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FTC Releases New Rule Provisions That Expand Company Responsibilities Under The CAN-SPAM Act
On Monday, May 12, 2008, the Federal Trade Commission (aFTCa) released a several new rules under the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (aCAN-SPAM Acta or aActa). The Act and the implementing rules establish standards for sending commercial email messages.
The new rules stem from two rulemaking proceedings and are intended to clarify the existing requirements as follows: :
(1) add a definition of the term apersona to clarify that CAN-SPAMas obligations are not limited to natural persons;
(2) modify the definition of the term asendera such that when multiple partiesa products and services are promoted, it is easier to determine which entity is responsible for CAN-SPAM compliance;
(3) clarify that a sender may satisfy the avalid physical postal addressa by using a registered post office box or private mail box established under U.S. Postal Service regulations; and
(4) clarify that email recipients who wish to opt-out from receiving future email messages cannot be required to pay a fee, provide any information in addition to their email address and opt-out preferences, or otherwise be required to take any steps other than sending a reply email or visiting a single webpage.
The FTC also released a Statement of Business and Purpose (SBP), which addresses several topics that were addressed in the rulemaking proceeding but that are not subject to new rules. For example, the FTC declined to alter the length of time in which a sender may honor an opt-out request. The FTC also declined to expand the statutory definition beyond the five categories of atransactionala or arelationshipa services it exempts from the CAN-SPAM Actas requirements, as codified at 16 C.F.R. ASS 316.2(o).
These rules have the potential to promote greater marketing flexibility as they preserve the ability of entities to jointly and efficiently market products and services through commercial and promotional email. However, entities must be careful to understand the responsibilities that ensue from classification as a asendera when such marketing endeavors are pursued.Leased Access Order Imposes Significant Regulatory Burdens on Cable Providers
On November 27, 2007, the Federal Communications Commission (aCommissiona or aFCCa) released an Order and Further Notice of Proposed Rulemaking in its Leased Access Proceeding (aFNPRMa). The Order was released on February 1, 2008.
In the Report and Order, the Commission modified its leased access rules which require cable operators to set aside channel capacity for commercial use by unaffiliated video programmers. Specifically, ASS 612 of the Communications Act authorizes the Commission to promulgate leased access rules to promote diversity of programming at reasonable terms and conditions. In its Notice of Proposed Rulemaking sought comment on a number of provisions relating to enforcement, rates and procedural issues. The Commission adopted a plethora of cumbersome new rules in all of these area that all cable operators must fully comply with, in addition to the already existing regulatory standards. The Commission attempts to justify the rule modifications by claiming that they are necessary in order to create uniformity in customer service standards, negotiation standards, rates, reporting requirements. However, these rules significantly limit the ability of cable operators to carry out their business plans in a manner that is tailored to their specific business needs. These rules become effective 90 days after publication in the Federal Register.
The Commission tried to take a preemptive strike against any challenge by cable operators, claiming that the rules, as adopted withstand constitutional scrutiny. While the DC Circuit has already held that the leased access provisions of the 1992 Cable Act are not content-based, further regulation may not survive the intermediate scrutiny standard of review due to the elimination of public access obligations in the broadcast context and the great possibility of a negative impact on revenue impact may be a taking. Further, robust growth in access to the Internet and increasing consumer preference for web-based and other alternative forms of content diminishes the need for access through traditional cable service.FCC Releases Proposals to Reform USF
On Tuesday, January 29, 2008, the Federal Communications Commission ("Commission") released three Notices of Proposed Rulemaking ("NPRM") to examine the deficiencies in the high-cost Universal Service Fund ("USF"). The Commission asks for comment in three areas: (1) changes to the identical support rule for wireless providers; (2) use of reverse auctions to distribute subsidies; and (3) recommendations of the Federal-State Joint Board on Universal Service including making broadband services eligible to receive subsidies.
These reform proposals are long overdue as the stability of the fund, in terms of both contribution base and distributions has waned in recent years. Whether the reform efforts announced will actually go through is yet to be determined. Commission Democrats have already expressed dissenting views on the use of reverse auctions, demonstrating a lack of unity on the proposals. And, industry backlash is highly likely.NCTA Appeals Commissionas MDU Order
On January 22, 2008, the National Cable & Telecommunications Association (aNCTAa) filed a Petition to Stay a Federal Communications Commission (aCommissiona) Order, prohibiting exclusive contracts between multichannel video programming distributors (aMVPDsa) subject to section 628 of the Communications Act and owners of multiple dwelling units (aMDUsa). NCTA petitioned the D.C. Court of Appeals for review of the Order on January 16, 2008. Prior to the Commissionas ruling, exclusive contracts were not regulated by the Commission. NCTA takes issue with the fact that the Order not only bans exclusive deals on a prospective basis, but also renders all previously exclusive deals void, stripping MVPD providers of their contractual rights and jeopardizing their ability to provide video, voice and data services.
NCTAas petition rests on the premise that the Commission has no statutory authority to prohibit exclusive deals, and even if it did, the Commission can not abrogate existing deals. Further, NCTA argues that the Commissionas decision is arbitrary and capricious as it dramatically changed its position and analysis from just four years ago and, failed to state why meddling with existing contracts results in any tangible benefit for consumers.
Given the wide range of parties involved and the nature of the issues, the Court will certainly have its hands full trying to balance the interests of all parties involved to reach a fair and workable outcome.Recent Forbearance Petitions Demonstrate Need for Meaningful Intercarrier Compensation Reform
On January 11, 2008, Embarq filed a forbearance petition with the Commission to eliminate the aEnhanced Service Providera (aESPa) Exemption to interstate access charges. Embarq claims that grant of its petition would make ESPs telecommunications carriers, thus subject to regulation. ESPs would no longer be considered acustomersa of telecommunications carriers.
The Embarq petition makes clear that it is targeting specific types of companies for new regulation. Foremost, Embarq seeks to create additional regulatory obligations for interconnected VoIP providers, such as cable operators and Vonage. In addition, the proposed regulation would extend to purely Internet-based calling services like Skype. Most damaging is that the petition appears to treat all ESPs, including conference calling companies, voicemail providers, and others, as telecommunications carriers, subject to full Commission regulation, including reporting requirements and access charges.
Meanwhile, late last year, Feature Group IP also filed a forbearance petition requesting that the Commission affirm the ESP Exemption, as applicable to advanced IP communication systems.
Both petitions emphasize the greater need of a comprehensive reform effort to treat like services with regulatory parity under a unified rate scheme. Rather than perpetuating the interim regime, which is built upon discriminatory regulations, sponsored by industry giants, the Commission should seize the opportunity as a means toward obtaining equal treatment for all telecommunications traffic by eliminating disparate intercarrier compensation rate structures for otherwise identical functionality to even the playing field among providers and enhance consumer benefit.FCC Seeks Comment in MDU Exclusivity Proceeding
On Monday, January 7, 2008 an FCC order which voids exclusive contracts between multichannel video programming distributors (aMVPDsa) subject to section 628 of the Communications Act and owners of multiple dwelling units (aMDUsa) was published in the Federal Register. The FCC also released a notice of proposed rulemaking (aNPRMa) seeking comment on whether providers of Direct Broadcast Satellite (aDBSa) and Private Cable Operators (aPCOsa) should be permitted to have exclusive access to MDUs. The notice also considers prohibiting exclusive marketing arrangements and bulk billing. The purpose of the NPRM is to determine whether these practices benefits or harms video consumers in MDUs. Comments are due on or before February 6, 2008 and reply comments are due on or before March 7, 2008.Martin in the Hot Seat (Again)
Today, the Federal Communications Commission (aCommissiona or aFCCa) voted to overturn its 32-year old media ownership prohibition. Under the ban, broadcasters in the nationas 20 largest markets are prohibited from also owning a newspaper. Todayas vote is somewhat surprising due to the intense criticism that Chairman Kevin Martin & Co. have received in recent weeks from members of the House and Senate on media ownership, Commission oversight and operations, as well as a host of other issues. Legislators have questioned Martinas self-imposed aKGB-like atmosphere,a lack of accessibility and a slew of decisions based on little evidence or notice. Although Martin promised lawmakers more transparency, Martin appears to have ignored his own recommendations by continuing his pattern of making last minute changes to the proposal prior to the Commission vote. Again, significant backlash is expected due to Martinas rush to bring the item to agenda and a vote.
Cable companies are most affected by Martinas erratic regulatory agenda. It is expected that the Commission will pass a rule prohibiting cable companies from serving no more than 30% of the nationas subscribers in the near future. Martin also has hopes of reincarnating his a-la-carte pricing plan and extending indecency rules to apply to cable. Hopefully Martin will raise these, and all other issues, in an open forum, where such contentious issues are subject to the appropriate level the rhetoric and debate warranted.GAO Urges the FCC to Develop a Comprehensive DTV Transition Plan
The Federal Communications Commission (aCommissiona) has suffered yet another embarrassing moment in its highly criticized digital television (aDTVa) transition planning. On December 11, the General Accountability Office released a report, expanding upon points made in prior Congressional testimony which faulted the Commission for not having a fully developed plan in place, with a little over a year until the hard date of the transition is met. Specifically, the GAO requested that the plan include: (1) detailed goals, milestones, and time frames that can be used to gauge performance and progress, identify gaps, and determine areas for improvement; (2) strategies for collaboration between public and private sector stakeholders to agree on roles and responsibilities; (3) a description of reporting requirements to track stakeholder efforts against planned goals; and (4) strategies for managing and mitigating risks to avoid potential problems and target federal resources.a All this, of course, takes valuable Commission time and resources, both of which are running thin given the time constraints that the Commission is now operating under.
While Commissioner Copps emphatically stated that a[i]t continues to astound [him] that we do not have a comprehensive DTV transition plan,a and that a[t]his effort is far too important to be left to chance or patchwork decisions by individual companies,a it remains to be seen whether the Commission will act expeditiously to implements a workable solution.Commission Seeks to Extend Do-Not-Call Registry Beyond 5-Year Limit
On November 27, the Commission adopted a NPRM that examined whether numbers placed on the Do-Not-Call registry should be kept on the list beyond the current 5-year period. The NPRM proposes that telemarketers would be obligated to honor the registrations either until the number was removed by consumers or the database administrator, due to disconnection or reassignment.
Extension of the Do-Not-Call registry rules would prolong the tension between the Commissionas existing Customer Proprietary Network Information (aCPNIa) rules and telemarketing regulation. If a subscriber is listed on a Do-Not-Call registry, the carrier or marketer would not be permitted to contact that customer via telephone, even if contact would be permissible under the existing CPNI regime.Commission Examines Formalized Forbearance Procedures
In a Notice of Proposed Rulemaking (aNPRMa) released on November 30, 2007, the Commission responded to a petition filed by several CLECs asking the Commission to tighten its procedural requirements for granting forbearance under Section 10 of the Telecommunications Act of 1996 (aActa).
The CLECs asked for rules establishing notice and burden-of-proof requirements, opportunity for comment, and access to documents in forbearance proceedings.
Approval of the petition marks a significant win for CLECs, who have been abused by last-minute submissions made by the Bells to the Commission. The Bells have used the lax forbearance rules to their advantage in recent years. Currently the Bells are permitted to ask the Commission to ease pricing restrictions on services they sell to competitors on a market-to-market basis. The lack of procedural safeguards has left everyone except the entity seeking relief completely unaware of the extent of the relief granted to the Bells. Establishing formalized procedures guarantees transparency in the process by ensuring that all affected parties have a full and fair opportunity to voice concerns to the Commission.Commission Voids Exclusive Deals in MDUs.
The Federal Communications Commission ("FCC" or "Commission") released the full text of the order adopted at its October 31, 2007 meeting, which takes the unprecedented step of voiding existing exclusive contracts between multichannel video programming distributors ("MVPDs") subject to Section 628 of the Communications Act of 1934, as amended, and owners of Multiple Dwelling Units ("MDUs"). The order applies retrospectively to existing contracts as well as any future agreements.
This order is the FCCas latest gift to AT&T and Verizon, who are in the midst of rolling out their own video services. The order is one of the most extensive and abrupt policy changes ever taken by the Commission. The FCCas actions will no doubt be challenged in court by both the cable and MDU industries on the basis that it constitutes an unconstitutional regulatory taking (an argument the FCC attempts to defend against in five short paragraphs of the order (APAP 56-60)). Once again the FCC relied on its "ancillary jurisdiction" to take sweeping regulatory action.Martin Proposes Leased Access Rate Cut
Today, Kevin Martin, chairman of the Federal Communications Commission, proposed a 75% cut on the rates that cable television companies may charge for leased access to spare channels. Martinas proposal calls for the current rate of $.40 per subscriber to be cut to $.10 per subscriber in the hopes of promoting competition and bringing more programming from women and minorities into the market.
It remains to be seen whether such a drastic rate cut is merited. The Commission is expected to vote on the proposal later this month.Commission Expands Local Number Portability Obligations to Interconnected VoIP Providers
In an Order released Nov. 8, 2007, the Federal Communications Commission (aCommissiona) took several actions relating to local number portability (aLNPa) that affect all carriers, including VoIP carriers.
With the ostensible goal of streamlining the LNP process across the telecommunications industry, the Commission unequivocally extended LNP obligations to interconnected VoIP providers for the first time. Imposition of such obligations is ironic, in light of the fact that VoIP providers still have no right to obtain numbers directly, and instead typically rely on partner CLECs in order to provide numbers to their end users. The Commission reiterated that entities obligated to provide local number porting, including VoIP providers, may not obstruct or delay the porting process by demanding excessive information from the porting-in entity. The Commission also issued a Final Regulatory Flexibility Analysis (aRFAa), in response to the D.C. Circuitas stay of the Commissionas 2003 Intermodal Number Portability Order. In response to the D.C. Circuit, the FCC clarified that wireline carriers qualifying as small entities under the RFA are required to port numbers to wireless carriers when the wireless carrieras coverage area overlaps the location of the territory where the wireline number is provisioned, provided that the porting-in carrier maintained the numberas original rate center designation following the port.
This is the FCCas latest order in a series of orders that has extended traditional wireline regulation to interconnected VoIP carriers citing its exercise of its aancillary jurisdiction;a the same rationale provided by the FCC (and upheld by the D.C. Circuit) in imposing USF obligations on other interconnected VoIP carriers.Internet Taxes: Battle Lines are Drawn
One of the most hotly debated issues concerning telecommunications this Congressional term comes over whether a permanent ban on Internet taxes should be imposed. The current moratorium expires on November 1. Proponents of a permanent ban is necessary to encourage growth and deployment of the Internet and broadband facilities. Opponents argue that a permanent ban brings too many fiscal implications that harm local businesses who rely on the Internet. Legislators are stuck with the task of trying to strike a bi-partisan balance. The best proposal so far seems to be the recently passed Senate bill which extends the moratorium for seven years while lawmakers work towards a better understanding of Internet access. The bill, H.R. 3878 is now being considered in the House.Update: Senate Intelligence Committee Passes Bill Giving Telecom Companies FISA Immunity
Late Thursday night, the Senate Intelligence Committee passed a bill, by a vote of 13-2, giving Telecom companies immunity under FISA for the release of confidential consumer information.
While the bill lets telcos off the hook for releasing consumer information under less than perfect court ordered administrative subpoenas and mere requests for information, the issue of whether such warrantless wiretaps and searches are legal still looms.
Whether a bill granting such immunity passes on the Senate floor remains to be seen.CPNI: The Government's Playground
On Monday, Verizon, in a letter to congressional lawmakers, revealed that it had provided customersa proprietary telephone records, or CPNI, to federal authorities without formal court orders hundreds of times since 2005. Specifically, Verizon has provided information including: the identifying information of individuals making phone calls, all of the people that customer called and the people that those people called. Verizon disclosed this information in response to administrative subpoenas issued by the FBI.
The willingness of companies, like Verizon, to provide such a range of information in response to an administrative subpoena begs Congress, the FCC and other regulatory agencies to reexamine this sensitive issue in the future. While, FISA and the Patriot Act permit warrantless surveillance without a court order for the purpose of obtaining foreign intelligence information for a period up to one year, it remains to be seen whether an administrative subpoena issued by the FBI qualifies as a lawful court order, or whether these agencies are infringing upon the constraints of the Fourth Amendment as an unlawful search of customersa valuable CPNI.
While it is doubtful the FCC will initiate any action to reiterate that these practices are within the scope of CPNI exemptions, the FCC could take action through a consumer complaint driven process in the future.NTIA Creates New $1.5 Billion Consumer Equipment Market
The National Telecommunication and Information Administration of the US Department of Commerce (NTIA) on March 13 created a new $1.5 billion dollar market for consumer settop equipment designed to convert digital television signals to analog signals. Pursuant to the Digital Television Transition and Public Safety Act of 2005 Congress will require all television broadcast stations to cease operating on the analog channels they currently use and broadcast only digital signals. Read more...GAO special access report brings FCC to the reality-based universe
Like some other aspects of the Administration, the FCC has been criticized by some for describing the world as they would like it to be, rather than how it is.
Yesterday, GAO admonished the FCC for failing to reasonably define "effective competition" and for failing gather data to adequately measure competition in the $16 billion dollar a year dedicate access business, which is dominated by AT&T and Verizon.
Kudos to GAO. We hope this report and others like it will bring the Eighth Floor to the reality-based universe.Pennsylvania becoming more VoIP friendly?
Today, the PAPUC is expected reverse two ALJ decisions and grant Core Communications and Sprint licenses to provide service in rural areas of Pennsylvania.
To date, Pennsylvania RLECS have aggressively -- and successfully -- fought to keep competitors out of their incumbent territories. Their most aggressive advocacy has been against companies like Sprint, which is seeking to rollout a wholesale offering to aid small cable operators in providing VoIP.
With licenses in place, new entrants will be able to bring VoIP and other services to all consumers in Pennsylvania, not just those in the big cities.AT&T/BellSouth Merger: The Speculation Continues
We have been on a bit of a hiatus here at Commlaw Source but we're back now, we promise. Luckily, not much has happened in the time since our last update due to the fact that the election froze most Federal regulatory activity. With the Dems on top and committee assignments made on the Senate side, as it was before the election so it is after, with continuing speculation on whether the AT&T/BellSouth merger will be approved by the FCC before the end of the year. And before the new Democratically controlled 110th Congress is seated in January. Democrats on the relevant oversight committees have urged the parties to slow down the merger and warned that the proposed transaction will likely be the subject of oversight hearings in the 110th Congress. Analysts at Stifel/Nicolaus today though said that they believe a bi-partisan approval of the merger at the FCC is possible before year end, which would short circuit such hearings and perhaps allow the Dem FCC Commissioners to get some meaningful conditions on the merged company, but the clock is ticking fast for that to happen.AT&T/BellSouth Approval Merger On the Cusp
It appears as though the FCC's draft order approving the AT&T/BellSouth merger went on circulation last night, setting the transaction up for approval at the October 12 meeting.
It shouldn't come as a surprise, given Ed Whitacre took a limousine ride over to the Commission last week to discuss "international and state" approvals of the merger. We look forward to the announcement of the AT&T/Verizon/Qwest merger.Pre Election Scramble @ the FCC
We have it on good information that the FCC is scrambling to approve the AT&T/BellSouth merger at its September agenda meeting. This is counter to the conventional wisdom that had the FCC holding off on acting on the merger until after the Election and after the posture of the Tunney Act case (reviewing the DOJ and FCC approval of the SBC/AT&T merger) was more certain.
In addition to approval of the merger, word is that folks on the Hill are trying to schedule Chairman Martin's confirmation hearing this month before the Election recess. It appears that after a slow August, its back to business as usual in the halls of Congress and the FCC!USF Notice of Apparent Liability Issued
Commission Issues Notice of Apparent Liability for Forfeiture
for Failure to Contribute to the Universal Service Fund
The Federal Communications Commission ("FCC") has assessed a forfeiture of $529,000 against Local Phone Services, Inc. d/b/a Best Phone ("LPSI"), for repeated and willful failures to contribute fully and timely to the Universal Service Fund ("USF") and certain additional violations.
LPSI failed to timely file certain required Telecommunications Reporting Worksheets ("Worksheets"). The FCC uses the information submitted in these Worksheets to determine the amount of the USF payment due by that telecommunications carrier. The failure to file the Worksheets and pay the subsequent USF assessments results in disproportionate distribution of USF liability between carriers. Compliant carriers end up bearing the "economic costs and burdens associated with universal service", while delinquent carriers reap "an unfair competitive advantage."
Although a reduction in the forfeiture amount is typical when the violation is disclosed voluntarily, the FCC declined to reduce the forfeiture in this case. The FCC expects the voluntary disclosure to be accompanied by "swift and effective corrective actions" which were not forthcoming in the instant case.
Please feel free to contact us with any questions you may have regarding Universal Service obligations.FCC Warns Verzion and BellSouth on DSL USF
It seems some of the folks at the FCC have caught wind of plans by Verizon and BellSouth to continue charging consumers, in effect, the USF surcharge on DSL lines, but calling the charge a "regulatory recovery fee" and pocketing the money.
According to the Wall Street Journal, the carriers should check the mail for a letter of inquriry asking for "documentation about how the surcharges are consistent with federal Truth-in-Billing laws as well as how the underlying costs of providing high-speed Internet services are supported by the surcharges. Additionally, the FCC wants information on why the companies are imposing the surcharges on all Internet customers, both those who buy bundled packages and those who subscribe only to high-speed Internet."
Its nice to see the FCC taking pro-active, pro-consumer enforcment role and we hope its a trend.BellSouth and Verizon Swap USF Charge for "Regulatory Cost Recovery Fee"
Last year when the FCC effectively removed all common carrier regulation from DSL services provided by the RBOCs the Commission also removed the obligation of DSL providers to pay Universal service surcharges on their DSL line revenues. Great news for end users, who will no longer have to pay those assessments, right?
But according to today's Wall Street Journal BellSouth and Verizon won't be passing the savings on to their customers. "Verizon recently emailed subscribers announcing that it dropped the universal-service fee as of Aug. 14 and will impose a new "supplier surcharge" beginning Aug. 26. The new fee -- $1.20 a month for slower-service customers and $2.70 a month for faster ones -- is almost exactly what consumers would have saved with the government's change. BellSouth yesterday said it also intends to continue charging Internet subscribers its $2.97 a month "regulatory cost recovery fee.'"
We are shocked! This is just like the "Missoula Plan" a/k/a Pimp Plan, which is supposed to "fix" the universal service problem without impacting incumbent revenues. Call us crazy, but we see a pattern emerging here.Non-Compete Agreements Cannot be "Reasonable-ized" by Court--Even with the Parties' Consent
Yesterday, the Supreme Court stiffened its stern treatment of non-compete agreements. At issue in Beverage Systems was a non-compete clause that allowed the trial court to modify its geographic scope if the court determined the original scope was unreasonable. The trial court, however, declined to shrink the agreementas scope--even after finding it unreasonable. The Court of Appeals reversed, noting that the parties had expressly empowered the trial court to modify the agreement. Tailoring was appropriate, the COA held, because it amakes good business sense and better protects both a selleras and purchaseras interests in the sale of a business . . . . in a rapidly changing economy.a Today the Court of Appeals issued a decision addressing Session Law 2014-102, the 2014 Business Court Modernization Act, which requires that appeals in matters that are designated as mandatory complex business cases go straight to the NC Supreme Court. The case is Christenbury Eye Center v. Medflow, Inc. and Riggi.
This case involved a dispute between Christenbury, which offered opthalmalogic and eye services, and Medflow, which provided medical records management software and was founded by Riggi. Christenbury filed a Complaint on September 22, 2014 against Medflow and Riggi, alleging that they breached an agreement to further develop and resell the software platform to other ophthalmological practices by failing to pay royalties owed to Christenbury. The case was designated as a mandatory complex business case on October 29, 2014. Judge Gale granted Medflow and Riggi's motions to dismiss Christenbury's claims for breach of contract and unfair and deceptive trade practices. Christenbury appealed to the Court of Appeals.
The COA found that it lacked jurisdiction to consider the appeal, explaining that "[i]n 2014, our General Assembly enacted Chapter 102 of the 2014 North Carolina Session Laws, which, among other things, amended N.C. Gen. Stat. ASS 7A-27 so as to provide a direct right of appeal to the Supreme Court from a final judgment of the Business Court.[.]" The Court further concluded that the effective date of the 2014 amendments to N.C. Gen. Stat. ASS 7A-27(a)(2) was October 1, 2014, and any case designated as a mandatory complex business case after that date (whether it was filed before that time or not) was subject to the 2014 amendments to N.C. Gen. Stat. ASS 7A-27(a)(2).
There are certainly myriad cases currently pending in Business Court that will lead to appeals. Just remember that if your case was designated after the magic date, you'll face dismissal (and likely lose your right to appeal due to untimeliness) if you don't go straight to the Supreme Court.
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