Frequently Asked Questions About Net Neutrality

By Marc MartinJenny Paul, and Elyse Schoenfeld*

Net neutrality has been a contentious policy issue for many years. Like many such issues, it is subject to political spin, conflicting academic analyses, and industry and consumer group advocacy. As a result, much of the reporting on net neutrality leaves the underlying facts distorted and confusing. We have designed this FAQ as a handy resource to clarify the contested history of net neutrality, what net neutrality regulations are intended to accomplish, and what the FCC is considering in this sphere.  The FAQs begin after the jump.

Q: What is net neutrality?

A: The term “net neutrality” was first coined by legal scholar Tim Wu in 2003.Since then, the term has spread globally and is subject to varying interpretations. At its core, however, net neutrality is the concept that Internet service providers should not favor or disfavor particular content, applications, or services when they are providing Internet access services. The Federal Communications Commission uses the term “Open Internet” to refer to the principle of net neutrality and the rules the FCC has said it designed in furtherance of that principle. No legally binding net neutrality regulations existed until 2010.

Q: What past actions has the FCC taken with respect to net neutrality?

A: The FCC first took action relating to net neutrality in 2005, when it issued its nonbinding Internet Policy Statement. These policy guidelines were designed to prevent broadband service providers from discriminating against and impeding access to certain applications, services, and content. In 2008, the FCC brought an enforcement action based on the Policy Statement against Comcast for allegedly slowing down peer-to-peer applications, such as BitTorrent. The FCC asserted that it had jurisdiction over Comcast and other broadband service providers via its ancillary authority, which may be employed when (i) its general Title I authority over interstate and foreign communication by wire or radio covers the subject of the regulations, and (ii) the regulations are reasonably ancillary to one of the FCC’s statutorily mandated responsibilities. Comcast appealed to the U.S. Court of Appeals for the District of Columbia Circuit, which vacated the FCC’s order related to the enforcement action and found, among other things, that the FCC did not have jurisdiction because the FCC had not demonstrated its regulations were reasonably tied to a statutory duty.  (Comcast later agreed to abide by the FCC’s 2010 net neutrality rules for seven years as a condition to the FCC's consent to Comcast’s purchase of NBC Universal. Comcast's commitment remains enforceable against Comcast even though the bulk of the rules of general application were struck down by the D.C. Circuit in 2014.)

In December 2010, the FCC adopted binding net neutrality rules to govern broadband Internet service providers. The FCC based its jurisdiction, in part, on Section 706 of the Telecommunications Act of 1996, which states that the FCC should encourage the deployment of broadband by enacting regulations that remove barriers to infrastructure investment or that promote competition in the local market. The FCC claimed that its net neutrality regulations would help to further this statutory mandate by promoting the use of broadband services.

The 2010 rules distinguished between fixed and mobile broadband access providers, largely due to the fact that mobile broadband was in earlier stages of development and had wireless network capacity constraints not faced by fixed networks. For fixed broadband access providers, who primarily provide broadband service and Internet access to a fixed location, the FCC established three rules aimed at transparency/customer disclosures, blocking, and discrimination. The regulations required broadband service providers to disclose information on their network management practices, performance, and commercial terms of services; prevented providers from blocking access to lawful content, applications, and services, subject to reasonable network management; and prevented unreasonable discrimination in the transmission of lawful network traffic over a user’s Internet access service, subject to reasonable network management. The FCC defined reasonable network management as “appropriate and tailored to achieving a legitimate network management purpose.”

Mobile service providers were required to follow the transparency rule, as well as a no-blocking requirement that prevented them from blocking users from websites and from applications that competed with the providers’ voice or video telephony services, subject to reasonable network management. Mobile providers were not subject to the anti-discrimination rule.

Q: Can the FCC mandate an Open Internet?

A: The answer is complicated due to years of FCC rulemakings and litigation, but the FCC has authority to establish at least some net neutrality requirements binding on providers of Internet access services. The unsettled questions are to what extent and under what authority the FCC can do so. The Communications Act of 1934 gives the FCC general jurisdiction over “all interstate and foreign communication by wire or radio.” Courts have said that the FCC may only adopt regulations where expressly authorized by the Act or where doing so would be ancillary to a specific provision of the Act. To be clear, however, the FCC has no authority to regulate the global Internet itself.

Q: What happened to the net neutrality rules adopted in 2010?

A: After the FCC issued the 2010 net neutrality rules, Verizon challenged them. In January 2014, the D.C. Circuit held that: (1) section 706 of the Telecommunications Act of 1996 gives the FCC authority to promote deployment, and the FCC’s conclusion that net neutrality requirements would promote broadband deployment was not unreasonable; but (2) the FCC’s section 706 authority is constrained by certain general limitations on any exercise of authority by the FCC, including that the FCC may not subject services that are not telecommunications services to common carrier regulation. Because the FCC had previously held that Internet access services were “information services,” as that term is defined by law, not “telecommunications services,” the FCC could not, in invoking its section 706 authority, impose common carrier regulation on Internet service providers. The court upheld the disclosure rule because it did not constitute a common carrier obligation and was within the scope of the FCC’s jurisdiction under Section 706. But the court found that the no-blocking and nondiscrimination requirements were framed in ways that made them indistinguishable from common carrier regulation. In so ruling, the court expressly left the door open that the FCC could reframe these requirements to comport with the law.

Q: What actions did Congress take to try to block or overturn the 2010 net neutrality rules?

A: In 2011, the House of Representatives passed a Resolution of Disapproval that, if it had become law, would have prohibited the FCC from regulating how Internet service providers manage their broadband networks. The House also passed an amendment to a budget bill that would have prevented the FCC from using funding to implement net neutrality rules. Neither measure gained traction in the Senate, and even if one had, the White House indicated it would have vetoed such efforts. Although the House Republican efforts failed, the lengths they took to oppose net neutrality demonstrate how partisan and controversial the issue has become.

Q: What’s left of the FCC’s authority to implement net neutrality after the 2014 decision in Verizon v. FCC?

A: Importantly, the D.C. Circuit did affirm the FCC’s authority to regulate broadband Internet service providers under Section 706 as long as the regulations do not impose common carrier requirements and are within the scope of that provision. While the FCC can no longer enforce the 2010 anti-blocking or anti-discrimination rules, it can undertake a new rulemaking to promulgate net neutrality rules that fall within the bounds dictated by the court in Verizon. The FCC could, if it so chooses, seek to reclassify broadband providers as common carriers under Title II of the Communications Act.

Q: Why is net neutrality in the news now?

A: The Verizon decision set off a new media firestorm over the future of net neutrality, with critics and supporters of net neutrality weighing in on the potential steps the FCC might take. In response to Verizon, on May 15, 2014, the FCC released a Notice of Proposed Rulemaking, which proposed new rules for regulating broadband Internet access services and asked for public comment on the regulations. Some published reports treated the FCC’s proposed rules as eliminating net neutrality.

Q: What would the FCC’s new proposed rules do?

A: In short, the new proposed rules would include a more robust version of the transparency rule announced in the 2010 Order; an anti-blocking rule that would allow individualized bargaining above a minimum level of access to a broadband provider’s subscribers; and an anti-discrimination rule that would require fixed broadband providers to use “commercially reasonable” practices in their provision of service. As with the 2010 rules, the FCC has tentatively concluded that the anti-blocking rule would apply a different standard to mobile broadband providers, and the anti-discrimination rule would not apply to mobile broadband providers. (See below for more detail about the proposed rules.) It is important to note that the rules the FCC adopts may differ from the proposed rules as a result of comments by the public, consumer advocacy groups, and industry stakeholders.

Q: On what authority does the FCC propose to rely to regulate broadband service providers?

A: The FCC identified several potential sources of its authority in light of prior court rulings regarding net neutrality.

1. Section 706

In the NPRM, the FCC proposed to rely on Section 706 for its authority to promulgate rules for broadband Internet service providers. While the D.C. Circuit upheld the FCC’s reliance on Section 706 in Verizon, the FCC is seeking comment on the scope of its authority under this provision, including how to interpret Section 706’s terms and definitions and whether the Verizon opinion impacts the FCC’s exercise of authority.

2. Title II

The FCC also seeks comment on whether it should rely on Title II for authority to regulate broadband Internet access service, which would allow the FCC to regulate the providers as common carriers. In order to rely on Title II, the FCC would need to reclassify broadband Internet services as a telecommunications service, instead of an information service. Separately, the FCC is seeking comment on a petition that urged the FCC to hold that an Internet service provider is actually providing two services simultaneously -- one to its end user customers and the other to edge providers whose traffic the Internet service provider delivers to its customers. The petition asks the FCC to reclassify only the latter as a telecommunications service.

3. Title III

Finally, the FCC seeks comment on whether to rely on Title III of the Communications Act for authority to regulate mobile broadband services. Title III empowers the FCC to “generally encourage the larger and more effective use of radio in the public interest” and specifically allows the FCC to dictate the nature of the service to be provided by each class of licensed stations and to adopt new conditions on existing licensees to promote the public interest, convenience, and necessity. In the NPRM, the FCC asserts that these Title III provisions allow it to adopt rules imposing net neutrality requirements on mobile broadband service providers.

Q: How do the proposed rules regulate disclosure and transparency?

A: The proposed transparency rule is a more robust version of the transparency rule adopted in the 2010 Order and upheld by the D.C. Circuit in Verizon. The proposed transparency rule would require providers to furnish more information to end users and edge providers when the providers make changes to their network practices. It would also require providers to disclose instances of blocking, throttling, and pay-for-priority arrangements, or the parameters of a default service as distinct from any priority service. Additionally, providers would have to disclose particular information about network congestion, including source, location, timing, speed, packet loss, and duration. The FCC also noted that the current transparency rules that are in place apply equally to fixed and mobile service providers and sought comment about whether and how the enhanced transparency requirements should apply to mobile service providers.

Q: How do the FCC’s 2014 proposed rules revisit the 2010 anti-blocking and anti-discrimination rules that were struck down in Verizon v. FCC?

A: The FCC proposed to restore the 2010 anti-blocking rule, stating that fixed broadband providers should “not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management” and mobile broadband providers should “not block consumers from accessing lawful websites, subject to reasonable network management; nor shall such person block applications that compete with the provider’s voice or video telephony services, subject to reasonable network management.” However, the FCC modified its interpretation of that text in response to the D.C. Circuit’s finding that the rule as promulgated in 2010 was an impermissible common carrier requirement. It proposed to make clear that this anti-blocking rule would allow individualized bargaining above a minimum level of access to a fixed broadband provider’s subscribers, but that the FCC would separately subject such practices to scrutiny to ensure that they are “commercially reasonable,” i.e., practices that do not threaten to harm the openness of the Internet. The FCC proposed to apply the anti-blocking rule differently to mobile broadband providers by prohibiting mobile providers from blocking lawful web content as well as applications that compete with the mobile broadband providers’ own voice or video telephony services, subject to reasonable network management.

With respect to the anti-discrimination rule, the FCC proposed to adopt a rule requiring fixed broadband providers to use commercially reasonable practices in their provision of service. The FCC noted this rule would allow fixed broadband providers to serve customers and carry traffic on an individually negotiated basis, without having to hold themselves out to serve all users indiscriminately on the same or standardized terms, so long as the providers’ conduct is commercially reasonable. The FCC has tentatively concluded that this rule would not apply to mobile broadband providers.

Q: How do the proposed rules address arrangements that permit a website to pay broadband providers for priority service and access to the provider’s subscribers?

A: Paid prioritization, or pay-for-priority, agreements theoretically would allow a broadband provider to arrange with a third party to directly or indirectly prioritize some Internet traffic over other traffic to reach the provider’s subscribers more quickly. No examples of such agreements have come to light yet, but some critics contend that such an agreement could entail an edge provider paying a broadband service provider to move content from the edge provider’s website to the provider’s subscribers more quickly — a so-called “fast lane” that could give the edge provider an advantage over competing websites.

The proposed rules discussed above appear to allow for at least some paid prioritization agreements. However, the FCC is seeking comment on an alternative anti-discrimination rule that would impose a ban on all, or certain types of, pay-for-priority services. The FCC is also seeking comment on an alternative anti-blocking rule that would either itself prohibit broadband providers from entering into pay-for-priority agreements with edge providers or would act in combination with the alternative anti-discrimination rule to prohibit such conduct.

Q: How are agreements like the one between Comcast and Netflix classified?

A: In February 2014, a media frenzy occurred when Comcast and Netflix entered into an agreement under which Netflix would pay Comcast an undisclosed sum of money for direct access to Comcast’s broadband network. Many reports characterized the deal as implicating net neutrality. However, the Comcast-Netflix deal is a paid peering agreement, not a paid prioritization agreement. A paid peering agreement occurs when one IP network pays another for the right to exchange traffic directly with it. For example, a content delivery network, such as Level 3 or the new proprietary network built by Netflix, may pay for the right to send its traffic directly into the network of a broadband Internet service provider, such as Comcast.

Q: How do the proposed rules address paid peering agreements?

A: The FCC’s 2010 rules did not apply to paid peering arrangements. In its explanation of the 2014 proposed rules, the FCC said it “tentatively” concluded that it would maintain that approach but sought comment on whether it should change this conclusion. The FCC later announced in June that it would conduct a review of Internet interconnection issues, including peering. That review is likely to be separate from its net neutrality rules, as Chairman Tom Wheeler stated in June that he thought interconnection issues and net neutrality were “two different things.”

Q: Why do parties care about which grant of authority the FCC uses to promulgate new net neutrality rules?

A: Certain fixed and mobile broadband service providers are concerned about the effect Title II would have on stakeholder’s business models and investment in the industry, as reliance on Title II would require the FCC to reclassify the provider broadband access services as common carrier offerings. AT&T, for example, argued in a filing to the FCC that Title II reclassification would not fulfill the main objective of its use — i.e., precluding paid prioritization agreements. In that filing, AT&T noted that Title II does not require that all customers be treated equally but rather prohibits only “unjust and unreasonable” discrimination. AT&T also noted that Title II carriers have been permitted to offer different pricing, different service quality, and different service quality guarantees to different customers so long as the terms offered are generally available to all similarly situated customers.

Public Knowledge, a non-profit group, disagreed and argued that the FCC could preclude paid prioritization under its Title II authority if it wished to do so. In a filing to the FCC, it cited past instances where the FCC found conduct or practices inherently unjust, unreasonable, or subject to abuse and, as such, affirmatively prohibited this conduct with no allowance for exception.

Q: How can I comment on the proposed rules?

A: You may e-mail your comments to openinternet@fcc.gov, or you may submit a filing on the FCC’s Electronic Comment Filing System in Proceeding 14-28: Protecting and Promoting the Open Internet. Such filings are made into an official FCC proceeding, and all information submitted, including names and addresses, will be publicly available via the Internet.

Q: When are comments due?

A: Comments are due on or before July 15, 2014. Reply comments (made in response to the comments filed) are due on or before September 10, 2014. Informal comments may be submitted by letter after those dates.

*Elyse Schoenfeld is a summer associate in K&L Gates’ Washington, DC office and contributed to this client alert.

UPDATE - 7/16/2014: The FCC's website has been overwhelmed by traffic, making it difficult for people to file comments into the FCC's Electronic Comment Filing System.  Therefore, the FCC has extended the comment deadline until midnight, Friday, July 18.

Broadcast Ownership Rules Undergo Scheduled FCC Review

By Krista Consiglio* and Nickolas Milonas

Every four years, the FCC reviews its broadcast ownership rules to keep them up to date with market trends.  The FCC began its statutorily required 2014 Quadrennial Regulatory Review of the Broadcast Media Ownership Rules by publishing a Further Notice of Proposed Rulemaking (FNPRM) in the Federal Register on May 20, 2014

First, the FNPRM proposes to change the local television ownership rule.  The rule currently employs an analog Grade B contour overlap test, but the FCC believes that a competition-based rule would better serve its localism goal.  The proposed local television ownership rule uses a digital noise limited service contour (NLSC) test.  Under this proposed rule, an entity may own up to two television stations within the same designated market area (DMA) under two possible scenarios:  (1) if the digital NLSCs of the stations do not overlap; or (2) at least one of the stations is not ranked among the top-four stations in the market and at least eight independently owned television stations would remain in the DMA.

The FCC also proposes to change the newspaper/broadcast cross-ownership rule, which bans an entity from owning a newspaper and television or radio station within the same DMA.  The change would keep the newspaper/TV cross-ownership rule but eliminate the newspaper/radio cross-ownership rule.  In retaining the newspaper/television cross-ownership rule, the FNPRM discusses the possibility of a case-by-case waiver when a merger would not harm viewpoint diversity in the DMA.

The FCC suggests the radio/television cross-ownership rule unnecessary to foster competition or localism, and the FNPRM seeks comment on whether it should be repealed.  The FNPRM retains both the existing local radio ownership rule and the dual network rule without any changes.

The last component of the FNPRM seeks comment on the FCC’s 2008 Diversity Order in the wake of the Third Circuit’s ruling in Prometheus II, where the court rejected the FCC’s revenue-based “eligible entity” definition as a race-neutral means of facilitating ownership diversity.  The FNPRM seeks to reinstate the revenue-based eligible entity standard.  However, it declines to adopt a socially disadvantaged business eligibility standard, which would expressly recognize the race and ethnicity of applicants, because the Supreme Court’s decision in Adarand held that race-conscious regulations by the federal government, even if intended to be benign, are subject to strict scrutiny.

The FNPRM comment period closes July 7, 2014, and reply comments are due August 4, 2014.

*Krista Consiglio is a summer associate in K&L Gates’ Washington, DC office and contributed to this post.

FCC Clarifies Consent Issues for Autodialed Calls and Texts to Mobile Phones

By Jenny Paul and Marty Stern 

The Federal Communications Commission last week clarified several open issues under the Telephone Consumer Protection Act relating to its prohibition on autodialed and prerecorded calls to mobile phones without the called party’s prior express consent, which applies to both voice calls and text messages.  
 

In a declaratory ruling issued in response to a petition from GroupMe, a free group text messaging service, the FCC confirmed that a consumer’s prior express consent for non-telemarketing autodialed calls to mobile phones “may be obtained through and conveyed by an intermediary” -- meaning that a sender or caller may use a third-party intermediary to obtain a consumer’s consent.  The FCC cautioned, however, that an intermediary “may only convey consent that has actually been provided by the consumer” and cannot provide consent on behalf of the consumer.  Similarly, the FCC reiterated that a sender or caller remains liable under the TCPA where it relies upon an intermediary’s assertion that a consumer has given prior express consent and the consent was not actually obtained.

In line with these clarifications, the ruling expanded the application of certain prior express consent reasoning contained in the FCC’s 2008 ACA Order on debt collection calls, extending that Order from the credit context to other commercial situations.

The ACA Order found that a consumer who provides his or her wireless telephone number on a credit application, absent instructions to the contrary, has given prior express consent to receive autodialed or prerecorded message calls “regarding the debt” at that number -- including calls from a debt collector acting on behalf of the creditor.   In its ruling last week, the FCC applied that reasoning more generally, recognizing that the ACA Order “did make clear that consent to be called at a number in conjunction with a transaction extends to a wide range of calls ‘regarding’ that transaction, even in at least some cases where the calls were made by a third party.”  The FCC cautioned, however, that whether a consumer has given consent to receive a particular communication is a fact-driven analysis and must be determined on a case-by-case basis, in line with the facts of a particular situation.

The TCPA authorizes a private right of action with potential statutory damages of up to $1,500 per call, with an increasing volume of class action suits filed in recent years. 

NHTSA Strongly Endorses Connected Vehicle Technology, But Implementation Questions Remain

By Thomas DeCesar, Edward Fishman, Cliff Rothenstein, and Marty Stern

In a recent announcement, the United States Department of Transportation’s (“DOT”) National Highway Traffic Safety Administration (“NHTSA”) endorsed the future implementation of vehicle-to-vehicle (“V2V”) communication technology in light vehicles (e.g., passenger vehicles and light trucks).  This technology, which is seen by some as the future of vehicle safety, allows vehicles to exchange location and speed information with other vehicles.  This information is processed to provide warnings of driving hazards, or even to automatically stop the vehicle.

In the near term, the practical effect of NHTSA’s decision will be increased interest in and study of V2V technology.  The results from NHTSA’s year-long Safety Pilot model deployment program, which tested V2V devices, will also be released shortly.  More importantly, this decision signals a cautious step over the line from general interest to intent to mandate V2V technology in the future.  NHTSA declined to set a timeline, but it will likely engage in a rulemaking process over the next few years to require V2V technology in new light vehicles.  NHTSA’s hesitancy to commit itself to this mandate may come from a lack of data or real world implementation of the technology, since the agency has historically only required safety features after they gained general acceptance within the automotive industry.

Legal concerns relating to privacy, security, and liability will also pose significant hurdles to the implementation of V2V technology.  Steps must be taken to ensure that the outflow of information will be used for proper purposes and that the technology is equipped with sufficient security measures to prevent improper access by third parties.  Although not mentioned in NHTSA’s press release, liability considerations may also play an important role in V2V implementation.  These risks will have to be understood and adequately managed by companies involved with this technology, including automotive companies, equipment suppliers, and technology providers.

In addition, the implementation of V2V technology may cause continued friction between the Federal Communications Commission (“FCC”) and proponents of unlicensed spectrum use on the one hand, and the DOT and automotive industry on the other.  As currently envisioned, V2V technology will operate using dedicated short-range communications (“DSRC”) over 75 MHz in the 5.9 GHz spectrum band, which also happens to be prime potential territory for unlicensed WiFi use.  The 5.9 GHz spectrum, however, was set aside for V2V communications by the FCC in 1999, but beyond the V2V test program, has not been deployed.  As a result, the FCC, at the direction of Congress in the 2012 Spectrum Act, recently began to consider opening the spectrum up for unlicensed shared broadband and WiFi use to meet predicted future demand, as part of a proceeding to consider allowing unlicensed use in the 5 GHz band.  There is a significant debate over whether the spectrum may be used for DSRC and shared broadband uses, and V2V proponents are concerned with potential interference with vehicle safety communications from such unlicensed use.  Further testing will be required before the issue can be resolved and will likely be prominently featured in the FCC’s 5 GHz proceeding in light of the DOT’s announcement and its upcoming V2V rulemaking.

V2V technology is part of the larger field of intelligent transportation systems (“ITS”).  Broadly speaking, ITS involves the integration of technology and communication devices into vehicles and other transportation infrastructure to improve safety and provide other benefits.  NHTSA’s decision should be seen as a positive step forward for ITS technology in general, and specifically for vehicle-to-infrastructure (“V2I”) technology, which refers to roadside communications infrastructure designed to operate in conjunction with V2V devices. 

The further implementation of ITS technology within U.S. transportation infrastructure will require the cooperation and collaboration of several industries, including the automotive, information technology, and telecommunication sectors.  The approach these industries take with regard to the connected car space, along with public opinion on the advantages and disadvantages of the technology, will be driving forces in the ITS field.  Given the rapid pace of innovation within these industries, it will be important for NHTSA to address compatibility, scaling and future-proofing issues related to V2V and other ITS technologies.  Although NHTSA has offered a strong endorsement of V2V technology with its recent announcement, there are still a number of important questions surrounding ITS technology (including the privacy, security, and liability issues identified above) that must be answered before widespread implementation can occur.

FCC's Net Neutrality Rules Largely Overturned

By Jenny Paul, Marc Martin, and Marty Stern 

UPDATE 2/24/14
:  The Federal Communications Commission announced last week that it will not appeal the D.C. Circuit’s net neutrality ruling and instead is poised to open a new rulemaking proceeding to write different rules, relying on the D.C Circuit’s finding that the Communications Act of 1934, as amended, grants the commission limited authority to impose general “open Internet” regulations on broadband providers. 

In a statement, Chairman Tom Wheeler said that the Commission will work to write rules within its authority that would fulfill the goals of the anti-blocking and anti-discrimination provisions that the D.C. Circuit struck down in January.  Wheeler said the new rules should ensure that edge providers are not unfairly blocked, explicitly or implicitly, from reaching consumers.  To fulfill its anti-discrimination goal, he said, the Commission will consider (1) setting an enforceable legal standard that provides guidance and predictability to edge providers, consumers, and broadband providers; (2) evaluating on a case-by-case basis whether that standard is met; and (3) identifying key behaviors by broadband providers that the Commission would view with particular skepticism.

While the opening of the new proceeding means that the Commission is not moving to reclassify broadband and regulate it as a common carrier service, Wheeler made clear that he is not taking that option off the table just yet.  “As the Court of Appeals noted, as long as Title II – with the ability to reclassify Internet access service as a telecommunications service – remains a part of the Communications Act, the Commission has the ability to utilize it if warranted,” he said in a statement.

UPDATE 02/04/14:
 Days after the D.C. Circuit struck down the bulk of the Commission’s net neutrality rules, a group of Democrats in the House of Representatives have introduced a bill that would restore the rules the court threw out.  The bill, titled the “Open Internet Preservation Act of 2014,” would reinstate the rules until the Commission takes final action in its Open Internet proceedings.  Sen. Ed Markey (D-Mass.) plans to introduce a companion bill in the Senate.

While the bill likely won’t get very far in the House of Representatives, which in 2011 passed a resolution opposing the Commission’s net neutrality rules, the introduction alone may signal to FCC Chairman Tom Wheeler that Democrats in the House and Senate would back Commission action that would more aggressively regulate broadband providers.

The D.C. Circuit struck a blow to the Federal Communications Commission’s net neutrality rules last week, upholding the Commission’s jurisdiction to regulate broadband service providers’ network management practices, but striking down anti-discrimination and anti-blocking provisions that were designed to ensure equal treatment of Internet traffic by broadband providers.

The court ruled that the Communications Act of 1934, as amended, grants the Commission limited authority to impose general “open Internet” regulations on broadband providers.  The court found that the authority granted to the Commission is restricted by statute, first by Congress’s grant to the Commission of limited subject matter jurisdiction over only interstate and foreign communication by wire and radio, and second by the statutory directive that the Commission’s regulations in this arena must be designed to encourage the deployment of advanced telecommunications capability to all Americans on a reasonable and timely basis. 

Relying on this authority, the Commission had promulgated specific rules — anti-blocking and disclosure requirements which applied to both fixed and mobile broadband providers, as well as a set of anti-discrimination rules that applied only to fixed broadband providers.  The D.C. Circuit found, however, that the Commission’s specific anti-discrimination and anti-blocking rulesamounted to per se common carrier obligations that could not be applied to broadband providers because the Commission has not classified broadband providers as common carriers. 

It upheld the Commission’s disclosure requirements for broadband providers, another aspect of the net neutrality rules that required both fixed and mobile broadband providers to publicly disclose the network management practices, performance, and commercial terms of their broadband services.

“[T]he court found that the FCC could not impose last century’s common carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative services to their customers,” Verizon, the appellant, said in a statement.  “We look forward to working with the FCC and Congress to keep the Internet a hub of innovation without the need for unnecessary new regulations that seek to manage the explosive dynamism of the Internet.”

The Commission’s next steps, and the future of net neutrality more broadly, remain unclear.  “My intention is to employ any necessary means among the wide variety of them given to the FCC by the Congress to sustain our jurisdiction,” FCC Chairman Tom Wheeler said on his blog.  “That the jurisdiction exists is not debatable. What path we take to assure it will be a function of circumstance, but whether we secure it should not be a source of doubt.”

In a separate release, the Chairman also raised the possibility of appealing the D.C. Circuit ruling to the Supreme Court.  The Commission could also pursue other regulatory options, such as proposing new rules that are more mindful of broadband’s status as a non-common carrier or pursuing a case-by-case enforcement approach.

Some net neutrality advocates, however, want the FCC to act more aggressively and reclassify broadband as a common carrier service.  “Internet service providers are common carriers, and as such they need government oversight and regulation,” Susan Crawford, a visiting professor at Harvard Law School, argued.  But some industry commentators believe that the Commission might be unwilling to wage the contentious battle that reclassification would spark.


House Energy and Commerce Committee Approves Bill to Incentivize Federal Agencies to Release More Spectrum for Commercial Use

By Jenny PaulMarc Martin, and Marty Stern 

The House Energy and Commerce Committee recently
approved the Federal Spectrum Incentive Act, a bill that provides a financial incentive for federal agencies to relinquish some of their government spectrum to the FCC, which would reallocate it for commercial use and auction it to the public. The bill’s incentive structure allows federal agencies that agree to relinquish their spectrum to share in a portion of the proceeds from the FCC’s auction of such spectrum.  This approach draws on the similar 600 MHz “incentive auction” model, which gives broadcast television licensees who relinquish their 600 MHz broadcast spectrum the ability to share in the proceeds of its auction for commercial wireless broadband uses.

Essentially, the bill creates a “Federal Spectrum Incentive Fund” that would hold one percent of the proceeds from FCC auctions of reallocated federal spectrum.  A federal government agency that vacates spectrum for commercial use would then be able to draw on its portion of the fund to offset sequestration cuts and would also have the ability to provide a portion of these funds to other agencies whose spectrum it can share.

In a more procedurally oriented initiative, the committee also approved the Federal Communications Commission Process Reform Act, which would require the FCC to set nonbinding deadlines for completion of proceedings and report to Congress about whether those deadlines are being met.

The full House is expected to vote on both bills early in 2014.  

FCC, Industry Announce Carriers' Voluntary Commitment to Unlock Phones

By Jenny PaulMarc Martin and Marty Stern

The Federal Communications Commission and CTIA recently announced that five major U.S. carriers have agreed to facilitate the unlocking of certain cellphones and tablets, allowing customers to use the unlocked devices on another carrier’s network.


The five largest U.S. wireless carriers have made a 
voluntary commitment to unlock certain eligible devices upon a customer’s request.  The move follows a year of criticism of a ban on unlocking devices that was announced by the Copyright Office of the Library of Congress in late 2012.

Under the commitment made by the carriers, a device may be unlocked after a customer has fulfilled the applicable contract term (usually two years) or device financing term.  Prepaid cellphones may be unlocked, upon request, no later than one year after initial activation.  The five wireless carriers have also committed to provide a clear notification to a customer when a device is eligible for unlocking or unlock it automatically when it becomes eligible.  The agreement also allows the carriers to charge a reasonable fee to unlock a non-customer’s phone.

All aspects of the agreement are to be implemented within a year, and the FCC will maintain oversight of the implementation, FCC Chairman Tom Wheeler 
said.

FCC Eases Broadcast Foreign Ownership Rules

By Jenny Paul, Marc Martin, and Marty Stern

The Federal Communications Commission recently
released a declaratory ruling on restrictions governing foreign investment in U.S. broadcasters, clarifying that it will now consider on a case-by-case basis whether to approve foreign ownership in TV and radio broadcasters exceeding a 25 percent cap.  The declaratory ruling was approved by a unanimous 5-0 vote.

Under the Commission’s application of foreign ownership restrictions set forth in the Communications Act, foreign ownership in companies owning broadcast and telecommunications licensees may exceed the 25 percent benchmark only with Commission approval.  While foreign investment in telecommunications licensees exceeding the 25 percent cap has been significantly liberalized, for broadcasters, the cap has functioned as a presumptive bar on foreign investment surpassing that level.  According to the declaratory ruling, this has limited the broadcasting industry’s access to capital and particularly affects small business entities and new entrants.  Under its new approach, the Commission will evaluate foreign investment above the threshold on a fact-specific, individual basis and hopes to spur new opportunities for capitalization for broadcasters, particularly in niche and minority programming.

While the vote signals a new willingness to consider transactions that exceed the cap, how the policy will operate in practice is less certain.  For example, while touting the ruling, FCC Chairman Tom Wheeler nonetheless
noted the move was “far from an indication we’re going to rubber stamp” proposals that involve foreign investment in broadcasters which exceeds the 25 percent level. 

FCC Rules on Telemarketing Robocalls Adopted in 2012 Now in Effect

By Nickolas Milonas and Marty Stern

Buried in news of the government shutdown negotiations, rules adopted by the Federal Communications Commission in 2012 went into effect yesterday.  These rules create new requirements for telemarketing robocalls, as we have previously discussed.  The rules, which harmonize the FCC’s rules with the Federal Trade Commission’s rules implementing the Telephone Consumer Protection Act, include the following requirements.

First, companies must now receive prior express written consent for telemarketing calls or solicitations made using an automatic telephone dialing system or a prerecorded voice to wireless numbers and residential lines.  Second, the rules eliminate the “Established Business Relationship” exemption that previously allowed for these types of calls to residential numbers if the business and consumer already had a business/customer relationship.  These new rules were first adopted by the FCC in February 2012 under authority granted by the TCPA.

Importantly, the new rules only apply to calls that deliver “marketing messages.”  Autodialed or prerecorded informational calls dealing with bank account balances, package deliveries, or school closings, for example, are not covered by the rule   The FCC also noted that such informational calls and text messages can likewise continue to be placed to wireless numbers, with the express prior consent of the customer, as required by the TCPA  In an earlier decision, the FCC found that in the debt collection context, consent to place autodialed calls to wireless numbers can be obtained through the provision of a wireless number by the customer for contact purposes as part of a transaction or application process. 

Under the new rules, prior express written consent for telephone solicitations must contain (1) a “clear and conspicuous disclosure” of the consequences of providing the requested consent (i.e., that the consumer will receive future calls that deliver prerecorded messages by or on behalf of a specific seller) and (2) an unambiguous agreement to receive such calls at a telephone number the consumer designates.  In eliminating the EBR exemption, the FCC noted “evidence of ongoing consumer frustration” and that the exemption “has adversely affected consumer privacy rights.”  Consequently, telemarketing calls to residential landlines will now require prior written consent, even where the consumer is already a customer of the business.  This change could be significant because many businesses rely on their existing customer base as a source for targeted marketing efforts, and can no longer place robocall solicitations without express prior written consent. 

TMT Round-up: Developments on Unlocked Phones; FTC Backs Do Not Track Standard Despite Ad Industry Objections; German Team Sets Wi-Fi Data Transmission World Record

 By Jenny Paul, Nickolas Milonas and Marc Martin

NTIA petitions FCC for rule requiring unlocked phones

The National Telecommunications and Information Administration is seeking new regulations that would require wireless carriers to unlock mobile phones, tablets and other devices upon the customer’s request.

 The NTIA filed a petition with the Federal Communications Commission in September, asking the FCC to immediately initiate a rulemaking that would shift the burden of unlocking mobile devices from consumers to wireless carriers.  Unlocking a device allows the device to be used on the networks of other carriers, not just the network of the carrier from which it was purchased.  Removing a lock on a mobile device would not affect the terms of the contract or the related penalties for termination between the consumer and the wireless carrier, according to an NTIA release.

FTC backs Do Not Track standard despite advertisers’ withdrawal from talks

Federal Trade Commission Chairwoman Edith Ramirez remains hopeful that the industry can create a Do Not Track standard, despite news that advertisers withdrew from online tracking talks at the World Wide Web Consortium.

A Do Not Track standard could allow consumers to opt out of online tracking or exercise more control over how their online activities are recorded.  The Digital Advertising Alliance withdrew from the W3C talks in September, saying it “no longer believes that the [W3C working group] is capable of fostering the development of a workable ‘do not track’ . . . solution.”

The DAA said it would work separately to consider options for enhancing consumer privacy, “rather than continuing to work in a forum that has failed.”

“[W]e intend to commit our resources and time in participating in efforts that can achieve results while enhancing the consumer digital experience,” DAA managing director Lou Mastria said in a letter to the W3C.  “The DAA will immediately convene a process to evaluate how browser-based signals can be used to meaningfully address consumer privacy. . . . This DAA-led process will be a more practical use of our resources than to continue to participate at the W3C.

Although Ramirez said she was disappointed by the DAA’s departure, she noted that a Do Not Track standard still could be reached.  “[M]y end goal on Do Not Track remains for consumers to have meaningful choices not to be tracked, whether that option emerges from within or outside the W3C,” Ramirez said in a statement.

German Team Sets Wi-Fi Data Transmission World Record

A team of scientists from the Fraunhofer Institute for Applied Solid State Physics (IAF) and the Karlsruhe Institute of Technology (KIT) recently set the world record for wireless data transmission at 100 Gigabits per second.  The team’s Wi-Fi network transmitted data at a frequency of 237.5 GHz over a 20-meter distance in controlled laboratory conditions. 

While such high-frequency signals allow for intensive data transfers, the propagation characteristics of these signals do not allow for long-distance travel and are easily disrupted by obstacles (e.g., buildings, walls, etc.).  At a rate of 100 Gbps, for example, you can transfer the contents of an entire Blu-ray disc in two seconds.  The team of scientists at IAF and KIT set the previous Wi-Fi data transmission record at 40 Gbps, and that technology was tested by sending data signals between the peaks of skyscrapers.  The team hopes that its new technology can be used in rural areas as “an inexpensive and flexible alternative to optical fiber networks, whose extension can often not be justified from an economic point of view.”  The same technology could also be used to patch holes in existing fiber lines.  One of the scientists also noted the use of multiplexing techniques (transmitting multiple streams) and multiple antennas could facilitate data rates of 1 terabit per second.

New FCC Proposed Rules Would Speed Deployment of Small Cell and Distributed Antenna Systems

By Jenny Paul, Marc Martin, and Marty Stern

 

As part of its efforts to spur the construction of new wireless infrastructure, the FCC recently released proposed rules and requested comment on ways to expedite the environmental review process for small cell, Distributed Antenna System, and other small-scale wireless systems.  Increasingly, such systems are used to increase wireless broadband coverage in areas that have been difficult to reach from traditional deployments.  Comments are due 60 days from date of publication in the Federal Register, which means the due date for comments will likely fall in early December.

 The small-scale wireless technologies targeted by the proposed rulemaking use a large number of smaller antennas placed at lower heights, usually on poles or rooftops, and supported by compact radio equipment.  The FCC rules that currently govern the environmental and historic preservation review of wireless deployments, including a 2004 National Programmatic Agreement on historic preservation review for new antenna structures under Section 106 of the National Historic Preservation Act of 1966, were adopted with an eye toward large-scale deployments on communications towers or other tall structures.  While FCC rules already exempt from most environmental review the collocation of antennas on existing antenna towers and buildings, the proposed rules would expand that exemption to include existing structures such as utility poles, water tanks, light poles, and road signs.

In addition, the NPRM proposes the adoption of a new rule to specifically exempt DAS, small cells, and other small-scale wireless facilities from most environmental review, including Section 106 review under the NPA.  The rule would be broader than the collocation proposal described above, because it would cover the construction of new support structures for these technologies, as well as collocation of the technologies on existing structures.  On this front, the FCC seeks input from commenters on how to define the scope of a blanket exclusion, while ensuring that technologies eligible for the exclusion have no more than de miminis effects on the environment and historic properties.

The NPRM also proposes the creation of a permanent exemption from the pre-construction environmental notification process for select temporary antenna towers.  The permanent exemption would track an interim waiver currently in effect for temporary towers that have certain characteristics — very short duration, height limits, minimal or no excavation, and no lighting — which minimize their potential to cause significant environmental effects.  According to the FCC, the exemption would streamline the offering of broadband and other wireless services during major events and unanticipated periods of localized high demand.

FCC Program Carriage Rules Survive First Amendment Challenge; Standstill Rule Vacated

By Nickolas Milonas, Marty Stern, and Marc Martin

In a decision that may affect future Federal Communications Commission rulemakings, the US Court of Appeals for the Second Circuit recently ruled in a case that challenged the constitutionality of the FCC’s program carriage rules. Specifically, the court held that the FCC’s program carriage rules, which address discrimination and related claims by programmers against cable operators, do not violate cable companies’ First Amendment rights. And although the court agreed that the FCC had the authority to regulate program carriage, the court vacated a specific component, the FCC’s “standstill rule,” on procedural grounds. 

Congress was concerned with the potential for anticompetitive effects resulting from increased vertical integration between distributors and content providers when it passed the 1992 Cable Act, which authorized the FCC to establish regulations addressing specified anticompetitive practices involving program carriage agreements. The FCC’s program carriage rules were designed to curb alleged anticompetitive conduct by prohibiting cable and other multichannel video programming distributors from discriminating against unaffiliated networks in favor of their own programming on the basis of affiliation and engaging in other specified conduct—such as requiring an interest in a programmer in exchange for carriage or requiring exclusive carriage rights vis-à-vis another distributor.  

Cable companies challenged the FCC’s most recent amendments to the program carriage rules, arguing that to the extent the program carriage rules required them to carry unaffiliated networks on the same terms as affiliated networks, the rules imposed a content-based restriction on their editorial determinations of what programming networks they chose to provide to their customers. The cable companies argued such content-based restrictions should be subject to—and would not survive—strict scrutiny.

In rejecting the cable companies’ argument, the Second Circuit held that the program carriage rules are content neutral and only prohibited distributors from discriminating based on affiliation—and not based on content. Consequently, the rules were subject to intermediate scrutiny. Under an intermediate scrutiny standard of review, the FCC’s rule must (1) advance an important governmental interest unrelated to the suppression of speech, and (2) not burden substantially more speech that necessary to further those interests. In applying this standard, the court found that the program carriage rules advanced governmental interests of fair competition and promotion of a diverse information sources in the video programming market. The court also noted that the program carriage rules were narrowly tailored to avoid placing any greater burden on distributors’ editorial discretion than necessary by only prohibiting affiliation-based discrimination that has anticompetitive effects. Indeed, the court was keen to note that distributors could still refuse to carry an unaffiliated network if based on reasonable business practices. In fact, the DC Circuit recently overturned an FCC program decision because it held that Comcast refused to carry an unaffiliated network based on reasonable business decisions—and not based on network affiliation.

While the court rejected the cable companies’ First Amendment challenge, it agreed with the companies in vacating the FCC’s standstill rule. The standstill rule requires a distributor to continue carrying an unaffiliated network under the terms of its preexisting contract until the network’s program carriage complaint against the distributor is resolved. The cable companies argued that the FCC failed to provide adequate notice of and opportunity to comment on the standstill rule under the Administrative Procedure Act (APA) because it was not mentioned in the FCC’s 2007 Notice of Proposed Rulemaking (NPRM), which eventually lead to a 2011 Order adopting the rule. 

The FCC argued that the standstill rule was procedural and not subject to notice and comment rulemaking under the APA. The court disagreed, finding that the standstill rule was substantive in nature because it allowed the FCC to “temporarily extend” the terms of an agreement between a distributor and an unaffiliated network while a dispute was pending. The court further noted that no statute specifically conferred such authority in the program carriage context and that the FCC did not indicate that it was considering adopting such a rule in its 2007 NPRM—which, as a result, provided no opportunity for public comment on the matter. And because the court vacated the rule on procedural grounds, it also recognized that the FCC would be free to adopt the exact same rule in the future by providing notice and comment. In terms of its significance, this decision may make the FCC, as well as other federal agencies, more cautious in adopting rules pursuant to the APA’s procedural exception to notice and comment. 

New Mobile Broadband Spectrum Rules Adopted for H Block

By Nickolas Milonas and Marc Martin

The Federal Communications Commission recently adopted a Report and Order setting the rules to auction and license the H Block—ten megahertz of paired spectrum at 1915-1920 MHz and 1995-2000 MHz.  In the Middle Class Tax Relief and Job Creation Act of 2012 (the Spectrum Act), Congress directed the FCC to make more spectrum available for commercial use.  As part of that mandate, the FCC was directed to allocate and license the H Block by February 2015.  The H Block auction is expected to take place later this year or in early 2014, in advance of the 2015 deadline. 

The Report and Order largely adopted the FCC’s proposals from the H Block NPRM, which found that designating the upper and lower H Block bands for Personal Communications Services (PCS) mobile operations would not result in harmful interference to the adjacent PCS band licensees.  The Report and Order also adopted a “straight forward” band plan in which the upper H Block will be used for downlink operations and the lower H Block will be used for uplink operations.

The H Block is unique because it is the only spectrum identified in the Spectrum Act that is paired and already cleared of incumbent licensees (thanks to the prior relocation of Broadcast Auxiliary Service licensees by Sprint).  The Spectrum Act requires the proceeds from these spectrum auctions be used to fund FirstNet, the first high-speed nationwide network for emergency responders and public safety.  The H Block auction revenue could be a significant “down payment” towards the roll out of FirstNet.

FCC Privacy Rules Updated for Smartphone Era

By Nickolas Milonas, Marc Martin, and Marty Stern

The Federal Communications Commission adopted a Declaratory Ruling that updates and broadens the scope of the FCC’s customer proprietary network information (CPNI) rules applicable to customer information stored on mobile devices.  Specifically, the ruling clarifies that wireless carriers have the same obligations to protect CPNI collected and stored on mobile devices using carrier software tools, as they do for CPNI collected through network facilities.  The Declaratory Ruling does not apply to third-party app developers, apps that customers download from an app store, nor to device manufacturers or operating system developers.  Commissioner Jessica Rosenworcel noted that the rules were in need of updating because the last time they were, the iPhone did not yet exist.

Under the existing rules, wireless carriers may use wireless devices to collect information regarding network use.  This type of information can include phone numbers of calls made and received, duration of calls, and the location of the device during the call.  Carriers use this information to monitor network congestion and improve network performance.  The FCC specifically recognized these benefits of carriers collecting CPNI on mobile devices and made clear that it was not barring carriers from doing so.  The Declaratory Ruling found, however, that when this information is stored on the mobile device of a customer, it may be vulnerable to unauthorized access and should be subject to similar protections as customer information maintained on carrier networks.  Consequently, the Declaratory Ruling requires wireless carriers to take “reasonable precautions” to safeguard that data, just as if the carrier was collecting the information from its network facilities, provided that the data is collected at the carrier’s direction and the carrier or its designee has access to or control over the information.  The Declaratory Ruling does not mandate a specific set of precautions or safeguards, but instead leaves it to each carrier to determine its own means of appropriate protection.

Comcast wins Program Carriage Decision before DC Circuit

By Nickolas Milonas, Marty Stern, and Marc Martin

The Federal Communication Commission’s first effort to force a cable operator to carry a cable network because of an apparent violation of its program carriage rules was recently overturned by the DC Circuit Court of Appeals. The DC Circuit ruled that the FCC failed to demonstrate Comcast violated the program carriage rules by “unlawfully discriminating” against the Tennis Channel. The Communications Act and the FCC’s program carriage rules generally prohibit cable operators and other video programming distributors from discriminating against unaffiliated programming networks in the terms and conditions of carriage. Essentially, this prohibits cable operators from discriminating against unaffiliated programmers in favor of their own affiliated content when doing so would “unreasonably restrain the ability of an unaffiliated video programming vendor to compete fairly.” An FCC order in 2012 required Comcast to carry the Tennis Channel on its networks with equal distribution as two of its own affiliated sports channels (the Golf Channel and NBC Sports Network, previously known as Versus).

Comcast offers programming to subscribers via distribution tiers—packages of programming at different prices. Comcast carries the Golf Channel and NBC Sports Network on its most broadly distributed tiers. In 2003, the Tennis Channel initially sought distribution on Comcast’s “sports tier”—a narrowly distributed package. In 2009, the Tennis Channel proposed that Comcast reposition Tennis Channel content on tiers with broader distribution. Comcast rejected the proposal, and the Tennis Channel filed a complaint with the FCC in 2010. The FCC affirmed an Administrative Law Judge decision requiring Comcast to carry the Tennis Channel on the same distribution tier in order to reach the same number of subscribers as the Golf Channel and NBC Sports Network. Comcast appealed.

The DC Circuit unanimously rejected the FCC’s 2012 order. The court noted that there was no dispute among the parties that the program carriage rules only prohibit discrimination based on affiliation. Therefore, according to the court, if a cable operator treated vendors differently as the result of reasonable business practices, then there would be no violation. The court first noted that the record lacked evidence to show that Comcast discriminated against the Tennis Channel on the basis of affiliation. The court then stated that there was a reasonable basis for Comcast to reject the Tennis Channel’s proposal because there appeared to be no benefit to Comcast from incurring additional fees by placing the Tennis Channel on a more advantageous tier.

Two separate concurring opinions would have vacated the FCC’s order based on First Amendment grounds, as well as the applicable statute of limitations. However, as the court noted, it did not need to reach those issues.

Supreme Court's City of Arlington Decision Buttresses FCC Interpretations of its Own Authority

By Marc Martin

Last Monday, the US Supreme Court issued its opinion in City of Arlington v. FCC, clarifying a fundamental tenet of administrative law and, more specifically, ending a challenge local governments had brought to the FCC’s new “shot clock” provisions for wireless siting decisions (see our previous coverage here). In addition to upholding the FCC’s deadlines of 90 days to respond to applications for collocated tower projects and 150 days to respond to all other applications, the decision presents a clear reaffirmation of an agency’s authority to interpret the bounds of its own jurisdiction, which should strengthen the FCC’s hand in jurisdictional challenges to its authority (and that of other federal agencies).

The City of Arlington had argued that while an agency’s interpretation of its enabling act is entitled to deference under the framework established in Chevron, such deference should not extend to an agency’s interpretation of its own jurisdiction. Rather, it argued, granting deference to a federal agency on jurisdictional questions usurps the judiciary’s constitutional role of interpreting the scope and intent of legislative delegations of authority. Writing for the 6-3 majority, Justice Scalia did not agree, explaining that the City of Arlington’s perceived distinction between jurisdictional and non-jurisdictional questions is a “mirage” and “an empty distraction” because “every new application of a broad statutory term can be reframed as a questionable extension of the agency’s jurisdiction.” By contrast, Chief Justice Roberts, joined in the dissent by Justices Kennedy and Alito, echoed the City of Arlington’s fear that deference to an agency’s interpretation of the bounds of its own authority would worsen “the danger posed by the growing power of the administrative state.”  

In the end, the significance of this decision is fairly limited. It is consistent with the DC Circuit’s rule and numerous precedents which follow Chevron’s framework. Nevertheless, some public interest organizations and other analysts suggest this decision may greatly help the FCC (among other agencies) in challenges to its jurisdictional authority, as the FCC has already argued before the DC Circuit in the pending appeal of the FCC’s Open Internet (or Net Neutrality) decision. Undoubtedly, the FCC will continue to rely on this decision when defending its actions on jurisdictional grounds.

The author would like to thank summer associate Jonah Fabricant for his contribution to this post.

FCC Incentive Auction Band Plan Public Notice Triggers Industry Debate

By Nickolas Milonas, J. Bradford Currier, and Marc Martin

The Federal Communications Commission recently released a Public Notice requesting further comments related to its Broadcast Television Incentive Auction NPRM.  The Public Notice seeks further comment on two variations of the “Down from 51” 600 MHz band plan under consideration in the NPRM, which would potentially (1) reverse uplink/downlink allocations or (2) provide for time division duplexing.  The Public Notice seeks comments on whether these band plan variations may be able to mitigate interference and address market variation where available spectrum may be limited.

In response to the Commission’s request, various industry participants voiced criticism of the FCC offering for comment the two alternative band plans after the submission of comments by broadcasters, wireless carriers and equipment manufacturers in vetting a framework for the 600 MHz band.  The NAB, Verizon Wireless and AT&T quickly published critiques of the Public Notice.  Several other wireless industry stakeholders, however, such as Sprint and Ericsson, previously submitted comments that discuss the advantages of proposed band plan alternatives.

The Public Notice sets a due date of June 14, 2013 for comments and a due date of June 28, 2013 for reply comments on the alternatives.

March Madness - Determining the Terms and Tenure of the FCC Commissioners

By Marty Stern

With Federal Communications Commission Chairman Julius Genachowski and Commissioner Robert McDowell announcing their departures, we have received many questions on the terms and tenures of the FCC Commissioners. Here, we provide in one place, a “TMT Cheat Sheet” that will help you fill your own brackets for the FCC Commissioners.

First, a little background. Under the Communications Act, the FCC has five Commissioners, with one designated as the Chairman by the President and with no more than three from the same political party. So not surprisingly, the Chairman and majority of the Commissioners are typically from the President’s party.

Commissioners are appointed for five-year terms, except when an appointee fills out the unexpired term of a predecessor. In that case, the Commissioner only gets appointed for the balance of the predecessor’s term. This is why one cannot just go to the FCC website’s Commissioner page, look at the date of appointment, and know when a Commissioner’s term expires.

For the current Commission, for example, Chairman Genachowski was appointed to complete the term of former Commissioner Jonathan Adelstein when he joined the Rural Utilities Service, and the Chairman’s term expires on June 30, 2013. Here are the terms of the remaining Commissioners:

  • McDowell (R):  Exp. June 30, 2014
  • Clyburn (D):  Exp. June 30, 2017
  • Rosenworcel (D):  Exp. June 30, 2015
  • Pai (R):  Exp. June 30, 2016 

Upon resignation of the Chairman and Commissioner McDowell, the Commission will have three sitting members, but will retain a Democratic majority. According to reports, this was one reason the Chairman waited for Commissioner McDowell, a Republican, to announce his resignation before the Chairman, a Democrat, announced his own.

An FCC Commissioner’s term does not really expire when it expires. Rather, the Communications Act allows a Commissioner to serve past the end of his or her term until a replacement is appointed and confirmed. So a holdover Commissioner, unless reappointed, can serve until the end of the Congress following the one in which his or her term expired.

Information on FCC nominations and Commissioner terms are available on Thomas, the online database of Congressional documents, through a site that tracks presidential nominations. The site can be searched both by nominee name and by nomination number. The entry includes information on when the Commissioner was nominated and confirmed, the expiration of his or term, and whether the Commissioner was appointed to fill the unexpired term of a former Commissioner and who that was. The entry also includes other interesting information, such as how long between receipt of the nomination by the Senate and confirmation.

Cell Phone Unlocking Ban Criticized by White House and FCC Chairman

By J. Bradford Currier and Nickolas Milonas

The ban on unlocking cell phones to enable their use on different wireless networks announced late last year may be reconsidered following recent criticism of the rule by the White House and FCC Chairman Julius Genachowski. As we discussed here previously, the Copyright Office of the Library of Congress announced the ban as part of its triennial review of the copyright exemptions under the Digital Millennium Copyright Act, which eliminated an exemption for unlocking devices in place since 2006. Under the new rule, devices purchased before January 26, 2013 can still be unlocked by users, but devices bought after that date can be unlocked only with the carrier’s permission, even after the service contract expired.

The unlocking ban drew criticism, and a public petition was soon started on the White House website asking the President to support legislation making unlocking legal and to request that the Copyright Office reconsider its decision. After receiving over 100,000 signatures, the White House responded in support of the petition, stating that it was “common sense” that consumers who purchased cell phones and are no longer bound by service agreements should be able to use their devices on another network. The White House argued that unlocking ensured a “vibrant” wireless market and was strongly supported in the recommendations of the National Telecommunications and Information Administration to the Copyright Office. The response also noted that permitting unlocking is particularly important for secondhand devices that consumers may buy or receive as gifts. 

FCC Chairman Genachowski echoed the White House’s response, stating that the ban “raises serious competition and innovation concerns.” As the Copyright Office is within the Library of Congress, an agency of the legislative branch, the White House and the FCC Chairman agreed to work together with Congress to develop “legislative fixes,” clarifying that copyright law does not prevent consumers from switching carriers when they are no longer bound by a service agreement. The Copyright Office subsequently responded to the criticism, stating that the unlocking ban “would benefit from review” by Congress and was not meant to foreclose broader public policy discussions on the issue. 

Consumer groups praised the White House and FCC’s actions and argued that the unlocking ban should be reconsidered as part of a comprehensive review of current copyright laws. In contrast, wireless industry groups argued that reconsideration of the ban would be unfair to carriers because they often offer consumers significantly discounted prices for devices in exchange for long-term service agreements. 

While the support of the President and FCC places pressure on Congress to act on the unlocking ban, industry observers note that a legislative solution regarding unlocking may be hard to reach in the currently divided Congress. The current political climate has not stopped members of Congress from announcing efforts to craft such legislation, but it remains to be seen whether efforts to overturn the unlocking ban will be successful.

FCC Pole Attachment Rates Affirmed

By Nickolas Milonas and Marty Stern

The D.C. Circuit recently upheld a 2011 Federal Communications Commission report and order amending its pole attachment rules, unanimously rejecting a challenge to the new rules by a number of electric utilities.

In general, Section 224 of the Communications Act authorizes the FCC to regulate the rates, terms, and conditions imposed by utilities and local exchange carriers on cable television systems and “providers of telecommunications services” for access to poles, conduits, and rights-of-way, ensuring those rates are just and reasonable and establishing an associated complaint process. Section 224 also authorizes the FCC to establish separate rate formulas for attachments by cable systems and attachments by “telecommunications carriers” and requires pole owners to provide non-discriminatory access to cable systems and telecommunications carriers. Significantly, while “providers of telecommunications services” is not a defined term, “telecommunications carriers” is specifically defined in Section 224 to exclude incumbent local exchange carriers, and the FCC previously found that ILECs were not covered by Section 224’s general rate protections and complaint procedures.

That all changed with the FCC’s 2011 report and order. As we previously explained, the amended rules determined for the first time that ILEC pole attachments would now be subject to Section 224 and authorized ILECs to bring complaints challenging pole attachment rates and conditions as unjust and unreasonable. In addition, among other changes, the order changed the telecom rate formula and revised the FCC’s rule on refunds for overcharges, finding that refunds could accrue consistent with the applicable statute of limitations, rather than from the date complaint is filed, which had previously been the rule.

The D.C. Circuit rejected the challenge to the FCC’s amended rules, despite the fact that in terms of ILEC coverage and accrual periods for damages, the amended rules reversed the FCC’s decades-old policy on these issues. Specifically, the court looked at several definitional idiosyncrasies in Section 224 and agreed with the FCC that the pole attachments of ILECs, as providers of telecommunications services, were covered by the FCC’s rules requiring just and reasonable pole attachment rates, terms, and conditions and associated complaint procedures. ILECs, however, still do not have the benefit of the FCC’s telecom rate, which extends only to “telecommunications carriers,” a term that is defined in Section 224 to exclude ILECs, as noted above. In addition, the court agreed with changes the FCC made to its telecom rate formula, which effectively lowered the rate pole owners can charge telecommunications carriers for pole attachments and brought that rate in line with the historically lower rate for cable systems.

Finally, the court rejected the utilities’ challenge to the change in the accrual period for overcharges. The court found that the challenge had “no serious statutory basis,” and given Section 224’s broad authorization to the FCC, the court could not “see any legal objection” to the selection of a reasonable period for the accrual of compensation for overcharges, including one consistent with the applicable statute of limitations, as opposed to the date a complaint is filed.

FCC Finds More Spectrum for Wi-Fi

By Nick Milonas

Yesterday, the Federal Communications Commission adopted a Notice of Proposed Rulemaking to free up spectrum in the 5MHz band for unlicensed Wi-Fi use. With this step, the FCC hopes to accelerate the growth and expansion of new high-speed Wi-Fi services, while reducing Wi-Fi congestion in the home and in public locations.

As part of the Middle Class Tax Relief and Jobs Creation Act of 2012, Congress mandated that the FCC explore options to open the 5MHz band for increased Wi-Fi use. The NRPM seeks to make up to 195 megahertz of additional spectrum (a 35% increase) available in the band for such purposes. The FCC hopes that manufacturers of unlicensed devices will take advantage of wider bandwidth channels to offer faster speeds to consumers and businesses. The NPRM also proposes a more-flexible regulatory environment to streamline existing rules and the device approval process.  

Comments are due 45 days after the NPRM’s publication in the Federal Register, which based on publication trends, may be early May. 

Wireless Signal Boosters Approved by FCC with New Safeguards

By Nick Milonas, Marc Martin, and Marty Stern

The Federal Communications Commission unanimously approved a new set of rules intended to facilitate deployment of wireless signal boosters by consumers and businesses, while avoiding potentially disruptive interference to mobile networks. Signal boosters are used to amplify signal strength between wireless devices and wireless networks. Their increased use raised interference concerns for wireless networks, which are addressed through new interference safeguards that manufacturers will be required to incorporate into boosters. Nationwide carriers, along with regional and rural carriers, support the new rules—provided that the boosters comply with the technical specifications designed to prevent interference.

As part of the new rules, the FCC addressed two classes of mobile signal boosters—consumer and industrial. Consumer boosters must meet certain “Network Protection Standard” requirements to prevent interference. Consumers will need to register their boosters with their providers prior to use. While most providers have already volunteered their consent for consumer use, some booster manufacturers objected to this requirement as “anti-consumer.” Industrial boosters, subject to licensing and a different set of regulations, are typically used in stadiums, airports and other public places.

The new rules recognize the importance of boosters in underserved and rural areas, in indoor environments such as buildings and hospitals, as well in conjunction with public safety first responders. According to the FCC, the new rules will remove uncertainty surrounding the manufacturing and use of signal boosters and promote investment and use of the technology.

FCC Eases Licensing for Broadband Access on Planes

By J. Bradford Currier and Marty Stern

Internet access on commercial and private aircraft will likely become more widespread under a recent Order and Notice of Proposed Rulemaking released by the Federal Communications Commission. The FCC’s action creates new technical and licensing rules for what it terms “Earth Stations Aboard Aircraft” (“ESAA”), small aircraft-mounted antennas that communicate with satellites tied to ground-based Internet access networks allowing for the provision of broadband Internet access on-board aircraft. The new ESAA licensing procedures, which include detailed technical requirements for ESAA systems intended to prevent radio interference among ESAA systems and existing satellite systems, will replace an ad hoc approval process for in-flight satellite-based Internet services in place since 2001. The FCC expects that the new rules will allow it to process ESAA apllications up to 50 percent faster and meet growing consumer demand for Internet access while traveling.

Under the new rules, airlines and other parties may apply for a blanket license for a fleet of aircraft and an ESAA network, as well as individual “airborne terminals.” The ESAA network must operate under the direct control of a Network Control and Monitoring Center (“NCMC”), which may be located outside the U.S., with a 24/7 contact within the U.S. that can cause an ESAA aircraft terminal to stop transmitting in the event of a malfunction. The rules, which generally apply to U.S. registered aircraft, also authorize (subject to certain coordination requirements) the operation of U.S.-licensed ESAA systems over international waters and in or near foreign airspace. Given the absence of internationally-recognized parameters for ESAA systems, the FCC will require an ESAA license for the operations of ESAA systems aboard foreign-registered aircraft in the U.S. and its airspace. The FCC indicated that it will license the ESAA systems of foreign airlines and others operating foreign-registered aircraft in the U.S. under the same terms and technical rules as U.S.-registered aircraft. In addition, the FCC made clear that ESAA operators providing facilities-based broadband Internet access or interconnected VoIP services must comply with law enforcement assistance requirements under the Communications Assistance for Law Enforcement Act (“CALEA”), though it declined to adopt a request of the U.S. Departments of Justice and Homeland Security that would have required the use of U.S. ground stations for ESAA operations within or adjacent to U.S. borders.

The new rules allocate ESAA on a primary basis in certain sections of the space-to-Earth spectrum band and on an unprotected basis in other space-to-Earth spectrum sections. The new rules also allocate ESAA on a secondary basis in the Earth-to-space spectrum band, although the FCC seeks comment on whether this allocation should be elevated to primary to place ESAA on equal footing with other mobile broadband Internet services. ESAA licensees will be required to coordinate their operations with satellite and other incumbent services in order to avoid interference. 

The new rules come on the heels of the Federal Aviation Administration’s announcement earlier this year that it will reexamine the current rules governing passenger in-flight use of personal electronic devices such as e-readers and tablets. The FCC previously indicated that it also supports relaxing the rules governing in-flight use of personal electronic devices. While the FCC’s action is expected to facilitate rapid broadband deployment on airlines, some note that technical limitations may limit the ability to use ESAA for streaming and other high-bandwidth services for the near future.

Wireless Data Roaming Rules Upheld by D.C. Circuit

By J. Bradford Currier, Marc Martin, and Marty Stern

Mobile wireless data providers must offer roaming agreements to competing carriers on “commercially reasonable” terms following the D.C. Circuit Court’s decision to uphold rules first adopted by the Federal Communications Commission in 2011. The FCC’s data roaming requirements were designed to supplement existing roaming obligations on mobile carriers that only applied to voice services by facilitating access to data services when customers travel outside of their providers’ networks. As we reported previously, the data roaming rules were adopted by a closely-divided FCC and were subsequently challenged by Cellco Partnership, more commonly known as Verizon Wireless.

Verizon Wireless challenged the data roaming obligations on three grounds, arguing that: (1) the FCC lacked statutory authority to impose “common carrier” type rules on mobile data providers; (2) new rules were unnecessary because mobile data providers were already entering into voluntary roaming agreements with competing carriers; and (3) roaming obligations would reduce incentives to expand wireless infrastructure if providers must share their networks with competitors.  Verizon Wireless alleged that the roaming requirements would unfairly benefit smaller carriers with limited networks at the expense of larger providers. In response, the FCC stated that the new rules did not impose common carrier type regulations on mobile data providers and the requirements were necessary in order to prevent larger carriers from excluding smaller providers from their networks. 

The D.C. Circuit began by noting that the FCC may not impose common carrier type obligations on providers of “information services,” including mobile data providers. However, the court found that the data roaming rules allow providers to negotiate the terms of their roaming arrangements on an individualized basis and do not require providers to serve other carriers indiscriminately on standardized terms. While the court recognized that the data roaming requirements “plainly bear[] some marks of common carriage,” the court deferred to the FCC’s determination that the new rules did not amount to common carriage regulation because providers can negotiate flexible terms and conditions. The court further concluded that the data roaming rules did not constitute an unconstitutional taking of Verizon Wireless’s data network or represent arbitrary and capricious rulemaking. Although supporters of the roaming rules also suggested that the court’s decision supports the FCC’s net neutrality rules currently subject to a separate appeal, the court in the data roaming case found that the FCC has explicit jurisdiction over wireless carriers under its broad authority over radio communications under Title III of the Communications Act.

FCC Proposes Licensing New Wireless Spectrum for Flexible Use

By J. Bradford Currier and Marc Martin

The spectrum band used for mobile wireless service would be extended by 10 MHz under a Notice of Proposed Rulemaking recently released by the Federal Communications Commission. Under the proposal, the FCC would license the so-called “H Block” spectrum for flexible use through a system of competitive bidding expected to occur in 2013. The licensing of the H Block was a requirement of the Middle Class Tax Relief and Job Creation Act of 2012, and the proceeds from the H Block auction will be used to support the buildout of a nationwide interoperable public safety network and reduce the national deficit. The FCC stated that its proposal is necessary to meet the growing demand for wireless broadband and follows other recent FCC efforts to make more wireless spectrum available.

Under the proposal, the FCC would license H Block spectrum for use in exclusive geographic areas. H Block licensees would be required to provide signal coverage and offer service to: (1) at least 40% of the population in each licensed area within four years and (2) at least 70% of the population in each licensed area at the end of a 10-year license term. New licensees would be required to reimburse a portion of the costs incurred in prior efforts to clear incumbents from the H Block and may disaggregate, partition, and lease their spectrum, subject to the FCC’s rules. Mobile and low-powered fixed transmissions would be authorized in the lower H Block spectrum, with base and fixed transmissions permitted in the upper H Block spectrum.

The FCC seeks comment on the above proposals as well as the appropriate interference mitigation techniques to ensure that the lower H Block spectrum does not cause interference to existing adjacent wireless operations. The FCC asserted that the power and emission limitations offered in its proposal would be sufficient to ensure that new and existing licensees can operate harmoniously but reserved the right to allocate the lower H Block spectrum to unlicensed use should interference issues become unmanageable. 

Comments on the proposal are due by February 6, 2012, with reply comments due by March 6, 2013.

FCC Proposes New Broadband Spectrum for Small Cell, Shared Use

By J. Bradford Currier, Marc Martin, and Marty Stern

New spectrum may become available for shared, small cell broadband use in a new a “Citizens Broadband Service” under a Notice of Proposed Rulemaking recently released by the Federal Communication Commission. The proposal would reallocate 100 MHz of spectrum in the 3.5 GHz Band for shared use using small cell technologies and implements recommendations made earlier this year by the President’s Council of Advisors on Science and Technology. The FCC stated that increased spectrum sharing is necessary as demand for wireless broadband outpaces the availability of new spectrum. The FCC seeks comment on the structure and implementation of the Citizens Broadband Service and whether adjacent spectrum should be included in the proposal to create a larger contiguous spectrum block.

The proposed rules would authorize small cell broadband systems using low-power wireless base stations that are designed to cover targeted indoor or localized outdoor areas, such as homes, stadiums, shopping malls, and hospitals. The FCC noted that small cell stations can be easily deployed at relatively low cost to greatly increase data capacity and fill in coverage gaps created by buildings and terrain. Building on the TV White Spaces model, incumbent users would be protected through the use of geolocational databases that would allow spectrum sharing in geographic areas where incumbent systems are not operating.

The FCC’s proposal would divide spectrum users into three tiers. First, the Incumbent Access tier would include authorized federal users and incumbent satellite licensees. These incumbents would be afforded protection from all other users in the 3.5 GHz Band. Second, the Protected Access tier would include critical-use facilities, such as hospitals, utilities, government facilities, and public safety entities that would be ensured access to a portion of the spectrum in certain designated locations. Third, the General Authorized Access tier would include all other users, including consumer and business users, wireless ISPs, and licensed commercial wireless providers, all of whom would operate in the 3.5 GHz Band subject to protections for the other tiers. The FCC seeks comment on a number of issues, including whether the General Access Tier should be subject to a light licensing regime similar to a registration requirement, potential interference mitigation techniques, and details on the geolocational database and how it will regulate access to the band.

Wireless broadband providers praised the FCC’s proposal, stating that spectrum sharing will enable increased coverage in rural and underserved areas and provide start-up companies with a testing ground for new technologies. Supporters of unlicensed spectrum use suggest that available interference mitigation techniques will ensure that incumbent users and critical care facilities can be protected, while opening up additional spectrum for commercial and public use. However, in reports earlier this Fall on opening up the 3.5 GHz band to unlicensed use, industry observers noted that spectrum sharing in the 3.5 GHz Band poses a number of technical challenges for commercial wireless providers that may take years to resolve before the spectrum can be deployed as an adjunct to their core wireless services.

Comments on the proposal are due by February 20, 2012, with reply comments due by March 22, 2013.

FCC Creates Do-Not-Call Registry to Protect Public Safety Communications from Robocalls

By J. Bradford Currier, Marc Martin, and Marty Stern

All users of autodialing equipment, with limited exception, will need to ensure that they do not contact phone numbers registered by Public Safety Answering Points (“PSAPs”) under a Report and Order adopted by the Federal Communications Commission that includes new enforcement mechanisms and stiff penalties for violations. The new rules apply not only to telemarketers but to commercial entities that use autodialing equipment to make informational calls, as well as to schools, charities, political campaigns, and other entities that use autodialers for non-commercial purposes.

The new rules generally mirror the existing requirements implemented in the National Do-Not-Call Registry administered by the Federal Trade Commission. Most significantly, the FCC adopted a strict liability standard for robocalls placed to PSAP numbers registered on the do-not-call registry, with no exceptions for non-solicitation, informational calls or calls placed for non-commercial purposes. Operators of automatic dialing equipment (“OADEs”) will be prohibited from using their robocalling equipment to contact a PSAP number listed on the registry, including by text, except for an emergency purpose. However, OADEs remain free to use their robocalling equipment to make PSAP calls in “situation[s] affecting the health or safety of consumers.” 

Under the new rules, PSAPs are given substantial discretion to designate which numbers to include on the registry “so long as such numbers are associated with the provision of emergency services or communications with other public safety agencies.” PSAPs will also be allowed to choose their representatives who will then file a certification with the registry operator allowing them to add numbers to the registry. PSAPs will be free to remove a number at any time from the registry and must review their registered numbers annually to confirm that no numbers should be removed. 

The new rules permit OADEs to access the list of registered PSAP numbers by filing a certification stating that it is accessing the registry solely to determine whether any telephone numbers to which it intends to place autodialed calls are listed. The certification will require OADEs to submit all of the telephone numbers used to place autodialed calls. Although some commenters suggested that the provision of all outbound numbers would be burdensome, the FCC found such a requirement necessary in order to easily trace and identify potential violators. OADEs will be required to access the PSAP registry 31 days prior to the date any call is made to avoid calling registered numbers. The Report and Order prohibits OADEs from selling, sharing, or using the PSAP registry for any purpose except compliance with the new rules. The FCC refused to establish any “safe harbor” for calls mistakenly made to registered PSAPs and will impose strict penalties for violators. For violations of the requirement prohibiting disclosure of registered PSAP numbers, the FCC may impose penalties of not less than $100,000 but no more than $1,000,000 per incident. For violations of the prohibition on contacting numbers on the registry, the FCC may impose penalties of not less than $10,000 but no more than $100,000 per call or text.

The new rules were required by the Middle Class Tax Relief and Job Creation Act of 2012, and supplement existing restrictions in the Telephone Consumer Protection Act on robocalls to emergency lines. The FCC did not establish compliance dates for the new rules, which will be announced through a Public Notice after the PSAP registry is operational.

Requests for TCPA Robocall Clarifications Examined by FCC

By Marty Stern and J. Bradford Currier

The Federal Communications Commission is seeking comment on requested clarifications on the rules applicable to autodialed and prerecorded “robocalls” under the Telephone Consumer Protection Act (“TCPA”) in response to a trio of requests filed with the FCC over the summer. The call for comments follows the FCC’s February Report and Order, which revised the TCPA rules applicable to robocall solicitations by: (1) requiring a customer’s prior express written consent before making solicitation robocalls; (2) eliminating the “established business relationship” exemption to the robocall rules applicable to solicitations; (3) requiring companies to establish an opt-out mechanism for such calls; and (4) limiting abandoned calls through the use of predictive dialers. The three requests address separate but interrelated issues regarding how companies may contact consumers under the TCPA.

First, in a petition for an expedited declaratory ruling, the Cargo Airline Association asks the FCC to clarify whether package delivery companies may rely on representations of package senders that package recipients consent to receiving autodialed and prerecorded customer service delivery notifications through their wireless telephones, in connection with a TCPA restriction on autodialed and prerecorded calls to wireless numbers in the absence of prior express consent. The Cargo Airline Association contends that such customer service delivery notifications help to reduce instances of package theft and the provision of a package recipient’s wireless telephone number by a package sender should establish the “prior express consent” necessary for shipping companies to send autodialed and prerecorded delivery notifications. In the alternative, the petition requests the FCC declare that package delivery notifications are completely exempt from the TCPA’s requirement to obtain prior express consent before making autodialed or prerecorded calls to a wireless telephone number.

Second, in a petition for declaratory ruling, Communication Innovators asks the FCC to clarify that “predictive dialer” technologies, that initiate the next phone call while an agent is on the phone with another consumer, which are not used for telemarketing purposes and do not have the ability to automatically dial random or sequential numbers, are not subject to the TCPA’s restrictions on automatic telephone dialing systems. The petition argues that the use of predictive dialer technologies for non-telemarketing, “informational” calls related to fraud alerts, appointment reminders, payment notices, and school closing announcements benefit consumers and do not conflict with the underlying policy of restricting telemarketing robocalls. The petition also notes that, unlike other autodialer systems, predictive dialer technologies allow the consumer to connect to a live operator at any time to address questions or concerns.

Third, in a request for clarification, CallAssistant LLC asks the FCC to clarify that its use of “operator supervised prerecorded call segments” does not violate the TCPA rules. CallAssistant states that its calling technology enables its agents to interact with the call recipient by using the agent’s own voice or by pressing a button to substitute an appropriate audio recording. CallAssistant further states that an agent is always able to hear what the consumer is saying and the consumer may request to speak with a live operator at any time, providing the human-to-human interaction that Congress sought when drafting the robocall provisions of the TCPA. CallAssistant also contends that the interactive nature of its calling technology means that its calls do not implicate the TCPA’s restrictions on robocalls.

Comments on each of the requests for clarification are due on November 15, 2012, with replies due on November 30, 2012.

FCC Slams Calling Card Provider Over Marketing Practices

By J. Bradford Currier and Marty Stern

Prepaid calling card services will need to pay careful attention to their marketing practices or face hefty fines following a recent Notice of Apparent Liability for Forfeiture released by the Federal Communications Commission proposing a $5 million forfeiture penalty on a prepaid calling card provider. The NAL alleges that a calling card provider marketed low-cost cards to immigrants with claims that customers could make “hundreds of minutes” of calls to their native countries, while failing to clearly disclose multiple fees and surcharges that reduced the available minutes to a fraction of what was advertised. Following on the heels of several similar cases in 2011 with significant forfeiture penalties, the FCC is putting calling card providers on notice that potentially deceptive marketing practices are being subject to increased scrutiny under a provision of the Communications Act that prohibits unjust and unreasonable sales practices.

The FCC’s marketing rules require calling card services to provide a “clear and conspicuous disclosure on how to calculate the total cost of a call.” Here, in an investigation, the FCC’s Enforcement Bureau found that the only information regarding the application of fees and surcharges for the calling cards was contained in very small font at the bottom of a poster, failing to convey sufficient rate information in violation of prior FCC rulings and deceptive marketing policies established by the FCC and the Federal Trade Commission.

As for the amount of the proposed forfeiture penalty, the FCC found that while each calling card sold constituted a separate violation, applying the base forfeiture amount of $40,000 per violation that it had previously used in telemarketing actions would result in an excessive penalty. Instead, following its earlier cases, the NAL determined that a $5 million dollar penalty appropriately reflected the “the nature, circumstances, extent, and gravity of the violation” and would ensure that calling card companies do not treat such penalties as the “cost of doing business.” The calling card company now has thirty days to pay the proposed forfeiture or file a response seeking a reduction or cancellation of the penalty.

Special Access Rules Suspended by FCC

By J. Bradford Currier, Marc Martin, and Marty Stern

The Federal Communications Commission has released a long-awaited order on special access, suspending rules that allowed incumbent providers pricing flexibility in their provision of these high capacity circuits to competitive providers and enterprise customers. Under rules originally adopted in 1999, the FCC regulated special access rates, but provided carriers with pricing flexibility in particular geographic areas where certain competitive showings were met, which allowed carriers to offer special access services at unregulated rates.

Special access is the middle mile workhorse of the telecom industry, backhauling traffic from cell towers for wireless providers, connecting the facilities of competitive carriers to enterprise customers, and transporting Internet traffic from various facilities to carrier points of presence. Since the adoption of special access pricing flexibility, special access customers have argued that the current rules allow special access providers, typically large incumbent providers, to raise prices above competitive levels even in the absence of meaningful competition. Special access providers have responded that the special access market is competitive and they are still subject to rate regulation despite competitive market conditions. The order suspends pricing flexibility pending the FCC’s adoption of a new special access regulatory framework. The order was adopted in a party-line vote, with the two Republican members of the Commission issuing strong dissents.

To facilitate the establishment of a new special access framework, the FCC will issue a data collection order within 60 days, which will ask carriers and other stakeholders for information regarding the appropriate regulatory regime for special access. The FCC aims to complete its investigation and adopt new special access rules by 2013.

Opening Brief Filed by Net Neutrality Challengers

By J. Bradford Currier and Marc Martin

Verizon and MetroPCS filed their initial brief with the D.C. Circuit in their joint appeal of the net neutrality rules adopted by the Federal Communications Commission in its 2010 Open Internet Order. The briefs kick off the first legal challenge to the net neutrality rules which became effective in late 2011. The FCC is scheduled to respond in September, with final briefs due from the parties in November. The D.C. Circuit is not expected to rule on the appeal until 2013.

As we reported previously, the Open Internet Order focuses on three goals: (1) network transparency; (2) no blocking; and (3) no unreasonable discrimination. Under the rules, both fixed and mobile broadband Internet access providers must disclose the network management practices, performance, and commercial terms of their services.  Fixed providers are prohibited from blocking access to all lawful content and services, while mobile providers must not block lawful websites and applications that compete with their services. The “no unreasonable discrimination” provision applies solely to fixed providers, leaving mobile operators free to favor or disfavor certain types of network traffic.

The brief challenges the net neutrality rules on four grounds:

  • First, the brief alleges that the rules conflict with the Communications Act by imposing nondiscrimination requirements on fixed broadband Internet access providers. The brief emphasizes the Communication Act’s distinction between traditional “common carriers,” that must provide service to all customers on an equal basis, and private “information services,” such as broadband Internet access, that are normally outside of the FCC’s jurisdiction. The brief notes that the FCC previously refused to impose common carrier-type regulations on information services in order to foster developing technologies. 
  • Second, the brief alleges that the FCC lacked the statutory authority to adopt the net neutrality rules. The brief highlights the D.C. Circuit’s 2010 decision in Comcast v. FCC, which ruled that the FCC could not rely on its “ancillary” authority under the Communications Act to regulate broadband Internet access providers. The brief argues that the FCC failed to articulate any specific source of authority supporting the net neutrality rules, instead relying on “speculative inferences” rejected in the Comcast decision in support of the rules. 
  • Third, the brief alleges that the net neutrality rules violate the free speech rights contained in the First Amendment and the property protections set forth in the Fifth Amendment. The brief states that the net neutrality rules eliminate the “editorial discretion” held by Internet access providers to decide the types of speech they will transmit and how they will transmit it as part of their services. Under this view, Internet access providers should enjoy the same level of discretion as newspapers to feature specific content and the FCC should not impose uniform restrictions when customers have numerous outlets to access content on the Internet. The brief also contends that the rules constitute a “per se taking” of broadband Internet access providers’ property by allowing providers of content, applications, and devices to access private broadband networks for free.
  • Fourth, the brief alleges that the net neutrality rules are arbitrary and capricious. The brief suggests that the FCC failed to identify any competitive issues in the broadband Internet access market that necessitated industry-wide regulation. The brief argues that the FCC’s concerns of discrimination in Internet access service remain hypothetical and that the net neutrality rules will stifle innovation and harm the public interest.

While Verizon and MetroPCS moved forward with their challenge of the net neutrality order, public interest group Free Press voluntarily withdrew its petition to review the new rules. Free Press previously challenged the exemption for mobile wireless providers from the nondiscrimination provisions of the net neutrality rules.

FCC Political File Rule Effective Date Set

By J. Bradford Currier and Marc Martin

Major television stations throughout the country will soon be required to disclose online how much candidates and interest groups pay for political advertisements. The so-called “political file” rules will take effect on August 2, 2012, following approval by the Office of Management and Budget of the online disclosure requirements adopted by the Federal Communications Commission in April 2012. The political file rules will initially apply only to television stations located in the top 50 national markets that are affiliated with the “big four” national broadcast networks. All other stations will need to comply with the political file rules by July 1, 2014. In addition to political advertising pricing and sales data, the FCC’s rules require television stations to provide programming lists, retransmission consent elections, joint sales agreements, FCC investigation notices, and other information in the online file hosted by the FCC.

The political file rules have drawn harsh criticism from certain broadcasters and lawmakers. Under the FCC’s rules, broadcast and cable stations may only charge political candidates the “lowest unit” rate for commercial advertisements. Broadcasters are concerned that making their political advertising rates widely accessible may cause private-sector advertisers to demand the same low price. In May, a group of broadcasters filed suit in federal court, alleging the political file rules violate the free speech protections of the First Amendment and exceed the FCC’s authority. Broadcasters also asked the OMB to reject the information collection requirements imposed by the political file rules as unduly burdensome and duplicative of existing FCC reporting obligations. A coalition of Republican lawmakers joined the broadcasters’ opposition to the new rules by introducing a rider to the recent FCC appropriation bill which would have cut off funds for implementing the political file requirements. Late last month, the lawmakers abandoned the rider, but inserted new language requiring the Government Accountability Office to analyze the economic impact of the rules. Public interest groups have opposed the broadcasters’ challenges, stating that the new disclosure requirements are well within the FCC’s authority and improve transparency-related goals.

Indecency Orders Against Broadcasters Struck Down by Supreme Court

By J. Bradford Currier and Marc Martin

The Federal Communications Commission failed to provide television broadcasters with fair notice that airing “fleeting” expletives and nudity could result in indecency fines and enforcement actions, according to the recent Supreme Court decision in FCC v. Fox Television Stations, Inc. However, the Court’s decision did not decide the overall constitutionality of the FCC’s indecency standards established in the late 1970s in FCC v. Pacifica Foundation. The Court noted that the FCC may, but is not required to, modify its current indecency standards to provide sufficient clarity for future broadcasts.

The decision concerns Fox’s broadcasts of the Billboard Music Awards in 2002 and 2003, during which artists uttered expletives, and ABC’s 2003 broadcast of an NYPD Blue episode, which contained brief female nudity. The FCC issued orders against Fox and ABC, finding that the broadcasts violated federal law banning the broadcast of “obscene, indecent, or profane” material. The FCC based its decisions on an order it issued after the Fox and ABC broadcasts, which reversed its prior indecency policy and stated that the fleeting nature of indecent material would no longer serve as a defense against FCC enforcement. The United States Appeals Court for the Second Circuit vacated the orders against the broadcasters, finding the FCC’s indecency policy “unconstitutionally vague.” The FCC appealed the Second Circuit’s decisions to the Supreme Court.

The Court’s unanimous opinion focused on the fact that the broadcasters did not have fair notice that the FCC would punish “fleeting” indecent material when the broadcasts aired. The Court noted that under the 2001 guidelines in force during the broadcasts, the FCC would consider whether a particular program “dwell[ed] on or repeat[ed]” the allegedly indecent material when considering enforcement action. In addition, the Court noted that the FCC previously refused to find broadcasts containing nudity indecent. As a result, the Court determined that the FCC’s later reversal of its indecency policy to include fleeting indecent material could not be retroactively applied to the Fox and ABC broadcasts. 

While the Court struck down the FCC’s orders, the decision leaves the FCC’s overall indecency policy unchanged. The Court declined to consider the broadcasters' arguments that the FCC’s indecency policy violates the First Amendment or whether the FCC has the authority to punish fleeting indecent material under the Pacifica decision. However, in her concurring opinion, Justice Ginsburg stated that the Court should overturn Pacifica as overly restrictive of free speech rights when the public has many different media options beyond broadcast television.

Obama Administration Pursues Mobile Privacy Code of Conduct

By J. Bradford Currier and Marc Martin

The National Telecommunications and Information Administration (“NTIA”) will hold its first meeting on July 12, 2012 aimed at developing voluntary codes of conduct designed to provide consumers with clear information regarding how personal data is handled by companies which develop and offer applications for mobile devices. The NTIA’s planned meetings with stakeholders were first announced in February 2012 as part of the White House’s proposed Consumer Privacy Bill of Rights. The NTIA meeting comes as both the Federal Trade Commission and Federal Communications Commission have recently taken action to improve consumer transparency and privacy safeguards for personal information collected by mobile apps.

A number of stakeholders have already filed comments expressing their support for improving the clarity and comprehensiveness of privacy disclosures provided to mobile app consumers. However, a number of commenters noted that the rapid pace of innovation in the mobile app market and the relatively small screen sizes of current mobile devices will make long-term, definitive disclosure rules difficult to develop. While NTIA hopes to tackle a number of Internet policy topics, including copyright and cybersecurity issues, the organization chose mobile app privacy as the first meeting topic because it believes consensus on a code of conduct can be reached “in a reasonable timeframe.” NTIA expects the mobile app privacy meeting will serve as a useful precedent for later discussions involving other online consumer protection concerns.

The NTIA meeting is open to all interested stakeholders and a venue should be announced before the end of the month. Interested stakeholders are asked to inform NTIA online in advance if they plan to attend the meeting.

Mobile Device Privacy Inquiry Comment Deadlines Set by FCC

By J. Bradford Currier and Marc Martin

Interested stakeholders may now file comments on the Public Notice recently released by the Federal Communications Commission relating to safeguarding Customer Proprietary Network Information on mobile devices. As we reported previously, the Public Notice seeks information on a number of privacy issues, including the types of customer information collected by wireless service providers, the steps that should be taken by wireless service providers to secure such data, and the scope of wireless service providers’ obligations relative to the device manufacturer or software developer.

The Federal Register notice states that comments on the Public Notice must be filed by July 13, 2012, and reply comments must be filed by July 30, 2012.

Telemarketing Robocall Rules Published in Federal Register

By J. Bradford Currier, Marc Martin, and Marty Stern

Regulations restricting the use of autodialers and prerecorded voice messages in telemarketing (a practice known as “robocalling”) adopted by the Federal Communications Commission in February 2012 were recently published in the Federal Register. As we reported previously, the regulations require telemarketers to obtain a person’s prior express written consent before placing a robocall, but contained exemptions for certain “informational” autodialer calls, such as debt collection inquiries, airline delay information, and fraud detection calls from banks. The new rules are designed to harmonize the FCC’s regulations under the Telephone Consumer Protection Act with the recently amended telemarketing rules issued by the Federal Trade Commission. While the Report and Order adopting the regulations has an effective date of July 11, 2012, the federal Office of Management and Budget must still approve key aspects of the new rules. Specifically, publication of OMB’s approval in the Federal Register will trigger a number of compliance deadlines, including:

  • Telemarketers must receive a consumer’s “prior express written consent” before making any robocall to a wireless number or residential line.  The written consent requirement will take effect one year after publication of the OMB’s approval of the new regulations in the Federal Register.
  • Previously, telemarketers could rely on an established business relationship (“EBR”) with the consumer for robocall solicitations.  At the end of a one-year period following publication of OMB’s approval of the new rules in the Federal Register, the EBR exception will be eliminated.
  • All telemarketing robocalls must provide “an interactive opt-out mechanism” that allows consumers to be placed on a telemarketer’s internal “do-not-call” list.  Telemarketers will be required to provide an opt-out mechanism within 90 days of the publication of the OMB’s approval of the new regulations in the Federal Register.
  • Telemarketers must employ technologies to limit the amount of “abandoned” robocalls that result in dead air.  Telemarketers will be required to meet certain abandoned call benchmarks within 30 days of the publication of the OMB’s approval of the new regulations in the Federal Register.

Spectrum Interference Working Paper Released by FCC

By J. Bradford Currier and Marc Martin

The Federal Communications Commission released a Working Paper examining how to better manage interference among licenses operating in adjacent spectrum. Prepared by senior economists at the FCC’s Office of Strategic Planning and Policy Analysis, the Working Paper discusses how establishing a “market” for interference rights could lead to more efficient transmitting power constraints, out-of-band emission limits, and other service rules designed to handle interference between nearby licensees. The Working Paper represents a pure market-based approach to addressing interference issues, where the FCC would have only minor input regarding licensing. The release of the Working Paper comes at a time when the FCC is addressing a number of interference-related issues in pending proceedings.

The Working Paper suggests that implementing marketable interference rights may help entities operating in adjacent spectrum balance the desires of some licensees for more signal strength with the interference concerns of nearby licensees. The Working Paper presents a model where an existing licensee seeks authorization from the FCC to increase its transmitting power. While the increase in transmitting power would benefit the requesting licensee, the model assumes it would also result in harmful interference to adjacent licensees. Under current rules, the FCC would develop a record assessing the public benefits alleged by the requesting licensee and the interference claims of the nearby licensees, and render a decision regarding whether the authorization should be granted.  

Instead of an inquiry led by the FCC, the Working Paper proposes two market solutions allowing the licensees to tell the FCC how much they value their spectrum. Under the first scenario, the requesting licensee must bid for the right to increase its transmission power, while the nearby licensees must bid for the right to preserve the status quo. If the requesting licensee’s bid exceeds the combined sum of the nearby licensees’ bids, then the authorization should be granted. This scenario appears to suffer from several flaws. First, as the Working Paper recognizes, this scenario may lead to a “free rider” issue in which each nearby licensee has the incentive to bid low so long as another nearby licensee would bid high. Second, it appears to allow deep-pocketed new entrants to force interference on smaller nearby licensees. Third, assuming the FCC would put the incumbents in the position to pay to remain free of interference, it may even give rise to a “takings” constitutional concern. 

Under the second scenario, the nearby licensees would own the right to prevent the requesting licensee from increasing its transmission power unless the requesting licensee purchased the right from the nearby licensees. If the requesting licensee offers a price that exceeds the amount demanded by the nearby licensees, then the authorization should be granted. Although this scenario resolves the “free rider” problem presented by the first scenario, the nearby licensees in the second scenario have the incentive to artificially inflate the asking price for their interference rights.

The Working Paper applies each market scenario to a hypothetical auction of wireless spectrum and finds that market solutions can produce efficient service rules under certain circumstances. However, the Working Paper notes that the assumptions underlying the market solutions may not hold “in the field,” where licensees may exaggerate their spectrum needs or interference concerns. The Working Paper calls for further research on how to ensure that all spectrum stakeholders receive sufficient information to reach an efficient allocation of spectrum rights.

FCC Seeks Comment on Mobile Phone Privacy Protections

By J. Bradford Currier and Marc Martin

The Federal Communications Commission recently released a Public Notice seeking comment on, among other things, how mobile wireless service providers safeguard customer information stored on user devices. The Public Notice was accompanied by an FCC Staff Report, discussing the privacy issues presented by location-based mobile applications, which collect and transmit information about a user’s physical location to the service provider in order to provide real-time services. The Public Notice requests comment on the types of customer information collected by wireless service providers, the steps that should be taken by wireless service providers to secure such data, and the scope of wireless service providers’ obligations relative to the device manufacturer or software developer, as set forth below.

The Public Notice seeks to update the record developed in response to a 2007 Further Notice of Proposed Rulemaking concerning the obligations of wireless service providers under the Communications Act to protect their users’ customer proprietary network information (“CPNI”). The Public Notice invites input on whether current data security practices meet consumer needs and whether developments in the past five years pose new risks to protecting CPNI. The FCC also request comment on the importance of certain factors when assessing a wireless service provider’s compliance with the CPNI rules, including:

  • Whether the device is sold by the service provider;
  • Whether the device only works on a single service provider’s network;
  • The degree of control that the service provider exercises over the design, integration, installation, or use of the software that collects and stores information;
  • The service provider’s role in selecting, integrating, and updating the device’s operating system, preinstalled software, and security capabilities;
  • The manner in which the collected information is used;
  • Whether the information pertains to voice service, data service, or both; and
  • The role of third parties in collecting and storing data.

The Public Notice asks whether the FCC should adopt a declaratory ruling clarifying the application of these factors and the regulatory obligations of wireless service providers that collect sensitive consumer data. Comments will be due 30 days after publication of the Public Notice in the Federal Register, with reply comments due 45 days after Federal Register publication.

FCC Releases Final Plan For Streamlining Regulations

By J. Bradford Currier

The Federal Communications Commission recently released its Final Plan for analyzing existing communications regulations to identify “duplicative, obsolete or repealed rules that should be taken off the books.” The Final Plan comes in response to President Obama’s Executive Order issued last July, which requested federal agencies to review their regulations and develop strategies for eliminating or streamlining burdensome or outdated rules.

The Final Plan stated that the FCC has already eliminated 219 regulations since 2009, including rules related to the E-rate program, Fairness Doctrine, international service reporting requirements, and tariff filing. The FCC highlighted its recent reforms designed to streamline the Universal Service Fund and Intercarrier Compensation regimes in response to the National Broadband Plan, as well as its Data Innovation Initiative aimed at eliminating unnecessary data collection obligations. The Final Plan identified a wide range of regulations that the FCC recently reviewed or is currently reviewing, including rules related to the Lifeline program, broadcast ownership, broadcast television spectrum allocation, Emergency Alert System, outage reporting requirements, wireless E911 accuracy, and wireless tower siting. The Final Plan set out three factors that the FCC will consider when reviewing whether to reform a regulation: (1) whether a regulation has been affected by changes in technology, new scientific research, or market structure; (2) whether a regulation disproportionately affects particular entities, caused unintended negative effects, or could result in greater net benefits to the public if modified; and (3) whether a regulation has been subject to frequent waiver requests or identified by the public as needing revision.

FCC Chairman Julius Genachowski called the rule reforms necessary to promote private investment, innovation, and job creation, while newly appointed Commissioner Ajit Pai suggested that some of the rules identified in the Final Plan may be reformed as part of the FCC’s upcoming biannual review of its regulations mandated by the Communications Act.

FCC Releases Net Neutrality Guide For Small Entities

By J. Bradford Currier, Marc Martin, and Marty Stern

The Federal Communications Commission recently released a compliance guide designed to help small businesses, non-profit organizations, and government bodies understand and abide by the net neutrality rules contained in the Open Internet Order released in late 2010 and published in Fall 2011. The compliance guide provides the regulatory background of the Open Internet Order proceeding, key definitions with citations, a summary of the net neutrality rules, and the compliance requirements applicable to small entities.

As we previously reported, the Order focused on three primary goals: 1) network transparency; 2) no blocking; and 3) no unreasonable discrimination. For “transparency,” both fixed and mobile Internet providers must publicly disclose the network management practices, performance, and commercial terms of their broadband services. 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 user access to lawful content, applications, services, subject to “reasonable” network management practices. Mobile wireless providers must not block lawful websites and applications that compete with the provider’s voice or video telephony services, also subject to reasonable network management practices. 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. The net neutrality rules adopted in the Open Internet Order remain subject to legal challenges.

Senate Confirms Two New FCC Commissioners

By J. Bradford Currier

The Senate today voted to confirm Democrat Jessica Rosenworcel and Republican Ajit Pai as new commissioners at the Federal Communications Commission. The new commissioners will fill the seats vacated by Commissioner Michael Copps, who retired in late 2011, and Commissioner Meredith Attwell Baker, who left the FCC nearly a year ago to join Comcast/NBC Universal. Ms. Rosenworcel previously served as a senior staffer on the Senate Commerce Committee, working closely with Committee Chairman John Rockefeller (D-WV), and also worked for former Commissioner Copps. Mr. Pai is currently a partner in private practice specializing in communications law and previously served in the FCC’s Office of General Counsel for former Chairman Kevin Martin. The nomination process was delayed for nearly four months due to a hold placed by Sen. Chuck Grassley (R-IA), which was removed late last week. Once the nominees are sworn in, the FCC will have a full panel of five commissioners after nearly a year operating with just three commissioners.

FCC Seeks Comments on Opt-Out Text Messages under TCPA

By J. Bradford Currier, Marc Martin, and Marty Stern

In a move that may affect the mobile marketing industry’s best practices, the FCC recently released a Public Notice seeking comment on whether a one-time text message sent to a consumer confirming the consumer’s request to opt-out of further text messages violates the text message robocall prohibitions of the Telephone Consumer Protection Act (“TCPA”) and the FCC’s robocall solicitation rules. The Public Notice comes in response to a petition for expedited declaratory ruling filed by SoundBite Communications, Inc (“SoundBite”), which sends text messages on behalf of a number of companies, including banks, retailers, utilities, and wireless operators. This apparently represents the FCC’s first inquiry into its TCPA rules since the FCC adopted new prohibitions on robocall solicitations in February. Comments on the petition are due by April 30, 2012, and reply comments are due by May 15, 2012.

The FCC’s February Report and Order substantially revised the rules applicable to robocall solicitations by: (1) requiring a customer’s prior express written consent before making solicitation robocalls; (2) eliminating the “established business relationship” exemption to the robocall rules applicable to solicitations; (3) requiring companies to establish an opt-out mechanism for such calls; and (4) limiting abandoned calls through the use of predictive dialers. However, the FCC made clear that its new rules do not extend to non-telemarketing “informational” autodialed calls that do not include advertisements. As made clear in the Report and Order, the restrictions on autodialed calls to wireless numbers already required a consumer’s prior express consent for such calls, and apply not only to voice calls and pre-recorded messages, but to text messages as well. 

SoundBite currently sends a one-time confirmation text message after it receives an opt-out request from a customer. SoundBite’s petition states that its practices are not only consistent with consumer protection policy, but also in accord with industry best practices established by the Mobile Marketing Association. SoundBite also argues that the confirmation text message helps it effectuate opt-out requests in accordance with the “grace period” established by the FCC, which allows telemarketers 30 days to honor do-not-call requests. In addition, SoundBite claims that its practices comply with the FCC’s rules because it does not send text messages randomly to wireless consumers using an autodialer, and hence is not covered by the limitation on autodialed calls to wireless numbers. Instead, only those persons who make an opt-out request to SoundBite receive a text conformation.

Online Video Captioning Rules Published in Federal Register

By Marty Stern and J. Bradford Currier

The FCC’s new closed captioning rules for previously televised online video were published in the Federal Register on March 30, 2011, with an effective date of April 30 and triggering additional deadlines for various IP video captioning requirements. The new rules implement IP closed captioning obligations required by the Twenty-First Century Video Communications and Accessibility Act of 2010 and initially proposed by the FCC in September 2011. Reports indicate that affected companies may launch legal and administrative challenges to the new rules now that they have been published.

The Report and Order adopting the rules consists of four key sections:

First, for owners, providers, and distributors of video programming, the new rules establish a regimented system for displaying closed captioning in both new and archived video content. The Report and Order defines video programming owners (“VPOs”) as “any person or entity that either (i) licenses the video programming to a video programming distributor or provider that makes the video programming available directly to the end user through a distribution method that uses Internet protocol; or (ii) acts as the video programming distributor or provider, and also possesses the right to license the video programming to a video programming distributor or provider that makes the video programming available directly to the end user through a distribution method that uses Internet protocol.” Meanwhile, the Report and Order defines video programming distributors (“VPDs”) and video programming providers (“VPPs”) identically as “any person or entity that makes video programming available directly to the end user through a distribution method that uses IP.”

Under the new regulations, VPOs will be required to include closed captioned files along with any video programming made available to VPDs and VPPs. The rules mandate that the quality of the required captioning be of “at least the same quality” as the captioning of the same programming when shown on television. Once they receive the required files, VPDs and VPPs must ensure the rendering or “pass through” of all required closed captioning content to end users, including through any equipment provided by the VPDs and VPPs such as television set-top boxes. The FCC obligated VPOs to establish a “mechanism” to make information available to VPDs and VPPs regarding whether certain video programming is subject to the closed captioning requirements on an ongoing basis. VPDs and VPPs which rely on the established mechanism in “good faith” will not be held responsible for determining whether captions are required for the programming files they receive. VPOs and VPDs may petition the FCC for case-by-case exemptions from the closed captioning requirements based on economic burden. The FCC declined to establish any categorical exemptions to the closed captioning requirements, but did indicate that de minimis failures to meet the new rules would not result in an actionable violation and regulated entities could achieve compliance through FCC-approved alternative means.

Second, the Report and Order established a deadline schedule for the captioning of new and archival video content. Prerecorded programming that is unedited for Internet distribution must meet the captioning requirement within 6 months of the March 30 publication date (September 30, 2012). Meanwhile, all live or near-live programming must be compliant within 12 months from publication (March 30, 2013), and prerecorded programming edited for Internet distribution must be adequately captioned within 18 months (September 30, 2013). For archival video programming content already available online without captions but which re-airs on television with captions, the FCC created an increasingly strict compliance schedule. In two years (March 30, 2014), such archival programming must be captioned within 45 days after it is re-aired. In three years (March 30, 2015), such programming must be captioned within 30 days after it is shown on television, with the timeline compressed to 15 days in four years (March 30, 2016). 

Third, the new rules broadly defined the types of “apparatus” that will be subject to the closed captioning obligations. The regulations cover not only physical devices such as television set-top boxes, personal computers, smartphones, tablets, DVD and Blu-ray players, but also all “integrated software” that is installed in a covered device by the manufacturer before sale or that the manufacturer requires the consumer to install after sale. By contrast, third-party video players independently installed by the consumer, but not required by the manufacturer to enable video playback, will not fall under the scope of the new rules. The new rules will also not extend to commercial equipment such as movie theater projectors or display-only monitors lacking playback capability. Critically, the FCC’s closed captioning requirements will no longer be limited to devices with screens larger than 13 inches, an exception originally established in the Television Decoder Circuitry Act of 1990

Manufacturers of covered devices will be able to petition the FCC for case-by-case waivers of the new rules due to “lack of achievability.” Whether compliance is achievable for a particular device will depend upon: (1) the costs of manufacturing a compliant device or software; (2) the technical and economic impact of compliance on the manufacturer and innovation; (3) the size and nature of the manufacturer’s operations; and (4) the extent to which the manufacturer offers other devices or software with accessibility features at differing price points.  As an alternative, manufacturers may also petition the FCC for a waiver by arguing that the device or software is “primarily designed” for activities other than receiving or playing back video programming. Beyond these exceptions, the FCC refused to create any categorical exemption to the closed captioning requirements for any specific device or software. All covered devices and software must achieve compliance with the closed captioning rules by January 1, 2014, although the FCC expects device manufacturers to take accessibility into consideration as early as possible during the design process for new and existing equipment.”

Fourth, the FCC adopted certain technical standards governing the color, size, font, opacity, and other aspects of the captioning text recommended by the Video Programming Accessibility Advisory Committee in July 2011. Additionally, although the FCC declined to adopt a mandatory format for the interchange or delivery of closed captioning content, the new rules established the Society of Motion Picture and Television Engineers Timed Text format (“SMPTE-TT”) as a “safe harbor” format. The FCC stated that the SMPTE-TT format met all of the technical aspects of the new rules and was already being used to reformat television content for Internet use. The FCC will continue to review industry practices for new safe harbor format options.

FCC Proposes Flexible Use of 2 GHz Band Spectrum

By J. Bradford Currier

Under its recent Notice of Proposed Rulemaking and Notice of Inquiry, the Federal Communications Commission seeks to increase the supply of spectrum for mobile broadband use by permitting flexible use of 40 MHz of spectrum located in the 2 GHz Band currently licensed for Mobile Satellite Service. Specifically, the proposed rules would allow terrestrial mobile broadband service in what the FCC termed the “AWS-4 Spectrum,” located at 2000-2020 MHz and 2180-2200 MHz. The NPRM/NOI covers four key areas:

(1)         AWS-4 Spectrum Band Plan

The FCC would license AWS-4 Spectrum in paired 10 MHz blocks for a 10-year term and would allow a licensee holding two contiguous blocks of AWS-4 Spectrum to combine these authorizations into a single licensed block. The FCC seeks comment on whether the AWS-4 Spectrum band should be shifted up 5 MHz to 2005-2025 MHz or up 10 MHz and compressed to 2010-2025 MHz. Additionally, the NPRM asks for industry input regarding its licensing scheme and whether the FCC should separately license a service area to cover the Gulf of Mexico, which poses special interference challenges. 

In the NOI, the FCC seeks comment on an alternative band plan proposed by NTIA, which would create two new blocks of spectrum: (1) PCS-Extension Block and (2) AWS-Extension Block.  The PCS-Extension Block would cover 35 MHz consisting of existing MSS downlink spectrum located at 2180-2200 MHz and spectrum located at 1695-1710 MHz. The AWS-Extension Block would encompass 30 MHz consisting of existing MSS uplink spectrum located at 2000-2020 MHz, combined with spectrum located at 2020-2025 MHz and 1995-2000 MHz. The alternative band proposal would require the relocation of existing licensees and may require incentive auctions. 

(2)        Licensing Conditions and Obligations

The NPRM imposes no eligibility restrictions on AWS-4 Spectrum licensees. The proposed rules would license the AWS-4 Spectrum under Part 27’s flexible use rules, allowing the licensee to use the spectrum for any terrestrial use permitted by current frequency allocation regulations. Applicants for AWS-4 Spectrum licenses would not be required to choose between providing common carrier and non-common carrier services. Future licensees would be able to lease AWS-4 Spectrum under the secondary market transaction rules first established by the FCC in 2003. The NPRM seeks comment on whether licensees should be permitted to enter into de facto transfer lease arrangements or whether licensees should be limited to spectrum manager lease arrangements. 

AWS-4 Spectrum licensees would be subject to certain performance and construction requirements. First, within three years an AWS-4 licensee must provide signal coverage and offer service to at least 30% of their total AWS-4 population. Second, within seven years the licensee must provide coverage and offer service to at least 70% of the population in each of its license authorization areas. If the licensee fails to meet these obligations, then it may lose its AWS-4 Spectrum licenses. The NPRM seeks comment on these requirements, penalties, and appropriate means for assessing compliance.

(3)        Relocation and Cost Sharing

The NPRM establishes relocation and cost-sharing obligations on AWS-4 Spectrum licensees. New entrants would be allowed to relocate incumbent licensees and recoup a portion of these relocation costs from later entrants. The FCC proposed a sunset date for new entrants’ relocation obligations at 10 years after the issuance of the first AWS-4 Spectrum license. The cost-sharing plan would be administered by a clearinghouse, which would resolve relocation disputes and assess the amount of relocation costs recoverable by a new entrant in the AWS-4 Spectrum. The NPRM seeks comment on whether the AWS-4 Spectrum relocation and cost-sharing rules should differ from previous AWS proceedings and whether the proposed sunset date poses certain risks to entrants or incumbents.

(4)        Interference and Other Technical Issues

The NPRM suggested numerous technical rules designed to prevent interference to other licensees from AWS-4 Spectrum users. The proposed regulations would impose emission limits on AWS-4 Spectrum licensees and require licensees to protect incumbent MSS licensees from harmful interference. The proposed rules would also impose: (1) base station and mobile station power limits; (2) antenna height restrictions; (3) signal strength restrictions; and (4) international coordination requirements on terrestrial operations. The FCC seeks comment on the proposed interference mitigation measures and industry input regarding whether the FCC should impose special interference rules protecting GPS services. 

Once the NPRM/NOI is published in the Federal Register, parties will have 30 days to comment. 

FCC Substantially Revises Robocall Telemarketing Rules

By J. Bradford Currier, Marc Martin, and Marty Stern

In response to “thousands” of complaints from consumers, the Federal Communications Commission unanimously adopted a Report and Order requiring telemarketers to obtain a person’s prior express written consent before placing a call using an autodialer or artificial/prerecorded voice (a practice known as “robocalling”). The FCC exempted certain “informational” robocalls, such as debt collection inquiries, airline delay information, and fraud detection calls from banks, from the new rules. The new rules are designed to make the FCC’s regulations under the Telephone Consumer Protection Act (“TCPA”) more consistent with the recently amended telemarketing rules issued by the Federal Trade Commission.

The robocalling regulations seek to protect consumers from unwanted telemarketing robocalls in four key ways:

            (1)        Prior Express Written Consent Requirement

Under the new rules, telemarketers must receive a consumer’s “prior express written consent” before making any robocall to a wireless number or residential line. Before consenting, the consumer must receive a “clear and conspicuous disclosure” of the consequences of providing consent and “unambiguously” agree to receive telemarketing calls at a designated telephone number. Telemarketers may not require robocall consent as a condition of purchasing any good or service. In the event of a dispute concerning consent, the telemarketer will bear the burden of showing that the required disclosure was provided and that it obtained sufficient written consent. Telemarketers may receive the required written consent through an electronic signature in compliance with state law or the federal E-SIGN Act, which allows agreements to be made through email, website form, text message, telephone key press, and other methods. Telemarketers will be required to comply with the written consent requirements within a year of the publication of the federal Office of Management and Budget's approval of the new rules in the Federal Register.

Critically, the FCC carved out a number of exceptions to the express written consent requirement, including for emergency calls, service calls from a customer’s carrier if the customer is not charged, and health-care related calls regulated under the federal Health Insurance Portability and Accountability Act. Additionally, the Report and Order stated that the prior written consent requirement only applies to telemarketing calls and the FCC was “leav[ing] undisturbed the regulatory framework for certain categories of calls.” Specifically, solicitations from tax-exempt charitable organizations, political messages, and school-closing notifications would not require prior express written consent. This exemption for political messages is particularly important in a presidential election year because robocalls are becoming an increasingly common technique by political candidates and parties – there will be no relief this year. In addition, informational calls such as debt collection calls, airline delay notifications, bank account fraud alerts, survey inquiries, and wireless usage warnings to the extent that these communications do not include advertisements or telemarketing messages were also excluded from the new requirements. The informational call exception represented a major victory for a broad cross-section of industry stakeholders, including credit card companies, financial services firms and airlines, who commented that companies should not need to receive prior express written consent before providing critical financial and travel information to consumers.

            (2)        Eliminating the “Established Business Relationship” Exemption 

Under existing FCC rules, telemarketers could normally place robocalls to residential landlines without prior consent when the telemarketer had an “established business relationship” with the consumer, usually based on the consumer’s previous purchases of the telemarketer’s goods or services. The Report and Order eliminated this exception, stating that telemarketers often misused this exemption to send frequent robocalls offering unrelated and unwanted services. The FCC stated that the electronic signature provisions of the new regulations would lessen any new compliance costs caused by the elimination of the established business relationship exception. Additionally, the Report and Order noted that the FTC eliminated the established business relationship exception for telemarketers under its jurisdiction in 2008, meaning that many telemarketers had already adapted their practices to comply with the new regulations.

            (3)        Establishing an Opt-Out Mechanism

Previously, customers who wished to opt-out of receiving robocalls had to dial a telephone number provided by the telemarketer to register his or her request. Many consumers complained that the call back system was burdensome and ineffective. Under the new regulations, all telemarketing robocalls must provide “an interactive opt-out mechanism” that is announced at the outset of the call and available throughout the recorded message. If the consumer selects the opt-out mechanism, the telemarketer must automatically add the consumer’s number to the telemarketer’s internal “do-not-call” list and immediately disconnect the call. Additionally, if the robocall is received by an answering machine or voicemail service, the message must contain a toll-free number that allows the consumer to call back and connect directly to the opt-out mechanism. The Report and Order did not prescribe a particular opt-out mechanism to be used by telemarketers. Telemarketers will be required to provide an opt-out mechanism within 90 days of the publication of the OMB's approval of the new rules in the Federal Register.

            (4)        Limiting Abandoned Calls Through Predictive Dialers

Telemarketers often use “predictive dialer” technologies, which initiate the next phone call while the telemarketer is on the phone with another consumer. If the telemarketer is unable to take the subsequent call, the consumer usually experiences a hang-up or “dead air.” The FCC’s rules limit the amount of these abandoned calls and requires telemarketers to employ technologies ensuring that no more than three percent of all calls result in abandonment. However, the FCC’s rules did not include a clear timeframe for measuring the rate of abandoned calls. The revised rules now calculate the abandonment rate during a “single calling campaign” over a 30-day period. The Report and Order adopted the FTC’s definition of calling campaign as “the offer of the same good or service for the same seller,” even if the telemarketer uses different scripts containing different wording in support of the same campaign. The FCC stated that the 30-day period would provide a reasonable assessment of the abandonment rate and would take into account fluctuations caused by time of day, operator availability, and number of phone lines used by the telemarketer. The revised abandonment rate measurement rules will become effective within 30 days of the publication of the OMB's approval of the new rules in the Federal Register. Interested parties will then have an opportunity to file petitions for reconsideration under a timeframe that will be announced by the FCC.

FCC's Wireless Deployment "Shot Clock" Provisions Upheld

By J. Bradford Currier, Marc Martin, and Marty Stern

A federal appellate court recently upheld regulatory timetables for state and local governments to act on siting applications to build cell towers. The panel’s decision in City of Arlington v. FCC upheld the Federal Communications Commission’s “shot clock” provisions, which were adopted in a 2009 declaratory ruling. The FCC adopted the declaratory ruling in response to concerns that the government approval process unnecessarily delayed tower construction. Under the shot clock provisions, state and local governments have 90 days to review applications for collocated tower projects and 150 days to review other siting applications. If the shot clock expires without action by the government, applicants can file for court relief within 30 days.

Following the adoption of the shot clock provisions, the Texas cities of Arlington and San Antonio appealed the declaratory ruling to the Fifth Circuit, arguing that the FCC lacked statutory authority to impose timetables for siting application reviews. The cities also argued that the FCC violated the Administrative Procedure Act because the timetables were not promulgated through a notice-and-comment rulemaking and were arbitrary and capricious.   In response, the Fifth Circuit decided all of the issues in favor of the FCC. Deferring to the FCC’s expertise, the panel held that the FCC had the statutory authority to implement the timetables pursuant to its general authority under the Communications Act to make “such rules and regulations as may be necessary to carry out the Communication Act’s provisions.”

The panel also found that the FCC’s actions did not violate the APA. First, the panel recognized that the shot clock ruling resulted from adjudication and therefore was not subject to the APA’s formal notice-and-comment rulemaking. Second, the panel noted that the FCC had discretion in choosing whether to establish the shot clock rules through adjudication or rulemaking. In this case, the FCC’s reliance on adjudication was neither arbitrary nor capricious because the City of Arlington court determined that even if the FCC failed to comply with the APA, this failure would represent a “harmless error” which would not require reversal of the FCC’s ruling.

The Fifth Circuit’s decision represents a win for wireless service providers which hope that the shot clock rules will facilitate the nationwide build-out of advanced wireless broadband networks. However, state and local governments already strapped for resources may find it difficult in all cases to “beat the buzzer."

FCC Amends Bill and Keep Effective Date and Clarifies Lifeline Impact of USF/ICC Reform Order

By J. Bradford Currier

On its own motion published in today’s Federal Register, the FCC issued a notice delaying the effective date of the carrier “bill and keep” requirements established late last year as part of the Commission’s report and order reforming the Universal Service Fund (“USF”) and Intercarrier Compensation system (“ICC”). As we reported previously, the USF/ICC reforms adopted a national bill and keep framework as the ultimate end state for traffic exchanged with a local exchange carrier, abandoning the existing “calling-party network-pays” model. The amendment states that intercarrier compensation for non-access traffic exchanged between Local Exchange Carriers and Commercial Mobile Radio Service providers pursuant to an interconnection agreement in effect by December 23, 2011, will be subject to the bill and keep methodology on July 1, 2012, rather than on the original deadline of December 29, 2011. The FCC noted that the amendment was necessary to limit marketplace disruption until carriers begin to receive recovery for this revenue under a system established in the USF/ICC reforms.

In addition to delaying the bill and keep effective date, the FCC notice also clarified the impact of the USF reforms on carriers that only participate in the FCC’s Lifeline Program, which provides discounts on monthly telephone charges for low-income households. The FCC stated that a Lifeline-only carrier which only provides facilities for non-“voice telephony services,” such as operator service or directory assistance, will no longer be eligible for USF support unless it seeks a forbearance from the Commission.

FCC Disability Accessibility Rules Published in Federal Register

By J. Bradford Currier, Marc Martin, and Marty Stern

In what the FCC described as the “most significant accessibility effort since the Americans with Disabilities Act,” manufacturers of tablets, laptops, smartphones and other devices will soon be required to ensure the accessibility of their equipment by disabled persons under final rules published in the Federal Register on December 30, 2011. The regulations, which will be phased in between January 30, 2012 and October 8, 2013, implement the disability accessibility requirements established in the Twenty-First Century Video Communications and Accessibility Act signed into law in October 2010.

Under the FCC’s Report and Order, manufacturers must make sure that device hardware and manufacturer-provided software allow disabled users to access advanced communications services such as email, voicemail, and text messaging unless such accessibility is not technically “achievable.” Manufacturers will only be responsible for the accessibility of software that they preload on their devices and will not be responsible for any software that is independently selected and installed by a user or any software which the user operates through cloud computing technology. Additionally, the new requirements will not apply to “customized equipment” created by the manufacturer for its enterprise customers which is not generally available to consumers or to devices designed primarily for purposes other than advanced communications services (e.g., electronic book reader devices).

Manufacturers may rely upon third-party hardware and software to meet the accessibility requirements so long as the third-party solutions are available at a nominal cost to the consumer. Manufacturers relying on third-party solutions must support these solutions for the life of the device or for two years after the third-party solution is discontinued, whichever occurs first. If a third-party solution is discontinued, the manufacturer must make another solution available, either through the manufacturer or another third-party entity. The disability access requirements also apply to any user guides, bills, or other customer service communications provided by the manufacturer to the user. The FCC did not impose any “universal design” plan for how devices must meet the accessibility requirements, leaving the door open for manufacturer innovation in disability access. 

Whether disability accessibility is “achievable” for a device will be evaluated under four factors: (1) the costs of manufacturing a compliant device; (2) the technical and economic impact of compliance on the manufacturer and device innovation; (3) the size and nature of the manufacturer’s operations; and (4) the extent to which the manufacturer offers other equipment with accessibility features at differing price points. The burden will be on the device manufacturer to prove that accessibility is not achievable regarding a particular device.  

Even if disability accessibility cannot be built into a device or offered for a nominal cost through a third-party solution, the manufacturer must still ensure that its devices are compatible with specialized equipment and software designed for communications access by disabled persons. Importantly, manufacturers may not install functions which impede usability by disabled persons. As a result, a device must “pass through” any features already included in content accessed by the user designed to improve accessibility, such as closed captioning. Consumers may file complaints with the FCC regarding the accessibility requirements and violators will be subject to administrative fines.

The new rules require manufacturers to “identify barriers to accessibility and usability” and to consider disability access performance objectives during device design, development, and evaluation. Manufacturers will also be required to maintain records indicating: (1) their efforts to consult with individuals with disabilities to develop compliant devices; (2) descriptions of the accessibility features of their devices; and (3) information regarding the compatibility of their devices with specialized accessibility equipment commonly used by disabled persons. The recordkeeping requirements remain under consideration by the U.S. Office of Management and Budget and will not take effect without the agency’s approval.

The FCC temporarily exempted small business entities from the accessibility requirements and will assess whether to make this exemption permanent through the Further Notice of Proposed Rulemaking published concurrently with the new regulations. The notice asks for industry input regarding how manufacturers can implement disability accessibility for Internet browsers and videoconferencing services included with devices as well as whether regulatory safe harbors should be created for manufacturers that adopt industry-created disability accessibility guidelines. The FCC will accept comments regarding the Notice of Proposed Rulemaking until February 13, 2012, with reply comments due on March 14, 2012.

First White Spaces Database and Device Approved by FCC

By J. Bradford Currier, Marc Martin, and Marty Stern

In a move that FCC Chairman Julius Genachowski called “an important step towards enabling a new wave of wireless innovation,” the FCC approved the first-ever television White Spaces database and compatible device. Spectrum Bridge will operate the new White Spaces database and is authorized to begin service on January 26, 2012. Koos Technical Services received FCC approval to sell products authorized to operate within the White Spaces on an unlicensed basis.

White Spaces, sometimes referred to as “Wi-Fi on steroids” or “Super Wi-Fi,” consist of unused spectrum between licensed broadcast television stations. White Spaces devices operate on lower frequencies than normal Wi-Fi devices, allowing for better signal penetration into building interiors. White Spaces proponents suggest that unlocking White Spaces for unlicensed use will lead to an expansion in low-cost wireless Internet access options, an increase in public Internet “hotspots,” and improved connectivity for smart grids designed to make energy consumption more efficient.

In addition to Spectrum Bridge, the FCC has conditionally designated a number of entities as White Space database administrators that must receive final FCC authorization after a 45-day public trial before commencing commercial service. One such company, Telcordia, is in its public trial now and its White Spaces database can be accessed by clicking here. Under the FCC’s rules, authorized White Spaces devices must connect to an authorized White Spaces database, securely transmitting their location information, in order to receive a list of nearby unoccupied channels available for use. White Spaces devices, utilizing the authorized database, are required to protect a number of licensed services included in the database from potential interference, particularly broadcast television stations. Wireless microphone users and operators of temporary broadcast auxiliary service links will need to register their sites with the White Spaces databases in order to receive protection.

Spectrum Bridge will be initially limited to covering the Wilmington, North Carolina metropolitan area. The FCC placed the geographic limitation on Spectrum Bridge’s authorization after initial testing uncovered issues with database registration by a number of entities, which Spectrum Bridge promised to correct before it begins full operations.

Public interest groups hailed the FCC’s announcement, claiming that unlicensed White Spaces use will spur innovation and create jobs in the tech industry. While the scope of the new White Space plan remains limited for now, broadcasters have continued voicing concerns that White Spaces use interferes with their digital and high definition signals, and unfairly restricts broadcasters’ spectrum footprint.

It remains to be seen how White Spaces will fair in spectrum reform legislation that is currently being considered by Congress. The spectrum reform language was expected to be passed as part of the year-end payroll tax extension legislation, but was not included in the final two-month deal. The House version of the spectrum legislation would prevent certain auctioned spectrum from being used for unlicensed wireless services, over the objection of House Democrats and tech interests. If spectrum reform is passed as part of a one-year tax extension deal, there is some question as to whether White Spaces will be preserved in some form in the final bill. Reports indicate that today’s announcement will be the first of many White Spaces database and device authorizations, setting the stage for a major increase in unlicensed wireless service nationwide – assuming Congress can reach a compromise that preserves White Spaces in the pending spectrum reform legislation.

FCC Adopts Sweeping USF and ICC Reforms

By Marc Martin and Marty Stern

The Federal Communications Commission adopted what FCC Chairman Julius Genachowski termed a “once in a generation” reform to the Universal Service Fund (“USF”) and Intercarrier Compensation system (“ICC”) at its recent open meeting

The USF is a longstanding system by which fees are collected from traditional landline, mobile wireless and interconnected voice-over-internet-protocol (“VoIP”) providers, among others, (which, in turn, collect USF surcharges from their customers) to subsidize the provision of telecommunications services in high-cost areas, among other purposes, as authorized by statute and the FCC’s rules. The ICC is the system by which carriers compensate each other to originate, terminate or transport telecommunications traffic as it travels from points of origin to termination. Under the new rules, all eligible telecommunications carriers that receive USF funding would be required to offer broadband services to their customers. The proposed reforms are intended to expand broadband coverage to 7 million customers in underserved areas.

Pending release of the full text of the order, the FCC released an executive summary detailing the key reforms, including the creation of a Connect America Fund (“CAF”). The CAF will disburse approximately $4.5 billion per year in high-cost support to subsidize broadband deployment to homes, businesses, and community anchor institutions located in underserved areas. CAF funding would come from a gradual phase out of subsidies for traditional landline phone services. CAF funding will proceed in two phases, with service providers receiving $300 million for immediate broadband build-out projects beginning in 2012. Providers receiving funding in the first round of CAF funding must meet specific build-out milestones and provide service exceeding certain speed requirements. The exact details of phase two CAF funding will be developed through a Further Notice of Proposed Rulemaking that will accompany the order and will include competitive bidding for USF funding and payments based on proposed cost models included in the Further Notice. 

The new rules also establish a Mobility Fund, which will support mobile voice and broadband services offered by mobile broadband carriers. As with the CAF, Mobility Fund disbursements will proceed in two phases, with the first phase involving a “one-time” payment of $300 million, which will be awarded through a nationwide reverse auction in late 2012 where service providers will attempt to underbid competitors to receive funding. The FCC will require successful auction participants to deploy 4G service within three years or 3G service within two years. Service providers to Tribal lands will also receive $50 million in funding to bolster broadband development in these historically underserved areas. Phase two of the Mobility Fund will provide up to $500 million annually in continuing funding, with $100 million targeted for Tribal areas. Recipients of Mobility Fund payments will be obligated to meet public service obligations involving data roaming and information collection requirements. The Further Notice will also address additional details regarding the proposed distribution methodology, eligible participants, and public interest obligations under the Mobility Fund.

The FCC will also allocate at least $100 million per year for a new Remote Access Fund intended to provide affordable access in the most remote areas of the country through alternative technology platforms, including satellite and unlicensed wireless services. Details of the Remote Access Fund will be addressed in the Further Notice, with final rules expected in 2012 and implementation in 2013. 

The ICC component of the order takes aim at the alleged “arbitrage practices” of certain carriers involving traffic pumping and phantom traffic, which, according to the FCC, are aimed at unduly increasing a carrier’s receipt of ICC payments, such as practices to misrepresent the origin of traffic that terminates on other carrier networks. To provide a technical solution to curb these apparent abusive practices, the FCC will require all telecommunications carriers and providers of interconnected VoIP services to include the calling party’s telephone number in all call signaling, and require intermediate carriers to pass this signaling information on to the next provider in the call path.

Significantly, the FCC adopted a national “bill and keep” framework as the ultimate end state for traffic exchanged with a local exchange carrier, abandoning the current “calling-party network-pays” model. Over the next decade, carriers will gradually reduce their termination rates to bill and keep, with an immediate cap to most ICC rates as of the date of the order. By 2013, carriers will be required to bring interstate and intrastate termination rates into parity, with a phasing out of those rates over the next six years for price cap carriers and nine years for rate of return carriers. The order permits incumbent telephone carriers to offset the loss of ICC revenue through limited monthly customer charges. Given the limitations it has imposed on this recovery mechanism, the Commission believes that customers will receive more than three times the amount of the charges through benefits such as lower calling prices and increased value.

The USF and ICC reforms follow a public comment period in which over 20,000 filings were submitted to the rulemaking docket. In response to the FCC’s order, some consumer groups applauded the FCC’s imposition of public service obligations on support fund recipients, although other organizations noted the potential for customer price increases. A number of leading lawmakers on telecom issues also expressed support for the reforms, citing the importance of broadband access for economic growth. By contrast, wireless industry groups suggested that the reforms provide too little long-term funding for mobile services. State utility commissioners warned that the new rules threaten to preempt state authority over local telecommunications issues. Providers of VoIP services also saw their earlier concerns confirmed as interconnected VoIP services will be subject to the payment of access charges under the new rules. However, the FCC order will require traditional circuit-based telecommunications carriers to “negotiate in good faith” in response to requests from VoIP providers for IP-to-IP interconnection of voice traffic. Industry observers also expect court challenges to the new rules.

Update:  On November 18, 2011, the FCC released the full text of the Order and Notice of Proposed Rulemaking

FCC Universal Service Reforms Push Broadband Expansion

By Marc Martin and Marty Stern

In a recent speech, FCC Chairman Julius Genachowski announced sweeping reforms to the Universal Service Fund (“USF”) and Intercarrier Compensation system (“ICC”) designed to expand broadband Internet access to underserved areas. The announcement provided a preview of a draft order that the Chairman circulated internally, which the FCC will consider for a vote at the agency’s October 27th open meeting. The reforms would extend broadband coverage to 18 million rural Americans and result in approximately $1 billion in savings for wireless customers.

The draft order follows the agency’s Notice of Proposed Rulemaking released in February, and incorporates a number of measures from America’s Broadband Connectivity Plan presented by a coalition of large and rural carriers over the summer. The new rules would transition nearly $4.5 billion in annual USF support to a “Connect American Fund,” which would subsidize wireless Internet access to homes, businesses, and public service organizations. The Connect America Fund would also dedicate resources intended to ensure the universal availability of affordable mobile broadband and provide a “shot-in-the-arm” to accelerate deployment of 4G networks in 2012. The reforms would phase out subsidies for traditional landline services and USF funds would be disbursed as part of an annual budget. For the first time, providers would be required to participate in a competitive bidding process to receive universal support funds. The ICC reforms also include the elimination of certain alleged “loopholes” that allow some carriers to claim undue compensation and so-called “arbitrage schemes,” which allegedly involve the diversion of traffic to avoid ICC payments. 

Industry observers noted that the Chairman’s announcement did not contain many details regarding the implementation of the USF/ICC reforms. Nevertheless, a number of VoIP providers expressed concern that the reforms would result in the imposition of access charges and other traditional phone service charges on Internet-based communications. The National Association of Regulatory Commissions stated that the reforms could result in unintended harmful consequences for consumers. Cable companies argued that the new rules favor large telecommunications companies to the detriment of smaller broadband service providers. Consumer groups suggested that the FCC should not allow carriers to raise rates for traditional landline service to pay for the broadband expansion. A number of wireless carriers, however, expressed support for the Chairman’s remarks, stating that broadband access remains critical and is a key economic driver. The Senate Commerce Committee will hold hearings on the USF/ICC changes later this week. Its Chairman, Sen. Jay Rockefeller (D-WV), recently spoke in favor of the proposed reforms.

FCC's Comment Deadline Set for Online Video Closed Captioning NPRM

The FCC's Media Bureau announced the following comment deadlines for the FCC’s recently released Notice of Proposed Rulemaking to adopt closed captioning rules for video programming delivered by Internet Protocol: Comments:  October 18, 2011. Reply Comments:  October 28, 2011. As we reported previously, the NPRM proposes closed captioning requirements mandated by the Twenty-First Century Video Communications and Accessibility Act of 2010 (“CVAA”). The new rules would apply to a broader range of devices, including mobile devices, and content providers would be required to meet a strict schedule based upon the type of content captioned.  Notably, under the NPRM, the FCC's closed captioning rules would no longer be restricted to television receivers or to those devices with screens larger than 13 inches, an exception originally established in the Television Decoder Circuitry Act of 1990.  The CVAA requires the FCC adopt these rules by January 12, 2012.

FCC Proposes Closed Captioning Rules for Online Video

By Marc Martin and Marty Stern

Closed captioning of online video for mobile and other devices is a step closer to reality with the FCC's release of a Notice of Proposed Rulemaking in connection with its implementation of the Twenty-First Century Video Communications and Accessibility Act of 2010 (“CVAA”). The CVAA required the FCC to adopt rules providing for the captioning of video programming delivered using Internet Protocol or IP if that programming previously appeared on television with captions. The new captioning regulations would apply to a broad category of IP-enabled devices, such as personal computers, mobile devices, videogame consoles, Blu-Ray players, and television set top boxes. Affected programming distributors will be able to seek hardship waivers from the proposed rules and will not be held responsible for minor compliance failures. Comments will be due within 20 days after publication of the Notice in the Federal Register, with reply comments due a quick 10 days after the deadline for initial comments.

Tech companies have already submitted numerous comments to the FCC in connection with CVAA proceedings, cautioning the Commission against adopting burdensome compliance obligations which could hamper innovation. The NPRM proposed a deadline schedule for the captioning of content, with pre-recorded programming unedited for Internet distribution meeting the captioning requirement within 6 months of the publication of the final rules in the Federal Register, live or near-live programming compliant within 12 months, and pre-recorded programming edited for Internet distribution adequately captioned within 18 months. The FCC chose not to adopt a controlling technical standard for the delivery of IP-enabled closed captioning.

The FCC also proposes in the NPRM to:

  • Require video programming owners to send captioned files for IP-delivered video programming to video programming distributors and video programming providers along with program files;
  • Obligate video programming distributors and video programming providers to “enable the rendering or pass through of all required captions to the end user”;
  • Mandate that the quality of all required captioning of IP-delivered video programming to be of “at least the same quality” as the captioning of the same programming when shown on television;
  • Adopt methods for handling complaints alleging a violation of the new requirements; and
  • Seek industry input regarding when an “apparatus” will fall under the obligations of the CVAA and when it is “technically feasible” for an apparatus to comply with the proposed rules.

The NPRM follows in the wake of the FCC’s August order reinstating video transcription requirements for the “big four” television networks, large cable systems, and direct broadcast satellite services. 

FCC's Net Neutrality Rules to be Published in Federal Register

By Marc Martin and Marty Stern

The controversial net neutrality rules adopted in the 2010 Open Internet Order will be published in tomorrow’s Federal Register, with a proposed effective date of November 20, 2011. The new rules were placed on the Federal Register’s public inspection page the day before its expected publication. The publication of the full rules follows the Office of Management and Budget’s approval of the information collection requirements mandated by the Open Internet Order earlier this month. Publication of the rules will enable net neutrality opponents in Congress and the broadband industry to launch their expected challenges to the FCC’s jurisdiction to regulate the network management practices of broadband service providers.

White House Super Committee Proposal Includes Spectrum Auction Plan

By Marc Martin and Marty Stern

The White House released its economic growth and deficit reduction proposal yesterday, which contains provisions for “incentive auctions” that were included as part of the American Jobs Act announced by President Obama last week. The proposal was part of the President's recommendations to the Joint Select Committee on Deficit Reduction, the so-called “Super Committee,” which has been tasked under the Budget Control Act with finding reportedly $1.5 trillion in long-term deficit reduction measures by late November. As we noted in our previous post regarding the Jobs Bill, incentive auctions would allow broadcast spectrum licensees to give up portions of their spectrum for auction by the FCC in return for a portion of the auction revenue. The FCC would then use the additional auction revenue to fund the creation of a nationwide, interoperable wireless network dedicated to public safety, with the remainder going towards deficit reduction. The plan projects revenue of approximately $24 billion from the incentive auctions, with $7 billion in auction proceeds and additional spectrum valued at $3 billion being used for the new public safety network. In addition, the FCC would be directed to collect $4.8 billion in spectrum licensing fees over the next ten years.

The incentive auction/public safety spectrum recommendation contained in the growth and deficit reduction plan, as with the Jobs Bill, is modeled on legislation introduced by Sen. Jay Rockefeller (D-WV) and Sen. Kay Bailey Hutchinson (R-TX),which has faced stiff opposition from House Republicans over the past year. As has been expected, the Super Committee approach provides yet another vehicle for the Obama Administration to press for incentive auction legislation, with the version in the American Jobs Act already introduced in the House and Senate. As with the Jobs Bill offered last week, the President's growth and deficit reduction recommendationsare silent on preserving unassigned spectrum for unlicensed use, including TV White Spaces (i.e., unassigned broadcast spectrum being developed for new "Super WiFi" broadband applications). As we noted in our Jobs Bill post, this has raised concerns from tech quarters that had been largely aligned with the Administration on spectrum policy issues.

Net Neutrality Rules Approved by OMB; Stage Set For Litigation and Legislative Challenges

In a major step forward for what one telecom observer called “the defining saga” of Federal Communications Commission Chairman Julius Genachowski's tenure, the Office of Management and Budget approved the information collection requirements of the controversial 2010 Open Internet Order. The approved provisions concern new network management disclosures required from broadband service providers and formal complaint procedures under the net neutrality rules. The new rules are expected to be published in the Federal Register in one to three weeks and will go into effect 60 days later.

While the OMB’s approval marks the final regulatory hurdle before implementing the Open Internet Order, the publication of the rules is expected to set off a flurry of long-awaited legal and legislative challenges to the net neutrality rules. Both Verizon and MetroPCS are expected to refile their appeals of the Open Internet Order challenging the FCC’s authority, which were dismissed without prejudice by the D.C. Circuit earlier this year because they were filed before publication of the rules in the Federal Register. The net neutrality rules would prohibit Verizon and other fixed broadband providers from slowing or discriminating against the delivery of content (a process known as “throttling”) from third-party content websites such as Netflix. Reports indicate that online video issues will become more heated over the next few years as more viewers forgo traditional cable and satellite television services.

On the legislative side, opposition to the Open Internet Order reached its peak last April, when the House of Representatives passed a Resolution of Disapproval under the Congressional Review Act seeking to invalidate the net neutrality rules while also attempting to limit the federal funds available to enforce the new regulations. The disapproval resolution followed months of hearings and criticism regarding the initial delay in publishing the net neutrality rules. Republican opponents of the net neutrality rules on the House Energy and Commerce Committee, led by Chairman Rep. Fred Upton (R-MI), are expected to continue questioning the FCC’s jurisdiction to regulate broadband traffic.

While opposition to the net neutrality rules increases, the FCC has already taken steps to notify companies affected by the Open Internet Order of their compliance obligations, releasing draft guidance last July on the network management transparency disclosures required from broadband service providers once the rules become effective.

White House Jobs Bill Includes Spectrum Auction Plan

By Marc Martin and Marty Stern

After being abandoned during the Congressional debate over the debt ceiling, the proposal to free up broadcast spectrum through “incentive auctions” is now part of the American Jobs Act announced by President Obama on Thursday and sent to Congress yesterday. Incentive auctions allow broadcast spectrum licensees to cede portions of their spectrum for auction by the FCC in return for a portion of the auction revenue. According to the Obama Administration’s estimates, the auctions will raise approximately $28 billion, which, under the proposed legislation, would be used to fund the creation of a nationwide, interoperable wireless network dedicated to public safety – bringing front and center the long simmering D Block controversy that has stymied earlier efforts to pass incentive auction legislation.

The current incentive auction proposal borrows from legislation introduced earlier this year by Sen. Jay Rockefeller (D-WV) and Sen. Kay Bailey Hutchinson (R-TX), and approved by the Senate Commerce Committee. The Senate bill would allocate, without auction, an additional swath of 700 MHz band “D Block” spectrum for public safety use and provide $7 billion to a new quasi-governmental entity named the “Public Safety Broadband Corporation” to fund and oversee the a new public safety network. This plan conflicts with draft legislation introduced by House Republicans of the House Energy and Commerce Committee. The House bill would not allocate the additional D Block spectrum but rather would auction this additional spectrum to commercial wireless companies that would construct nationwide networks for use by the public safety community. House Republicans contend that auctioning the D Block to private industry would save taxpayers from having public safety entities construct the networks and would likely result in the networks becoming operational much more rapidly. The House Republican draft legislation would have also allowed successful spectrum auction bidders to remain exempt from certain transparency rules imposed by the FCC's 2010 Net Neutrality Order, a provision omitted from the new jobs bill.

The White House bill authorizes the FCC to hold incentive auctions for non-D Block broadcast spectrum. In addition, it directs the agency to recover a substantial portion of the value of terrestrial broadband deployment rights originally set aside for satellite services through new spectrum fees on certain non-broadcast television and public safety licensees. In addition to receiving auction revenue, broadcast licensees may also be eligible for reimbursement of the costs incurred in “repacking” their licenses from their current allocations in order to make contiguous spectrum blocks available for auction. The Commission would also be given authority to adopt rules that allow public safety entities to roam and receive priority access on commercial networks during emergencies. The FCC would be required to make regular reports to Congress on the use of public safety spectrum and provide suggestions on how to increase spectrum efficiency. 

Wireless industry organizations, such as Mobile Future, quickly praised the auction proposal, stating that the additional spectrum freed under the proposal could produce half a million new jobs. A group of computer and software developers asked the FCC to “accelerate” the reassignment of spectrum to mobile broadband use if the agency receives auction authorization from Congress. Democratic leaders also called for prompt consideration of the President’s plan to avoid the delays, party conflicts, and broadcast industry opposition which hampered consideration of earlier spectrum auction proposals.

But some telecom observers suggest that the Obama Administration may be courting criticism from former allies through the new legislation. Specifically, the proposed legislation does not contain any language preserving the use of unassigned spectrum for unlicensed use. Major Internet companies, such as Google, which previously supported the Administration’s efforts regarding auctions, hoped to use this “white space” spectrum to expand broadband network coverage. The observers further contend that the bill could undermine the goodwill the administration cultivated with television broadcasters over the past few months on establishing auctions with sufficient protections for incumbent television licensees.

Even if opponents manage to strike incentive auctions from the new jobs legislation, the bipartisan “supercommittee” created during the debt debate could separately push broadcast spectrum auctions through debt reduction legislation. Public safety advocates have already lobbied many lawmakers on the supercommittee to include funding for a public safety network in any plan it sends to Congress later this year.

FCC Regulatory Fees for 2011 Due by September 14th

The FCC issued a public notice last week announcing that FCC licensees and various types of FCC-regulated service providers must pay their 2011 annual regulatory fees to the Commission no later than September 14, 2011. Entities owing fees must ensure their payments are received by September 14th to avoid incurring a 25% late-payment fee. The annual regulatory fees are mandated by Congress under Section 9 of the Communications Act of 1934, as amended, which requires the FCC to collect regulatory fees to recover the regulatory costs associated with the agency’s activities. Regulated entities can find additional information regarding the assessment of fees and payment methods at a special section of the FCC’s website.

FCC Proposes Streamlined Foreign Ownership Reviews for Wireless Mobile Companies

By Marc Martin and Marty Stern

The FCC launched a review of its foreign ownership rules for common carrier radio licensees, such as wireless carriers, as well as certain aeronautical radio licensees and spectrum lessees in a Notice of Proposed Rulemaking adopted earlier this month. The NPRM aims to reduce the regulatory hurdles on companies petitioning the FCC to exceed the agency’s 25% foreign ownership benchmark, adopted under Section 310(b) of the Communications Act, which in general requires an FCC public interest finding for 25% indirect foreign ownership of common carrier, aeronautical, and broadcast licensees. According to the Commission, the streamlined procedures would reduce the number of required filings by more than 70%. The NPRM does not affect radio or television broadcast licensees.

The Commission noted the continued difficulties companies encounter under the agency’s foreign ownership rules which were last significantly revised in 1998. Specifically, companies must currently compile detailed records concerning the citizenship and principal places of business of their investors, including entities which hold only de minimus interests through intervening investments and holding companies. The NPRM also recognized that under the current rules, companies must repeatedly submit foreign ownership updates to the FCC. To reduce these burdens, the NPRM offered a number of suggestions for comment, including:

  • Eliminating the requirement that companies obtain specific approval for named foreign investors, unless the foreign investor seeks to acquire an interest in the parent company that exceeds 25 percent or represents a controlling interest at any level
  • Allowing parent companies to request specific approval for foreign investors named in their initial petitions to increase their interests in the parent at any time after issuance of the initial ruling up to and including a non-controlling 49.99 percent equity and/or voting interest
  • Issuing foreign ownership rulings in the name of the parent company of the licensee, allowing for automatic extension of the parent’s ruling to cover any of its subsidiaries or affiliates, provided that the parent company remains in compliance with the terms of its ruling
  • Authorizing parent companies with a foreign ownership ruling to have up to and including 100 percent aggregate foreign ownership by investors that are not named in its initial foreign ownership petition, provided that that no single foreign investor or “group” of foreign investors acquires an interest in the parent that exceeds 25 percent, or a controlling interest at any level, without prior FCC approval
  • Permitting internal reorganizations of a parent company in certain circumstances where a new, foreign-organized controlling parent is inserted into the vertical ownership chain above the U.S. company
  • Amending the FCC’s practice of issuing foreign ownership rulings on a service-specific basis and on a geographic-specific basis

In a statement accompanying the NPRM, FCC Chairman Genachowski predicted the proposed paperwork reductions would save companies both time and money while increasing transparency and predictability for foreign investors. Commissioner Clyburn similarly highlighted the importance foreign investment plays in encouraging broadband deployment and economic growth. By contrast, Commissioner Copps questioned whether the current review process actually discouraged foreign investment and warned that the elimination of some foreign ownership rules carries potential risks.

Comments on the NPRM will be due 45 days after its publication in the Federal Register, which is pending, and reply comments will be due 30 days later.

House Draft Spectrum Bill Would Auction D-Block, Conflicts with Senate Bill; House Democrats Respond with Separate Discussion Draft

By Marc Martin and Marty Stern

In advance of tomorrow’s hearing on spectrum allocation and public safety, Rep. Greg Walden (R-Ore.), Chairman of  the House Subcommittee on Communications and Technology released a discussion draft of legislation that would auction off the 700 MHz band D Block spectrum to commercial bidders. The commercial auction provision puts the  Republican draft at odds with S. 911, passed by the Senate Commerce Committee, and championed by Sen. John D. Rockefeller (D-WV), which would allocate, without auction, the D Block spectrum for the creation of the public safety broadband network. The House bill would also allow the auctioning of “white space” spectrum between television channels, which the FCC  has opened  up for unlicensed use. The draft would also prohibit the FCC from imposing a spectrum cap on bidders, meaning the largest carriers could participate in the auction.

The House draft authorizes the FCC to conduct a single round of voluntary “incentive auctions” for television broadcast spectrum. While the auctions remain voluntary, nothing in the legislation prevents the FCC from forcing broadcasters to move from a UHF to a VHF channel in order to free up additional spectrum. The legislation would require that the FCC keep the identities of any broadcasters volunteering to cede their spectrum confidential in order to protect existing business. Broadcasters would also be permitted to ask the FCC for the waiver of a Commission rule in exchange for  forgoing a percentage of the auction proceeds. In a provision that has already been roundly criticized by public interest groups, the draft  bill would allow successful incentive auction bidders to remain exempt from certain transparency rules imposed by the FCC's 2010 Net Neutrality Order

House Democrats, led by ranking Energy and Commerce Committee member Rep. Henry A. Waxman (D-CA) and Rep. Anna G. Eshoo (D-CA), responded to the Walden bill with their own discussion draft, which would continue to allocate the D Block for public safety use and prohibit the FCC from relocating broadcasters from UHF to VHF channels. Reports indicate that negotiations between the parties continue with the hopes of ultimately producing a bipartisan proposal.

The conflict between the House and Senate bills and among the parties may complicate Sen. Rockefeller’s hopes to pass the spectrum legislation by the ten-year anniversary of the September 11th attacks.  That said, the possibility nonetheless remains that any resulting compromise legislation, which in all cases will raise significant auction revenue, may get fast-tracked as part of legislation resolving the debt ceiling impasse.

Court Upholds FCC Media Ownership Rules But Remands Newspaper-Broadcast Cross-Ownership Rule

In a mixed decision for the FCC, the Third Circuit remanded part of the Commission’s 2008 order relaxing the newspaper-broadcast cross-ownership rule while upholding the order’s decision to maintain existing TV duopoly, radio ownership, and TV-radio cross-ownership rules. The remanded rule would have permitted newspaper-broadcast cross-ownership in the top 20 markets and in smaller markets under certain conditions.

A number of media watchdog groups challenged the FCC’s 2008 order, asserting that then-Chairman Kevin Martin did not follow proper rulemaking procedures by announcing the newspaper-broadcast rule change in a newspaper op-ed followed by a press release issued just weeks before its adoption. The Third Circuit agreed, stating that the FCC failed tofulfill its obligation to make its views known to the public in a concrete and focused form so as to make criticism or formulation of alternatives possible.” The decision marks the second time that the Third Circuit has rejected Commission attempts to loosen media ownership restrictions, vacating relaxed limits proposed by the Commission in 2004 for failing to provide a reasoned analysis supporting its decision. Experts do not expect the FCC to appeal the Third Circuit’s decision.

Public interest groups applauded the Third Circuit’s decision to maintain the existing limits placed on television and radio ownership. Commissioner Michael Copps also praised the decision, calling it a “huge victory” for critics of media consolidation. By contrast, broadcasters argue that the ownership restrictions fail to reflect new market conditions and the rise of popular Internet media sources. Broadcasters assert that “modest reform” is still in the best interest of consumers and will likely reassert their challenges as part of the Commission’s ongoing ownership policy review, which is the subject of a pending Notice of Inquiry released last May.

Net Neutrality Rules Under OMB Review

After a lengthy administrative delay, the FCC finally kicked off the Office of Management and Budget Review of the information collection requirements in its 2010 Open Internet Order. Today’s Federal Register published companion notices seeking comment to OMB on the network practice disclosures and complaint procedure paperwork required under the Commission’s proposed net neutrality rules. Comments to OMB on both of these notices are due by August 8, 2011.

These requirements must be vetted by OMB under the Paperwork Reduction Act before the information collection requirements can become effective. Because the FCC decided to hold off publishing other aspects of its Open Internet Order pending OMB review of the disclosure and complaint requirements, the overall rules will not become effective pending completion of that process. Broadband service providers have already indicated their intention to challenge the information collection requirements before the OMB, arguing the FCC underestimated the paperwork burdens placed on small and mid-sized providers.  The OMB review process is a key step towards finalization of the rules and final publication, expected sometime this fall (depending on the timing and outcome of that process). As we have previously noted, early appeals of the net neutrality rules by Verizon and Metro PCS were dismissed without prejudice because they were filed before publication of the rules, and legislative challenges to the Open Internet Order remain in play, which together leave the path ahead for the new rules uncertain.

Net Neutrality Transparency Guidance Issued by FCC

In a preview of the disclosure obligations required by the FCC’s controversial net neutrality rules, the Commission recently issued advisory guidance to broadband service providers for meeting the transparency requirements of the 2010 Open Internet Order. The guidelines present a number of options by which broadband providers will disclose information regarding their network management practices, performance standards, and commercial terms to potential customers. The advisory guidance comes in response to requests from the broadband industry and Internet watchdog groups calling for flexible reporting requirements and regulatory clarity in advance of any enforcement of the transparency rules. Significantly, the advisory was issued by the Commission’s Enforcement Bureau and Office of General Counsel, reinforcing the potential for compliance exposure and that implementation issues will potentially be addressed in enforcement and complaint proceedings. The advisory guidance focused on five key areas:

      1.         Point-of-Sale Disclosures

The FCC clarified that the transparency rules do not require the distribution of information in hard copy or extensive training of employees regarding disclosure procedures. Broadband providers can normally meet their disclosure requirement by directing prospective customers to a web address at which the required disclosures are clearly posted and updated. In the case of “brick-and-mortar” retail outlets, broadband providers relying on the web for their point-of sale disclosure will need to make available equipment “such as a computer, tablet, or smartphone, through which customers can access the disclosures.”

      2.         Service Description

The Open Internet Order established an FCC broadband performance measurement project to assess network metrics such as connection speeds which broadband providers will need to disclose. The service description requirements vary depending on whether the provider offers fixed or mobile broadband. For fixed broadband, any provider which participates in the Commission’s performance measurement project can present the project’s results to customers to satisfy their disclosure requirement. Fixed broadband providers opting not to participate in the project may provide actual performance data based on internal testing, consumer speed reports, or reliable third-party sources.  

For mobile broadband, the FCC recognized the increased difficulties with obtaining accurate performance measurements. The guidance states that mobile providers “that have access to reliable information” may disclose the results of internal or third-party testing of mean upload and download speeds as well as mean roundtrip latency. The FCC will permit smaller mobile providers lacking advanced testing resources to provide a “typical speed range” experienced by most customers for each service tier offered along with a statement that the submitted data represents the provider’s best estimate of its service performance.

      3.   Extent of Required Disclosures

While acknowledging that the list of disclosure topics in the 2010 Open Internet Order “is not necessarily exhaustive,” the FCC asserted that broadband providers may satisfy their transparency requirements by providing basic information on their (i) network practices such as congestion management; (ii) performance standards such as access speed and latency; and (iii) commercial terms such as monthly service prices, privacy policies, and customer complaint procedures. 

      4.         Content, Applications, Service, and Device Providers

In addition to consumer disclosure obligations, the transparency rules also require broadband providers to disclose information to certain “edge providers” like application and device suppliers. The FCC equated these two transparency requirements, finding that the disclosures required by broadband providers to consumers should also suffice for edge providers.

      5.         Security Measures

As broadband providers constantly monitor and assess new network threats, many providers argued that reporting and updating their security policies to customers represented an unreasonable and time consuming burden. The FCC replied that the transparency rules focus only on security disclosures that allow consumers to make informed choices regarding their use of the service, such as the deployment of an anti-virus program which prevents the customer from running a particular application.

The FCC emphasized the advisory nature of the guidelines, noting it may provide additional details in the future. How the broadband industry will react to the new rules remains an open question, as the Open Internet Order remains unpublished in the Federal Register while it awaits OMB approval. Commission observers estimate that the net neutrality rules will not become effective until October, at which time the pending legislative and court challenges to the net neutrality rules may further define how much information broadband service providers will be required to disclose and how these transparency measures will actually be implemented (if at all).

FCC Chairman Promises New Rules Against Telecom Mystery Fees

By Brendon P. Fowler 

The FCC has intensified its enforcement efforts against “cramming,” a practice where companies unlawfully bill consumers for unauthorized services that the consumers rarely if ever use. By placing misleading labels on fees and burying them in phone bills, the FCC believes that companies charge customers significant amounts for months or years before such “mystery fees” are discovered. In light of these activities, the FCC has announced plans to develop new rules to increase transparency and disclosure on phone bills as part of its “Consumer Empowerment Agenda,” and Chairman Genachowski remarked that the agency is “turning up the heat” on companies that engage in cramming. The FCC has already acted on that mandate, issuing Notices of Apparent Liability to four companies for a total of $11.7 million in penalties. In a parallel Enforcement Advisory, the FCC’s Enforcement Bureau warned that cramming activities are prohibited under Section 201(b) of the Communications Act, and also implicate the Commission’s Truth-in-Billing rules mandating the use of clear, non-misleading, plain language in describing services for which the consumer is charged. The Enforcement Bureau also encouraged consumers to continue reporting instances of cramming in order to enable it to take additional enforcement action. The FCC’s plans to propose new rules combined with the  Enforcement Bureau’s emphasis on enforcement of the existing rules, indicate that the Commission has placed a renewed focus on telecom billing practices. 

FCC Working Group Releases Future of Media Report

The FCC Working Group on the Information Needs of Communities delivered a comprehensive report yesterday addressing recent fundamental changes in the media landscape. The “Information Needs of Communities” report, produced by a group of journalists, scholars, media entrepreneurs, and government officials, reached a number of conclusions indicating that while technological advancements have improved public access to information, major deficiencies exist in contemporary news coverage. Specifically, the report found:

  • An explosion in Internet-based reporting on “hyperlocal” news directed by citizen journalists. The report expects further public reliance on Internet news sources as these non-traditional outlets proliferate. The Working Group pushed for rapid universal broadband deployment to expand access to these new media sources in rural and underserved communities. 
  • A marked decline in “local accountability reporting” from tradition news organizations. The Working Group noted that the recent increase in media outlets failed to result in more stories focused on community issues. The report warns that the dearth of local overage will result in less government accountability, greater corruption, wasted taxpayer dollars, and other community detriments. As a result, the study recommends policymakers craft incentives for media organizations to establish a “state-based C-SPAN” system and allocate more of the federal government’s $1 billion advertising budget for local media outlets.
  • Enhanced collaboration between commercial and non-profit media organizations, with synergies growing across media sectors. The report discovered increased diversification in non-profit media offerings, which the Working Group suggested should be supported through favorable tax reforms.
  • The FCC should take action to put media disclosure information online for easier public access. The Working Group advocated streamlining programming disclosures and eliminating burdensome disclosure rules. The report also advised the agency to take steps to discourage “pay-for-play” arrangements where TV stations allow advertisers to influence content. The report calls for the online disclosure of these arrangements.
  • The media industry would benefit from the repeal of the Fairness Doctrine and the termination of the FCC’s localism proceeding. The report also suggested the FCC re-assess the efficacy of the current satellite TV set-aside for educational programming.

Reaction from policymakers and media organizations to the report’s findings varied considerably. FCC Commissioner Michael Copps criticized the Working Group’s characterization of the media landscape as “vibrant,” considering the shrinking levels of local media coverage and the closure of many community news outlets. Chairman Julius Genachowski reiterated the agency’s concern with the growing “gap” between local news stories and other topics. The Media Access Project disparaged the report as a missed opportunity to set minimum public affairs program requirements on broadcasters.

In response, the American Society of News Editors denied the implication that newspapers abandoned investigative journalism and neglected local issue coverage. Broadcast associations such as the National Cable & Telecommunications Association stated its members provide a wide array of local and regional programming and represent leaders in broadband deployment. Broadcasters also approved of the Working Group’s recommendation to terminate the localism proceeding and highlighted the report’s findings that broadcast ownership restrictions should be softened in smaller markets to allow successful outlets to rescue failing stations in their area.

The report represents a product of the Working Group’s ongoing two-year examination of the media industry. Whether and to what extent the recommendations might be adopted by the FCC remains to be seen.

FCC Proposes to Extend Outage Reporting Rules to Internet-based Services [Updated: 6/9/11]

Update [6/9/11]:  The FCC's Notice of Proposed Rulemaking extending outage reporting requirements to interconnected VoIP and broadband-based services was published in today's Federal Register.  Comments are due by AUGUST 8, 2011 and reply comments are due by OCTOBER 7, 2011.  As we previously noted, the proposed rules raise a number of the same jurisdictional issues as the FCC's net neutrality order and other Commission initiatives extending various regulatory requirements to IP-based services, and will likely be hotly contested. 

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The FCC believes Internet-related outages are a growing problem for which providers lack sufficient accountability and consumers lack appropriate notice. To address these issues, yesterday the FCC adopted a Notice of Proposed Rulemaking which would require interconnected VoIP, broadband Internet, and broadband backbone providers to report service outages lasting longer than 30 minutes. The proposal would impose reporting obligations similar to those currently borne by wireline and wireless carriers, cable operators, and certain satellite providers, and represents the latest example of FCC efforts to layer traditional carrier regulations on VoIP and broadband providers. The Commissioners voted 4-0 in favor of the proposed rules (Commissioner Meredith Baker recused herself following her announced upcoming departure from the FCC to join NBC/Universal). Citing the recent natural disasters affecting Japan and the Midwest and Southern states of the United States, Chairman Julius Genachowski stated the reporting obligations would provide the FCC with the data necessary to rapidly respond to emergency situations.

Leading Internet service and VoIP providers immediately criticized the proposed new rules, arguing that regulations designed for traditional circuit switched phone service are ill-suited for Internet-based technologies. By contrast, public service commissions of states like California and New York hailed the proposal as an effective means of improving local emergency communications.

A threshold issue is whether the FCC possesses the authority to apply the new rules to interconnected VoIP and broadband-based services. In his partial concurrence to the proposed rules, Commissioner Robert McDowell stated that while he believed the reporting requirements exceeded the FCC’s authority, he “look[ed] forward to learning more” as the rulemaking progressed. Commissioner Michael Copps also voiced his displeasure with the agency’s attempt to utilize its ancillary authority under Title I of the Communications Act to support the new rules and reiterated his preference to reclassify VoIP as a Title II telecommunications service. While recognizing the authority issue, Chairman Genachowski indicated he has little doubt the FCC possesses the authority required to enact the proposed reporting obligations. In many respects, the proposed new rules raise the same jurisdictional issues as the Commission’s adoption of new Net Neutrality rules, and would be expected to face court challenge, if adopted.

Under the proposed rules, providers of the affected services would face substantial fines for violations, with the FCC proposing a base forfeiture penalty of $40,000 for notification failures. As a result, beyond the jurisdictional questions, affected providers will likely focus their comments on the FCC’s proposed definition of outage reporting, the scope of what information must be reported, and whether the FCC will permit providers to submit outage reports confidentially. The deadline for comments and replies will be set after publication of the NPRM in the Federal Register.

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.

Lawmakers proposed nearly 100 amendments designed to address a number of unresolved issues present in the legislation, and the future of the legislation is uncertain. Critics contend that the D-Block spectrum should be auctioned to commercial broadband providers as required by current law. According to the Act’s detractors, commercial providers remain better equipped to rapidly develop wireless networks which could then be shared with public safety organizations. Experts have already voiced concerns that the financial strains placed on local governments will limit the funding to public service organizations necessary to build out broadband networks. Opponents of the bill noted that nearly $13 billion in federal funds and 100 megahertz of spectrum has already been allocated to public safety with no development of an interoperable network. By auctioning the D-Block, the FCC would give private industry the incentive to develop robust wireless networks, especially in rural areas.

Some industry observers question the government’s estimates of the revenue expected from the incentive auctions, arguing current valuations overestimate the amount of participating broadcasters and the value of available spectrum. Broadcasters and other spectrum holders also charge satellite television and wireless carriers with amassing large quantities of unused spectrum and have argued that Congress should require an inventory of current spectrum use before going forward with the incentive auction plan. Reports suggest that future wireless demands may be met through existing technology such as antennae designed to transmit signals more efficiently and small area “femtocell” networks, which can offload wireless network traffic to a wired network installed in a home or office. The FCC’s “repacking” plan could lead to a domino effect of interference issues as relocated channels interfere with stations in neighboring markets. Spectrum innovators have urged that TV White Spaces technologies, newly emerging unlicensed devices and networks that use vacant broadcast channels, would be foreclosed by the reallocation and repacking of broadcast spectrum. An amendment to the bill by Sen. Maria Cantwell (D-WA), which allows the use of auction funds to maintain portions of spectrum for unlicensed public use, is said to potentially address some of these concerns and drew praise from public interest groups. Many lawmakers and broadcasters have also argued that the voluntary incentive auctions will eventually transform into an FCC-led takeover of spectrum. Most politically damning, the bill has also been characterized as a “spending bill,” leading to potential issues with House Republicans, and it is also expected that various Senate Republicans will place holds on the legislation questioning its cost impact.

Despite opposition from a number of quarters, the White House praised Committee Chairman Sen. Jay Rockefeller (D-WV) and ranking member Sen. Kay Bailey Hutchinson (R-TX) for taking a preliminary step to satisfying the President’s pledge to expand wireless coverage to 98% of Americans as part of the National Wireless Initiative. The wireless industry similarly welcomed the bill, characterizing the incentive auction plan as “critical” to satisfying growing customer demand for wireless broadband. Some organizations, however, expressed concern that the Act fails to afford the FCC sufficient flexibility to efficiently manage the auctions.

Sen. Rockefeller hopes to speed the legislation to a vote in the Fall, prior to the tenth anniversary of the September 11th attacks.

Net Neutrality Opponents Question Publication Delay

Administrative delays continue to plague the publication of the FCC’s controversial Net Neutrality Order adopted back in December 2010. According to agency observers, ongoing negotiations with Internet service providers and the need for OMB to approve the rules’ complex information reporting requirements may push the publication date of the regulations into the Fall.

The official publication of the regulations in the Federal Register will enable net neutrality opponents to launch long-awaited legal and legislative challenges against the Order. Even as publication remained pending, Verizon and Metro PCS each appealed the Order in the D.C. Circuit, contending that the FCC exceeded its statutory authority when it imposed the new regulations. The D.C. Circuit dismissed the suits without prejudice last month because the companies filed prior to the Order’s publication, but Verizon indicated that it plans to refile its challenge once the rules are published in the Federal Register. 

In the House of Representatives, opposition to the Net Neutrality Order has been especially strong. Following an initial delay and contentious hearings on the issue, in April, the House passed a Resolution of Disapproval under the Congressional Review Act seeking to invalidate the Order. Rep. Greg Walden (R-OR), a leading critic of the FCC’s net neutrality policies, began questioning the publication delay last month and suggested the agency intentionally put off the Order’s publication to hinder impending challenges. In response, the FCC noted that the Order is going through the “normal process” of OMB review under the Paperwork Reduction Act and that the agency has no incentive to delay the implementation of one of its key policy proposals.

OMB approval of new reporting requirements, however, is not automatic. For example, OMB rejected new FCC backup power rules in 2008 because the FCC did not allow for sufficient public comment, did not prove the information required from carriers would be useful, and did not show it had sufficient staff to analyze the required information. While commentators have not focused on the OMB review process, this perceived delay in the publication of the final rules has added yet another twist to the political drama that has surrounded the Net Neutrality issue.

If You Want Broadband, You've Got To Get It Built

With expanding broadband as its defining priority, the FCC is taking a number of steps to facilitate the deployment of broadband facilities. We recently wrote on the FCC’s new pole attachment order, intended to expedite and lower the cost of access to utility poles. In a companion Notice of Inquiry, published today in the Federal Register, the Commission will be exploring ways that local governments and other authorities can help improve rights-of-way access and facility siting, both of which are key to mobile broadband deployment. Comments on the NOI are due by July 18 and Replies are due August 30. 

To give the FCC’s action some context, it has been estimated that the wireless industry has deployed some 250,000 cell sites in the U.S. in the last 25 years. With 4G deployments, which require sites deeper into the network, one analyst estimated that the country will need 2.4 million sites by 2020 to support the expected level of mobile broadband traffic. For those who remember the battles a few years back between the telecom industry and local governments, as well as agencies managing federal lands, a real question exists as to how that all gets done.

Enter the FCC and the facilities deployment NOI, which has identified and seeks comment on various points of contention between industry and government affecting broadband buildout, in an effort to identify a comprehensive solution. These include timeliness and ease of the permitting process; reasonableness of rights-of-way and other charges; outdated ordinances and statutes, including the treatment of small antenna systems on existing facilities (known as Distributed Antenna Systems or DAS); differing regulation between rights-of-way access, including traditional pole attachments versus wireless facilities siting; and opportunities for FCC intervention and best practices.

Joanne Hovis, incoming president of the National Association of Telecommunications Officers and Advisors (NATOA), recently struck a conciliatory tone on these issues in a live webcast conversation with K&L Gates Partner Marty Stern at the Broadband Properties Summit Economic Development Conference in Dallas, carried on Broadband US TV. Ms. Hovis stressed local governments’ interest in helping to facilitate broadband deployment, and that she hoped the FCC’s discussion would focus on collaboration between local government and industry, rather than preemption, litigation and antagonistic processes.

Striking a similar chord, in an earlier letter to Chairman Genachowski, local government groups stressed that the NOI focused too much on past practices as well as right-of-way compensation issues, with insufficient attention on how local governments, the FCC and industry can work cooperatively on these issues. In contrast, wireless industry groups such as CTIA largely praised the NOI after its release, stating the proposals will help “unlock greater efficiencies in rights-of-way and wireless facilities siting policies to speed broadband deployment.”

It remains to be seen what the ultimate tenor of the proceeding will be, and whether the FCC will seek to broker common ground between industry and local governments, or if the agency will examine areas where it might take more aggressive actions that local governments will undoubtedly resist. An additional wild card with this issue is how to deal with local community opposition to wireless projects, that have stopped projects cold, even where the projects may have had the support of local officials. As to telecom access to federal and tribal lands, perhaps the Administration should examine reenergizing the Federal Rights of Way Working Group, an interagency group led by the NTIA, which did a report in 2004 on best practices at the federal agencies for facilitating the deployment of telecom infrastructure, but has not been heard from since.

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.

House Committee Majority Staff Proposes Structural Changes to FCC

With all five FCC Commissioners scheduled to appear before the House Subcommittee on Communications and Technology today, the majority staff of the Committee on Energy and Commerce released a memorandum proposing significant changes to the FCC’s operating procedures.  According to the memorandum, the proposed reforms will streamline the Commission’s rulemaking processes and provide for more public input before the agency renders its decisions.  A few of the key proposals recommended in the memorandum include:

1.      Requiring the FCC to initiate all rulemaking proceedings with a notice of inquiry instead of a notice of proposed rulemaking. This mandatory prerequisite before the FCC could propose rules would require more deliberation by the agency before it adopts final rules.

2.      Obligating the FCC to publish the text of proposed rules for public comment before adopting any final rule.  In addition, agenda items scheduled for a vote by the FCC would be published in advance of any agency meeting.

3.      Establishing minimum comment and review periods for all proposed rules.  The FCC would also be required to render rulemaking decisions by set deadlines.

4.      Allowing a bipartisan majority of FCC Commissioners to set agenda items for consideration.  This proposal would replace the current process where the FCC Chairman holds the initial power to designate an agenda item for consideration. This proposal could also have the effect of requiring a supermajority of Commissioners to approve agenda items (although FCC Commissioner votes do not always fall along partisan lines).

5.      Requiring that the FCC identify the specific consumer harms addressed by a proposed rule and conduct a cost-benefit analysis of the rule’s market effects.  The FCC would need to review the continued efficacy of any adopted rule and eliminate regulations which no longer serve their intended purposes.

6.      Limiting the FCC’s power to impose conditions on transactions such as mergers to only those “narrowly tailored” to the public interest harms posed by the transaction.  Although Chairmen under both Republican and Democratic administrations have imposed conditions on mergers, the House Republicans have been particularly vocal in recent months about how conditions should not be a means to extract broader policy objectives.

7.      Relaxing the current “sunshine” law, which prohibits more than two Commissioners from conferencing in their official capacities outside of an open meeting.  The proposal would permit three or more Commissioners to meet and discuss agency issues as long as the meeting is bipartisan and follows other procedural safeguards.  This proposal is arguably the least ideological of all those proposed in the memorandum and has been suggested by several observers over the years as a practical solution to the limitations of the sunshine law on communications among Commissioners.

The majority staff’s memorandum is the latest salvo from the Republican majority in its battle with the FCC’s Democratic Chairman over the FCC’s regulatory agenda, particularly its adoption late last year of new Net Neutrality rules over the vociferous objections of Republican members of the Energy and Commerce Committee and House Republican leadership.  Those rules face almost certain legal challenge (earlier appeals by Verizon and MetroPCS were dismissed by the court as premature), and a resolution disapproving the rules under the Congressional Review Act passed in the Energy and Commerce Committee earlier this year.  The CRA resolution, which now faces an uphill battle in the Senate, was put aside last month during the debate over the 2011 budget, and remains pending before the full House.

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.

FCC Challenged on Net Neutrality at House Hearing

By Brendon P. Fowler

House Republicans continued to press their general opposition to the FCC’s Open Internet or “Net Neutrality” rules yesterday in a hearing conducted by the House Subcommittee on Intellectual Property, Competition, and the Internet. FCC Chairman Julius Genachowski defended the new rules and emphasized the importance of transparency for consumers and innovators, open access for lawful Internet content and services, non-discrimination, and flexibility for Internet service providers to manage their broadband networks in managing congestion and harmful traffic. In contrast, Republican Commissioner McDowell’s remarks shared Subcommittee Chairman Goodlatte’s skepticism of the need for the rules, arguing that in the absence of market failure, the Internet access market does not need fixing, and that the FCC’s recent Net Neutrality order will do more harm than good. Commissioner McDowell added that Congress never gave the FCC legal authority to take such action, and that sufficient consumer protections already exist to prevent and cure any harms that the FCC’s actions were supposed to correct, such as antitrust law. Chairman Genachowski countered that antitrust laws are expensive to undertake and can take years to enforce and address harms after the damage to the market has taken place, while the FCC’s Net Neutrality rules can be enforced relatively quickly and potentially before significant harm to the market occurs. While both the Chairman and Commissioner McDowell remarked on the importance of competition, innovation, and open access for the Internet, the competing visions of Chairman Genachowski’s “light-touch” regulatory framework and Commissioner McDowell’s deregulatory approach reflect the ongoing heated debate over the FCC’s Net Neutrality rules, and foreshadow potential Congressional efforts to alter or overturn those rules through legislation.

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.

In addition, the FCC held a conference call today for the press in which it shed some light about how it will analyze the merger. First, the FCC indicated that it will conduct its spectrum screen analysis on a "market-by-market" (as opposed to nationwide) basis. AT&T had argued that this is the proper framework for analyzing the merger, contending that there are five or more wireless providers operating in 18 of the top 20 U.S. local markets. Some analysts suggest that if evaluated on a nationwide basis, the transaction's approval would face a higher hurdle because it combines two of the four existing nationwide mobile wireless carriers. Second, the FCC declined to give any timeframe for the transaction's review. If the recent Comcast-NBCU merger is any guide, the FCC's review will take at least twelve months. This timeframe would push the likely decision beyond the expiration of Democratic Commissioner Michael J. Copps’s term with the FCC. Unless a new Democratic commissioner is confirmed by then, there will be a 2-2 partisan split at the Commission just as it seeks to adopt a decision under the glare of a presidential election year (which is not to suggest the transaction is inherently partisan, but partisan politics may complicate the agency's consideration). Third, the FCC clarified that it will primarily focus on the transaction's effect on competition today and in the future, whether it serves the FCC's spectrum policy goals and whether it advances the deployment of new technologies and services. Fourth, the FCC said it will coordinate with the U.S. Department of Justice Antitrust Division's parallel review of the transaction, just as it had with the Comcast-NBCU merger. In addition to review by the FCC and DOJ, the Senate Judiciary Committee will hold hearings next month on the acquisition’s potential impact on the mobile wireless telecom market.

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.

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.

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.

House E&C Committee Schedules Markup of Resolution to Reject FCC's Net Neutrality

Yesterday the Communications and Technology Subcommittee of the House Energy and Commerce adopted a disapproval resolution (H.J. Res. 37) of the FCC's 2010 Net Neutrality Order by a party-line vote. Today, the Energy and Commerce Committee issued a markup notice for the disapproval resolution of Monday, March 14 at 3:00 p.m. Assuming it is approved that same day (a likely outcome), it could be ready for House floor action fairly quickly (depending on the legislative priorities of the House majority leadership). 

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.

In a recent Notice of Proposed Rulemaking entitled “Innovation in the Broadcast Television Bands,” the Commission is taking the first steps in this process, proposing to allow multiple broadcasters to share a single 6 MHz channel, and designating fixed and mobile wireless services as co-primary services with broadcasting in these bands. According to the Commission, this will allow it to later make the broadcast spectrum available for flexible broadband use in anticipation of the incentive auctions. Initial comments in this proceeding are due March 18.

However, the auction proposal itself, which requires new legislation, faces staunch opposition from many television broadcasters and lawmakers concerned that the proposed auction plan will become a forced government takeover of broadcast spectrum, creating a “voluntary” offer broadcasters cannot refuse. While wary of the Administration’s motives, broadcasters aimed much of their recent criticism at the cable industry and consumer electronics firms. In an opening salvo, the National Association of Broadcasters (NAB) noted that broadcasters already spent significant capital and relinquished large portions of spectrum for wireless broadband as part of the digital transition. In one of the sharpest exchanges of the debate thus far, the president of the NAB pointed blame at satellite television and wireless carriers for “hoarding” large amounts of unused spectrum. The NAB also highlighted the public service burdens placed on broadcasters for providing local news and emergency communications that wireless providers do not share. The National Cable & Telecommunications Association, in response, called the NAB’s hoarding claim “flat wrong” and emphasized the fact that cable providers holding wireless spectrum purchased that spectrum for billions of dollars while broadcasters received their spectrum for free. Joined by the Consumer Electronics Association and CTIA, reallocation supporters chastised the broadcast industry for blocking the incentive auction plan which they claim may produce more than $33 billion in auction revenue, which at least one public interest commentator believes “is not a terribly realistic estimate of how things are likely to play out.”

Broadcaster supporters have called upon Congress to mandate an inventory of spectrum use and users before going forward with the FCC proposal, potentially delaying the implementation of the auction plan for years. Lawmakers such as Fred Upton (R-MI), Chairman of the House Energy and Commerce Committee, appear to favor this measured approach, as he recently cautioned the FCC against coercing local television broadcasters into relinquishing their spectrum on unfair terms. The Chairman went on to promise a “win-win-win” solution which would compensate broadcasters, open up spectrum to wireless broadband providers, and reduce the deficit. 

Such a “winning” result could remain elusive if, as some suggest, the incentive payments will not exceed the value of a profitable television station once government and transaction costs diminish sale proceeds. Although some Administration officials contend that the proposed auctions will still produce sizeable benefits even if many broadcasters abstain, continued industry opposition could result in the abandonment or significant delay of the incentive auction plan.

In the meantime, alternative broadcast spectrum proposals have begun to emerge. One option, articulated by Commissioner McDowell in the FCC’s Broadcast Spectrum Innovation NPRM as warranting further study, would empower broadcasters to engage in more flexible use of their spectrum through market transactions under Section 336 of the Communications Act. This “spectrum flexibility” approach could allow broadcasters to lease spectrum to third parties for wireless broadband use, potentially without substantial FCC involvement. No new legislation would be required, but the FCC’s rules applicable to broadcast spectrum leases would have to be relaxed. Like incentive auctions, this proposal would potentially allow the Treasury to recover a portion of the value of the leased broadcast spectrum.

Resolution of these issues appears to be a long way off if the incentive auction approach is the preferred route, but some accord on this issue will become essential as the nation’s broadband appetite begins to exceed the supply of available spectrum.

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.

The Comcast/NBCU Merger Conditions: Hedges Against an Uncertain Future

On January 18, 2011, the Federal Communications Commission granted its approval to the acquisition by Comcast, the nation's largest cable service operator and cable modem Internet access provider, of NBC Universal, Inc. (NBCU), the owner of the broadcast television network, several cable networks, Internet websites, and a leading Hollywood studio. The merger should fundamentally affect the businesses of programming, production and distribution across many platforms, including broadcast television, cable, online, and film. With significant control over both content and its distribution, the Comcast/NBCU merger created a potential incentive for the combined firm to raise prices and limit access to its programming to the disadvantage of its broadcast and online rivals. Working in coordination with the Department of Justice’s Antitrust Division, the FCC imposed a number of “targeted” conditions aimed at ameliorating the merger’s potential harms and quashing impending antitrust suits from states such as California. The Commission highlighted four key conditions to the government’s approval:

      1.     Ensuring Online Competitor Access to Comcast/NBCU Programming

The FCC imposed a number of provisions designed to ensure that bona fide online content distributors have the ability to acquire Comcast/NBCU programming at fair market prices and conditions. These protections extend to “online video distributors” (OVDs) such as Netflix, Hulu, Amazon and iTunes to prevent Comcast/NBCU from refusing to distribute their content to or intentionally impairing Internet access of the OVDs’ websites. The OVD conditions follow the Commission’s earlier order designed to implement firm net neutrality policies for fixed broadband service providers. Comcast/NBCU agreed to abide by the fundamental net neutrality principles even if they are overturned by a federal court. Comcast/NBCU further agreed to relinquish managerial control over Hulu, in which it is a significant investor, and provide standalone broadband Internet access services at “reasonable” prices. These provisions represented a blow to Comcast, which unsuccessfully argued that their company held no incentive to compete against OVDs because they lacked the capacity to deliver programming on a large scale. The Commission disagreed, citing the Department of Justice’s assessment of Comcast internal communications which indicated the company had taken steps to eliminate Internet video service competitors. The FCC marked the nascent OVD’s services for special protection by compelling Comcast/NBCU to share content as soon as an OVD establishes a distribution arrangement with one of Comcast/NBCU’s peers like ABC or CBS. This low threshold for sharing extends a lifeline to OVDs who feared they would be shut out of some of the most popular programming available.

      2.     Preventing Comcast/NBCU from Enacting a Discriminatory Distribution System

Numerous critics of the merger warned that Comcast/NBCU would stifle competition by withholding carriage of outside programming or imposing prohibitive carriage fees. To assuage these concerns, the FCC emphasized three stipulations in the merger approval to foster nondiscrimination in distribution. First, Comcast/NBCU must not discriminate against third-party programming on the basis of its non-affiliation with the merged firm. As a consequence, the cable set top boxes which enable customers to access both cable and online programming must direct incoming data on a neutral basis. Second, if Comcast carries news programming in a “neighborhood” of adjacent channels, it must carry all independent news in that same neighborhood. This provision arose after sustained complaints by networks like Bloomberg which charged Comcast with exiling their station to premium tiers away from other news content. Third, Comcast voluntarily committed to add a minimum of ten new independent channels to its digital lineup over the next eight years. Unlike the conditions involving OVDs, these conditions signified a major victory for the merged firm, as competitors originally asked the FCC to order Comcast/NBCU to divest itself of any NBCU stations in areas where Comcast held substantial market power.

      3.     Safeguarding Public Interest Concerns

The FCC enumerated some conditions and voluntary commitments related to the ethical concerns raised by the large media consolidation. Comcast/NBCU committed to expanding its local-interest, educational, Spanish-language, and children’s programming, although the FCC stopped short of mandating specific percentages for independent and minority-produced programming. The import of these policy commitments varied among the Commissioners. Commissioner Clyburn emphasized Comcast/NBCU’s willingness to enter into voluntary commitments as credible evidence of the merger’s public benefits. In contrast, Commissioners McDowell and Baker criticized the FCC for effectively forcing Comcast/NBCU to adopt costly policy programs which may hamper the merged firm over time.

       4.    Improving Arbitration Process for Licensing Comcast/NBCU Programming

Drawing upon conditions imposed in past large-scale mergers, the FCC announced an improved commercial arbitration process to facilitate disputes involving prices, terms, and conditions for licensing Comcast-NBCU programming. The arbitration procedures will apply to all of Comcast/NBCU’s affiliated programs, including video-on-demand and pay-per-view content, with the arbitrator considering the “last best offers” submitted by both sides before choosing the arrangement which best reflects the fair market value of the programming. Smaller distributors will hold the option to band together, in “baseball-style” arbitration, during their complaints against Comcast/NBCU. However, the Commission emphasized that the level of discovery available in these proceedings will be limited.

While few observers doubt that the Comcast/NBCU merger will significantly alter the media landscape, critical questions remain regarding what further effects the decision will have on content providers and distributors. Within Comcast, the company has already folded some of its flagship channels into their NBC counterparts to reduce redundancy and will reportedly invest heavily in reviving NBC’s primetime lineup. Meanwhile, Comcast/NBCU’s competitors may become more aggressive to avoid losing any additional market share to the new merged firm. In the interim, the unprecedented size of the merger will initially complicate any analysis of its effect on the national market. Even Chairman Genachowski conceded that the alleged benefits of the merger “are inherently difficult to quantify.” As demonstrated by Viacom and AOL Time Warner, vertical mergers can fail to produce their expected benefits, resulting in subsequent break-ups of the merged companies. Prior to the merger’s approval, Comcast submitted a report concluding the merged firm would have no incentive to deny NBCU programming to competitors and would not greatly disrupt the current market. However, one study commissioned by the American Cable Association placed the potential harms of the merger to consumers at $2.4 billion over the next nine years, nearly ten times the size of the expected public benefit of $204 million. Other critics of the merger questioned the efficacy of the imposed conditions, stating the disproportionate market power held by Comcast/NBCU post-merger will make the merged firm nearly uncontrollable. This gap between corporate and public benefit led Commissioner Copps to issue the sole dissent against the merger, finding multiple instances where the new entity will be able to wield unchecked market power post-merger. For example, nothing under the FCC agreement prevents Comcast/NBCU from bundling less popular programming with marquee content into “bloated” packages, potentially driving up prices for consumers. As Comcast faces no significant competition in many operating areas, the bloated packages will remain unconstrained by market forces. The merger threatens to exacerbate this situation by potentially weakening the few remaining Comcast/NBCU competitors in smaller markets.

On the issue of localism and diversity, supporters of independent media criticized the FCC for sustaining the status quo in the industry instead of increasing protections for smaller media providers. These critics cautioned that the merger would put NBC newsrooms under heightened corporate pressure to cut investments in local journalism and place one in every five television viewing hours under the control of a single company. Even if increasing numbers of online-only media sources rise up to take on the bulk of local investigative journalism, they will nevertheless fail to have the dominant market penetration that Comcast/NBCU will wield.

Most troubling for the merger’s critics, many of the commitments taken on by Comcast/NBCU will expire in seven years, potentially allowing the company to renege upon its pledges of content neutrality. Whether those concerns are valid remains to be seen, but what does seem likely is that future media consolidations will need to survive a protracted FCC review. Although lawmakers from both parties expressed their displeasure with the length of the FCC’s consideration of the merger, the number of interested stakeholders in these issues shows no signs of dwindling. However, the exacting investigation process is unlikely to deter other companies from developing their own large-scale merger proposals in order to stay competitive with the new FCC-approved Comcast/NBCU media giant.

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.

The announcement marked the FCC’s first assertion of authority over broadband Internet access services since the D.C. Circuit overturned their 2008 enforcement action against Comcast Corporation. The court ruled that the FCC could not rely on the “ancillary” authority provided under Title I of the Communications Act of 1934 (the “Act”) to regulate broadband Internet access providers. FCC Chairman Genachowski initially indicated a “Third Way” approach to regulating broadband Internet access service by reclassifying the transmission component of the service as a regulated “telecommunications service” under Title II of the Act, and forbearing application of many of the provisions of Title II against such providers. Ultimately, the Commission relied upon a patchwork quilt of statutory provisions of the Act to assert the FCC’s jurisdiction over broadband Internet access services, including Title II’s “telecommunications services” definition, Title III’s authority to license the wireless spectrum, Title IV’s authority to promote competition in video services, and Section 706 of the Telecommunications Act of 1996’s authority to facilitate the deployment of advanced telecommunication capabilities to the public. Commissioner Baker sharply disapproved of the use of Section 706, stating the provision did not amount to an independent grant of authority. By comparison, Commissioner Copps believed the FCC should have gone further in asserting its authority by classifying all broadband services as common carrier services under Title II.

Reaction to the Order’s treatment of wireless broadband from net neutrality supporters was swift and pointed. Free Press, a leading proponent of net neutrality, attacked the FCC’s relatively lenient treatment of mobile wireless providers, calling the Order a “squandered opportunity” which permits providers to block customer access to disfavored third-party content and a “betrayal” of President Obama’s campaign promise to protect a free Internet. The technology editor of the U.K.’s Guardian labeled the Order “a stunning example” of the U.S. government’s inability to bring about substantive change in telecommunications policy. While these commentators criticized the FCC’s failure to impose more stringent wireless guidelines, others criticized the Commission for overreaching and unnecessary government interference that would stifle innovation. Verizon took a strong stance against the Order, warning the new rules will introduce uncertainty into the wireless market without a solid legal foundation. Others argued that even the more lenient approach towards mobile wireless broadband providers was unnecessary for a robustly competitive wireless industry thathas no incentive to risk alienating customers through blocking, discrimination or unreasonable network management practices.

Despite the FCC’s more lenient approach towards the mobile wireless industry, two appeals of the FCC’s Order have been filed by mobile wireless operators Verizon and MetroPCS. Verizon filed itssuit against the FCC last month, alleging the Commission exceeded its regulatory authority in imposing the new rules. Ironically, Verizon and Google had drafted a joint net neutrality proposal that the Commission largely adopted in the Order’s final language. The company filed its case in the U.S. Court of Appeals for the District of Columbia, the same court which ruled against the FCC in last year’s suit involving Comcast, and requested its case be assigned to the same panel of judges which decided the Comcast case. The D.C. Circuit denied the assignment request and will now review the FCC’s opposition motion requesting that the venue be chosen by lottery and that the appeal be dismissed on ripeness grounds. MetroPCS’s appeal follows the recent allegation that the company violated the FCC’s net neutrality Order by blocking Skype, Netflix and other popular consumer Internet services under its new service plan.

Meanwhile, on Capitol Hill, House Republicans launched a two-pronged attack against the Commission, introducing a Resolution of Disapproval under the Congressional Review Act to overturn the net neutrality rules and passing an amendment to a spending bill preventing the FCC from using funds to implement the Order. House Communications and Technology Subcommittee Chairman Greg Walden (R-OR) called the actions necessary to prevent “onerous restrictions on the currently open and thriving Internet.” Echoing his colleague’s concerns, House Energy and Commerce Committee Chairman Fred Upton (R-MI) warned that “[t]he controversial Internet regulations stifle innovation, investment, and jobs. A federal bureaucracy should not be picking winners and losers.” Leading Democrats responded by sending a letter to the Senate leadershipcriticizing the Republican actions as unwarranted uses of legislative procedure designed to thwart the FCC from properly exercising its delegated authority.

The challenges to net neutrality in the courts and in Congress have caused some proponents to concede that “well-organized and well-funded” opposition groups will always have the advantage in any debate over net neutrality, rendering meaningful change unlikely. Although both House measures must still pass a Democrat-controlled Senate, which largely supports net neutrality, and escape Presidential veto, Congressional rancor over the Order will continue to engender heated debate amongst lawmakers for the foreseeable future while the Order’s ultimate legality plays out in the courts.

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.


The National Broadband Plan, the Broadband Stimulus, the Comcast decision, the Google gigabit initiative, White Spaces, Comcast-NBCU, the first steps toward spectrum and Universal Service reform, the changing face of Congress, the FCC's long-awaited net neutrality decision, and many other significant developments have made 2010 an unforgettable year for broadband in America and have set the stage for another remarkable year in 2011. 

An expert panel, moderated by Broadband US TV co-hosts Marty Stern and Jim Baller, delved into these and other issues, examining developments over the last year, and discussing what we can expect in 2011 in this live, interactive webcast.  As usual, viewers had an opportunity to submit questions to panelists throughout the webcast.  

This webcast is the latest in Broadband US TV's Broadband Policy Series/Inside Voices on Critical Choices, which tackles major issues in the broadband field. The programs present high-profile speakers of differing views and elicit lively, spirited and balanced debate. Recent programs in the series include:

  • Spurring Adoption and Use of Broadband, originally webcast October 7, 2010.  Watch the program by clicking here.
  • The Community Broadband – A Blessing or Curse?, originally webcast July 29, 2010.  Watch the program by clicking here.
  • The Net Neutrality/Open Internet Debate - What's Next, What's the End Game?, originally webcast May 27, 2010.  Watch the program by clicking here.
  • Broadcast v. Broadband: You Decide, originally webcast March 10, 2010. Watch the program by clicking here.
  • Broadband Stimulus National Town Hall, original webcast February 12, 2010. Watch the program by clicking here.