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

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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...

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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." 

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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...

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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...

• Email This
• Print
• Trackbacks
• Share Link

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.

Continue Reading...

• Email This
• Print
• Trackbacks
• Share Link

 

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...

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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...

• Email This
• Print
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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). 

• Email This
• Print
• Trackbacks
• Share Link

While the rest of the Enforcement Bureau has not yet fully emerged from the FCC transition, the Spectrum Enforcement Division continues to move investigations along. Last month, the division fined several wireless carriers for failing to file hearing aid compatibility reports. Yesterday, the division settled two outage reporting investigations involving wireless carriers. In both cases, the carriers were alleged to have failed to report outages within the 120 minute deadline. One carrier agreed to a "voluntary contribution" of $40,000. The other carrier agreed to a contribution of $50,000, must implement a compliance training program and must file three compliance reports with the FCC. Clearly, the Commission felt that this carrier's degree of non-compliance was greater. A little prevention can make all the difference in these investigations.

• Email This
• Print
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

 

 

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link

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.

• Email This
• Print
• Trackbacks
• Share Link