Last year, we posted a couple of items about outages in Verizon's 911 call completion systems, and investigations by the FCC and the Maryland PSC. We thought now would be a good time for an update on those investigations.
Continue Reading...In 2011, the FCC was extremely active in the prepaid calling card area, proposing $25 million in fines and investigating several other prepaid card providers. While the FCC has exclusive jurisdiction over prepaid cards when provided by common carriers, the Federal Trade Commission also has jurisdiction over non-carrier marketers of prepaid calling cards. This case is a reminder of the shared jurisdiction between the agencies.
Continue Reading...Here's another VoIP item from our backlog. On December 16, the FCC's Enforcement Bureau issued an "Enforcement Advisory" reminding providers of their obligation to submit an FCC Form 477 every six months. The Form 477 collects information about broadband deployment on a Census Tract level. All facilities-based broadband providers and all interconnected VoIP providers are required to submit the form.
The Advisory lists several "problems" the Enforcement Bureau has noticed with the filings, including:
The FCC has not issued any forfeitures for failure to submit a Form 477, nor, to our knowledge, are any investigations into Form 477 compliance pending. Nevertheless, as a reminder, below is a summary of the Form 477 filing obligations for broadband providers and VoIP service providers.
Continue Reading...We took a holiday break, and now we have a large backlog of entries for you. To begin, we have an unusual item to cover. This blog, of course, deals with telecom enforcement. Usually, that means fines for failure to comply with various regulatory requirements and filing obligations. This item is a reminder that some violations result in criminal penalties also.
The basis for this post is a recent report that a payphone service provider was sentenced to three months in jail for fraudulently collecting FCC-mandated per-call compensation for dial around calls. The background, and the story are discussed below.
Continue Reading...On Friday, the FCC proposed a $25,000 fine against a carrier that failed to respond to a Commission investigation. In the NAL, the Enforcement Bureau stated that Net One International had failed to respond to a letter of inquiry launching an investigation into its practices. According to the NAL, the Bureau sent the letter of inquiry via certified mail, and the letter was signed for at the company's headquarters. In addition, the Bureau attorney handling the investigation sent an email after the response date had passed, providing a second deadline for the company to respond. Thus, the company was given two chances to respond before the Bureau issued the NAL.
The Bureau proposed a fine of $25,000 for the failure to respond, and ordered the company to respond to the letter of inquiry within 10 days.
The NAL is significant in two respects. First, the proposed fine is $25,000, which is an upward adjustment from the $4,000 standard fine contained in the Forfeiture Guidelines. In addition, the fine is greater than the $20,000 failure to respond fines the Bureau had used a few years ago. The Bureau justified the increase amount as appropriate due to Net One's "apparent disregard for the Commission's authority and investigatory process."
Second, the subject matter of the investigation was described as "[Net One's] billing practices and its offering of prepaid calling card services." This investigation was initiated in July 2011, well after its earlier prepaid card marketing investigations, and roughly at the time that the Bureau was presenting to the full Commission proposed $5 million fines for prepaid card marketing practices. The timing suggests that the Enforcement Bureau is not finished with its examination of prepaid card providers. Presumably, more investigations of prepaid card providers are pending at this time.
On December 7, the FCC adopted a consent decree with an international carrier resolving several alleged transfers of FCC authorizations without prior approval. This marks the latest in a series of enforcement actions in the area of ownership violations. Many of these involve carriers providing foreign terminations. The consent decree underscores the importance for all regulated carriers to monitor changes in ownership, even pro forma changes, and to seek prior FCC approval for the changes.
Continue Reading...In response to yesterday's announcement that BART, the San Francisco area transit authority, modified its cell phone blocking policy, FCC Chairman Julius Genachowski announced that the FCC would soon be taking action as well. Genachowski pledged an "open, public process" to provide guidance on lawful wireless service blocking.
If opened, this will be the first formal proceeding the FCC has undertaken to address lawful blocking of wireless signals. In the past, the FCC staunchly denied any requests to sanction wireless call blocking.
UPDATE: This SF Chronicle report states that the FCC commented on BART's policy before it was adopted. According to the report, the FCC suggested language recognizing that an interruption poses risks to public safety and that the benefits of a shut down should outweigh the risks to public safety. While a BART official correctly notes that this is not an endorsement of the policy, it signals an openness (in limited circumstances) to a shut down that the FCC has not shown before.
Continue Reading...Yesterday, the FCC proposed another $5 million fine for insufficient disclosures on prepaid calling cards. This action is best understood as an echo to the FCC's action in September, when it proposed four similar $5 million fines against other prepaid calling card providers. In fact, I believe that this NAL has been circulating at the FCC since shortly before the other four NALs were released.
2011 has been highlighted by an active FCC using Section 201(b) of the Act to engage in consumer-focused enforcement. Although the FCC's authority to use 201(b) in this way is in doubt, the lesson for carriers is clear, especially in the prepaid market. Carriers should clearly and conspicuously disclose all material terms and conditions of their services. Failure to do so risks claims of deceptive marketing or cramming.
Continue Reading...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.
According to FierceWireless and other news sources, the wireless industry announced this morning an agreement with the FCC and consumer groups to provide free text alerts to consumers before they exceed their plan limits on voice minutes, text messages, data usage or international roaming. The press release is available on the CTIA website here. A good summary of the agreement is available here.
Not surprisingly, the FCC Commissioners have praised the industry for these new "voluntary" measures. Statements from Chairman Genachowski, and Commissioners Copps and Clyburn have already been released.
This agreement likely will allow the FCC to close its "bill shock" rulemaking proceeding without adopting formal rules. The new Guidelines will have to be reviewed carefully, however, particularly since Commissioner Clyburn's statement asserts that the guidelines contain a mechanism to assist the FCC's enforcement of them. That sounds more like a mandate than voluntary guidelines.
The same circuit that decided the Comcast case will decide the net neutrality appeals after all. Yesterday, the Judicial Panel on Multidistrict Litigation announced that the D.C. Circuit had been selected by random selection (i.e., lottery) for the net neutrality appeals. The other cases will be consolidated with the D.C. Circuit case.
With the September 23rd publication of the Net Neutrality Order in the Federal Register, appeals of the order could finally be filed. As expected, multiple parties filed appeals in multiple districts, and the choice of circuit will now be decided by lottery under the Judicial Panel on Multijurisdiction Litigation rules. Verizon has again asserted that the case must be heard in the DC Circuit, but the FCC moved to dismiss that appeal, on substantially similar grounds as in January.
The next step is for the panel to announce which circuit is selected in the lottery. That decision is expected by the end of the week. If the pick is not the DC Circuit, Verizon is expected to move to transfer venue to the DC Circuit.
Continue Reading...One long march is finally over, another one begins. After OMB approval of the rules was announced earlier this week, today, the FCC published the Net Neutrality Order in the Federal Register. The 44 page summary is available here. With this notice today, the next stage in the net neutrality saga finally begins.
First, and most likely, with the publication today, appeals of the rules may finally begin. Multiple appeals will be filed, most likely in multiple circuit courts of appeals. The question will be where the appeals will be heard. On one side, Verizon Wireless has argued that the appeal must be heard in the DC Circuit because it is a "licensing" decision. Others have argued that the general appeal provision applies, so venue is proper in any of the circuits. If this latter view is correct, a lottery will be held among the circuits with appeals filed in the first 10 days to determine which circuit will hear the case.
Second, the publication triggers the effective date of the new rules. With publication today, the new rules will take effect on November 20th unless stayed by the court. It is important to recall that Commissioner McDowell wrote a dissent that essentially argued that the rules will create irreparable harm, which is the primary factor examined in determining whether a stay is proper.
Watch this blog for more updates. We expect today to mark the beginning of a busy litigation period over the new rules.
We noted in April 2010 that the FCC was investigating prepaid calling card provider disclosures. We suspected that action was likely when we saw four notices of apparent liability against unidentified companies appear on the FCC's items on circulation list in late June. Yesterday, it became official: the FCC announced four separate Notices of Apparent Liability against prepaid calling card providers for insufficient disclosures to consumers of its prepaid calling card rates. in each case, the FCC proposes a fine of $5 million for "unjust and unreasonable" practices in violation of Section 201(b) of the Communications Act.
The NALs follow a recent trend of large fines proposed against multiple carriers as a warning to the entire industry. Other prepaid card providers should examine their disclosures carefully to ensure that they clearly and conspicuously disclose all terms and conditions associated with the cards they sell.
Continue Reading...Earlier today, the U.S. Department of Justice filed a complaint in U.S. District Court in Washington, D.C. seeking to block the $39B AT&T / T-Mobile merger. DOJ claims that the deal would violate U.S. antitrust law by removing a key competitor while giving AT&T more than a 30% share in the nationwide wireless market and more than a 50% share in many large metropolitan markets. DOJ's press release can be found here.
While certainly a twist in the road, this may not be the end of it for AT&T and T-Mobile. It remains to be seen whether AT&T can sell-off enough assets (likely a tall order, given that the complaint asserts that the relevant geographic market is the entire U.S.) and make enough commitments to settle-out of the complaint and get its deal done in a way that still makes sense for its shareholders.
As the Commission is proposing to expand its outage reporting rules, the Enforcement Bureau is moving closer to establishing base forfeitures for violations of the outage reporting requirements. A settlement released on Friday suggests that the Commission has settled on a two-tiered approach to failures to provide outage reports.
Continue Reading...On July 7, in a case of first impression, the US Tax Court (Broz v. Commissioner) reviewed the class lives (depreciation periods) applicable to wireless cellular assets to establish the permissible depreciation deductions of the taxpayer. In general, the court determined that the taxpayer should have followed the rules the Internal Revenue Service applied to determine the class lives for telephone communications equipment. The decision will affect depreciation deductions for tax years prior to 2011.
For a while, failure to pay per-call compensation to payphone owners was as much of an enforcement focus as is failure to pay the Universal Service Fund today. The FCC resolved one of its legacy cases this week, agreeing to a settlement with prepaid card provider Compass, Inc. d/b/a Compass Global Inc. Notably, the Bureau settled the $466,000 NAL for $20,000 based in part on an inability to pay.
Continue Reading...Implementing the Truth in Caller ID Act passed last December, the FCC adopted rules prohibiting the fraudulent manipulation of caller ID information. These so-called anti-"spoofing" rules track the statutory language to prohibit any person from "knowingly transmit[ing] misleading or inaccurate caller identification information with the intent to defraud, cause harm, or wrongfully obtain anything of value." The Commission also released a report to Congress recommending additional legislative changes to strengthen the spoofing protections.
Continue Reading...In many ways, the America Movil Notice of Apparent Liability is a typical unauthorized transfer of control case. The company engaged in a transaction that changed its ownership without seeking prior FCC approval. As we've noted, such cases typically generate a fine of $8,000, an amount that seems too small in proportion to other violations. What's notable here is that the Bureau doubled the standard fine (i.e., applied an "upward adjustment") against the company that committed the violation.
Continue Reading...Yesterday, the FCC released another Notice of Apparent Liability in a "junk fax" case. The NAL employs the Commission's standard proposed penalties for each alleged unlawful fax. What is significant, however, is that the FCC also imposed a $150,000 penalty to deter a "more persistent wrongdoer." This increased penalty may in fact be unlawful.
Continue Reading...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.
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.
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.
As we've noted previously, the U.S. Department of Justice has urged the FCC to take an expansive interpretation of the Truth in Caller ID Act of 2009. In comments filed last week, the Department continued its effort to have the FCC apply the rules to VoIP providers, including those not subject to any FCC rules today.
In its comments in response to the FCC Notice of Proposed Rulemaking, the Department urged the FCC to adopt rules regulating Caller ID spoofing providers directly. It contends that this authority is rooted in the Truth in Caller ID Act of 2009 itself and in the Commission's "ancillary" authority over non-common carriers (the same authority at issue in the Comcast net neutrality case). The Department does not explicitly mention non-interconnected VoIP providers or one-way VoIP providers in its comments, but its arguments would extend to any service provider offering spoofing services.
The Department's comments are available here.
Last week brought new actions in three of the FCC's most common enforcement areas: Failure to pay USF contributions, "robocall" telemarketing violations and "junk fax" solicitations. One action also is an example of anti-spoofing enforcement by the Commission. The Commission's actions are briefly described below.
Continue Reading...It has been a month and a half since we noted that the FCC and Maryland PSC were investigating an incident in which Verizon experienced outages in processing wireless 911 calls to two Maryland counties. See below for a quick update on the status of each investigation.
Continue Reading...In response to the passage of anti-spoofing legislation late last year, the FCC recently adopted a Notice of Proposed Rulemaking to tighten rules relating to the "spoofing" of caller ID information. The Commission is seeking comments in late April and early May, which would make it tough for the Commission to meet the legislation's six-month deadline for the adoption of implementing rules.
The NPRM contains a surprising proposal to bypass the ordinary enforcement processes the Commission uses. See below for that and other highlights of the proposal.
Continue Reading...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.
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.
Since 1998, the FCC has adjudicated individual consumer claims that the consumer's telecommunications services were switched without authorization (aka "slamming"). These adjudications often are released by the dozens and use a consistent format and language. The most recent batch of such releases confirms that, when it comes to orders confirmed by third party verification ("TPV"), the Bureau employs a literal interpretation of the content requirements for verification.
Continue reading to see examples of the Bureau's literal interpretations.
Continue Reading...On January 26th, a snowstorm hit the Washington DC area. For many of us in the area, the commute home was quite a nightmare. But for Verizon, the impact was even more disturbing. Verizon suffered outages in its ability to process wireless 911 calls in two Maryland counties adjacent to Washington, DC.
This week, both the FCC and the Maryland Public Service Commission began investigations into Verizon's 911 outages. Time will tell if the 911 outages will lead to any enforcement action against Verizon, but the FCC previously warned providers to take action to minimize the risk of disruptions to their 911 service.
See below for more detail on the FCC and Maryland PSC investigations.
Continue Reading...Late yesterday, the FCC released its latest NPRM on high cost USF and ICC reform (see our 2/8 post). The 289 page item, available here, sets forth staggered comment dates triggered by federal register publication. The first -- 30 days after Federal Register publication -- is for comments on intercarrier compensation for VoIP traffic, rules to address phantom traffic and rules to reduce access stimulation. Reply comments are due 15 days after that. Comments on the rest of it will be due on the same day (45 days after Federal Register publication). State members of the Federal-State Joint Board on Universal Service get two extra weeks to file comments. All reply comments on the remaining sections are due 80 days after federal register publication.
In late December, Congress passed new Anti-Spoofing legislation. As we told you at the time, the Act requires the FCC to enact implementing regulations within 6 months. In anticipation of that rulemaking, the U.S. Department of Justice's Criminal Division submitted a letter to the FCC with its recommendations for the regulations.
The DOJ letter is described in more detail below. Most notably, DOJ recommends verification obligations be imposed on providers of spoofing services and proposes an expansive definition of "IP-enabled Voice Service" that would impose obligations on services heretofore not subject to FCC regulations. If the FCC agrees, new classes of entities would be subject to compliance obligations relating to Caller ID spoofing.
Continue Reading...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.
Two developments last month portend a more difficult time for entities "spoofing" caller ID information. On December 22, President Obama signed into law the Truth in Caller ID Act of 2009 [sic], which makes it unlawful for a person to transmit misleading or inaccurate caller ID information with an intent to defraud. In addition, the FTC is seeking comment on rule changes to strengthen the caller ID provisions of its Telemarketing Sales Rule (TSR).
Descriptions of both developments are provided below.
Continue Reading...Late yesterday, the FCC released the text of its Open Internet Report and Order (aka the Net Neutrality decision). We're on vacation already, so we don't have time for any analysis right now. Nevertheless, for those interested, the Report and Order is available here.
Readers should review paragraphs 151-160 for the discussion of enforcement of the new rules. Also, paragraph 161 states that all of the rules will be effective 60 days after the Federal Register notice of OMB's approval of the new information collection requirements associated with the rules.
Today, a divided FCC adopted enforceable "net neutrality" rules for the first time. By a 3-2 vote, with all three Democrats voting in favor and both Republicans voting against, the Commission adopted a Report and Order in its Open Internet inquiry. As Chairman Genachowski announced last month, the new rules rely upon the FCC's "Title I" authority to adopt "basic rules of the road" to preserve the open Internet "as a platform for innovation, investment, competition and free expression."
To win the support of the other Democratic Commissioners, the Chairman agreed to several changes from his proposal last month. Most notably, the Order applies the transparency rule and a limited blocking prohibition to wireless carriers, and -- although the exact extent is unclear -- appears to bar wireline broadband service providers from engaging in paid prioritization of Internet content. The Order also adopts a definition of the "broadband Internet access services" to which the rules apply.
Commissioners Copps and Clyburn pronounced this action imperfect but sufficient to enable them to permit adoption of the Chairman's proposal. On the other hand, both Commissioners McDowell and Baker dissented from the Order. Both strongly objected to the Commission's claim of exisiting authority over Internet network management. Commissioner McDowell also asserted that the Order would create "irreparable harm" -- a factor considered by courts in granting a stay of agency orders.
The FCC action is described in more detail below. UPDATED: A PUBLIC NOTICE WITH THE RULES WAS RELEASED. SEE BELOW
Continue Reading...Complaints of unsolicited faxes (aka "junk faxes") persistently are the most common type of complaint that the FCC receives. As a result, the FCC issues a steady stream of investigations, citations and proposed fines for junk faxes. This week, the FCC released an order that we believe marks the first adjudication determining that a "fax broadcaster" is not liable for unsolicited faxes sent on behalf of others. See below for the details.
Continue Reading...
Late last week, the Federal Trade Commission (“FTC”) issued a highly-anticipated staff report on privacy entitled “Protecting Consumer Privacy in an Era of Rapid Change.” The report – which is preliminary in nature and does not reflect the views of the FTC (though it was approved and issued by the FTC) – proposes a new privacy framework for businesses and policymakers which is intended to be adopted next year by the FTC after public comment (due January 31, 2011) and further modification (which may or may not be significant). In other words, the proposals in the report provide insight as to what business can expect with respect to privacy compliance requirements and enforcement in the future and are not directly enforceable regulations right now. Readers should keep in mind, however, that there is much that is mentioned in the report that is enforceable right now and distinguishing the enforceable from the aspirational isn’t always easy.
Continue Reading...Since April, the FCC has been struggling with how to react to the Court's reversal of the Comcast P2P blocking order. Today, Chairman Genachowski announced that he plans to move forward to adopt net neutrality rules at the FCC's December 21 open meeting. That announcement was met with prompt condemnation from the Republican commissioners and measured support from his fellow Democratic commissioners.
Genachowski's speech abandons his prior proposal for a "third way" to resolve this issue. His current approach relies upon the same Title I authority that the court of appeals found lacking, although presumably the Chairman intends to provide a better rationale connecting the rules to the Commission's authority. One issue that should not get lost in the shuffle, however, is that Chairman Genachowski is proposing to adopt enforceable rules that bind broadband providers for the first time. This would replace the 2005 Policy Statement, which, as we've pointed out, creates enforcement problems of its own.
Follow the jump below to read the statements released today.
Continue Reading...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).
News reports last week that the FCC is investigating possible violations by Google underscore the expansive view that this FCC is taking of its enforcement powers. According to reports such as this Wash Post article, the FCC has confirmed that it is investigating Google's alleged capture of user data from open WiFi connections when it gathered information for its Street View product. The FCC investigation comes on the heels of an FTC no action letter released in late October concerning the same actions by Google.
So what is the FCC investigating?
Continue Reading...
The Government Accountability Office (GAO) recently released a study of the FCC's e-rate program controls. The GAO study recommended that the FCC conduct a "robust risk assessment" of its e-rate program and revise the internal control structure of the program. What caught our eye, however, was the commentary on USAC's e-rate beneficiary audits.
The GAO criticized USAC's beneficiary audits as lacking documented and approved policies and procedures. As a result, "[USAC] management may not have the assurance that control activities are appropriate and properly applied." It specifically criticized USAC for not using information gathered from the audits to assess and modify the e-rate program's internal controls. As an example, the GAO noted that of 64 beneficiaries that were audited multiple times over a three year period, 56 percent of the beneficiaries (36 of 64) had the same audit finding in multiple years.
The full GAO report is available here.
This order stands in stark contrast to the nominal CPNI settlements, odd refund provisions and low-ball forfeiture penalties we've discussed in this blog. Today, the FCC announced an eye-popping $25 million settlement with Verizon Wireless in its investigation of Verizon's unauthorized billing of wireless data charges. The so-called "mystery fees" investigation stemmed from allegations that Verizon Wireless was charging customers $1.99 per megabyte usage charges for data sessions that consumers did not initiate or were not aware of. According to the FCC, many of the charges were caused by mobile applications accessing the Internet, third party-initiated data transfers and failures of Verizon's Internet access and billing. The FCC boasts that this is its largest-ever settlement and consumer refund action.
A few weeks ago, Verizon announced $50 million in customer credits related to the "mystery fee" charges. At the time, the FCC confirmed it was investigating, but it withheld its powder about its own enforcement action. Today, the FCC announced a settlement and the $25 million "voluntary payment" by Verizon Wireless. Click here for the press release and text of the consent decree.
The FCC highlighted the following provisions in its press release:
In addition, the consent decree contains training and compliance monitoring provisions over two years.
What are the ramifications of the FCC's refusal to classify interconnected VoIP? For one, it complicates the job of the FCC's Enforcement Bureau. As a recent Citation to Vantage Communications shows, the failure to classify interconnected VoIP as either telecom or non-telecom has allowed interconnected VoIP providers to get one "free violation" before the FCC imposes fines for violations of the Act or FCC rules.
In Vantage Communications, the Enforcement Bureau found that Vantage failed to provide 911 calling capability to at least three customers. This is a clear violation of Section 9.5(b) of the FCC rules, which requires interconnected VoIP providers, "as a condition to providing service to a consumer," to provide E911 calling capability. The FCC issued a Citation to Vantage -- a warning -- and stated that future violations could subject it to fines or other enforcement action. So why does Vantage get a warning when other telecommunications carriers would get fined? Keep reading to learn why.
Continue Reading...In a recent USF appeal, the FCC agreed with a prepaid card "platform provider" that each of its customers, not the platform provider, is the "carrier" for Universal Service purposes. The FCC ruled, however, that the platform provider may owe USF on transport services it provided, unless it properly qualified the customers as resellers under the USF rules. The case, Network Enhanced Telecom LLP, is discussed after the jump.
Prepaid card providers should take note. This decision carries implications for all "carrier" responsibilities, including 214 authorizations, tariffing, CPNI obligations and responsibility for marketing claims, not just for USF contributions.
Wholesale carriers and resellers also should take note. This represents the first time since Global Crossing that the FCC has addressed the obligations of wholesale carriers to qualify their resellers -- a persistent point of contention in USF auditing and reporting.
Continue Reading...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.
In August, we warned that the FCC was preparing a series of major enforcement orders for the transmission of unsolicited faxes. Today, the FCC released 9 forfeiture orders totaling $3.1 million in fines against senders of unsolicited faxes (aka "junk faxes"). With the two proposed fines released in early September and a $77,500 forfeiture ordered two weeks ago, the Commission looks to have completed this round of "junk fax" enforcement.
In a few days, the Commission will list the Forfeiture Orders here. Notably, all but one of the alleged senders failed to respond to the FCC's Notices of Apparent Liability, and the FCC imposed the full forfeiture it had proposed.
Continue Reading...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?
Continue Reading...AT&T has joined the ranks of petitioners seeking to overturn the Wireline Competition Bureau's tough stance on contributors' late-filed USF forms. On September 13, AT&T joined Airband Communications in seeking Commission-level review of the Bureau's Denial Order.
Note: A third carrier, Airnex Communications, filed a petition for reconsideration of the Denial Order.
AT&T asserts that the Denial Order is inconsistent with other orders granting waivers of Form 499 filing deadlines. For good measure, AT&T also asks the FCC to act on its 5-1/2 year old petition to reverse the 1-year amendment deadline that it missed in this instance.
Continue Reading...Universal service violations, slamming, "junk faxes" and privacy violations typically draw large FCC fines. It may seem surprising, then, to learn that unauthorized transfers of control of FCC licenses draw a comparatively small forfeiture amount.
In this Notice of Apparent Liability released on Friday, the FCC proposed to fine Turner Broadcasting System, Inc. $16,000 for failing to obtain prior FCC approval before closing on a transaction that changed the control of Turner's FCC licensees. Yes, the transfer was a pro forma transfer of control, and resulted from a single transaction. But, the Bureau concluded that 49 licenses were transferred without authorization and Turner's violation remained uncorrected for two and one half years. Nevertheless, the total fine proposed is less than one-third the amount that the FCC has been assessing for a single failure to file a Form 499-Q. Personally, I think it is time to re-assess the comparative significance of the Commission's forfeitures.
Last week, we posted an entry about the tough stance the FCC's Wireline Competition Bureau is taking on late-filed Universal Service Forms submitted by contributors. One of the parties whose USF appeal was denied, Airband Communications, has filed an application for review of the Bureau decision. The Commission yesterday asked for comment on the request. Comments are due September 30 and October 15.
The FCC's quick action is unusual in one sense: the deadline for petitions for reconsideration or applications for review of the Denial Order is not until September 14. Other parties to the same order may file additional petitions on the same issue.
There has not been an official announcement, but indications are strong that the FCC is planning soon to issue a number of forfeitures and proposed forfeitures for the sending of so-called "junk faxes." Under the Telephone Consumers Protection Act of 1991 ("TCPA"), it is unlawful to send "unsolicited advertisements" via facsimile. In the past two weeks, the Enforcement Bureau has begun "circulating" 11 new orders that appear to be junk fax enforcement orders. (Circulation is the process of submitting an order for a vote by the Commission.)
The Commission, rather than the Bureau, must vote on all proposed fines above $100,000, so one may presume that each item involves a significant fine. Significant fines also are likely because several of the subjects of the draft enforcement orders have histories of prior FCC enforcement actions. One company -- The Hot Lead LLC -- received a fine of $2.5 million in 2008 for junk faxes. Pending against it are four proposed fines, of $739,500, $695,000, $47,000 and $51,500. Another company -- Sunstar Travel and Tours -- received a fine of $169,500 in 2008 and has a proposed fine of $136,000 pending now.
In addition, one potential action appears to be against an alleged "fax broadcaster." If issued, it would be the first proposed forfeiture issued under the Commission's "high degree of involvement" standard for fax broadcaster liability.
Caveat: Circulation of an item does not necessarily indicate impending action by the FCC. Four apparent "junk fax" orders began circulating in June 2009. 14 months later, those orders remain under consideration.
UPDATE 9/3/10: The FCC is beginning to release the orders. On Thursday, it released a Notice of Apparent Liability against Clean Credit, Inc. in the amount of $528,000. The Commission imposed the statutory maximum penalty of $16,000 per violation because
"Clean Credit has exhibited a flagrant disregard for the TCPA and the Commission’s rules and orders, with a lengthy history of violations, and an ongoing pattern of violations extending to as recently as a few months ago."
If the Commission similarly applies the $16,000 maximum forfeiture to the remaining investigations, multi-million dollar forfeitures are on the way.
In stark contrast to the Bureau's more liberal waiver policy for recipients of Universal Service Funds, the Wireline Competition Bureau recently released orders affirming a tough stance for contributors who miss USF filing deadlines. In the Waiver Order, the Bureau granted two waviers of the deadline to file 499-A revisions. In the Denial Order, the Bureau denied ten requests for similar waivers. The difference? In the Waiver Order, the Bureau found "special circumstances" -- complex revisions undertaken after a merger and late-filing due to the 9/11 terrorist attacks. By contrast, in the Denial Order, the Bureau characterized the reasons for late-filing as "simple negligence."
The Bureau's stance is summarized with this quote from the Denial Order:
We reaffirm the importance of filing revisions to FCC Forms 499 promptly and within the windows established by the Commission's rules and requirements. In order for USAC to process the thousands of forms it receives each year and for contributors to know that their contributions will not dramatically change each year on account of late-filed revisions, filers must comply with the deadlines we have established for filing and revising FCC Forms 499.
As a public service, we remind readers: Corrections to the quarterly estimates (499-Q) are due within 45 days of the due date. Revisions that reduce USF liability for a year (499-A) are due within one year of the April 1 499-A filing date.
Earlier this month, Verizon and Google announced an agreement on the vexing issue of net neutrality. The agreement has been criticized by net neutrality advocates for allegedly permitting a "private Internet," and for excluding wireless services, among other things. Until recently, the provisions in the Verizon-Google "Legislative Framework" that radically alter FCC enforcement have been overlooked.
Four elements of the Legislative Framework are described in detail in this post. These elements would restrict the tools available to the FCC and would raise the standard for FCC fines. In addition, one provision strips the Federal Trade Commission of any potential jurisdiction over broadband Internet access service.
Continue Reading...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.
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:
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."
Yesterday, I attended a bar association event featuring the FCC's Enforcement Bureau. There were no newsworthy revelations made during the session, but the Bureau distributed an updated organizational chart and contact list. I'm attaching the materials here and will be adding them to our resource links on the right hand column of the blog.
In a story with a decidedly 1990’s feel, long distance reseller Silv Communication faces a Notice of Apparent Liability proposing a $1.48 million fine for switching customers’ long distance services without authorization (a/k/a “slamming”). After an investigation, the FCC alleges that Silv Communication submitted 25 switches without obtaining the customers’ authorization pursuant to the FCC’s rules. The FCC alleges that Silv’s third-party verification (TPV) of the calls failed to satisfy the rule’s requirements. Specifically, the Commission found that the TPV provider incorrectly stated that the purpose of the verification was for “quality control and … data entry purposes,” rather than to confirm the decision to switch carriers.
The FCC classified 12 of the switches as “egregious” because Silv’s telemarketer allegedly told customers that they were changing from one plan offered by their current carrier to another plan from the same carrier or that the call was simply to verify information regarding their current account. The Commission classified these misleading marketing statements as “unjust and unreasonable” practices under Section 201.
Per the forfeiture guidelines, the FCC proposes a fine of $40,000 per customer switched without authorization, plus a fine of $80,000 for each “egregious” violation.
Continue Reading...
On May 6, 2010, the FCC issued a Notice of Apparent Liability to NTS Communications, Inc. for failure to pay universal service contributions. The NAL is the second large fine for failure to pay USF proposed in a little over a month.
The NAL follows the Commissions prior practice of assessing USF fines at $20,000 per month for failures to pay USF invoices and $10,000 per month for partial payments of USF invoices. Both fines are subject to an upward adjustment equal to one-half of the amount of USF that was unpaid.
For example, in the NTS case, the Commission concludes that NTS failed to pay two invoices ($40,000 total), made only partial payments on twelve occasions ($120,000) and assessed an upward adjustment of $124,250 representing approximately one-half of the highest amount of unpaid USF.
A month after the Court of Appeals reversed the FCC's Comcast decision, FCC Chairman Genachowski announced a "third way" to regulate broadband transmission lawfully. The Chairman released a statement describing his "third way" along with a memo from the General Counsel asserting its legality. Commissioner Copps, who publicly advocated reclassification of braodband internet access services to Title II, praised Genachowski's solution (though he still prefers reclassification). Meanwhile, Commissioners McDowell and Baker, the two Republicans on the Commission, declared the proposal "disappointing" and "deeply concern[ing]."
The battle has only begun.
Continue Reading...
Even though this blog covers telecom litigation and enforcement, this is the first post about a formal complaint brought before the FCC. Among the reasons are that the FCC does not handle many formal complaints these days (it had only 10 docketed cases in all of 2009), and decisions on the merits are few and far between. But a decision issued last week caught our attention. In the decision, the FCC's Enforcement Bureau took a narrow view of the Telephone Consumers Protection Act (“TCPA”).
The Enforcement Bureau held that unsolicited calls to a consumer were not TCPA violations because the messages were intended for current customers, not as solicitations to obtain new customers. Moreover, the telemarketer’s mistake in directing the calls to a non-customer did not make the calls actionable. This decision will make it harder for a consumer to prove a violation when communications are intended for current customers.
Late last week, the FCC sent inquiry letters to a number of prepaid calling card providers concerning their marketing practices. This action represents the first significant entry by the FCC into prepaid calling card marketing practices. Prior to this action, prepaid card enforcement activities have been conducted in private litigation brought by a large prepaid carrier, before a handful of state attorneys general and, in the case of non-carrier distributors, before the Federal Trade Commission. However, the FTC is barred from taking action against common carriers. The FCC's action suggests that the Commission is attempting to close the gap in compliance within the prepaid industry by acting directly against carriers that offer prepaid cards.
Details about the FCC requests are available after the jump.
Continue Reading...The US Court of Appeals for the DC Circuit vacated the FCC's decision declaring illegal Comcast's 2007 blocking of P2P internet traffic. This decision is not surprising, given how poorly the oral argument went for the FCC. (see our post here).
Click here to download the Court's decision. We will post a discussion of the jurisdictional issue later.
UPDATE 4/6/10: The Court of Appeals vacated the FCC Order because the Commission had not adequately justified its exercise of Title I "ancillary" authority over Comcast's network management practices. Discussing at length appellate Title I jurisdiction cases over the last 40 years, the Court in essence held that the FCC failed to relate Internet network management to common carrier telephone service (Title II), broadcast service (Title II) or cable TV service (Title VI). One quote from the decision sums up the conclusion: "On the record before us, we see 'no relationship whatever' between the Order and services subject to Commission regulation." In other words, the FCC must connect its assertion of authority to something that it indisputably can regulate.
Since the decision was released, there has been much discussion about whether the FCC will reclassify Internet access services as Title II common carrier services. While it is premature to predict these issues with any confidence, one alternative not being discussed is to accept the Court's invitation to connect regulation of Internet access service with regulation of pure transmission services. In the Wireline Broadband Order, the Martin Commission concluded that Internet access did not have a separate transmission component. The decision today may lead the Commission to reverse that determination -- and find that a separate transmission component is inherent in the offering -- so that it may then regulate bundled Internet access due to its impact on stand alone transmission services.
Finally, I note that the Court did not address the enforceability of the Policy Statement itself. As a result, the potential impact on the Universal Service Fund's Form 499-A instructions did not come to pass. Maybe next time.
The Genachowski FCC is enamored with the bully pulpit as an enforcement tool. In the year since the new Chairman has taken office, we've seen examples with FCC letters to Apple regarding its iPhone approval practices; letters to Google concerning the classification of Google Voice; and letters to wireless carriers concerning their early termination fees. This time, the FCC's Public Safety and Homeland Security Bureau "reminds" telecommunications carriers of the need to provide diversity and redundancy in their 911 and E-911 services. Although the Public Notice is not enforceable and does not cite to enforceable rules, it clearly is intended to influence carrier behavior. Those who fail to heed this "reminder" could find themselves in an investigation questioning whether their practices are "just and reasonable."
The Public Notice stemmed from a review by the Bureau of network outage reports that carriers are required to file. The Bureau stated that it has observed a "significant number" of 911/E911 outages caused by a lack of diversity. Moreover, it notes that these outages "could have been avoided at little expense to the service provider" (emphasis mine). The clear implication is that FCC tolerance for these types of outages will diminish over time.
Follow the link for a discussion of the diversity mistakes highlighted by the Bureau.
Continue Reading...It has been quiet on the FCC front as all hands seem to be focused on the upcoming National Broadband Plan. In the meantime, I didn't want this development at the FTC to go unnoticed. Our firm's sister blog, Adlawaccess, provided this report on the confirmation of two new Commissioners. A statement by the FTC Chairman is available here.
With the FTC active in enforcement on prepaid card and mobile marketing matters, and with the FTC seeking an end to the "common carrier exception" to its jurisdiction, it is worth monitoring activities at the FTC.
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.
The House Committee on Energy and Commerce has sent a February 16, 2010 letter to 24 rural local exchange carriers seeking information about their access charge services. The 24 carriers receiving the letters were chosen on the basis of responses to earlier letters sent to long distance carriers who complained of "traffic pumping" by some rural LECs. The Congressional letter expresses concern that "excessive rates for terminating access" will harm rural consumers because interexchange carriers will refuse to send traffic to those locations. It requests written responses to twelve questions by March 8, including information about the sharing of access revenues with other entities. In such cases, the letter seeks the identity of each such sharing party, the total percentage of revenues shared and a sample contract for sharing revenue. The letter also inquires about the amount of universal service support which the rural LECs receive. The LECs are asked to inform Congressional staff by March 1 if they intend to refuse to provide the information voluntarily, presumably so that it can be subpeonaed. The letter is signed by Committee Chairman Henry Waxman (D. CA) and subcommittee chairs Rick Boucher (D. VA) (Communications, Technology and the Internet) and Bart Stupak (D. Mich) (Oversight and Investigations).
Continuing its recent custom, the FCC quickly sought comment on two Universal Service Appeals. The issues involved in these appeals include classification of information services, classification of reseller revenues and identification of subscriber line charge (SLC) revenues. Carriers offering similar services take note.
Telepacific Appeal and Request for Stay. In this appeal, Telepacific seeks reversal of USAC's classification of an integrated T-1 service as telecommunications. Telepacific contends that its service is an information service based on the FCC's 2005 Wireline Broadband Internet Access Order. Telepacific also seeks a stay of the instruction that it refile a Form 499-A consistent with USAC's decision. Comments are due January 29; replies February 3.
USF filers should note that this appeal did not result from a USAC audit. Instead, Telepacific attempted to revise its 499-A form, and USAC raised questions about the revision. Ultimately, USAC disagreed with the classification reflected in the revision and rejected the filing. In my view, USAC's rejection is procedurally improper. All Form 499-As are certified by an officer of the company under penalty of perjury. USAC should be obligated to accept and process a revision properly certified by an officer.
Grande Communications. In this appeal, Grande challenges three conclusions made in an audit of its 2004, 2005 and 2006 revenues. First, Grande challenges USAC presumption that Grande assessed an interstate Subscriber Line Charge (SLC). Second, Grande challenges USAC's classification of a wireline broadband Internet access service as telecommunications for a portion of the audit period. Finally, Grande challenges USAC's reclassification of Grande reseller revenues, including at least one instance where USAC is seeking to collect USF from Grande and Grande's reseller customer simultaneously.
Comments on the Grande appeal are due February 18. Replies are due March 5.
Full Disclosure: Kelley Drye represents Grande in its appeal.
Yesterday, the DC Circuit held oral argument on Comcast's appeal of the FCC's ruling that Comcast ilegally blocked P2P traffic in its broadband Internet service. By all accounts, the argument went poorly for the FCC. If the FCC indeed loses the case, it could have implications for enforcement of federal Universal Service Fund (USF) contribution obligations too.
Some of the best summaries appear in MultiChannel News, The Blog of the Legal Times and Enterprise Networking Planet. The argument went so poorly that FCC Chairman Julius Genachowski issued what amounts to a "vote of confidence" for the enforcement order. And we know how well those things work out for NFL coaches.
It appears that the FCC might lose because the court feels the FCC lacks authority over broadband Internet service providers. That would have a significant impact on the FCC's activities, particularly with the Commission on the verge of adopting (and then implementing) a National Broadband Plan.
A more narrow ground also could have significant impact on Universal Service. One argument made by Comcast was that the FCC Order is unlawful because the Commission was enforcing a 2005 Policy Statement, not an actual law. The FCC can enforce obligations that are legally binding -- statutes, properly adopted rules and lawful FCC orders. But a policy statement is not itself enforceable. Its enforceability depends on the underlying legal obligations that the Commission is interpreting. If the only "authority" relied upon is the Policy Statement, the FCC would lose.
The Policy Statement is a shortcut to the harder task of adopting specific and enforceable obligations, typically through rulemaking. The FCC is taking a similar shortcut with its Universal Service rules. In a series of FCC Orders, the Commission has created a federal USF and established rules for who must contribute to the Fund and on what revenues. Each year, the FCC releases an FCC Form 499A for contributors to report their revenues for assessment purposes. The 499A comes with 30+ pages of instructions. The instructions purport to mandate a variety of actions by contributors, and they are frequently modified without any change in the underlying FCC rules or orders.
The problem is that USAC acts as if the instructions are binding rules. It is increasingly becoming more aggressive in audits and enforcement actions, relying on specific instructions that never were subject to notice and comment rulemaking, were not adopted by the FCC and could not be appealed. If the FCC loses the Comcast case because the Policy Statement is not enforceable, it will have to return to enforcing actual law. Hopefully, such an outcome will reign in USAC's reliance on non-binding instructions, too. If so, it will not be a moment too soon.
Tucked inside a semi-annual report released over the holidays, the FCC's Inspector General revealed that its most recent round of audits of the Universal Service Fund included, for the first time, an effort to identify entities that failed to contribute to the fund. The IG contracted with an independent accounting firm to compare state PUC listings of active telecom companies with the USAC 499 filer database.
This led to 50 letters sent in September 2009 to companies that had not filed a 499-A. Of these 50 targets, 23 had responded by the end of the reporting period (Sept. 30). The other group -- slightly more than half -- had not yet responded to the IG's letter. However, this sample was taken from only six states. The IG estimates that as many as 1,000 non-filing companies may exist in 32 states.
Although the IG lacks enforcement power, potential targets of the IG effort should be cautious. The IG likely will refer non-filers to the FCC's Enforcement Bureau, where they could be subject to substantial penalties after an Enforcement Bureau investigation. For example, in January 2009, the FCC proposed a fine against a small provider that filed four months late in the year that it slightly surpassed the de minimis threshold for contributions. The FCC's proposed fine was $672,000, even though the highest amount of USF owed was alleged to be $22,000.
With respect to its contributor audits, the IG reports that 12 audits conducted in 2009 are close to resolution. According to the IG, three of the audits conclude that a wholesale carrier overstated reseller revenues. This has been a frequent subject of USF appeals, leading to one FCC decision in August 2009 (now subject to an application for review) and a half dozen other appeals pending before the FCC. It appears that more are on the way.
On July 22, 2009, the Senate Commerce, Science, and Transportation Committee’s Subcommittee on Consumer Protection, Product Safety, and Insurance held a hearing on advertising trends and consumer protection. David Vladeck, Director of the Federal Trade Commission’s Bureau of Consumer Protection testified before the Subcommittee, as well as various industry and consumer advocacy representatives. The hearing focused primarily on Vladeck’s testimony, in which he outlined the FTC’s proposed revisions to its guidelines for testimonials, endorsements, and green marketing.
Those speaking on behalf of consumer advocate groups applauded the FTC’s plans to strengthen its advertising guidelines, while industry representatives raised concerns about the burdens imposed by the revisions, specifically those related to the safe harbor provision for atypical result testimonials. Subcommittee members generally agreed with the FTC and consumer advocacy representatives that consumers need more protection from deceptive marketing practices, but they have not reached a consensus on the extent to which the FTC should regulate advertisers. More details on each of these issues are provided in this advisory, authored by Kelley Drye partner Reed Freeman and associate Alysa Z. Hutnik.
The Consumer and Governmental Affairs Bureau of the FCC has reversed a November decision by its Consumer Policy Division relating to alleged slamming by a VoIP provider. The Bureau's May 19 ruling granted a request to reconsider the Consumer Policy Division's November 6, 2008 decision that Mediacom, a VoIP provider, had violated the "slamming" rules by switching a customer from Verizon to Mediacom without following the FCC's prescribed procedures for authorizing carrier changes. The November Order of the Division stated that it had sought to contact Mediacom but gotten no response, and thus it applied a presumption of liability to Mediacom and held it liable for slamming. The new Bureau Order indicates that Mediacom had actually responded to the Division, but had misfiled it and thus the Division was unaware of the response at the time it ruled. Then, stating that "the Commission's carrier change rules have not been extended to VoIP", the Bureau rescinded the November Order and denied the slamming complaint against Mediacom. The Bureau noted that the FCC requested public comment on the application of the slamming rules to VoIP in 2004, but has never acted on that proposal.
This latest ruling remains consistent with the FCC's position that VoIP providers are only subject to carrier rules after the FCC explicitly decides to apply them; in contrast, more traditional carriers are obligated to observe all rules simply by virtue of being authorized to operate as common carriers. In light of the FCC's extension of the number porting rules to VoIP providers, however, it seems very likely that the slamming rules will be extened to VoIP sometime in the next several months.
With the new chairman still awaiting Senate confirmation, it has been fairly quiet on the enforcement front the past few months. Yesterday was an exception, when the the FCC released an NAL proposing to fine a carrier $100,000 for failing to obtain a 214 from the FCC. Although this order is significant, its timing most likely reflects the operation of the FCC's statute of limitations, rather than a revival of carrier enforcement activity. Absent a tolling agreement (which the Bureau apparently did not seek in this instance), the statute of limitations would have expired on June 18, one year after the carrier received its 214 in this instance. The Bureau thus had to release this order or lose the ability to fine the carrier for its action.
On the merits, the order is not surprising. The Enforcement Bureau proposed to fine a carrier $100,000 for initiating international service before obtaining FCC authorization pursuant to section 214 of the Communications Act. This marks the third time that the FCC has proposed a $100,000 forfeiture for failing to obtain a 214, indicating the FCC considers this the "base forfeiture" for such a violation. However, the Bureau still has not explained why it is consistent with the statute to penalize a carrier $8,000 for an unauthorized transfer of control but 12 times that amount for the unauthorized operation of a carrier (which is like an unauthorized acquisition of a carrier). Until a carrier challenges the FCC's approach in court, we can expect to see more orders using the $100,000 base forfeiture for this type of violation.
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.
Major prepaid calling card distributors have agreed to pay $2.25 million as part of a settlement to resolve Federal Trade Commission charges that they made false claims to consumers about the number of minutes of talk time their prepaid calling cards would provide. The companies targeted their advertising at recent immigrants, who the FTC said depend on the cards to stay in touch with friends and family in other countries. The defendants’ cards, which retail for $2 to $10, are sold through small retailers such as grocery and convenience stores, gas stations, and newsstands in Florida, Massachusetts, New Jersey, New Hampshire, and Rhode Island.
The settlement resolves charges brought by the FTC last May against Alternatel, Inc., Voice Prepaid, Inc., G.F.G. Enterprises, LLC, also d/b/a Mystic Prepaid, Voice Distributors, Inc., Telecom Express, Inc., and their individual principals, Nickolas Gulakos, Moses Greenfield, Lucas Friedlander, and Frank Wendorff. The Commission vote to approve the settlement was 4-0. The proposed settlement was filed in the U.S. District Court for the Southern District of Florida in Miami.
In its lawsuit, the FTC charged that the companies misled consumers about the number of minutes of talk time their prepaid calling cards provided. The FTC said its testing showed that consumers received only about half the advertised minutes. In addition, the FTC alleged that the defendants’ cards carried hidden fees. For example, while the defendants’ ads for their cards often prominently claimed “no connection fees;” they then failed to clearly disclose a host of fees, such as “hang-up” and “maintenance” fees and “destination surcharges” that could wipe out the value of the cards. Such fees were said to be disclosed in a font size that was too small and stated in confusing language. At the request of the FTC, shortly after the case was filed, the court issued a temporary injunction against the companies.
In addition to the payment of $2.25 million, as part of the settlement announced today the defendants have agreed to a Consent Decree barring them from misrepresenting the number of minutes of talk time consumers will receive from prepaid calling cards, and requiring them to disclose any applicable material limitations, such as any fees or charges.
The settlement is part of an ongoing FTC crackdown on disclosures in the prepaid calling card industry. The FTC has brought similar charges against Clifton Telecard Alliance, another major prepaid calling card distributor. The FTC has also established a joint federal-state task force concerning deceptive marketing practices in the prepaid calling card industry and has other active prepaid calling card investigations. So far, the FTC has limited its actions to card distributors and has not sought to challenge prepaid carriers themselves; carriers are exempt from FTC authority as they are regulated as common carriers by the FCC. In recent times, however, the FTC has expressed frustration over the limitation on its powers and Congress has considered legislation to remove the common carrier exemption from FTC enforcement authority.
Enter keywords:
