Archive: 2011

1
Spectrum Auction Legislation Passes Senate Commerce Committee
2
House Committee Launches Data Security and Electronic Privacy Review
3
Net Neutrality Opponents Question Publication Delay
4
Copyright Bill Targeting Rogue Websites Approved by Senate Judiciary Committee
5
If You Want Broadband, You’ve Got To Get It Built
6
Verizon Challenges FCC Data Roaming Rules
7
House Committee Majority Staff Proposes Structural Changes to FCC
8
FCC’s New Pole Attachment Rules Become Effective
9
No Group Hugs: The Supreme Court Says “Yes” to Class Action Arbitration Waivers
10
Restrictive Website Rules Found to Be Anticompetitive

Spectrum Auction Legislation Passes Senate Commerce Committee

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

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

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House Committee Launches Data Security and Electronic Privacy Review

In the wake of recent high-profile data breaches suffered by major companies that exposed over 100 million customer records to identity theft, the House Energy and Commerce Committee announced plans to conduct a sweeping review of the data security and privacy issues affecting American consumers and businesses. The Committee will divide the review into two phases by first surveying current security measures used to protect personal information online before turning to bolstering privacy protections for Internet users. Committee Chairman Rep. Fred Upton (R-MI) noted that the recent rise in cyber attacks seeking access to personal data necessitates a reassessment of the security standards used by companies that collect customer information. Communications and Technology Subcommittee Chairman Rep. Greg Walden (R-OR) echoed Sen. Upton’s concerns and stated that the review aims to produce policies which will strike a balance between protecting consumer information and maintaining innovation.

The Committee’s review will likely serve as a launching point to evaluate existing cybersecurity proposals and develop new data protection legislation. In April, Sen. John Kerry (D-MA) and Sen. John McCain (R-AZ) introduced the “Commercial Privacy Bill of Rights Act” to establish federal consumer privacy protections that would apply across industry sectors and level stiff civil penalties against companies that mishandle or lose customer information. To protect the privacy of young social media users, Rep. Joe Barton (R-TX) and Ed Markey (D-MA) proposed the “Do Not Track Kids Act,” which would establish a “Digital Marketing Bill of Rights for Teens,” require companies to erase personal information upon request, and prohibit the storage of user geolocation data. The storage of geolocation data garnered recent media attention following reports that Apple’s iPod and iPad operating systems tracked user movements through a software “bug” which the company later removed. States such as California have also attempted to force social media providers to afford customers more control over their online privacy settings, facing staunch opposition from many major Internet companies.

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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. 

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Copyright Bill Targeting Rogue Websites Approved by Senate Judiciary Committee

The Senate Judiciary Committee unanimously voted to approve legislation aimed at shutting down “rogue” websites selling counterfeit goods or offering pirated content. The PROTECT IP Act would authorize the Justice Department to seek court orders prohibiting American Internet service providers from offering access to infringing sites. The Act would further allow content owners to prevent online advertising services and credit card companies from dealing with websites “dedicated to infringing activities.” The new bill represents a less sweeping version of the abandoned Combating Online Infringement and Counterfeits Act (“COICA”) bill, which would have permitted the government to seize domain names involved in copyright infringement.

While some media watchdog groups greeted the proposed reforms with guarded optimism, other organizations expressed lingering concerns over the constitutionality of the Act. Critics note that the definition of a website “dedicated to infringing activities” includes sites which they argue play too small a role in the infringing activity. Reports indicate that the threat of broad enforcement may drive leading Internet search providers like Google to challenge the bill if enacted.

Proponents of the bill, such as Sen. Patrick Leahy (D-VT), contend that the scope of the legislation remains narrow and will only target the “worst-of-the-worst” infringing websites. The proposal enjoys strong support from manufacturer associations and the Chamber of Commerce which blame rogue sites for job losses and recent market declines. The National Association for Broadcasters recently joined the fight in favor of the bill, citing the need to combat widespread piracy of movie and television content. Whether such bipartisan support and industry backing will be enough for the PROTECT IP Act to succeed where its predecessor failed remains to be seen.

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.

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Verizon Challenges FCC Data Roaming Rules

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

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

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

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).

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FCC’s New Pole Attachment Rules Become Effective

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

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

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

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

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

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

By Andrew Glass and Robert Sparkes III

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

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

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

Restrictive Website Rules Found to Be Anticompetitive

By Scott M. Mendel and Michelle S. Taylon

In Realcomp II, Ltd. v. FTC (6th Cir. April 6, 2011), the Sixth Circuit upheld the Federal Trade Commission’s conclusion that Realcomp, a Detroit area multiple listing service, violated Section 5 of the Federal Trade Commission Act by adopting rules restricting the ability of its broker members to advertise discounted brokerage services. While none of Realcomp’s website restrictions eliminated discount brokerage services or information regarding such services, they made such information less accessible and more costly to obtain. That was enough for the court to conclude that Realcomp’s policies had an actual anticompetitive effect based on the decline in the share of listings accounted for by discount listings.

The Realcomp decision can have significant implications for businesses, especially joint ventures, considering rules that restrict the information that can be disseminated over their websites. Rules that prevent, restrict, or make more costly the dissemination of information relating to discounted services must be reviewed carefully to determine their potential for anticompetitive effects.

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