. During his keynote address, Commissioner Phillips recommended the FTC keep in mind the congressional intent of COPPA when discussing whether the rule should be updated. He noted that proposed changes must be based on facts, observable industry trends, and whether current business practices cause harm to the consumer.

In the meantime, Senators Blumenthal and Blackburn also wrote to Senate Appropriations Committee leadership on Monday urging them to increase funding for programs for missing and exploited children, noting that “perpetrators are becoming increasingly technologically sophisticated, masking their identity and their crimes behind virtual private networks and near-impenetrable encryption techniques.”

House Subcommittees to Examine Section 230

Next Wednesday, the House Energy and Commerce Subcommittees on Communications and Technology and Consumer Protection and Commerce will hold a joint hearing called “Fostering a Healthier Internet to Protect Consumers” to examine Section 230 of the Communications Decency Act. Full Committee Chairman Pallone (D-NJ) and Subcommittee Chairs Doyle (D-PA) and Schakowsky (D-IL) said, “The Internet has opened America’s homes to a wealth of social, economic and educational opportunities. Sadly, bad actors, both foreign and domestic, have abused this access to peddle extremism, disinformation and hatred that divides our nation. This hearing will explore whether online companies are appropriately using the tools they have – including protections Congress granted in Section 230 of the Communications Decency Act – to foster a healthier Internet.”

This week, Chairman Pallone announced that the Committee invited US Trade Representative Robert Lighthizer to testify at the hearing, noting that several proposed trade agreements include provisions similar to Section 230 and that the Committee wishes to examine “how these provisions may affect the ability of the United States and our trading partners to enforce existing laws or write new ones.” Pallone and Ranking Member Walden (R-OR) wrote to Lighthizer in August to express concern about such a provision in the US-Mexico-Canada Agreement (USMCA). Walden expressed support for Pallone’s invitation to Lighthizer to appear next week, though the Committee later confirmed that Lighthizer turned down the invitation.

OECD Publishes Digital Tax Proposals Ahead of Presentation to G-20 Finance Ministers

The Organization for Economic Cooperation and Development (OECD) published proposals this week to address global taxation in an increasingly digital economy. The international coordination effort comes as several countries, including France, have moved ahead with their own digital service taxes (DSTs) that the United States argues disproportionately impact American technology companies. The OECD effort aims to reach international consensus by January 2020.

While this week’s draft proposals leave much to be determined, the initial recommendation is for companies with a large global footprint and at least €750 million in revenue to trigger compliance with the OECD-mandated tax, provided they also meet a to be determined country-specific sales threshold. Once those thresholds are met, the company would first owe a tax to its home country. At a certain level of additional profits, also to be determined, the company would be responsible for paying an additional tax to be divided amongst certain countries based on the company’s footprint of operations.

OECD will present its initial proposals to G-20 finance ministers on October 17 and will hold a consultation in November to solicit additional input. For more on the ongoing debate between the United States and France on the French DST, read here.

NHTSA to Examine Whether Cameras Can Replace Rearview Mirrors in Vehicles

The National Highway Traffic Safety Administration (NHTSA) published a Federal Register notice today announcing an Advanced Notice of Proposed Rulemaking (ANPRM) seeking information to help the agency determine whether Camera Monitor Systems (CMS) can be an alternative to inside and outside rearview mirrors. The ANPRM will help NHTSA as it considers whether to update Federal motor vehicle safety standard (FMVSS) No. 111, ‘‘Rear Visibility,’’ which requires vehicles be equipped with rearview mirrors. The ANPRM is a response to rulemaking petitions from manufacturers seeking to install CMS on both light vehicles and heavy trucks.

NHTSA poses 21 questions to support its information collection to determine if cameras will provide an equivalent level of safety as mirrors under today’s standard. Comments are due by December 9.