Facebook App Offers Free Phone Calls Over Wi-Fi

By J. Bradford Currier and Marc Martin

In a move likely to further disrupt the voice services market, Facebook recently announced that it will offer free calls via Wi-Fi for users of its Messenger app on Apple devices in the United States. The Messenger calling feature, tested in Canadian markets earlier this month, allows users to “call” their Facebook friends who have installed the Messenger app and linked their mobile number with Facebook by clicking their contact information. While data charges will still apply for Messenger calls made over a wireless carrier’s 4G or 3G network, there will be no separate charge for calls made over a device connected to the Internet via a Wi-Fi connection. Facebook’s announcement marks another example of the growing trend of using mobile apps to end-run traditional public switched telephone network (“PSTN”)-based voice services.

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FCC and Wireless Carriers Reach "Bill Shock" Accord

FCC Chairman Julius Genachowski recently announced an agreement with the mobile wireless industry by which it has agreed to abide by new voluntary guidelines to prevent “bill shock” through the delivery of advance warning messages to subscribers at risk of incurring high charges on their monthly mobile service bills. Bill shock is a term used by the FCC to describe when a consumer claims a sudden, unexpected increase in their monthly bill, usually as the result of exceeding limits on voice, data, or messaging plans. As a result of the agreement, the FCC suspended its plans to adopt new wireless billing regulations that it proposed last year, but warned that the Commission would not hesitate to adopt regulations in the future if the industry self-regulation proves ineffective.

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Mobile Telecommunications Market Nearly 2% of World's GDP

Representing the growing prevalence and indispensability of mobile telecommunications worldwide, a recent study estimates that the mobile industry comprises almost 2% of global gross domestic product. The report, released by technology consulting group Chetan Sharma, found that mobile telecommunications currently accounts for nearly $1.3 trillion in global revenue as subscriptions rise exponentially in the U.S. and international markets. Research indicates that an explosion in data usage through smartphones and other next-generation mobile devices represents a key driver of the mobile industry, bringing in approximately $67 billion in the U.S. and $300 billion worldwide. The U.S. wireless data market grew 26% and per-month data usage more than doubled from 2009 to 2010. The gains for the mobile industry follow a critical turning point late last year, as smartphones outsold personal computers for the first time in history and data devices such as e-readers and tablets saw a jump in sales. 

Global data usage growth has already led some telecommunications providers to rein in or terminate their previously unlimited data plans as worldwide demand continues to climb unabated. Cisco Systems estimated that 48 million people in the world have mobile phones while lacking electricity at home. The same report concluded that over 7.1 billion mobile-connected devices will be in use by 2015, nearly one mobile device for every person on the planet. As a result, the mobile industry will likely soon account for an even larger slice of the global GDP pie.

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Spectrum Auction Legislation Passes Senate Commerce Committee

With wireless Internet traffic expected to increase 26-fold over the next few years, the Senate Commerce Committee yesterday approved the Public Safety Spectrum and Wireless Innovation Act, sending the divisive legislation on to the full Senate for consideration. The bill further stokes the ongoing battle across industry sectors over how best to apportion spectrum and who should bear the burden of reallocation, addressing in one bill issues surrounding both the public safety D-Block spectrum and broadcast spectrum reallocation.

The cornerstone of the new legislation is the establishment of controversial “incentive auctions,” where television broadcasters and other licensees will voluntarily cede some of their existing spectrum inventory to the FCC in exchange for a share of the auction proceeds. The Act would also compensate broadcasters that retain their spectrum but agree to be “repacked” to adjacent channels, potentially freeing up new swaths of spectrum for public use. Auction income would be used to fund the construction and maintenance of a nationwide wireless broadband network dedicated to public safety services. Any surplus revenue obtained from the auctions would go to the U.S. Treasury targeted for deficit reduction. The Act further allocates 10 megahertz of spectrum known as the D-Block for the creation of the public safety broadband network and would permit public safety officials to lease capacity on their network subject to certain restrictions.

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Verizon Challenges FCC Data Roaming Rules

In a move expected by many industry analysts, Verizon Wireless filed a notice of appeal last week in the U.S. Court of Appeals for the District of Columbia challenging the data roaming obligations imposed on wireless carriers adopted by the FCC last month. The FCC order required all wireless carriers to allow customers of competitors to roam on their data networks and mandated “commercially reasonable terms” for intercarrier roaming agreements. The Commission adopted the data roaming order through a close 3-2 vote, with Commissioners Robert McDowell and Meredith Baker questioning the FCC’s authority to impose common carriage-like requirements on an information service.

Verizon’s appeal echoes the dissenting Commissioners’ concerns, characterizing the data roaming order as an arbitrary and capricious exercise of the FCC’s power that unduly burdens major carriers such as itself and AT&T. The company further contends that the new regulations are unnecessary due to the many data roaming agreements the company has with small- and medium-sized wireless companies. Verizon stated that the company now has less incentive to expand its wireless infrastructure if it must share its network with outside users. Meanwhile, consumer watchdog groups hailed the order as necessary to sustain competition during a time when AT&T’s attempted purchase of T-Mobile may lead to further market consolidation.

The data roaming appeal marks Verizon’s most recent challenge to the FCC’s statutory authority at the D.C. Circuit. Just last month, the court dismissed suits brought by Verizon and another carrier against the FCC’s net neutrality regulations because the carriers filed their complaints prematurely.

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FCC's New Pole Attachment Rules Become Effective

The FCC's amended pole attachment rules, which are intended to expedite the rollout of advanced telecom, video and broadband services, promote competition and reduce the costs of network buildout, have been published in the Federal Register and have become effective.  The FCC’s pole attachment rules, adopted under Section 224 of the Communications Act, govern the rates and conditions imposed by local exchange carriers, electric and other utilities on cable television and telecom carriers for access to their poles, conduits, and rights-of-way to ensure access is provided in a nondiscriminatory manner and at reasonable rates. The FCC's new rules include:

(1) a four-stage timeline governing utility grants of pole attachment access to speed the processing and provide greater administrative clarity to applicants. The new rules would limit utilities' right to halt attachments for emergencies under a “good and sufficient” cause standard; 

(2) modified procedures to expedite attachment-related complaints. In order to encourage meaningful negotiations between utilities and those seeking attachment, the FCC will now require the parties to engage in “executive-level” discussions before filing a complaint with the Commission. The rule institutes additional system reforms designed to expedite the pole access and complaint processes; 

(3) changes to the telecommunications rate formula and procedures applied to pole attachments; and

(4) permitting local exchange carriers to file complaints with the Commission regarding pole attachment rates and conditions while confirming that wireless providers remain entitled to the same attachment rates and conditions as landline telecom providers.

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No Group Hugs: The Supreme Court Says "Yes" to Class Action Arbitration Waivers

By Andrew Glass and Robert Sparkes III

The Supreme Court’s ruling in AT&T Mobility LLC v. Concepcion continues the Court’s string of arbitration decisions bringing greater clarity to what has been a cloudy subject.  In this decision, the Court addresses the question of whether businesses can enforce class action waivers in their consumer arbitration agreements, answering unequivocally “yes.” Indeed, the decision is an important victory for businesses, and is likely to help businesses avoid the costs of what are more often than not meritless class lawsuits. 

The Concepcion decision finds its roots in the Court’s recent decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corporation. There, the Court established the principle that parties cannot be forced to submit to class-wide arbitration unless they have actually agreed to do so. In Stolt-Nielsen the Court did not have the occasion to address whether parties can expressly waive arbitration on a class-wide basis. Now, applying Stolt-Nielsen to express class action arbitration waivers, Concepcion finds the Federal Arbitration Act (FAA) invalidates state law aimed at barring such waivers. State law is preempted by the FAA where it presents “an obstacle” to accomplishing Congress’s objective of promoting the efficiency of arbitration.            

The telecommunications, consumer credit and finance, and sales industries, as well as other businesses that offer consumer services, are likely to benefit from the lower costs of individual arbitration. AT&T contends that consumers will also benefit from the streamlined procedures offered by arbitration.

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FCC Launches Proceeding to Review AT&T Acquisition of T-Mobile and Answers Questions

Today the FCC announced the opening of a docket and the issuance of a protective order related to AT&T's proposed acquisition of T-Mobile USA. Presentations by interested parties before the FCC will be exempt from the agency's ex parte procedures until the applications seeking FCC approval are filed. When filed, ex parte communications before the FCC must follow the "permit but disclose" ex parte procedures applicable to non-restricted proceedings, although it reserved the right to treat the proceeding as restricted.

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House Votes to Overturn FCC's Net Neutrality Order

In a setback to one of the FCC’s key policy proposals, the House of Representative today voted in favor of a Resolution of Disapproval under the Congressional Review Act aimed at invalidating the Commission’s Net Neutrality Order adopted late last year. The vote follows months of heated industry and Congressional debate, including sharply partisan debate  about the Resolution’s merits, court challenges brought by wireless carriers, and procedural delays in bringing the Resolution to the House floor. While the Resolution seeks to overturn the FCC’s new anti-blocking, network management transparency, and traffic discrimination rules, it faces an uphill battle to become law. The Resolution would need to get passed by the Democrat-controlled Senate and get signed by the President. The White House recently said it plans to veto any measure overturning the FCC's Net Neutrality Order.

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FCC Adopts New Data Roaming Rules to Promote Mobile Broadband

by Brendon P. Fowler

On April 7, 2011, the FCC voted 3-2 to require mobile broadband operators to offer data roaming arrangements to other providers. Such arrangements allow consumers with mobile data plans to remain connected by utilizing another network while roaming outside their own provider’s network coverage. Conceptually, the data roaming rules are related to those already established for voice roaming, and Chairman Genachowski tied the Commission’s present action to its prior efforts to develop "automatic" voice roaming and nationwide voice services. Analysts believe that the decision will benefit companies like Sprint Nextel Corporation and MetroPCS Communications Inc. at the expense of AT&T and Verizon Wireless by allowing smaller competitors onto the networks owned by larger rivals, and by enabling smaller carriers to offer more broadband services.

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Court Dismisses Appeal Against FCC's Net Neutrality Rules

Today the FCC prevailed in the continuing skirmish over Net Neutrality in Washington. The U.S. Court of Appeals for the District of Columbia dismissed the lawsuits filed last January by Verizon and Metro PCS seeking to overturn the FCC’s Net Neutrality order adopted in December. The court found that the two wireless carriers filed their challenges too early and should have waited until the Net Neutrality order was published in the Federal Register. Both wireless carriers have indicated they will re-file their appeals.

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Will Broadcasters Have Incentive to Contribute Spectrum for Wireless Broadband?

By Marc S. Martin and Martin L. Stern

With demand for wireless Internet access predicted to increase exponentially over the next few years, the debate over the FCC’s proposal to free up large amounts of broadcast spectrum through “incentive” auctions pits television broadcasters against other industry sectors and the Administration in a heated regulatory and legislative battle over the future of broadcast television and mobile broadband.

Under the National Broadband Plan, the FCC set a goal of redeploying 500 MHz of spectrum for mobile broadband use by 2020, recommending that 120 MHz come from the broadcast television bands. The Commission’s National Broadband staff set their sights on television broadcasters after concluding that much of the 6 MHz currently allocated to television stations remains underutilized following completion of the digital transmission transition in  2009, with only 15% percent of U.S. households reliant on over-the-air transmission for their reception of television programming. Additionally, estimates place the value of wireless spectrum at $1.28 per MHz per person, compared to 11 to 15 cents per MHz for television spectrum. In response to this value gap, FCC officials propose that television broadcasters participate in voluntary auctions of some or all of their spectrum, with broadcasters receiving a portion of the proceeds as an incentive to vacate their spectrum. The thought is that some broadcasters may welcome the prospect of trading in their spectrum for cash. As part of this proposal, the FCC would also oversee the “repacking” of the spectrum, moving broadcasters (potentially including those who chose not to give up their spectrum) to fewer adjacent channels and potentially placing two or more broadcasters on a single 6 MHz channel. The theory is that the repacking process would free-up significant swaths of broadcast spectrum for wireless broadband use by the winning bidders. The Obama Administration hopes the auction and reallocation processes will mark the first step towards fulfilling the President’s recent pledge to extend high-speed wireless access to 98% of Americans, while putting billions in auction revenue in the public coffers.

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Net Neutrality Supporters Delay House Subcommittee Vote to Reverse FCC Rules [UPDATED: 3/7/11]

In response to a request by House Democratic supporters of the Federal Communications Commission's Open Internet (or Net Neutrality) order, the House Energy and Commerce Subcommitee on Communications and Technology has postponed its vote, scheduled for this morning, on the resolution to reverse the FCC order.  Although no new date has been announced, we understand that a hearing will likely be scheduled for next week.

Yesterday, Energy and Commerce Committee ranking member Henry Waxman (D-CA) and Rep. Anna Eshoo (D-CA), the ranking member on the Communications and Technology Subcommittee, wrote to Communications and Technology Subcommittee Chairman Greg Walden (R-OR) urging him to first hold hearings on the proposed resolution of disapproval under the Congressional Review Act in which supporters of the FCC's order could be heard before having the vote.  Note that even if the House approves the resolution of disapproval, it must still pass the Senate and survive a presidential veto to successfully reverse the FCC's order.

UPDATE: A hearing has been scheduled for March 9, at 10:30 a.m. in 2123 Rayburn House Office Building.

SECOND UPDATE (3/7/11): Representatives Waxman and Eshoo sent a letter on behalf of a group of net neutrality supporters in the House asking Chairman Walden and Rep. Fred Upton (R-MI), Chairman of the Energy and Commerce Committee, to allow lawmakers to offer amendments to the resolution of disapproval. The Democrats requested the Chairmen bring the disapproval measure as a regular House Resolution instead of under the Congressional Review Act.

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The FCC's Net Neutrality Order: Substance and Status for Mobile Wireless Broadband

On December 21, 2010, a divided Federal Communications Commission adopted its long-awaited, but highly controversial, Preserving the Open Internet order (“Order”), which requires broadband service providers to treat all web traffic equally and protect open access to the Internet for web consumers and other stakeholders. While Congressional and industry opposition continues to ferment, a closer look at the Order reveals that mobile wireless broadband providers will retain considerable flexibility in how they manage their networks when compared to their fixed provider counterparts. 

The Order focused on three primary goals underpinning the Commission’s net neutrality policy: 1) transparency 2) no blocking and 3) no unreasonable discrimination. For “transparency,” both fixed and mobile providers must publicly disclose the network management practices, performance, and commercial terms of their broadband services. By contrast, the application of the “no blocking” condition differs depending on the type of provider. Fixed providers are subject to a broad obligation to not block lawful content, applications, services, or non-harmful devices. Mobile wireless providers are subject to a narrower obligation to not block lawful websites and applications that compete with the provider’s voice or video telephony services. Most importantly, the Order’s “no unreasonable discrimination” provision applies solely to fixed providers, leaving mobile operators free to favor or disfavor certain types of network traffic. According to the Commission, these new rules for mobile wireless providers will not harm customers because most consumers have more choices for mobile wireless service than for fixed broadband. The Commission also noted favorably the mobile industry’s recent moves towards openness, including the introduction of open operating systems like Android. As a result, when the rules finally go into effect, mobile wireless broadband providers will be exempt from the obligation to manage network traffic in a nondiscriminatory manner.

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K&L Gates Global Government Solutions Report Includes Articles on Key TMT, Privacy and Patent Developments

K&L Gates recently published its Global Government Solutions 2011 Annual Outlook, which contains articles from around the firm on key governmental developments expected in 2011.

The Annual Outlook includes an article addressing developments affecting the Telecom, Media and Technology sector in 2011 by DC partners Marc Martin and Marty Stern, noting that the TMT sector enters 2011 with significant regulatory uncertainty and the FCC facing an uphill battle on many signature regulatory initiatives.

The article reviews the FCC’s net neutrality order and the challenges it faces in court and on Capitol Hill, discusses the recent FCC and Department of Justice approvals of the Comcast/NBCU transaction, and a number of additional issues getting significant focus in 2011. These include retransmission consent battles between broadcasters and cable/DBS providers and the FCC’s expected rulemaking proceeding on this issue, the Commission’s implementation of new communications accessibility requirements under the new 21st Century Communications and Video Accessibility Act, and continued efforts to reform the Universal Service Fund and make it broadband-centric.

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CALEA II - Bigger and Badder?

Recent leaks to the New York Times, as reported in September and October, indicate that the Obama administration will next year be pushing for sweeping expansions of the Communications Assistance for Law Enforcement Act (CALEA).  CALEA facilitates government surveillance by, among other things, requiring companies subject to the law both to design their systems so that the government can easily plug in and intercept communications in real-time and to provide assistance to the government in these efforts. 


A task force comprised of representatives from DOJ, Commerce, the FBI, and other agencies, are discussing amendments to the law.  These changes would greatly expand the reach of CALEA, would significantly increase the costs of non-compliance for covered companies, and would include other requirements which may fundamentally change business models for companies promising encryption and decentralized communication services.    



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Broadband in America: The Year in Review; What Lies Ahead

K&L Gates co-hosted a live webcast December 22, carried live on Internet TV channels Broadband US TV and National League of Cities TV.

You can access the free webcast by clicking here (free registration is required).

K&L Gates partner Marty Stern joined co-host Jim Baller, together with guests Cecilia Kang, Communications Industry Journalist, the Washington PostGigi Sohn, President, Public Knowledge,  Jeffrey Silva, Senior Policy Director, TMT, Medley Global Advisors, and  Scott Cleland, President, the Precursor Group, for a lively and provocative review of 2010, particularly of the day-old FCC net neutrality decision, and for some bold predictions for 2011.

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Live Webcast: Spurring Adoption and Use of Broadband

K&L Gates co-hosted a live webcast October 7, carried live on Internet TV channels Broadband US TV and National League of Cities TV.

You can access the free webcast by clicking here (registration is required).

Stakeholders in America's broadband future disagree on most issues, but not on this: with 35% of Americans not using broadband today and many others not using broadband to maximum advantage, spurring increased adoption and use is critically important to America's success in the emerging knowledge-based global economy.

FCC Commissioner Mignon Clyburn kicked off the program, joining BroadbandUS TV hosts Marty Stern and Jim Baller for a provocative discussion ofthe FCC's goals, activities, and progress in this area.

The program also included a panel on National Policy and Support, featuring Karen Peltz Strauss, FCC Consumer and Governmental Affairs Bureau; Emy Tseng, National Telecommunications and Information Administration; Dr. Kenneth Peres, Communications Workers of America and US Broadband Coalition; Nicol Turner-Lee, Joint Center for Political and Economic Studies; and John Windhausen, Schools, Health and Libraries Broadband Coalition. A second panel featured a look at success stories from around the country.

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FCC Seeks Comment on its "Third Way" Approach to Regulating Broadband Internet Service

by Marc S. Martin, Martin L. Stern, Peter W. Denton

On June 17, 2010, the U.S. Federal Communications Commission (“FCC” or the “Commission”) adopted a Notice of Inquiry (the “NOI”) seeking comment on the Commission’s consideration of the appropriate legal framework for broadband Internet service, and in particular the “Internet connectivity component” of that service.[1]   Comments on the NOI are due by July 15, 2010, with Reply Comments due by August 12, 2010.

The NOI is the latest step in a contentious debate between the Commission and broadband Internet access providers (e.g., cable, telco and wireless broadband providers) over the Commission’s legal authority to regulate broadband Internet service.  As discussed in our previous alerts, on April 6, 2010, the U.S. Court of Appeals for the District of Columbia overturned an FCC enforcement action against Comcast Corporation arising from allegations that Comcast engaged in unreasonable and discriminatory broadband management practices.[2]   The Commission had previously classified Comcast’s cable modem broadband Internet service as a largely unregulated “information service” under Title I of the Communications Act of 1934, as amended (the “Communications Act”), but asserted indirect “ancillary” authority to enforce certain net neutrality guidelines against broadband Internet access providers.  The court in Comcast ruled that the Commission, based on its prior decision classifying cable modem service as an unregulated information service, lacked direct statutory authority to regulate broadband Internet service, and therefore could not rely on its ancillary jurisdiction to do so.

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