Happy Holidays from Kelley Drye
Kelley Drye wishes you a wonderful holiday season and a very Happy New Year.
You can see and hear our holiday greeting by clicking here.
"To Do List" for the National Broadband Plan
Although advertised as a "policy framework" for the National Broadband Plan, Wednesday's presentation to the FCC looks more like a "to do" list for Chairman Genachowski's 2010 agenda. A number of suggestions will be very controversial, including ensuring "productive" use of spectrum (especially TV broadcast spectrum), spurring competition for TV set-top boxes, and measuring "advertised vs. actual" broadband speeds. Most relevant to this blog's focus are the reforms of USF and the FCC Formal Complaint Process.
USF Reform. Staff emphasized that USF should be refocused to support broadband, and suggested a 5-10 year transition. Increases in broadband support would come with "trade-offs", primarily in the form of cuts in high cost support, but with all funding programs being reformed. The long-discussed Lifeline support for broadband services may be growing legs. Finally, "sustainability" would be the driving force for reforming the USF contribution base (no doubt, spurred by concerns over the new 14% USF factor next quarter).
FCC Formal Complaints. A number of enforcement reforms were discussed to promote infrastructure deployment. In particular, the Staff urged "timely and predictable" dispute resolution by the FCC's Enforcement Bureau of pole attachment requests and development of a uniform rental rate to replace a rate that varies by the type of provider attaching to the pole. FCC mandates to decrease the "make-ready" work a pole owner performs and to impose deadlines for current attachers to perform "make-ready" work may be on the horizon too.
The FCC press release and Staff's presentation are available here and here. The FCC will adopt the National Broadband Plan by February 17, 2010.
USF Contribution Factor Reaches a New High
The FCC today announced its proposed Universal Service Fund contribution factor for the upcoming quarter, 1Q 2010. The factor will rise almost two percent, to a new record high of 14.1% of end user telecommunications revenues. As it did earlier this year when the factor first exceeded 12%, the FCC declined to raise the threshold on the "88-12" rule for international carriers. Instead, the FCC repeated its statement that it will give a waiver to any carrier who demonstrates that (1) its revenue is less than 14% interstate AND (2) its resulting USF contribution is more than its interstate revenue.
The public notice states that the factor will take effect automatically unless the FCC releases an order modifying the rate. In the 12+ years of the USF, however, the FCC has never changed the proposed factor, and I don't expect to see a change this time either. Effective January 1, telecommunications providers will be assessing USF contributions at 14.1% of end user telecom revenues.
It's hard to believe that so many people were up in arms about a federal excise tax of 3% yet the USF factor continues to rise without any real change in the fund. Clearly, the current USF is unsustainable. It is looking more likely than not that 2010 will finally be the year that the Fund sees significant reform.
Broadband Plan is Only Item on FCC December Agenda
As we do regularly in this blog, we preview significant items to be presented at the FCC's upcoming monthly meeting. This month it is easy, because the FCC's agenda includes only one item: an update on the development of the National Broadband Plan.
At the December 16th meeting, the FCC staff will present an update on the status of the National Broadband Plan, and particularly, on the "policy framework" for the Plan. With the National Broadband Plan due to be adopted by February 17, 2010, this update likely will include the first disclosure of the major components of the plan. Word is that the Plan will recommend ways to re-focus the federal Universal Service Fund to support broadband connections, and may include suggestions for phasing out some existing USF support in order to replace it with broadband support.
In addition, the update may discuss proposals to examine TV broadcast spectrum as a possible source of mobile broadband service. The possibility of authorizing broadcasters to use or lease spectrum for this purpose, or, even more radically, to reallocate broadcast spectrum to other licensees, has been floated by wireless interests in the past few months. While certain FCC personnel have indicated a willingness to investigate this possibility, the views of the Commissioners -- the ones whose votes count -- are unclear. We will be watching the FCC meeting with anticipation.
Federal Court Enjoins AT&T From Enforcing Its Restrictions on Payment of Promotions to Local Resellers
A federal district court in Dallas, Texas has issued a preliminary injunction ordering AT&T to cease reducing amounts it pays to local Resellers when it gives promotions offered to AT&T's own retail customers, Budget Prepay et al v. AT&T Inc. The AT&T ILECs often promote new local services by offering a $50 bill credit to new retail customers. Effective September 1, AT&T initiated a new policy which gave Resellers only about $4 (the actual amount varies by state) for their new sign-ups on the AT&T local networks. The Resellers filed suit against AT&T, seeking an injunction against the new policy. On November 30, the Court granted a Preliminary Injunction and instructed AT&T not to apply the new, reduced promotional policy until it has received approval from each affected state PUC. The Court reasoned that the FCC's rules require any "restriction on resale" to be approved by a PUC before it is implemented. Since AT&T admitted in open court that it had never sought nor received permission for the new reduced promotions payments, it is in violation of the FCC's rules. The court concluded that the FCC requirement that AT&T get prior approval is turned upside down if AT&T is allowed to simply change its policies, thus reversing the obligation and forcing the Resellers to go to the PUCs to seek revocation of the new AT&T policy. AT&T has appealed the ruling to the U.S. Court of Appeals for the Fifth Circuit and has received an expedited schedule from that court, with oral argument to be held in February.
Text Messaging Petition Draws Little Comment
Initial comments were filed last week on Club Texting's request for a declaratory ruling regarding the use of text broadcasting for marketing purposes. Club Texting, a provider of mass texting services to marketers and other customers, asked the FCC to rule that text broadcasters enjoy the same protection from liability under the TCPA that applies to fax broadcasters. Under this standard, a text broadcaster would not be considered a "sender' of the message unless it has a "high degree of involvement" in an illegal message or had actual notice that the transmission is illegal and failed to take steps to prevent the transmission.
The FCC sought public comment on Club Texting's petition, but the only comment was filed by another text broadcaster. Not surprisingly, the commenter also supported a ruling that the FCC will apply the same standard to text broadcasters that it applies to fax broadcasting. No consumers, class action plaintiffs or public interest groups filed in response to the petition.
With such little comment, it is unlikely the FCC will rule on the petition any time soon, if at all. This issue most likely will be addressed initially in litigation challenging a mobile marketing campaign.
Hearing on Calling Card Consumer Protection Bill Today
The House Energy and Commerce Committee, Subcommittee on Commerce, Trade and Consumer Protection, will hold a hearing today on the "Calling Card Consumer Protection Act of 2009" (HR 3993). The bill would require prepaid calling card providers and their distributors to disclose all applicable rates and other terms and conditions to consumers. The FTC would be empowered to enforce the requirements, including against common carrier prepaid card providers.
Rep. Engel (D-NY) introduced the bill on November 3, 2009. This is the first hearing on the bill.
Scheduled witnesses today will be:
- Lois Greisman, Director, Division of Marketing Practices, Federal Trade Commission
- Sally Greenberg, Executive Director, National Consumers League
- Patricia Acampora, Commissioner, New York State Public Service Commission, National Association of Regulatory Utility Commissioners
- Alie Kabba, Executive Director, United African Organization
- Scott Ramminger, President, American Wholesale Marketers Association
