Telecom Law Monitor

Telecom Law Monitor

Litigation, Enforcement & Compliance Issues Update

Court Case Counsels Caution for International Telecommunications Carriers

Posted in Enforcement, International

As the Securities Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) continue to aggressively pursue investigations under the Foreign Corrupt Practices Act of 1977 (the “FCPA”), international telecommunications carriers are particularly at risk.  International terminations often involve relationships with foreign governments or with state-owned telecommunications carriers.  With these types of carrier partners, an international carrier may be subject to the FCPA, and its dealings with the terminating entity may be limited by U.S. law.

The SEC and the DOJ have been very aggressive in many aspects of their enforcement actions, including their broad interpretation of the law.  A recent decision by the United States Court of Appeals for the 11th Circuit, in United States v. Joel Esquenazi and Carlos Rodriguez, highlights the government’s broad interpretation of what commercial enterprises are deemed governmental “instrumentalities” subject to the proscriptions of the FCPA against certain payments to and transactions with foreign officials.  In the case, the court found that principals of a Miami telecommunications company, Terra Telecommunications (“Terra”), which resells international long distance telephone services, could be subject to the FCPA because the state-owned entity with whom they dealt qualified as a foreign official under the FCPA.

Kelley Drye’s Corporate Finance and Securities practice group has prepared this client advisory on the court’s decision.  The Advisory describes the Eleventh Circuit’s fact-dependent approach to defining “instrumentality” and highlights the quandary confronting international telecom carriers in identifying which of their business counterparts abroad will be considered “foreign officials” under the FCPA.


FCC Releases Order Detailing Competitive Application Rules and Selection Criteria for Rural Broadband Experiments

Posted in Broadband, FCC, Infrastructure, Universal Service Fund

As reported earlier on this blog, the FCC has adopted a Report and Order setting forth the application requirements and selection methodology for its forthcoming rural broadband experiments. The FCC will provide $100 million of Connect America Fund financial support for experiments in areas where the incumbent provider of voice services is a price cap local exchange carrier. As detailed in the Report and Order, released on July 14, 2014, funding will be available in three categories: projects with very high performance standards, projects with minimum performance standards, and projects in extremely high cost areas.  Competition for funding in each category will be through a single-round auction on a national basis and selections will be based on a single criterion: “cost-effectiveness” as defined in the Commission’s Report and Order.

Proposals from traditional and non-traditional eligible broadband providers will be accepted through Tuesday, October 14, 2014, at either the census block or the census tract level as chosen by the applicant. Winning applicants, all of whom will be selected simultaneously, will receive ten years of recurring support, rather than one-time support. The Order also details obligations for winning bidders, including obtaining Eligible Telecommunications Carrier (ETC) status (if not already held), build-out milestones, and reporting requirements, along with enforcement measures in the event of non-compliance.

For more information, please click here for our client advisory.

FCC Requires Closed Captions for Online Video Clips

Posted in Disabilities Access, FCC, New Media, Video Programming

On July 11, 2014, the FCC adopted a Second Order on Reconsideration and Second Further Notice of Proposed Rulemaking responding to a coalition of consumer groups that had pushed the FCC to reconsider its position and require that programming distributors (broadcast, cable, and satellite) include closed captioning for certain IP-delivered video clips.  The new rules will apply to video clips only if the video clip was shown on television and then posted online to the programming distributor’s own website or mobile app and do not apply to consumer-generated media.  The Order sets forth a number of compliance deadlines:

  • January 1, 2016: “Straight lift” clips – a single excerpt of a captioned program with the same video and audio as when the clip appeared on television
  • January 1, 2017: Video montages that compile multiple straight lift clips
  • July 1, 2017: Video clips of live and near-live television programming, subject to grace periods

Notably, the Order does not apply to clips in the distributor’s online library that were posted online before the applicable compliance deadline. Further, the quality of captions must be at least as good as those on television.

The Commission’s release also includes a Second Further Notice of Proposed Rulemaking that seeks comment on four core issues:

  1. The application of IP closed captioning rules to third-party distributors;
  2. Whether to shorten or eliminate grace periods that apply to video clips of live or near live programming;
  3. Whether to extend the rules to “mash-ups” of video clips from captioned programming and online only content; and
  4. How to apply IP closed captioning rules to “advance” video clips that are posted online before being shown on TV.

The Commission’s Order represents the latest step toward expanding access to digital technologies for those with disabilities, and Chairman Wheeler indicated that Friday’s action is “just the beginning.” As with the Commission’s rules related to Advanced Communications Services (“ACS”), which we discussed previously in a client advisory and a related blog post, this latest Order gives the FCC greater authority to regulate online content.  Therefore, as distributors increasingly place their content online, they should remain mindful of the Commission’s expanded jurisdiction.

FCC Announces USF Enforcement “Strike Force” To Combat Waste, Fraud and Abuse

Posted in E-rate, Enforcement, FCC, Lifeline, Universal Service Fund

FCC Chairman Tom Wheeler issued a Public Notice on July 14, 2014, announcing the creation of a new “Strike Force” to respond to concerns of waste, fraud and abuse in the Universal Service Fund (USF). Chairman Wheeler reiterated that “the Commission is committed to aggressively rooting out waste, fraud and abuse.” Operating within the Enforcement Bureau, the Strike Force is expected to boost the Commission’s USF enforcement efforts. The Strike Force will coordinate closely with the FCC’s Office of Inspector General (OIG) to enhance OIG efforts and build an additional layer of enforcement activities directed at alleged violations of USF programs and funds.

The initiative will be led by Loyaan Egal, a new member of FCC staff who previously served as a prosecutor in the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia. Mr. Egal also served as a federal prosecutor in the Southern District of New York leading complex investigations and prosecuting a multitude of cases. Since the new Strike Force will be a part of the Enforcement Bureau, all activities will be overseen by Travis LeBlanc, Acting Chief of the Enforcement Bureau. The Strike Force is still being formed within the Commission, but is expected to include prosecutors, investigators and forensic analysts. The new group is expected to investigate violations of all four of the USF programs. However, it would not be surprising to see the new Strike Force focus primarily on the Lifeline and E-rate programs.

The launch of the new Strike Force follows on the heels of the Bureau’s recent Public Notice announcing that Katherine Winfree will be the Bureau’s new Chief of Staff. Similar to Mr. Egal, Ms. Winfree is also a seasoned prosecutor having served as Chief Deputy Attorney General of Maryland.

FCC Announces Upcoming Public Workshop on Social Media Accessibility

Posted in Disabilities Access, FCC

On July 10, 2014, the Federal Communications Commission announced that it will hold a public event entitled “Accessing Social Media” on Thursday, July 17, 2014, under the banner of its Accessibility and Innovation Initiative. The event will be held at the FCC’s Washington, DC headquarters at 445 12th Street SW from 9am to 4pm and will include broad panels of industry, government, and consumer representatives as well as a product exhibit floor.

Participating organizations will include: the American Association of People with Disabilities; Adobe Systems; Hearing Loss Association of America; IBM; the U.S. Department of Labor; University of Colorado, Boulder; and the U.S. Business Leadership Network. (A complete list of participating organizations can be found here.)

The Commission launched the Accessibility and Innovation Initiative in 2010, on the twentieth anniversary of the passage of the Americans with Disabilities Act, to push for improved access to technology for disabled citizens. Several months after the announcement of the Initiative, President Obama signed the Twenty-First Century Communications and Video Accessibility Act (CVAA) into law, imposing a variety of accessibility requirements on advanced communications products and services. The FCC has, on occasion, granted waiver requests for select devices including most recently for certain e-reader devices.

FCC Adopts Competitive Bidding Rules and Selective Criteria for Rural Broadband Experiments

Posted in Broadband, FCC, Infrastructure, Universal Service Fund

This past Friday, at its open meeting, the Federal Communications Commission (“FCC” or “Commission”) adopted a Report and Order and Further Notice of Proposed Rulemaking (FCC 14-98) establishing the method by which the FCC will solicit proposals for and award funds to support experiments in bringing robust broadband services to rural America’s high cost areas.  As reported earlier on this blog, the FCC authorized these rural broadband experiments in the Technology Transitions Order it released in January of this year.  The News Release issued after the Commission’s vote states that an ancillary purpose underlying the experiments is to test the competitive bidding process that the FCC will use to allocate funds in Connect America Fund (“CAF”) Phase II, which is expected to take place in 2015.

In Friday’s Order, the FCC establishes a $100 million budget for the experiments and sets the criteria for selecting which proposals to fund.  Funding will be made available for three categories of projects in areas where the incumbent is a price cap carrier:

  • $75 million for projects delivering service at 25 Mbps downstream and 5 Mbps upstream in high cost areas for the same or lower amount of support than will be offered to carriers in CAF Phase II
  • $15 million for projects delivering service at 10 Mbps downstream and 1 Mbps upstream in high cost areas
  • $10 million for projects delivering service at 10 Mbps downstream and 1 Mbps upstream in extremely high cost areas

Applicants will compete nationwide for access to funding in a single-round auction, and funds will be awarded by the Commission to those proposals that are deemed most cost effective based on a numerical score.  Commission staff has indicated that cost effectiveness will be based on a proposal’s per-connection cost compared to the CAF cost model amount for the area to be served. 

The Commission invites proposals utilizing a diverse array of technologies, including fiber and wireless networks, and will be open to non-traditional providers, such as electric utilities and wireless broadband providers.  The Order establishes rigorous buildout milestones, with strong enforcement mechanisms to ensure compliance.  In addition, the proposals will be required to identify whether the applicant will offer a low-income broadband plan, and further requires awardees to offer Lifeline service once they have been designated as an eligible telecommunications carrier (“ETC”).  The Commission also will provide entities seeking to serve tribal areas with a 25% bidding credit.  However, the Order also sets limits on funding available.  Specifically, in order to ensure a diversity of experiments, the Order caps the size of projects and the amount of funding that a carrier may accept.

Final applications are due 90 days after the release of the Order, and the Commission expects to make its selections by the end of the year. 

The Order also includes a Further Notice of Proposed Rulemaking, which seeks comments on how the CAF Phase II competitive bidding process can offer bidding credits in situations where states have agreed to provide matching funds to expand rural broadband.

The text of the Order and rules have not yet been released, although Commission staff has given indication the release will be prompt.  When the Order becomes available, we will provide additional details.

FCC’s New E-Rate Rules Expose a “Digital Divide” Among Commissioners

Posted in Broadband, E-rate, Universal Service Fund, Wireless

At its Open Meeting today, the Federal Communications Commission adopted new E-rate rules, despite strong objections from Commissioners Pai and O’Reilly.  As predicted, the new E-rate rules direct a significant, short-term boost of funding for wireless connections to schools and further focus E-rate funding on broadband services.  While the Chairman lauded the Commissioners for approving the new rules, Commissioners Pai and O’Reilly lamented the “missed opportunities” of the new rules, and making special mention of the lack of bipartisanship during the rulemaking process.  Among the dissenting Commissioners, Pai was most concerned with how the E-rate program would continue to receive funding, and repeated assertions that the Chairman intended to raise the E-rate cap later this year.  Commissioner O’Rielly asserted that there was “no long term plan” for the program and complained that many changes were “short-sighted.”

According to the Commission’s press release, the new E-rate rules will bring digital learning benefits to 10 million students across the country in 2015 alone.  The new rules also phase-out support for voice services and lower the maximum discount for schools from 90% to 80%, meaning that for every $1 that is spent by a school, $4 will be contributed by the USF. Continue Reading

Could 2014 be the year for Cybersecurity Information Sharing Legislation?

Posted in Broadband, Infrastructure, Internet Protocol Networks, Privacy

The Senate is one step closer to a floor vote on cybersecurity legislation that would address information sharing between the private sector and the government.  On July 8, the Senate Select Committee on Intelligence approved a contentious cybersecurity bill known as the Cyber Information Sharing Act (CISA).

The proposed legislation would remove legal barriers to allow private companies to share information regarding cyber-attacks “in real time” with other private companies and the government.  Companies sharing information for cybersecurity purposes would be shielded from lawsuits by individuals against the company for sharing that data, regardless of terms of service contracts that may prevent such actions without a customer’s consent.  In order to receive the liability protection, private entities would be required to submit information directly to the Department of Homeland Security, which could then share the information with other federal agencies as necessary to address the threat.  Additionally, CISA would direct the federal government to share classified and unclassified information with the private sector.

CISA also includes several provisions to protect privacy, such as requiring that companies sharing information remove all personally identifiable data (e.g. names, addresses, and Social Security numbers). The Attorney General would be directed to write procedures to limit government use of cyber information received to “appropriate cyber purposes” and ensure that privacy protections are in place. A full synopsis from the Senate Committee Chair and co-sponsor of CISA, Dianne Feinstein (D-CA), is available here.

Continue Reading

On the Heels of Aereo, FCC Takes a Firm (and Expensive) Stance in Retransmission Consent Case

Posted in Enforcement, New Media, Video Programming

Yesterday, the FCC issued a $2.25 million Forfeiture Order against TV Max Inc. (and its affiliates and subsidiaries) for “willfully and repeatedly” violating Section 325 of the Communications Act.  The fine reflects the amount proposed in the FCC’s June 2013 Notice of Apparent Liability.  In a post-Aereo world, the FCC seems to be taking retransmission violations more seriously than ever.  In addition, following a trend in recent large enforcement orders, the FCC took the position that each day TV Max acted in contravention of Section 325 constituted a separate violation of the Commission’s rules.  This approach allowed the Commission to conclude that the statutory maximum exposure exceeded $16 million, thereby clearing room for the Commission’s $2.25 million fine.  The Commission’s discussion also provides some interesting insights into its view of permissible rebroadcasts absent retransmission consent agreements.  Continue Reading

Steady Volume of USF Appeals Forces Change in FCC Procedure

Posted in FCC, Universal Service Fund

Followers of this blog know that appeals relating to Universal Service Fund contribution obligations proliferate.  Despite a rule stating that the FCC will address such appeals in 90 days, contribution appeals routinely linger for two years or more before a decision.  Moreover, the number of new appeals outpaces the number of USF decisions issued by the Commission, leading to a growing backlog of pending appeals.  Bowing to this steady stream of appeals, on July 2, the Federal Communications Commission’s Wireline Competition Bureau announced that it would henceforth apply the default comment period to Universal Service Fund (USF) appeals, rather than issuing separate public notices for each USF appeal filed.  The default cycle provides ten days for comments after an initial appeal is filed and an additional five days for responses.  Under the previous approach, the Bureau typically allowed 30 days for comments and 15 days for replies.  The new policy is in effect immediately, beginning with an appeal filed on June 30, 2014.

The default comment period is good news for those who seek to speed the pace of USF appeals.  Few appeals generate any comments, and this proposal will significantly shorten the amount of time it takes to compile a record in cases for which there is a significant question.  But it remains to be seen whether the Bureau will be able to generate orders resolving appeals more quickly.  One of our biggest complaints is that certain issues — MPLS, private line jurisdiction, etc. — appear repeatedly in USF appeals.  If the Bureau could provide some clarity on these types of issues (like it did with reseller certification issues in 2012), it will go a long way toward reducing the backlog of appeals.