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

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.

Background.  In August, BART garnered headlines and much criticism when it temporarily shut down wireless services in four of its transit stations to quell protests over a police shooting.  Many, including the FCC, criticized BART for actions of dubious legality.  At the time, an FCC spokesman stated that the Enforcement Bureau would investigate the shut down.  The results of that investigation were not publicly announced.

New, More Restrictive BART Policy.  Over the past several months, BART has re-examined its cell phone interruption policy.  Yesterday,  BART adopted a new policy restricting such interruptions.  Under the new policy, BART will shut down wireless service in its system only in extraordinary circumstances.  Specifically, the policy limits interruptions only to the following instances:

when it determines that there is strong evidence of imminent unlawful activity that threatens the safety of District passengers, employees and other members of the public, the destruction of District property, or the substantial disruption of public transit services; that the interruption will substantially reduce the likelihood of such unlawful activity; that such interruption is essential to protect the safety of District passengers, employees and other members of the public, to protect District property or to avoid substantial disruption of public transit services; and that such interruption is narrowly tailored to those areas and time periods necessary to protect against the unlawful activity.

FCC Porceeding.  FCC Chairman quickly released a statement praising the agency's more restrictive policy.  He asserted, however, that preserving the openness of wireless networks is paramount and stating that there must be a "high substantive and procedural bar" to any permissible interruption of service.  Genachowski stated that the FCC "will soon announce an open, public process to provide guidance on these issues."

In the past, the FCC has staunchly denied any requests to sanction wireless service blocking.  For example, in 2009, the FCC denied CellAntenna's request for temporary authority to provide a demonstration of its cell phone blocking technology in a state prison.  It also has proposed substantial fines against companies manufacturing wireless jamming devices.  Perhaps this BART situation will be viewed differently, given that it does not involve jamming, but rather the decision by a property owner to turn off equipment it had installed. 

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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. 

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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.
 

The court noted that the IRS class lives are defined by reference to the FCC’s Uniform System of Accounts for Class A and Class B Telephone Companies (USOA). In its review, the court applied what it describes as the plain language of the USOA to the various categories of wireless cellular assets. The taxpayer argued that the IRS rules did not apply to the wireless cellular assets because those rules ignore the physical, technological and practical differences between wireless cellular equipment and traditional landline telephone equipment. The court, however, was unconvinced and indicated that the IRS rules apply to telephone communications equipment used to provide commercial and contract telephonic services like those which the taxpayer was providing. Based on its legal conclusions and a more in-depth analysis of the specifications and use of the various assets, the court held that the applicable class life for the taxpayer’s antenna support systems is fifteen years; for its cell site equipment (other than the switch which has a five year class life) is ten years; and for its leased digital equipment is ten years. The decision applies to years before 2011 as the IRS recently issued new guidance to provide updated class life guidance for the ever-changing cellular service industry and an opportunity to change accounting methods to conform to the new guidance. [See Rev. Proc. 2011-22]

Kelley Drye Tax partner Allan Weiner and Telecom partner Chip Yorkgitis authored this special report.

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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:

• $25 million voluntary contribution to the federal treasury;
• minimum $52 million in consumer refunds;
• cessation of billing for "unauthorized charges";
• revised consumer disclosures and a "data block" service option.

In addition, the consent decree contains training and compliance monitoring provisions over two years. 

 

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While the FCC has taken an interest in mobile marketing by carriers -- most notably with investigations of carrier early termination fees and proceedings examining wireless consumer "bill shock" -- it also is helpful to remember that the mobile content providers are subject to enforcement for deceptive marketing practices.  Our colleagues at the Ad Law Access blog covered a recent settlement of a class action lawsuit by several mobile marketers.  They remind marketers to clearly and conspicuously disclose costs so that consumers know what they are obligated to pay.  Mobile service providers should ensure that their billing and collection agreements impose such an obligation on the content provider and that the carrier properly polices compliance.

Read the Ad Law Access story here. 

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The FCC took a flurry of actions at yesterday's monthly open meeting.  Fulfilling this blog's role as your resource for news and helpful links, below is your guide to yesterday's actions.

Wireless Market Report:  The  Commission adopted its 14th Annual Report on the state of the wireless market.  Among other things, this report was controversial because it refused to make an "effective competition" judgment on the wireless market.  The report also expands coverage beyond CMRS to address the broader mobile marketplace. 

Number Porting:  The Commission released a Report and Order shortening the time interval for "simple" ports.  This action will particularly affect wireline-to-wireless ports, and might accelerate the trend of "cut the cord" conversions.

Pole Attachments:  The Commission made a number of changes to its rules governing the rights of cable and competitive telecommunications providers to hang facilities on utility poles.  The order also proposes a number of changes to the pole attachment complaint rules.

Universal Service:  The Commission issued a Notice of Proposed Rulemaking to modify its "e-rate" rules, which support discounts for schools and libraries for internet access and other services. 

Broadband Spectrum:  The Commission adopted rules to make available another 25 MHz of spectrum for mobile braodband use. 

REMINDER:  For more information on many of these topics, peruse our links on the right hand side of this page. 

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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.

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