Telecom Law Monitor : Washington D.C. Telecom Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

Yesterday, the FCC released an order cancelling more CPNI fines proposed in its Omnibus CPNI Forfeiture Order.  Because proposed fines for failing to file the CPNI certification have become an annual event, this is a good time to remind telecommunications carriers of their obligation to file the CPNI certification that is due annually on March 1.

If for any reason, your company is a telecommunications carrier or interconnected VoIP provider and you have not filed the certification for calendar year 2010, you should do so as soon as possible.  And, since this usually is the time during which the Enforcement Bureau sends out its CPNI Letters of Investigation, if you've received a letter, do not delay in responding.  Your window to present evidence and negotiate a settlement will close near the end of February.

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The Commission continues to clear the decks from its 2009 Omnibus CPNI NAL.  Apparently having exhausted all of the cases warranting revocation of the NAL and meriting a consent decree, the Enforcement Bureau release five forfeiture orders for failure to file the 2007 Annual CPNI Certification.  These orders all involve a prepaid card provider and are virtually identical to the 88 Telecom Forfeiture released earlier this week.  All conclude that the $20,000 forfeiture proposed should be imposed.  None of the providers were represented by FCC counsel, which may have cost them the opportunity to settle for a few hundred to a few thousand dollars instead of $20,000.

The carriers involved are:  VoIP Alliance, Touch-Tel USA, Phone Club Corp., DigitGlobal Communications, and StraightTel Corp.

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Still working its way through the 2009 Omnibus CPNI NAL, the FCC released a forfeiture order against prepaid card provider 88 Telecom.  The Commission imposed the full $20,000 penalty proposed in the NAL, rejecting 88 Telecom's arguments that its violation was not willful and that it could not pay the forfeiture.  What is most significant about the order, however, is that the provider did not settle the allegation via a consent decree.  Most of those who did were able to settle for a few hundred to a few thousand dollars.

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The Commission's efforts to resolve the 2009 Omnibus CPNI NAL continue to provide insights into the enforcement process generally.  In the past, we've commented on surprisingly small settlements and odd provisions, but two orders earlier this week are especially cryptic.

In both orders, the Chief of the Telecommunications Consumers Division of the FCC Enforcement Bureau concluded that "no forfeiture should be imposed" with respect to the carriers identified.  I would like to provide you a definitive reason for the cancellation, but the orders literally provide no explanation of the basis for that conclusion. 

In one case, I believe the rationale is that the entities are interconnected VoIP providers.  As we've explained previously, because of the Commission's refusal to determine if interconnected VoIP providers are telecommunications carriers, they get one free bite at FCC violations.  Each of the three carriers listed in this cancellation order reports itself as an interconnected VoIP provider on its USF forms.  Because of that, the FCC could not impose a fine for failing to file the CPNI certification unless the FCC had issued a Citation first.

The other case is truly mystifying.  The two carriers listed in this cancellation order are listed as a "CAP/LEC" and an "IXC", respectively, in the USF filer database.  Although one appears to have ceased providing business in 2007, the other provider filed a Form 499-A in April 2011.  We are left to guess what circumstances justified the decision not to impose a forfeiture.

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Despite many high-profile forfeiture proceedings, significant outreach by the FCC and even a new app to facilitate filing, the level of CPNI certifications filed this year was on a par with 2010. 

Last year, we reported about 3,000 CPNI certifications filed during the filing window.  This year, 2,858 submissions were made through 3/2/11.  While many filers certified on behalf of multiple USF filers, this total still is about a thousand carriers below the number of active USF filers as identified in USAC's most recent contribution factor report and is well below the 6,700 filers in USAC's database. 

It appears that the FCC has achieved about as much compliance as it is going to receive from the universe of required filers.  Now, the question is whether it will pursue more $25,000 fines from the remaining (mostly small) entities that failed to file a certification. 

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Due to the 1 year statute of limitations for proposed fines against common carriers, the release of a Notice of Apparent Liability for failing to file CPNI certifications has become an annual late-February event.  This year's order, released late on Friday, proposes fines against 10 entities for failing to file the CPNI certification due on March 1, 2010.  Despite what has been a roller coaster in CPNI fines and in CPNI settlements, the Order proposes a $25,000 fine for failing to file the certification (the same amount proposed last year).  Moreover, each of the 10 entities was accused of failing to respond to the Enforcement Bureau's Letter of Inquiry, resulting in an additional proposed fine of $4,000.

For those who have not yet filed their 2011 certifications, today is the last day.

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Customer Proprietary Network Information Certifications

All telecommunications carriers and interconnected VoIP providers must file an annual report certifying their compliance with the Federal Communications Commission’s (FCC) rules regarding Customer Proprietary Network Information (CPNI). The report covers calendar year 2010 and must be filed with the FCC by March 1, 2011.

The FCC’s Enforcement Bureau recently released a FCC Enforcement Advisory addressing the importance of making timely and compliant filings and noting that filers now have the option of filing CPNI certifications via a new FCC web application, in addition to filing via ECFS, mail or by hand delivery.

Form 477: Local Competition and Broadband Report

The Local Competition and Broadband Report, containing data as of December 31, 2010, must be filed by March 1, 2011. The report requires the submission of information regarding broadband connections in individual states.

Who Must File:
(1) ILECs or CLECs that provide local exchange service to one or more end user customers;
(2) facilities-based providers of mobile telephony services that serve one or more mobile telephony subscribers;
(3) entities (including all commonly-owned or commonly-controlled affiliates) that are facilities-based providers of broadband (i.e., faster than 200 kbps, in at least one direction) connections (including both wired lines and wireless channels) to one or more end users in a state; and
(4) providers of interconnected VoIP services that provide interconnected VoIP service to one or more subscribers in a state.

Reporting Basis:
In addition to specific reporting requirements contained in the Form 477 Instructions, for all broadband technologies other than terrestrial mobile wireless, filers must report broadband subscribership information by Census Tract.

Filing Process:
The Form 477 Report must be submitted via an FCC web-based interface and filers will need to use their Federal Registration Number (FRN) and associated password to access the system.

REVISED Form 499-Q Quarterly Telecommunications Reporting Worksheet

Providers required to contribute to universal service support mechanisms must report their actual and projected end user and wholesale revenues for each calendar quarter by filing FCC Form 499Q on a quarterly basis. Filers making revisions to the February 1, 2011 Form 499-Q filing must submit the revisions to the Universal Service Administrative Company (USAC) no later than March 18, 2011.

REVISED Form 499-A Annual Telecommunications Reporting Worksheet

All providers of interstate telecommunications service and all common carriers are required to file FCC Form 499-A with USAC each year with limited exceptions. Filers making revisions to their previous year’s Form 499-A Telecommunications Reporting Worksheet filing which result in a decreased contribution must submit the revisions to USAC by March 31, 2011.
 

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For the past few years, telecommunications carriers and interconnected VoIP providers have been required to file annual certifications of CPNI compliance in WCB docket 06-36.  These certifications are due by March 1 each year -- and this year is no exception.  Failure to file a certification has led to significant proposed fines from the FCC.  Proposed fines have been issued at $100,000,  $20,000 or $25,000, depending upon when the FCC issued the order.   We would not bet on this year's $25,000 standard fine being reduced this year, what with the deficit to contend with and all.  And, although the FCC recently settled some CPNI-related actions for as little as $250, the agency could impose a fine as high as $150,000 which can translate into a fine of $1.5 million under the FCC's "continuing violation" method of jacking-up fines. 

Earlier today, the FCC released an "Enforcement Advisory" reminding its subjects of the filing requirement and its intention to "strictly" enforce the rules (or to at least go after those who don't file or fail to file properly).   The Advisory should soon be available here (it wasn't at the time of our post)

Notably, the FCC is making available a new web application for filing this year's CPNI certifications.  Filers can still use the FCC's electronic comment filing system or paper filing process, if they prefer one of those methods.  The new app interface is available here. 

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On January 20, Kelley Drye will host its 3rd annual privacy law seminar:
Privacy by Design, Choice and Transparency: What a New Framework Will Mean for Business and Technology.

As businesses strive to innovate and evolve using new technologies, federal agencies including the FTC and FCC, the Congress, and state regulators are increasing scrutiny on privacy practices in an effort to protect consumers.

On the heels of the FTC’s proposed new framework for protecting consumer privacy, Kelley Drye gathers government leaders from key federal agencies for a discussion about how new privacy regulations and best practices, pending privacy and data security legislation, and enforcement trends are impacting U.S. companies ranging from retailers to telecommunications and technology companies.

KEYNOTE SPEAKERS:

Jessica Rich, Deputy Director, FTC Bureau of Consumer Protection

Josh Gottheimer, Senior Counselor to FCC Chairman Julius Genachowski

Peter Swire, Professor of Law, Ohio State University; former Obama Administration Special Assistant to the President for Economic Policy, National Economic Council; and former Clinton Administration Chief Counselor for Privacy, U.S. Office of Management and Budget

WHEN: Thursday, January 20, 2011, 3:00 – 5:30PM

WHERE: Kelley Drye, 3050 K Street, NW, Suite 400, Washington, DC, 20007

Remote access available.

TO REGISTER: Email dcevents@kelleydrye.com
 

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Yesterday, the FCC released an Order adopting a consent decree resolving several investigations into failures of AT&T’s CPNI opt-out practices. In the settlement, AT&T agreed to make a $200,000 voluntary contribution to the U.S. Treasury and to adopt a two-year Compliance Plan including monthly testing of its opt-out mechanisms, training and reporting requirements. The Order, which closes out three separate investigations into AT&T’s self-reported lapses in its opt-out mechanisms for small business, can be found here. The Order and others like it (see TLM, June 28, 2010 post) demonstrates that the FCC continues to prioritize taking enforcement action with respect to easily detected failures to comply with its CPNI rules (see TLM, August 4, 2010 post).
 

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Our post about the unique enforcement posture of interconnected VoIP quickly became the most popular post on the Telecom Law Monitor.  One person asked if we could elaborate on the differences in regulatory treatment between traditional telecom services, interconnected VoIP and non-interconnected VoIP (like Skype).   In response, we prepared a chart comparing applicability of the major telecom obligations to both types of VoIP.

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As we noted, the FCC is working its way through the 600+ proposed fines included in the Omnibus CPNI NAL.  Virtually every day, the Enforcement Bureau releases a handful of consent decrees resolving several proposed fines.  This one contained an unusual feature, and therefore, caught our eye.

On October 5, the Bureau settled two investigations of Global Information Technologies.  One investigation involved the failure to file a CPNI certification, for which GIT received a $20,000 proposed fine.  The other investigation involved whether GIT overcharged customers for the USF owed as a result of the services they received.  (FCC rules prohibit carriers from collecting more than the contribution factor times the end user's interstate telecom revenues). 

In this Consent Decree, GIT agrees to a $23,500 voluntary contribution to resolve the investigations. They get to pay it over 24 months (less than $1,000 per month).  In addition, however, GIT agreed to notify the customers it may have overcharged for USF contributions.  If GIT refunds the USF overcharges to any of the customers, it gets to deduct that amount from its voluntary contribution to the FCC.  In other words, GIT must pay its customers or the FCC, but not both.  In our experience, that is the first time the FCC has agreed to a provision like that.

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At Kelley Drye, we handle a lot of FCC investigations, so we know first hand how the Commission develops proposed forfeitures for telecom violations.  In previous posts, I've commented that the FCC should reconsider the proportionality of the base forfeiture amounts it uses in telecom enforcement cases.  A case released today underscores the inherent weaknesses of the FCC's current ad hoc approach to setting these base forfeiture amounts. 

In the case described below, the FCC proposed a $100,000 fine for a telecom carrier's non-compliance with its privacy rules -- namely, the rule requiring carrier to execute annual compliance certifications.  Three years later (and after a shift in administrations), the FCC settled the proposed fine for a mere $250.  There is no mention of mitigating circumstances, of an inability to pay or of any of the statutory factors the FCC is obligated to consider.  The outcome leaves you wondering:  Just what is the base fine for failing to comply with the FCC's privacy rules?

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In February 2009, the FCC proposed $20,000 fines against 600 carriers for failing to file their annual CPNI certifications.   The problem with issuing 600 fines of $20,000 each?  The FCC actually has to issue orders in all 600 cases.  That process has turned into a bureaucratic quagmire, but -- finally -- there are signs that the FCC is making progress toward resolving the cases.

The Commission got off to a good start:  In the summer of 2009, it released 58 orders canceling forfeitures (based on proof that the entity either filed on time or was not required to file) or settling cases against, primarily, very small telcos.  After September 1, 2009, however, the FCC did not release another order resolving the Omnibus CPNI forfeitures for almost a year. 

Beginning in June of this year, the pace picked up again.  Since June 11, the FCC has issued over 40 orders resolving the Omnibus CPNI NALs.  One order canceled 15 NALs, again because the entities provided sufficient proof of timely filing.  The rest have been settlements of the NALs.  They follow essentially the same form:  (1) the carrier agrees to implement a Compliance Plan; (2) for two years, the carrier agrees to provide a copy of its CPNI certifications to the Enforcement Bureau; and (3) the carrier pays a small settlement amount.  Thus far, the settlements have ranged from a few hundred dollars to a few thousand dollars -- far below the $20,000 proposed.

By my count, the FCC has resolved about 110 cases.  It has just under 500 left to go.

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Consumer privacy is a hot topic in many arenas.  At the FCC, consumer privacy is protected by the Commission's "customer proprietary network information" ("CPNI") rules.  Today, the FCC released another CPNI enforcement item, but surprisingly, it was the first enforcement item in 2010 not related to a carrier's filing of its annual CPNI certification statement.

Today's action is a consent decree with Verizon Communications, Inc's regulated telecommunications operating entities.  In the case, Verizon had self-reported a failure of its databases to track customers who had opted out of CPNI-based marketing.  Verizon reported that it discovered a discrepancy in the total number of customers in its opt-out database.  Verizon attributed the discrepancy to the absence of opt out records from seven weeks over a period of two years.  Verizon reported the problem to the FCC, which launched an inquiry into Verizon's procedures. 

Verizon does not admit or deny liability in the consent decree, but it agreed to pay $90,000 to resolve the case.  In addition, Verizon agreed to a compliance plan to ensure future compliance with the CPNI opt-out procedures.  The Compliance Plan obligates Verizon to:

• perform monthly validation tests,
• perform a weekly check for transaction errors,
• perform validation tests prior to implementing any material changes to its systems,
• enhance its employee training procedures, and
• add CPNI compliance to its compliance management processes.

The consent decree applies to all Verizon entities.  However, the consent decree exempts the Verizon entities to be sold to Frontier Communications Corporation.  In a footnote, the FCC explained that Frontier committed to implement the "best practices" employed by Frontier and the Verizon entities.  Relying on this commitment, the Bureau determined that it would exempt Frontier form the obligations "upon Frontier providing the Bureau with a copy of [its post-acquisition] practices and procedures." 

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As of COB yesterday, 3070 unique CPNI submissions were made in the FCC's annual CPNI certification docket.  That number is almost the same as the 3,107 CPNI filers in 2009.  However, it still is about 500 fewer than the number of active USF filers, according to USAC's most recent report, and is over 3,000 entities fewer than USAC has in its filer database.  It looks like the FCC's Enforcement Bureau will still have some work to do to track down potential CPNI violators.

For those who failed to file the certificiations, be warned that last year, the FCC released an Omnibus CPNI NAL proposing to fine over 600 carriers $20,000 each for failing to file the required annual certification or for filing a non-compliant certification.  This year, the fine has increased to $25,000, at least according to two NALs released late last week (available here and here).  No, this is not an inflationary increase.  Instead, the Bureau reasoned that carriers were on notice of the requirement and had failed to file in past years as well.  Therefore, the action this year was more culpable and deserving of a higher fine.

If you didn't file your 2010 CPNI certification, you should do so soon.

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What:   Annual CPNI Certification pursuant to Section 64.2009.   Carriers must certify that their procedures comply with the FCC's privacy rules, disclose complaints about CPNI breaches and identify actions taken against pretexters.  The certification must be signed by an officer of the company and based on the officer's personal knowledge.  In addition, the certification must be accompanied by a statement describing the company's CPNI policies and explaining how those policies comply with the rules. 

Where:  Certifications are to be filed in FCC docket no. 06-36.

When:  Due by March 1, 2010

Who must file:  All telecommunications carriers and all interconnected VoIP providers.  Filing obligation applies to carriers who are de minimis for USF purposes.  Filing obligation does not apply to private carriers. 

WARNING:  Last year, the FCC proposed base fines of $20,000 to companies that failed to file certifications or that filed certifications that did not comply with the rules.

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On February 24, the FCC announced its first major CPNI enforcement actions since the new CPNI rules went into effect in April 2007. In an Omnibus CPNI NAL, the Enforcement Bureau proposed fines of $20,000 each against over 600 telecommunications carriers that failed to file their annual CPNI certifications on time. Knowledgeable staffers tell us that the 600 carriers include those who filed certifications significantly after the deadline as well as those who never filed the 2008 certification. The respondents have 30 days to respond to the NAL.

The Bureau also released over a dozen smaller NALs for various deficiencies in carrier certifications. The deficiencies were hyper-technical: failures to state whether actions were taken against pretexters or failures to state whether the carrier received any CPNI complaints.

Update: It appears that a number of late-filers received citations instead of fines. Some have all the luck.

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