CommLaw Monitor https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor News and analysis from Kelley Drye’s communications practice group Tue, 02 Jul 2024 17:03:16 -0400 60 hourly 1 Join Kelley Drye at the 16th Annual FCBA/ABA Privacy and Data Security Symposium https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/join-kelley-drye-at-the-16th-annual-fcba-aba-privacy-and-data-security-symposium https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/join-kelley-drye-at-the-16th-annual-fcba-aba-privacy-and-data-security-symposium Wed, 10 Nov 2021 11:53:44 -0500 On Tuesday, November 16 at 2:00 PM, the FCBA Privacy and Data Security Committee and the American Bar Association’s Forum on Communications Law will hold the 16th Annual Privacy & Data Security Symposium: “The Evolving Privacy Landscape in the Absence of Federal Legislation”. This event will take a deep dive into the evolving privacy landscape, examining the latest developments in the states, at the FTC, and abroad and exploring how U.S. companies can implement policies and procedures that meet the expanding expectations of the varying regimes in the dynamic data ecosystem.

The panel discussion is on “How the FTC is Filling the Federal Privacy Law Void”. The event will cover a number of policy issues, including the recently released FTC report on the data collection and use practices of Internet Service Providers (“ISPs”).

Click here for more information and to register for this virtual event.

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FTC Staff Report Puts Spotlight Back on ISP Data Collection and Use Practices; FCC Re-Regulation Suggested https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ftc-staff-report-puts-spotlight-back-on-isp-data-collection-and-use-practices-fcc-re-regulation-suggested https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ftc-staff-report-puts-spotlight-back-on-isp-data-collection-and-use-practices-fcc-re-regulation-suggested Wed, 27 Oct 2021 16:24:33 -0400 Over the past few years, the data collection and use practices of Internet Service Providers ("ISPs") have largely flown under the radar while large internet platforms and the broader adtech industry have been under greater scrutiny. That respite may be coming to end following a staff report released last week by the FTC detailing the scope of ISPs’ data collection and use practices. The staff report was based on orders issued in 2019 under Section 6(b) of the FTC Act and puts ISPs and large platforms on similar footing, observing that “many ISPs in our study can be at least as privacy-intrusive as large advertising platforms.” In addition, the staff report finds that several ISP data practices could cause harm to consumers but does not go as far as calling any practices unfair or deceptive.

What the FTC will do with the staff report is less clear. The Commission voted unanimously to release the report, which does not make any specific policy recommendations. Members of the Commission, however, drew their own conclusions and articulated starkly different outlooks on the report’s implications. Chair Lina Khan and Commissioner Rebecca Kelly Slaughter declared that the FCC should play a leading role in overseeing ISPs’ data practices, citing the FCC’s industry expertise and legal authority. Commissioner Christine Wilson, however, stated that “oversight of ISPs for privacy and data security issues should remain at the FTC.” ISPs’ data practices – and the broader question of whether the FCC should reclassify broadband service back to a Title II telecommunications service and re-impose strict broadband privacy rules – are likely to be prominent issues as the Biden FCC takes shape in the months ahead.

The FTC Staff Report’s Findings

The staff report is based on information the FTC obtained from the country’s six largest ISPs and three of their adtech companies. The FTC compelled the companies to provide information about their data collection and use practices through orders issued under FTC Act Section 6(b) in March and August of 2019. While this group of ISPs “represents a broad swath of the internet services offered” to U.S. consumers, their practices are not necessarily representative of ISPs in general.

The staff report raises several concerns about ISPs’ practices, beyond generally equating ISPs with large advertising platforms, which include the following examples.

  • Scope and Scale of Data Collection. The staff report finds that “many” of the ISPs in the FTC’s study “have access to 100% of consumers’ unencrypted internet traffic,” potentially allowing the ISPs to obtain information about sensitive web browsing behavior. In addition, FTC staff determined that several ISPs in the study collect and use potentially sensitive, real-time location information for advertising. They are also collecting customer information from other products and services they offer—such as voice, content, smart devices, advertising, and analytics—as well as purchasing information about consumers from data brokers. According to the report, several ISPs combine data from across their product lines, though the report did not reach a conclusion about how extensively ISPs combine this data.
  • Opacity and Consumer Choices. The staff report concludes that ISPs collect and use personal data more extensively than consumers expect, do not provide clear disclosures about their practices, and generally provide opt-out choices that are difficult to use.
  • Potential Consumer Harm. Finally, FTC staff conclude that some of the practices observed among these ISPs could cause harm to consumers. These practices include combining data from distinct services (e.g., video, web browsing, location, and connected devices) in a manner that consumers do not expect, as well as enabling third-party data uses that could harm consumers (e.g., targeting ads in a discriminatory manner, or making location data available to third parties “without reasonable protections”).
What The Staff Report Could Mean for ISPs

The unanimous vote to approve and issue the FTC staff report—an increasingly rare instance of bipartisan agreement on a major issue—does not necessarily signal consensus on further steps the FTC should take on the basis of the report. Chair Khan’s remarks highlight ISPs’ practices as an example of more general problems with the privacy framework the FTC was instrumental in establishing. In her view, the report’s findings “underscore deficiencies of the ‘notice-and-consent’ framework for privacy” and that “[a] new paradigm that moves beyond procedural requirements and instead considers substantive limits increasingly seems worth considering.”

Commissioner Slaughter expressed similar sentiments in her remarks, echoing some of her previous statements calling for “clear rules on data abuses” in general, and FCC-led regulation of ISPs, specifically.

The ISP disclosure practices described by the FTC staff report are subject to the FCC’s Transparency Rule. In 2017, although the Trump FCC classified commercial ISP services as subject to FTC jurisdiction, the FCC retained a transparency rule that, among other things, requires disclosure of “accurate information” regarding commercial terms of broadband internet access services. The FCC stated that disclosure of “commercial terms” included disclosure of information collection practices and privacy policies. If ISPs failed to adequately disclose their practices, as alleged in the FTC Report, the FCC retains jurisdiction to enforce that failure to comply with the transparency rule.

Further oversight by the FTC may not be necessary in the long term if oversight of ISP data practices is moved back under the FCC’s jurisdiction, and they once again become subject to Section 222 of the Communications Act. That statute places privacy restrictions on the use of customer proprietary network information ("CPNI") by telecommunications service providers. (The Obama FCC reclassified broadband as a telecommunications service under Title II of the Communications Act and imposed net neutrality regulations as well as broadband privacy rules. The Trump FCC largely reversed the net neutrality rules, and Congress nullified the broadband privacy rules.)

Commissioner Slaughter and Chair Khan may get their wish to have the FCC jump back into the fray. The White House announced on October 26 that President Biden will nominate Jessica Rosenworcel for another term as FCC Commissioner (and named her as the permanent FCC Chair) and Gigi Sohn as the third Democratic commissioner. Both Rosenworcel and current Democratic Commissioner Geoffrey Starks have expressed support for reclassifying broadband back to Title II, and Sohn was instrumental in orchestrating Title II reclassification in 2015 under former FCC Chairman Tom Wheeler. While Title II reclassification would subject ISPs to Section 222 of the Communications Act, the FCC’s authority to create broadband-specific rules remains unclear because Congress’ repeal of the FCC’s 2016 broadband privacy rules under the Congressional Review Act prohibits the agency from adopting substantially similar rules.

In the meantime, ISPs should be prepared to entertain further oversight activity by the FTC or potential FCC examination of the adequacy of ISP disclosures under its transparency rule.

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Competition Policy Gets a Top Spot in the White House https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/competition-policy-gets-a-top-spot-in-the-white-house https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/competition-policy-gets-a-top-spot-in-the-white-house Mon, 08 Mar 2021 22:50:39 -0500 Following weeks of speculation about a potential role for Columbia Law Professor Tim Wu in the Biden Administration, the White House announced on March 5 that Wu has been named Special Assistant to the President for Technology and Competition Policy. As an official housed in the National Economic Council ("NEC"), Wu will not directly command staff within federal agencies or set the agencies’ enforcement or regulatory agendas. Instead, Wu will most likely focus on coordinating federal agencies’ efforts to identify and address competition issues. Given his history, Wu could seek to have particular influence on the Federal Communications Commission ("FCC") and Federal Trade Commission ("FTC") as they shape their Biden Administration agendas.

Wu’s history as a law professor and advocate may offer some clues about how he will approach his duties. He rose to prominence as an advocate of “net neutrality,” a phrase he coined in 2002. In general, his scholarship focuses on telecommunications, technology, and competition.

After the 2020 presidential election, Wu and several former federal antitrust officials authored a Washington Center for Equitable Growth (WCEG) report entitled “Restoring Competition in the United States: A Vision for Antitrust Enforcement for the Next Administration and Congress.” The report that concludes the “U.S. economy is plagued by a problem of excessive market power” and “antitrust enforcement has failed to prevent this problem.” Among the report’s recommendations is a suggestion to create a White House Office of Competition Policy within the NEC, to bring a “‘whole government’ approach to competition policy.”

Although the White House has not created such an office, Wu’s title and administrative home in the NEC closely track WCEG’s advice. In the view of Wu and his co-authors, the White House should “pressure agencies to open up closed markets while discouraging agencies from entrenching the industries that they regulate.” Agencies that the WCEG report lists as possessing competition-related rulemaking authority range from the FDA to the Federal Housing Finance Agency.

Wu’s record and the current political environment, however, suggest that the internet and communications industries are likely to be a core part of his focus. The Department of Justice, FTC, and FCC will be central to any ramp-up in competition regulation or enforcement in this arena. These agencies have over time played complementary, but sometimes competing, roles in internet and communications issues, particularly in large communications and media mergers. With the shifting jurisdictional classification of broadband internet services at the FCC, moreover, the dividing line between FCC and FTC jurisdiction over various players in the market has been unclear. Both the FCC and FTC, for example, jointly took an aggressive stance against VoIP gateways through which unlawful robocalls were being transmitted.

These agencies present challenges to an assertive White House coordinating role. The FCC and FTC are independent; the selection of agency chairs and nominations to fill vacancies could indicate how willing the agencies will be to coordinate with the White House. At the same time, the Justice Department’s independence was a prominent issue in Merrick Garland’s confirmation hearings and could affect how the White House attempts to shape the Department’s competition policy agenda.

Wu will also have competition of his own within the White House. For instance, OMB’s Office of Information and Regulatory Affairs has a direct role in reviewing proposed federal regulations and may be more reluctant to issue aggressive regulations. Other White House components, from the Office of Science and Technology Policy to the Domestic Policy Council, are likely to make their voices heard, too.

We will closely monitor developments as Wu’s role and the leadership picture in key agencies become clearer.

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Section 230 Executive Order Strikes Back at Twitter, But Legal Impact Likely to be Limited https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/section-230-executive-order-strikes-back-at-twitter-but-legal-impact-likely-to-be-limited https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/section-230-executive-order-strikes-back-at-twitter-but-legal-impact-likely-to-be-limited Tue, 02 Jun 2020 19:26:05 -0400 In a move spurred by Twitter’s decision to fact-check a pair of President Trump’s tweets, the president recently signed a multi-pronged “Executive Order on Preventing Online Censorship” with the claimed intention of stopping online platforms from making content moderation decisions that discriminate against particular viewpoints. The President, along with other conservative political figures and commentators, have frequently claimed that social media platforms have used content moderation practices to stifle conservative speech. The Executive Order ("EO") evokes the First Amendment, calling online platforms the 21st century “public square,” where people go to express and debate different views, and saying the allegedly biased content moderation practices undermine that free expression.

The most controversial aspects of the order are its interpretation of Section 230 of the Communications Decency Act ("CDA")—the statutory provision that shields online service providers from liability for user-generated content and the decisions they make about how to moderate that content—and its attempt to prompt the Federal Communications Commission ("FCC") to adopt regulations further interpreting the law. Reform of Section 230 has been under consideration in Congress for years, with Republicans and Democrats both offering different—and mostly contrary—critiques about how online platforms have failed to act in accordance with the statute while also benefitting from the liability protections.

Other directives in the EO attempt to elicit other parts of the federal government to discipline online platforms for their content moderation practices. Absent Congressional action, the EO’s directives appear to stand on shaky legal ground and are likely to have limited legal impact. However, the issuance of the EO alone may be unlawful, at least according to a complaint challenging the constitutionality of the EO filed with the U.S. District Court in D.C. by the Center for Democracy & Technology ("CDT"). According to the complaint, the EO violates the First Amendment, which strictly limits the government’s ability to abridge speech, by retaliating against Twitter for exercising its right to comment on the President’s statements and because it “seeks to curtail and chill the constitutionally protected speech of all online platforms and individuals” by demonstrating the government’s willingness to retaliate against those who criticize the government.

Seeks to “Clarify” the Scope of Section 230 Immunity Through FCC Regulations

Section 230 gives online service providers immunity from liability in two ways. First, Section 230(c)(1) says that online services are not the “publisher or speaker” of the user content they host. Publishers and speakers can be held liable for language that is, for example, libelous or defamatory. This clause prevents online services from being subject to lawsuits making such claims, while preserving the ability to bring direct suits against the users who actually generate the content. Second, Section 230(c)(2) says that online service providers cannot be held liable for “any action voluntarily taken in good faith to restrict access to or availability of material that [it] considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.” This clause is designed to prevent online services from being deemed publishers when they make decisions about what user-generated content to remove. Its intent originally was to remove disincentives for online service providers to employ blocking and filtering technologies to protect children from online pornography.

The EO purports to clarify the scope of the immunity available under Section 230. Specifically, the EO says that online providers are not acting in “good faith” when they claim to be forums for free and open speech but instead engage in “deceptive or pretextual actions (often contrary to their stated terms of service) to stifle viewpoints with which they disagree.” According to the EO, under these circumstances, the online services are editorializing and therefore acting as publishers, in which case, the EO says the online services should lose their immunity under Section 230(c)(2). This interpretation, which is largely contrary to more than two decades of court precedents, would effectively mean that online services could be held liable for all the content their users post if it is determined their content moderation practices are biased.

To effectuate this interpretation, the EO sets out two directives. First, it directs “all executive departments and agencies [to] ensure that their application of section 230(c) properly reflects the narrow purpose of the section.” This directive is unlikely to carry any weight as Section 230 is not applied by federal agencies, but by courts, which are not subject to presidential directives. Second, the EO directs the National Telecommunications Information Association ("NTIA") to, within 60 days, file a petition for rulemaking asking the FCC to propose regulations to further clarify the circumstances under which an online service can lose its liability protection when it “restricts access to content” in a manner not specifically protected by subparagraph (c)(2)(A),” and the conditions under which such restrictions are not made in “good faith.”

Absent additional authority delegated by Congress, the FCC is unlikely to actually implement such regulations. The Commission has been reluctant to extend regulation to edge providers, such as online platforms, and its legal authority to do so has been debated. While the CDA technically added Section 230 into the Communications Act—the FCC’s regulatory sandbox—the Communications Act does not have any legal hooks that allow the agency to regulate online platforms and Section 230 itself does not provide the agency with any such independent authority. Tellingly, the FCC did not implement Section 230 in 1996 when the provision was added to the Act and does not have any rules on its books that interpret Section 230. Even if the FCC does have such authority, current leadership has already made clear, in the Restoring Internet Freedom order, that it does not want the agency to be the arbiter of neutrality for Internet service providers, which it ostensibly has the authority to do, let alone the arbiter of neutrality by online platforms, over which it has no explicit authority. While all five Commissioners released statements after the EO, three Commissioners expressed opposition or strong skepticism of the “good faith” concept. Thus, even if NTIA were to file a petition for rulemaking, new rules appear unlikely.

Other Directives in the Executive Order

While the directives above have received the most attention, the EO includes four other directives designed to penalize online platforms that engage in alleged viewpoint discrimination.

  • Review Government Spending to Online Platforms – The EO directs executive branch departments and agencies to, within 30 days, assess their advertising and marketing spending on online platforms and report their findings to the Office of Management and Budget, while also directing the Department of Justice to “review the viewpoint-based speech restrictions imposed by each online platform identified in the report[s]” and assess whether any “are problematic vehicles for government speech due to viewpoint discrimination, deception to consumers, or other bad practices.” Conspicuously absent is an actual directive for departments and agencies to limit federal spending to such online platforms.
  • FTC Review of Content Moderation Practices – The EO directs the Federal Trade Commission ("FTC") to “consider taking action” using its authority under Section 5 of the FTC Act to determine whether online platforms have engaged in unfair or deceptive acts or practices by “restrict[ing] speech in ways that do not align with those entities’ public representations about those practices,” which is something the FTC was already permitted to do. The FTC is also required to consider whether to develop a report describing the apparent 16,000 complaints that the White House received through its “Tech Bias” reporting tool.
  • State Review of Content Moderation Practices – The EO directs the Attorney General to establish a working group to assess potential enforcement of state statutes prohibiting unfair or deceptive acts or practices against online platforms, develop model legislation for states that do not have such authority, and collect information regarding various practices by online platforms that could amount to viewpoint discrimination.
  • Federal Legislation – The EO directs the Attorney General to “develop a proposal for Federal legislation that would be useful to promote the policy objectives” of the EO.
Initial Reactions and Potential Outcomes

The order has garnered substantial criticism from online industry advocates and civil liberties groups alike. Among the online platforms, Twitter seemed undeterred by the EO, calling it a “reactionary and politicized approach” and promptly labeling another Trump tweet for glorifying violence in violation of its terms and conditions. Meanwhile, Facebook CEO Mark Zuckerberg, while critical of the EO, also critiqued Twitter’s actions, saying that social media companies should not be the arbiters of truth.

Initial reactions from the FCC Commissioners have been mixed. Republican Commissioner Carr was most supportive of the move, saying he welcomed the EO and its call for guidance on the “good faith” limitation in Section 230. Democratic Commissioner Rosenworcel had a contrary take, saying the EO would turn the FCC into the “speech police.” Both Commissioner Starks (a Democrat) and Commissioner O’Rielly (a Republican) avoided any direct criticism of the EO but affirmed the First Amendment’s important role in the issue. Chairman Pai largely stayed out of the fray, saying that the agency would “carefully review any petition for rulemaking” filed by NTIA. NTIA has not commented on the Executive Order.

The FTC commissioners have been silent on the EO, but the agency’s spokesperson, Peter Kaplan, said that “[t]he FTC is committed to robust enforcement of consumer protection and competition laws, including with respect to social media platforms, and consistent with our jurisdictional authority and constitutional limitations.”

Any substantive action at the FCC is likely months away, at best. NTIA has until July 27, 2020, to file its petition with the FCC, on which the FCC has no obligation to act. If the agency does respond, it may seek comment on whether to initiate a rulemaking first, before initiating a Notice of Proposed Rulemaking. Given the constitutional implications, the FTC may also hesitate to act in accordance with the EO. Regardless, we don’t expect any substantive action in 2020, if at all, particularly in light of the pending legal challenge by CDT. In the meantime, the impact of the EO will largely be political, not legal, while the purpose, meaning and fate of Section 230 is almost certain to be debated in Congress for years to come.

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COVID-19: What Communications Service Providers Need to Know – May 26, 2020 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/covid-19-what-communications-service-providers-need-to-know-may-26-2020 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/covid-19-what-communications-service-providers-need-to-know-may-26-2020 Tue, 26 May 2020 19:57:16 -0400 As the COVID-19 pandemic rapidly unfolds, the Federal Communications Commission (“FCC”) has been active to keep communications services available through various waivers, extensions, and other regulatory relief. Kelley Drye’s Communications Practice Group is tracking these actions and what they mean for communications service providers and their customers. CommLaw Monitor will provide regular updates to its analysis of the latest regulatory and legislative actions impacting your business and the communications industry. Click on the “COVID-19” blog category for previous updates.

If you have any urgent questions, please contact your usual Kelley Drye attorney or any member of the Communications Practice Group. For more information on other aspects of the federal and state response to the COVID-19 pandemic, as well as labor and employment and other issues, please visit Kelley Drye’s COVID-19 Response Resource Center.

FCC Approves Seventh Set of COVID-19 Telehealth Applications, Surpasses $50 Million in Funding

On May 20, 2020, the FCC’s Wireline Competition Bureau (“WCB”) approved 43 funding applications for the COVID-19 Telehealth Program. Under the latest funding round, $16.87 million in funding will go to health care providers across 20 states. This includes Children’s National Hospital, the first Washington, D.C. provider to receive funding. With this latest set of approvals, the FCC’s COVID-19 Telehealth Program has funded 132 health care providers in 33 states, plus D.C., for a total of just over $50 million in funding awarded.

Congress appropriated $200 million for the Program and the FCC continues to evaluate applications and distribute funding on a rolling basis. Providers therefore should take action now to assess their interest and ability to participate in the Program, if they have not already done so. On May 21, 2020, the senior counsel for the WCB’s Telecommunications Access Policy Division encouraged providers to apply as soon as possible. "Don't let the perfect be the enemy of the good" he said. “Bureau staff will work with applicants and seek clarification as needed.”

FCC, FTC Demand More Gateway Providers Cut Off Robocallers to Stop Coronavirus-Related Scams

On May 20, 2020, the FCC demanded that service providers take action to stop coronavirus-related scam robocalls from bombarding American consumers. The agency warned a number of “gateway” communications providers allegedly facilitating COVID-19-related scam robocalls originating overseas that they must stop carrying these calls or face serious consequences. Specifically, if the providers do not take action to address the scam robocalls, the FCC will allow other providers to block all traffic from these gateway providers’ networks.

This is the second such action taken by the agencies, following a similar demand in in April, when three gateway providers stopped carrying COVID-19-related scam robocalls within 24 hours of receiving the warning. The FCC and FTC have been working closely with the Department of Justice on these efforts to stop scammers from reaching American consumers. The warning shows that the FCC, FTC, and other agencies plan to aggressively address consumer protection-related issues during the crisis and will target service providers in addition to the underlying scammers to resolve problems quickly.

FCC and IMLS Partner to Keep Libraries and Communities Connected

On May 21, 2020, the FCC announced that it is partnering with the Institute of Museum and Library Services (“IMLS”) to promote use of $50 million in CARES Act funding to help address the digital divide. The CARES Act allocated $50 million in funding to IMLS, the primary source of federal funding for the nation’s museums and libraries, to enable these institutions, as well as organizations serving Tribal communities, to respond to the pandemic. This includes work to expand network access, purchase Internet accessible devices, and provide technical support services to communities. States and territories may use the funds to expand broadband access and prioritize their efforts to high-need communities. $15 million in funding will be awarded through grants to libraries and museums, as well as Tribes and organizations serving and representing Native Hawaiians. Applications are due June 12, 2020 with award announcements anticipated in August 2020.

As part of the FCC’s collaboration with IMLS, the FCC will publicize these CARES Act resources, help conduct outreach to libraries and organizations serving Tribal Communities, and provide information on broadband service providers that may be able to help. The agencies will also work together to ensure that libraries are aware that community use of Wi-Fi networks supported by the FCC’s E-Rate program is permitted during library closures.

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FCC/FTC Stake out Aggressive Robocall Position, Tell Gateway VoIP Providers to Block COVID-19 Robocalls – or Be Blocked Themselves https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-ftc-stake-out-aggressive-robocall-position-tell-gateway-voip-providers-to-block-covid-19-robocalls-or-be-blocked-themselves https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-ftc-stake-out-aggressive-robocall-position-tell-gateway-voip-providers-to-block-covid-19-robocalls-or-be-blocked-themselves Wed, 15 Apr 2020 16:43:18 -0400 The FTC and FCC have taken a number of actions to stem unlawful robocalls generally and, during the COVID-19 pandemic, to stem harmful and deceptive calls that seek to exploit the COVID-19 crisis. Even amid the backdrop of their long-standing commitment, the agencies’ most recent action stands out as an aggressive new approach to unlawful calls. On April 3, 2020, the enforcement arms of each agency jointly sent warning letters to three Voice over Internet Protocol ("VoIP") service providers allegedly facilitating the transmission of international scam telemarketing calls originating overseas. The letters make an unprecedented demand: block the traffic of specific allegedly unlawful actors or have all of your traffic blocked by other carriers. In this post, we’ll take a look at this new approach, and discuss its relationship to the broader provisions of the Telephone Robocall Abuse Criminal Enforcement Act ("TRACED Act"), which institutes a number of measures designed to combat illegal robocalls.

The Warning Letters

The agencies identified the three VoIP gateway providers as the sources of the illegal calls through the efforts of the USTelecom Industry Traceback Group, a consortium of phone companies that help officials identify potentially unlawful calls. The phone companies used a process known as “traceback,” in which they share information to trace unlawful spoofed robocalls to their origination.

In the letters, the agencies reminded the companies that the COVID-19 scam robocalls are in fact illegal and directed them to cease transmitting the traffic immediately, as the calls have “the potential to inflict severe harm on consumers.” The letters warned the companies that if they did not stop transmitting the identified traffic within 48 hours, the FCC would authorize other U.S. voice providers to block all calls from the companies and take any other steps necessary to prevent transmission of the calls. The agencies also sent a separate letter to USTelecom advising the trade association that, if the VoIP providers do not block the traffic, the FCC will authorize other U.S. service providers to block all calls coming from that gateway and will take other actions as necessary to authorize U.S. service providers to block traffic from the originating entities. In addition, the FCC encouraged other service providers to take immediate action to block unlawful calls pursuant to existing legal authority.

This action is a significant – and significantly aggressive – new approach by the agencies. While both agencies have taken actions to prevent and deter unlawful robocalls, the threat to block traffic from the originating carrier is a new tactic in the fight against unlawful calls. Notably, it is not clear under what authority the FCC can or would order the blocking of all traffic from the subject VoIP gateway providers if they failed to block the allegedly unlawful robocalls. The letter does not cite any provision of the Communications Act that would authorize such blocking. Moreover, existing FCC orders relating to call blocking have authorized only limited call blocking practices that were optional for the carriers. Were the FCC to order such blocking (and to make it mandatory), it appears that such action would be the first of its kind by the agency.

Briefly, we will review the agencies’ recent history with anti-robocall activities.

The Educare Services Enforcement Action and Prior FTC Warning Letters

In the three letters to the VoIP gateway providers, the FCC and FTC reference the FTC’s recent enforcement action against VoIP provider Globex Telecom. This action relied upon provisions of the FTC’s Telemarketing Sales Rule ("TSR"), which addresses calls made for a telemarketing purpose. In December 2019, the FTC obtained a preliminary injunction against Educare Services and Globex Telecom Inc. for robocalling consumers to promote allegedly fraudulent credit card interest rate reduction services. The FTC complaint alleges that Globex played a key role in “assisting and facilitating” the illegal credit card interest rate reduction services Educare promoted by providing Educare with the means to call consumers via interconnected VoIP communication services and facilities. For a VoIP company to be liable under a TSR “assisting and facilitating” theory, the FTC must prove that the company “knew or consciously avoided knowing” the robocall campaigns violated the TSR.

A week before the joint letters, the FTC sent letters to nine VoIP service providers and other companies warning them that “assisting and facilitating” in the transmission of illegal COVID-19-related telemarketing or robocalls is unlawful. The agency also sent letters to nineteen VoIP service providers in January with a similar warning about all illegal robocalls.

FCC TRACED Act Implementation and the STIR/SHAKEN Mandate

Like the FTC, the FCC recently shifted its focus in robocall enforcement towards the originating carriers. On February 4, 2020, the FCC’s Enforcement Bureau sent letters to seven VoIP gateway service providers, notifying them that unlawful robocalls had been traced to their networks and asking for their assistance in tracking down the originators of the calls. Although no enforcement action was threatened at the time, the FCC also asked each provider to detail their anti-robocall efforts to the Commission.

More recently, the FCC took several steps in implementing the TRACED Act, which requires the FCC to initiate several near-term rulemakings and other actions aimed at addressing unlawful spoofing and robocalling operations. On March 27, the agency adopted a Report and Order and Further Notice of Proposed Rulemaking establishing rules for the registration of a single consortium to conduct private-led “traceback” efforts, which is expected to formalize the relationship with the USTelecom Industry Traceback Group. Additionally, on March 31, the FCC adopted a separate Report and Order and Further Notice of Proposed Rulemaking mandating that originating and terminating voice service providers implement the STIR/SHAKEN framework in the IP portions of their networks by June 30, 2021. STIR/SHAKEN—the technology framework behind the “traceback” process—allows providers to verify that the caller ID information transmitted with a particular call matches the caller’s number as the calls are passed from carrier to carrier. FCC Chairman Pai previously urged major providers to adopt STIR/SHAKEN technology voluntarily and warned that the voluntary approach would become a mandate if the providers did not move fast enough. Still to come are comments on a “know your customer” obligation for service providers and rules to deny access to numbering resources to originators of unlawful calls.

As we have previously noted, the TRACED Act also requires the implementation of an alternative call authentication framework in non-IP networks, extends the FCC’s statute of limitations for bringing some illegal robocall enforcement actions, and eliminates the requirement to give warnings before issuing certain filings.

Takeaways

These letters, coupled with the recent activity by the FTC and FCC to combat illegal robocalls, signal the agencies’ desire to cause a meaningful reduction in unlawful calling, and in particular, demonstrate a desire to prevent scammers from taking advantage of the COVID-19 crisis to carry out their deceptions. Both agencies can seek civil penalties and take other actions necessary to prevent the proliferation of these calls.

Importantly, the targets of agency action are not necessarily limited to the entities that place the unlawful calls. These federal actions are a good reminder for VoIP and other service providers to assess whether their customers’ practices may indicate unlawful use of VoIP or other services. With the warning letters, and now these blocking letters, the FCC and FTC increasingly are showing an openness to pursuing penalties under vicarious liability theories. If there are facts that support knowledge of the unlawful activity or “red flag” type practices (such as a customer being the target of multiple third party government subpoenas, among other facts), that’s a good indication that further steps by the VoIP provider may be warranted to mitigate the risk of facing an enforcement action by the FTC or FCC. If you have questions about how these enforcement trends and related risk factors are relevant to your business, please contact your Kelley Drye counsel.

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COVID-19: What Communications Service Providers Need to Know – April 13, 2020 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/covid-19-what-communications-service-providers-need-to-know-april-13-2020 https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/covid-19-what-communications-service-providers-need-to-know-april-13-2020 Mon, 13 Apr 2020 18:24:41 -0400 As the COVID-19 pandemic rapidly unfolds, the Federal Communications Commission (“FCC”) has been active to keep communications services available through various waivers, extensions, and other regulatory relief. Kelley Drye’s Communications Practice Group is tracking these actions and what they mean for communications service providers and their customers. CommLaw Monitor will provide regular updates to its analysis of the latest regulatory and legislative actions impacting your business and the communications industry. Click on the “COVID-19” blog category for previous updates.

If you have any urgent questions, please contact your usual Kelley Drye attorney or any member of the Communications Practice Group. For more information on other aspects of the federal and state response to the COVID-19 pandemic, as well as labor and employment and other issues, please visit Kelley Drye’s COVID-19 Response Resource Center.

FCC Establishes the COVID-19 Telehealth Program

On April 2, 2020, the FCC issued a Report and Order (FCC-20-44) establishing the COVID-19 Telehealth Program. The COVID-19 Telehealth Program will provide $200 million in funding, appropriated by Congress as part of the CARES Act, to help health care providers provide connected care services to patients at their homes or mobile locations. The COVID-19 Telehealth Program will provide immediate support to eligible health care providers responding to the COVID-19 pandemic by fully funding telecommunications services, information services, and devices purchased on or after March 13, 2020 until the program’s funds have been expended or the COVID-19 pandemic has ended. The COVID-19 Telehealth Program represents the FCC’s most significant action yet to ensure telehealth services remain affordable and available during the crisis.

On April 8, 2020, the Wireline Competition Bureau (“WCB”) released guidance on the COVID-19 Telehealth applications process. The barriers to funding are relatively low. There are three steps interested providers should take immediately to prepare to apply for the COVID-19 Telehealth Program: (1) obtain an eligibility determination from the Universal Service Administrative Company (“USAC”); (2) obtain an FCC Registration Number (“FRN”); and (3) register with the System for Award Management. The WCB recommends that potential applicants undertake these steps now to apply for the early stages of funding.

On April 10, 2020, the WCB announced via Public Notice (DA 20-403) that it will begin to accept applications for the COVID-19 Telehealth Program beginning today, April 13, 2020 at 12:00 PM ET. Applications for the program may be filed through a dedicated application portal, available on the COVID-19 Telehealth Program page: www.fcc.gov/covid19telehealth. The WCB will accept applications on a rolling basis. To assist applicants in preparing their applications, the WCB will hold a webinar today, April 13, 2020 at 11:00 AM ET, which also will be available on the COVID-19 Telehealth Program page: www.fcc.gov/covid19telehealth. The presentation will assist interested parties in navigating the application portal and provide answers to frequently asked questions regarding the COVID-19 Telehealth Program’s application process. The webinar will remain publicly available for viewing.

FCC Adopts Connected Care Pilot Program

On April 2, 2020, in the same Report and Order (FCC 20-44) establishing the COVID-19 Telehealth program, the FCC adopted the Connected Care Pilot program. This three-year Pilot Program will provide universal service support to help defray certain health care provider costs incurred in delivering connected care services, with a primary focus on services aimed at low-income or veteran patients. The FCC will support selected pilot projects to help health care providers improve health outcomes and reduce health care costs, thereby supporting efforts to advance connected care initiatives. The Pilot Program also would study how connected care could become a permanent part of the Universal Service Fund. All eligible nonprofit and public health care providers that fall within the statutory categories under section 254(h)(7)(B) of the Communications Act, regardless of whether they are non-rural or rural, can apply for funding under the Pilot Program.

FCC Extends E-Rate Program Deadlines

On April 1, 2020, the WCB granted extensions of key deadlines for participants in the Schools and Libraries (or E-Rate) program (DA 20-364). Specifically, the Bureau waived the service implementation deadline for special construction projects for all funding year 2019 applicants and extended the deadline for funding year 2020 applicants by one year (from June 30, 2020 to June 30, 2021). Under the FCC’s rules, applicants normally must complete special construction projects and the network must be in use by June 30th of the applicable funding year. With schools and libraries closed for lengthy periods of time, the Bureau recognized that service providers may not be allowed on the premises and may experience significant challenges in meeting this construction deadline. The Bureau also (1) extended the service delivery deadline for nonrecurring services for funding year 2019 by one year (from September 30, 2020 to September 30, 2021); (2) granted schools and libraries an automatic 60-day extension to file requests for review or waiver of decisions by USAC; (3) provided applicants and service providers an automatic 120-day extension of the invoice filing deadline; and (4) gave all program participants an additional 30-day extension to respond to certain information requests from USAC.

FCC, FTC Demand Gateway Providers Cut Off Robocallers

On April 3, 2020, the FCC and the Federal Trade Commission (“FTC”) demanded that service providers take action to stop coronavirus-related scam robocalls from bombarding American consumers. They specifically warned three gateway communications providers allegedly facilitating COVID-19-related scam robocalls originating overseas that they must take action to stop carrying these calls or face serious consequences. Specifically, if the providers do not take action to address the scam robocalls, the FCC will allow other providers to block all traffic from these gateway providers’ networks. The FCC and FTC have been working closely with the Department of Justice (“DOJ”) on this first-of-its-kind effort to stop scammers from reaching American consumers. The warning shows that the FCC, FTC, and other agencies plan to aggressively address consumer protection-related issues during the crisis. Click here to read more about the FCC and FTC actions.

Chairman Pai Announces More Keep Americans Connected Signatories

On March 25, 2020, Chairman Pai announced that additional service providers have signed the Keep Americans Connected Pledge (see our coverage of the pledge here). Under the pledge, service providers agree to forgo service terminations due to inability to pay, waive late fees, and open Wi-Fi hotspots for those who need them for a 60-day period. There are now 626 service providers and 14 trade associations that have signed the Chairman’s pledge.

FCC Enables Rural Broadband Providers to Waive Certain Consumer Fees

On April 1, 2020, the WCB approved waiver requests from the National Exchange Carrier Association (“NECA”) and John Staurulakis, Inc. (“JSI”) to allow the two organizations to quickly implement tariff changes to ensure that NECA and JSI participant companies have the flexibility to meet the Keep Americans Connected pledge during the COVID-19 pandemic. The WCB’s action immediately permitted waivers of late payment penalties as well as installation and early cancellation fees that the providers normally would be required to assess in accordance with their tariffs. The WCB’s waiver deserves close attention by tariffed service providers and signals the agency’s openness to regulatory relief benefitting consumers.

FCC Waives Restrictions on Hiring Contractors for ASL Interpretation Services

On April 3, 2020, the Consumer and Government Affairs Bureau granted a temporary, limited waiver of the Commission’s rule restricting providers of video relay service (“VRS”) from contracting for video interpretation services with an entity that is not itself an eligible provider (DA 20-378). With increased VRS traffic levels and employee absences due to health concerns, school closures, and other restrictions imposed by state and local authorities, VRS providers continue to face a shortage of interpreters able to work as communications assistants. By allowing VRS providers additional flexibility to contract for qualified American Sign Language (“ASL”) interpreting from other entities, such as providers of video remote interpreting, the FCC hopes to alleviate this shortage.

FCC Postponing 3.5 GHz Auction on Account of COVID-19

On March 25, 2020, the FCC announced a one-month postponement of the 3.5 GHz auction (3550-3650 GHz) in the Citizen’s Broadband Radio Service (“CBRS”), a.k.a. Auction 105 (DA 20-330). The Commission cited the need to protect the health and safety of Commission staff during the auction and the ancillary benefit that parties would have additional time to prepare to participate. FCC Chairman Ajit Pai reiterated the agency’s commitment to hold the auction this summer. The auction is the first in the so-called mid-band, a range of spectrum seen as critical to the rollout of 5G wireless applications. Commissioner Michael O’Rielly tweeted that a further delay would be unlikely absent absolutely compelling circumstances. The start of the auction has been postponed to July 23, 2020 (from June 25, 2020), and the new short-form application filing window is April 23 through May 7, 2020. For more information on the postponement and the auction, please see our blog post.

Wireline Competition Bureau Extends Mozilla Remand Comment Cycle

On March 25, 2020, in response to a March 11, 2020, petition asking for a 30-day extension, the WCB issued a Public Notice (DA 20-331) granting a 21-day extension of the comment and reply comment cycle for the proceeding in the wake of the D.C. Circuit’s remand in Mozilla v. FCC (2018). Comments are due on April 20, 2020 (from March 30, 2020), and reply comments are due on May 20, 2020 (from April 29, 2020).

In issuing the extension, the WCB agreed with the petitioners’ argument that individuals, organizations, and state and local governments whose work is dedicated to public safety are increasingly focused on managing the COVID-19 pandemic and may be unable to submit comments on the public safety issues discussed in the remand proceeding. However, the FCC cited the need for expediency in remand proceedings as the reason for granting a 21-day extension instead of the petition’s request for a 30-day extension.

In addition, the FCC took the following actions in response to the pandemic:

  • On March 25, 2020, the Office of Engineering and Technology issued a Public Notice (DA 20-334) granting a 21-day extension of the reply comment deadline in the 5.9 GHz proceeding. Reply comments are now due on April 27, 2020 (from April 6, 2020). Initial comments were due on March 9, 2020. The entire 75 megahertz of the 5.850-5.925 GHz Band is allocated for connected car intelligent transportation systems using dedicated short-range communications ("DSRC") technology. Under pressure to allocate more spectrum for Wi-Fi operations and dissatisfied with the pace of DSRC development and deployment, the Commission has proposed reallocating 45 megahertz of the Band for unlicensed use and 20 megahertz to cellular vehicle-to-everything intelligent transportation system technology, while preserving only 10 megahertz for DSRC.
  • On April 10, 2020, the FCC’s Office of Economics and Analytics (“OEA”) extended via Public Notice (DA 20-401) the comment and reply comment deadlines for its Public Notice, released on February 27, 2020, which sought input on the state of the communications marketplace to inform the Commission’s required assessment of competition within the communications industry in its second Communications Marketplace Report to Congress. The Report provides an opportunity for stakeholders to evaluate competitive barriers to wireless and fixed broadband deployment, as well as international services. With this extension, comments are now due April 27, 2020 and reply comments are due May 28, 2020.
  • On April 1, 2020, the Wireless Telecommunications Bureau (“WTB”) announced (DA 20-365) a compilation of instructions for filing Special Temporary Authority (“STA”) and waiver requests in response to the declaration of national emergency due to COVID-19 issued on March 13, 2020. The WTB STA and Wavier Filing Guide can be found online here. On April 10, 2020, the Public Safety and Homeland Security Bureau provided guidance to public safety entities on requesting STA and waivers (DA 20-404). All providers should consider whether an STA is appropriate to provide additional flexibility and improve service.
  • ​On March 27, 2020, the FCC granted​ STA for 33 wireless Internet service providers (“WISPs”) to use the lower 45 megahertz in the 5.850-5.925 GHz Band for 60 days to address the increase in consumer demand because of the COVID-19 pandemic. Participating WISPs are required to file FCC Form 601 (application for an STA) within 10 days to access the full 60-day STA, and are required to operate in the band on a secondary, non-interference basis so as not to interrupt existing DSRC and federal radiolocation operations.
  • ​On March 26, 2020, the FCC's WTB granted AT&T Special Temporary Authority (“STA”) to utilize additional spectrum in Puerto Rico and the U.S. Virgin Islands for 60 days to handle increased network traffic as a result of the COVID-19 pandemic. On March 30, 2020, the WTB granted A:shiwi College & Career Readiness Center an STA to utilize unassigned Educational Broadband Service(“EBS”) spectrum for 60 days in the eligible rural tribal land on the Zuni Reservation in New Mexico for similar reasons. These STAs are in addition to the ones previously granted by the Commission. ​
  • On April 10, 2020, the FCC’s WTB enabled AT&T to deploy two cell sites in Wisconsin to support wireless service for a critical medical facility. That facility is being constructed by the U.S. Army Corps of Engineers at the Wisconsin State Fair Park in Milwaukee, Wisconsin to care for COVID-19 patients. The WTB granted AT&T’s request to expedite environmental review of the two proposed wireless tower sites, which will also serve first responders as part of AT&T’s FirstNet public safety broadband network. It is likely that the FCC will grant similar requests to expand communications infrastructure during the crisis.
  • On April 2, 2020, the Public Safety and Homeland Security Bureau released a Public Notice (DA 20-367) reminding authorized alert originators, including state and local governments, that the Wireless Emergency Alert (“WEA”) system is available as a tool to provide life-saving information to the public during the coronavirus COVID-19 pandemic. In recent years, the FCC, together with the Federal Emergency Management Agency (“FEMA”) and participating wireless service providers, have taken important measures to promote the effectiveness of WEA, and to make such messages more accessible, including the capability to send more detailed alerts of up to 360 characters for 4G-LTE networks, the option to convey recommended actions for saving lives or property for use in connection with Imminent Threat Messages, and the ability to send alerts in Spanish.
  • On March 26, 2020, the WCB waived a number of rules in its Rural Healthcare Program affecting existing users of the support programs. Most importantly, the Bureau’s order (DA 20-345) permits RHC applicants to extend existing evergreen arrangements with service providers by one year, without conducting an additional competitive bidding process, thereby ensuring continuity of service during the crisis. This builds on the Commission's previous waiver of rules for both the Rural Healthcare Program and the E-Rate program.
  • On March 30, 2020, the FCC's WCB issued an order (DA 20-354) waiving certain rules requiring involuntary de-enrollment of Lifeline subscribers, including for non-usage of the service, until May 29, 2020. The Bureau also extended the previous waivers​ of the annual recertification and National Verifier reverification process de-enrollments to May 29 so that all of the waivers will expire at the same time.

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AT&T To Pay $60M to Settle 2014 FTC Data Throttling Complaint https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/att-to-pay-60m-to-settle-2014-ftc-data-throttling-complaint https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/att-to-pay-60m-to-settle-2014-ftc-data-throttling-complaint Tue, 12 Nov 2019 10:29:05 -0500 After a long road that included questions over the scope of FTC and FCC jurisdiction, AT&T finally settled one of two cases challenging the unlimited data plans it offered to consumers. On Tuesday, November 5, 2019 the Federal Trade Commission (“FTC”) moved to settle its October 28, 2014 complaint against AT&T Mobility, LLC (“AT&T” or “Company”) in which the FTC asserted that the Company was reducing the data speeds of customers grandfathered into unlimited plans after they had used a certain amount of data. The stipulated order, approved 4-0 by the FTC and awaiting final approval from the United States District Court for the Northern District of California, will require AT&T to dole out $60 million to eligible customers and prohibit the Company from portraying the amount or speed of mobile data in its plans, including unlimited, without disclosing any material restrictions accompanying such plans.

As we covered extensively in several previous blog posts, one of the primary consequences of the case were questions about the limits of the FTC’s jurisdiction. The case mirrored a time when the Federal Communications Commission (“FCC”) took opposing positions in successive administrations regarding whether mobile data services and other Broadband Internet Access Services (“BIAS”) were subject to FCC regulation. One of the central questions underlying the case was which agency, the FCC or the FTC, could regulate AT&T’s mobile data practices. After the FTC won a Ninth Circuit decision that its jurisdiction reaches to non-common carrier activities of common carriers (and the FCC concluded that mobile BIAS was not a common carrier service), AT&T agreed to settle the FTC case. However, so long as the jurisdiction of particular services remains in doubt, or is subject to changing FCC positions, service providers will face potential overlapping enforcement activities by the two agencies.

The path to determining the FTC’s jurisdiction was long. In response to the FTC’s 2014 complaint, AT&T moved to dismiss the case, arguing that, because it is a common carrier, the Company is exempt from FTC regulation under Section 5 of the FTC Act. AT&T argued that the exemption in Section 5 for common carriers was “status based” – that is, that the FTC could not regulate any activities of a common carrier, even activities the FCC had subjected to limited or no regulation. The FTC responded by asserting that Section 5 of the FTC Act exempts only the common carrier activities of common carriers from FTC regulation.

Agreeing with the FTC, the district court denied AT&T’s motion to dismiss on March 31, 2015. The Company then appealed that decision to the Ninth Circuit Court of Appeals (“Ninth Circuit”). On August 29, 2016, a three-judge panel issued an opinion that reversed the district court’s decision and dismissed the case. The FTC then requested a rehearing en banc, which the Ninth Circuit granted on May 9, 2017. On February 26, 2018, the Ninth Circuit, sitting en banc, issued an opinion reversing its previous decision and giving the FTC broad authority to regulate practices not classified by the FCC as telecommunications services. It then remanded the case to the district court for further proceedings. AT&T settled the case before the District Court addressed the merits of the allegations.

Notably, AT&T commits to making refunds within 90 days to eligible customers without requiring a claims process. AT&T agreed to issue bill credits to current customers and to issue refunds to former customers. Any remainder not distributed will be deposited into a redress fund maintained by the FTC. Commissioner Rohit Chopra of the FTC issued a statement accompanying the settlement, in which he urged the FTC to pursue fraudulent practices by large and small firms alike, asserting that “scammers come in all sizes.”

Having settled with the FTC, AT&T is not necessarily out of hot water for alleged data throttling during this time period. In 2015, the FCC issued a $100 million Notice of Apparent Liability for Forfeiture (NAL) to AT&T over its mobile broadband data services and practices. The FCC also reached a $48 million settlement with T-Mobile on October 20, 2016 concerning a similar data throttling allegation regarding mobile data services. However, since the FCC’s leadership changed hands in early 2017, the Commission has not taken any action to finalize (or settle) the AT&T NAL. It remains pending, four years after its issuance.

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Net Neutrality Showdown Scheduled for February 1st https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/net-neutrality-showdown-scheduled-for-february-1st https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/net-neutrality-showdown-scheduled-for-february-1st Mon, 24 Sep 2018 16:15:32 -0400 In an event sure to garner significant attention from tech, consumer protection, and government stakeholders, oral argument on the consolidated appeals of the FCC’s Restoring Internet Freedom Order (“Order”) will take place on February 1, 2019, at the D.C. Circuit. As we previously discussed, the Order largely reversed the FCC’s own 2015 rulemaking to reclassify broadband internet access services (“BIAS”) as telecommunications services subject to a host of Title II common carrier obligations. The Order re-reclassified BIAS as information services subject to “light-touch” Title I regulations, while retaining pared-down transparency requirements on BIAS providers. The challengers allege that the FCC failed to adequately explain its changed regulatory approach, relied on faulty data, and ignored consumer complaints when issuing the Order. The oral argument will provide our first indication of which way the D.C. Circuit, which handled the last three appeals of FCC net neutrality rules with varied results, may go in this latest challenge.

Even with the appeal moving forward, action on net neutrality legislation continues on multiple fronts. While federal net neutrality bills may be stalled in Congress until after the mid-term elections, states continue to propose and adopt legislation and executive actions aimed at incentivizing BIAS providers to abide by the FCC’s 2015 net neutrality rules. These moves complicate the legal environment for BIAS providers as they attempt to navigate the non-uniform patchwork of state-level actions. The oral argument also comes less than a year after the Ninth Circuit’s decision giving the Federal Trade Commission broad authority over practices not classified by the FCC as telecommunications services, which includes BIAS (at least for now). A D.C. Circuit decision reversing the Order could undermine the FTC’s authority over BIAS providers and result in further legal challenges. In short, the oral argument represents only the next step in the continuing debate over the appropriate regulatory regime for broadband services and their providers. We will continue to track the appeal and report on any major developments.

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Support for FTC Jurisdiction Over Broadband: Ninth Circuit En Banc Rules Common Carrier Exemption is “Activity,” and not “Status-based,” Reversing Earlier AT&T Victory https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/support-for-ftc-jurisdiction-over-broadband-ninth-circuit-en-banc-rules-common-carrier-exemption-is-activity-and-not-status-based-reversing-earlier-a https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/support-for-ftc-jurisdiction-over-broadband-ninth-circuit-en-banc-rules-common-carrier-exemption-is-activity-and-not-status-based-reversing-earlier-a Tue, 27 Feb 2018 23:04:18 -0500 The Republican-led FCC’s effort to get out of the business of regulating broadband providers’ consumer practices took a step forward on Monday. In an appeal that has been proceeding in parallel with the FCC’s “Restoring Internet Freedom” reclassification proceeding, the U.S. Court of Appeals for the Ninth Circuit issued an opinion giving the Federal Trade Commission (FTC) broad authority over practices not classified by the FCC as telecommunications services. Specifically, the Ninth Circuit, sitting en banc, issued its long-awaited opinion in Federal Trade Commission v. AT&T Mobility, holding that the “common carrier exemption” in Section 5 of the FTC Act is “activity based,” exempting only common carrier activities of common carriers (i.e., the offering of telecommunications services), and not all activities of companies that provide common carrier services (i.e., rejecting a “status-based” exemption). The case will now be remanded to the district court that originally heard the case. Coupled with the FCC’s reclassification of Broadband Internet Access Services (BIAS) in the net neutrality/restoring internet freedom proceeding, the opinion repositions the FTC as top cop on the Open Internet and broadband privacy beats.

Background

As we discussed in several earlier blog posts, this case stems from a complaint that the FTC filed against AT&T Mobility in the Northern District of California in October 2014 alleging that AT&T deceived customers by throttling their unlimited data plans without adequate disclosures. AT&T moved to dismiss the case on the grounds that it was exempt under Section 5, based on its status as a common carrier, but the district court denied the motion, finding that the common carrier exemption was activity-based, and AT&T was not acting as a common carrier when it offered mobile broadband service, which, at the time the FCC classified as a non-common-carrier “information service.” AT&T appealed and a three-judge panel of the Ninth Circuit reversed the district court, holding that the common carrier exemption was “status-based,” and the FTC lacked jurisdiction to bring the claim. As we noted then, the three-judge panel’s decision was the first recent case to address the “status-based” interpretation of the common carrier exemption, and the decision – if it stood – could re-shape the jurisdictional boundaries between the FCC’s and the FTC’s regulation of entities in the communications industry.

The En Banc Court’s Analysis

The FTC appealed the case to an en banc panel of the Ninth Circuit, which issued its opinion this week. The court’s decision relied on the text and history of the statute, case law, and significant deference to the interpretations of the FTC and FCC, which both view the common carrier exemption as activity-based rather than status-based.

The Court first analyzed the history of Section 5 and the common carrier exemption. It found that the Congress intended the exemption to be activity based and rejected textual arguments advanced by AT&T that other statutory provisions—including Section 6 of the FTC Act and the Packers and Stockyard Exception—demonstrated that the common carrier exemption was status based. The Court gave significant weight to the understanding of common carriers in 1914, when the FTC Act was first passed, and legislative statements made during consideration of that Act.

The Court then addressed case law that an entity can be a common carrier for some activities but not for others. The Court found this case law to support an activity-based interpretation of the common carrier exemption. Specifically, the Court found that while Congress has not defined the term “common carrier,” Supreme Court case law leading up to and following the passage of the FTC Act interpreted the term “common carrier” as an activity-based classification, and not as a “unitary status for regulatory purposes.” The Court found that its approach was consistent with the Ninth Circuit’s longstanding interpretation of the term “common carrier” as activity-based, as well as the interpretations of the Second, Eleventh, and D.C. Circuits. (AT&T did not contest these cases, but instead argued that the FCC had many legal tools to address non-common carrier activities, including Title I ancillary authority and potential structural separation.)

Notably, the Court also provided significant deference to the views of the FTC and FCC, both of which have recently expressed the view that the FTC could regulate non-common carrier activities of common carriers. The Court cited the FCC’s amicus brief before the en banc panel and a 2015 Memorandum of Understanding between the two agencies that interpreted the common carrier exemption as activity-based.

Finally, the Court rejected arguments that the FCC’s 2015 Open Internet Order reclassifying mobile broadband as a common carrier service (or the FCC’s 2017 Restoring Internet Freedom Order reversing that classification) retroactively impacted the outcome of the appeal.

Agency Response

After the court issued its opinion, both FTC Acting Chairman Maureen Ohlhausen and FCC Chairman Ajit Pai applauded the ruling. Chairman Ohlhausen stated that the ruling “ensures that the FTC can and will continue to play its vital role in safeguarding consumer interests including privacy protection, as well as stopping anticompetitive market behavior,” while Chairman Pai stated that the ruling is “a significant win for American consumers” that “reaffirms that the [FTC] will once again be able to police Internet service providers” after the Restoring Internet Freedom Order goes into effect.

Our Take

The Ninth Circuit’s ruling is unsurprising in some senses. When a court grants en banc review, it often is for the purpose of reversing or at least narrowing the panel’s initial decision. AT&T also faced fairly strong questioning during the oral argument in September. Further, the Court’s decision affirms a position that the FTC had taken for many years and that the FCC – as evidenced by the 2015 Memorandum of Understanding – supported. Thus, the en banc court here effectively affirms current practice.

All of that said, the issue is not settled. AT&T’s reaction was decidedly muted, and it may still seek Supreme Court review of the question. This option may be particularly attractive to AT&T because it noted several times during the oral argument that it faced both FTC and FCC enforcement actions against it for allegedly the same activities. The Ninth Circuit did not mention the FCC enforcement action or the potentially conflicting interpretations of AT&T’s obligations. It is not clear whether both actions could or would proceed as a result of the decision.

Going forward, once the FCC’s Restoring Internet Freedom Order takes effect, we can expect that the FTC will serve as the top cop for alleged broadband consumer protection violations, including with respect to open Internet- and privacy-related complaints. And yet, there is still some uncertainty. The FCC’s Restoring Internet Freedom Order is under appeal. If the appeals court that ultimately hears the challenges to the Restoring Internet Freedom Order were to reverse the Order, the possibility exists that broadband services would again come under FCC common carrier jurisdiction, thereby exempting the provision of such services from FTC jurisdiction even under an activity-based interpretation of the FTC Act. Thus, we may not have finality on broadband regulation, despite the Court’s decision this week.

More broadly, we expect that the FTC will continue to push for eliminating the common carrier exemption altogether before the Congress, as it has for many years. Congressional action to repeal the exemption appears unlikely in the near term.

At least for now, broadband providers should continue to ensure that their privacy and broadband practices are in line with FTC guidelines and judicial interpretations of Section 5, and should comply with remaining FCC Open Internet requirements, such as the transparency rule.

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What to Expect from the FCC’s Restoring Internet Freedom Order https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/what-to-expect-from-the-fccs-restoring-internet-freedom-order https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/what-to-expect-from-the-fccs-restoring-internet-freedom-order Wed, 13 Dec 2017 17:38:23 -0500 This Thursday, December 14th, the FCC will vote on the Restoring Internet Freedom Order, after releasing a draft on November 22nd. The Draft Order would overturn the FCC’s earlier 2015 Open Internet Order. We don’t expect any bombshell revisions when the FCC acts, and as such we expect that the Order will:
  • Reclassify fixed and mobile BIAS as an information service. The most significant change in the draft Order to the regulatory classification of BIAS. We expect that the Commission will follow through with its plan to reverse the 2015 Open Internet Order’s classification of fixed and mobile BIAS as a common carrier telecommunications service under Title II of the Communications Act, reclassifying BIAS as an “information service” and reinstating the regulatory framework that was in place prior to March 2015.
  • Vacate the bright-line rules and the general conduct standard. Having reclassified BIAS as an information service, we further expect the Commission will eliminate the conduct rules adopted in the 2015 Title II Order, including the “bright-line” prohibitions on paid prioritization, blocking and throttling and the 2015 Order’s general conduct rule. The general conduct rule, which raised particular concern from Republican commissioners when it was adopted, prohibited BIAS providers from unreasonably interfering with or disadvantaging the ability of consumers to select, access, and use lawful Internet content, applications, and services, and for edge providers to make such content, applications, and services available to end users.
  • Retain, but refactor, the open Internet transparency rule. Contrary to early suggestions, the Restoring Internet Freedom Order likely will not scrap the open Internet transparency rule, which was first imposed in 2010 and later enhanced in 2015. Instead, we expect that the Order will rescind the 2015 Order’s enhancements to the 2010 rule and provide additional flexibility to providers, allowing them to either post the statement on their websites or to submit them to the FCC for posting on a publicly accessible website.
  • Return consumer protection authority to the FTC (with caveats). By reclassifying BIAS as an information service, the Order cedes the FCC’s consumer protection authority over BIAS to its sister agency the Federal Trade Commission (FTC). Specifically, while the 2015 Open Internet Order applied core consumer protection provisions of the Communications Act to BIAS providers, including sections 201, 202, 222, and 255, BIAS will now be subject to Section 5 of the FTC Act, which prohibits unfair and deceptive trade practices. Importantly, although the FCC and FTC are actively working on a memorandum of understanding to promote coordination of enforcement efforts, it’s an open question whether the FTC is able to enforce Section 5 against BIAS providers who also provide regulated common carrier services. Specifically, in 2016 the Ninth Circuit ruled that Section 5’s exemption for “common carriers” applied not just to a company’s common carrier activities, but to all activities of a common carrier. As a result of this decision, any BIAS provider that also provides telecommunications services may be shielded from both FCC and FTC jurisdiction. The FTC has appealed the panel decision en banc and the court heard argument in September. How the Ninth Circuit resolves this question – or whether it reaches a result without addressing the jurisdictional question – may impact whether the FTC will be able to be the “cop on the beat” that the FCC Order expects.
  • Addresses several procedural issues. The draft Restoring Internet Freedom Order also resolves several procedural issues, denying a request from trade group INCOMPAS to modify protective orders related to four recent major transactions involving BIAS providers, and denying a request from the National Hispanic Media Coalition to incorporate several informal complaint in a subsequent proceeding open for public comment.
So, what’s next? The Commissioners will vote on the finalized version of this item at the Commission’s December 14th meeting. Chairman Pai’s Republican colleagues are expected to support the item, while Democratic Commissioners Clyburn and Rosenworcel are expected to dissent, giving the Order a 3-2 majority for adoption. After the Order is published in the Federal Register, we expect pro-Title II parties to appeal the Order.

Ultimately, we will be back in a familiar location – in appeals over the FCC’s classification of broadband. Three of the FCC’s previous attempts have been before the D.C. Circuit, with two reversals (at least in part) of the FCC’s action and (ironically) one decision sustaining the 2015 decision that this Order will reverse. Appellate courts give substantial deference to agency decisions, so long as the ultimate decision addresses the relevant facts and arguments and the outcome is within the zone of reasonable interpretations of the statute. It is possible, therefore, that both the FCC’s classification of BIAS as a Title II service and its expected reclassification of BIAS could be upheld, so long as the court determines that the decision falls within this traditional zone of deference. If that happens, then it will ultimately be up to Congress to prevent constant flip-flopping of the regulatory regime applicable to these services.

We are tracking and will provide a more complete client advisory when the final Order is released.

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On the Eve of the FCC’s Reclassification of Broadband Services, the FCC and FTC Release Memorandum of Understanding for Oversight of Broadband https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/on-the-eve-of-the-fccs-reclassification-of-broadband-services-the-fcc-and-ftc-release-memorandum-of-understanding-for-oversight-of-broadband https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/on-the-eve-of-the-fccs-reclassification-of-broadband-services-the-fcc-and-ftc-release-memorandum-of-understanding-for-oversight-of-broadband Wed, 13 Dec 2017 17:03:31 -0500 On December 11, 2017, the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) released a draft Memorandum of Understanding (MOU) which will allocate oversight and enforcement authority related to broadband Internet access service (BIAS) between the two agencies. The new MOU was announced three days before the FCC’s scheduled vote to reclassify BIAS as an “information service,” and is expected to be finalized simultaneously with that vote. The MOU is part of an ongoing effort to address concerns that reversing the current “net neutrality” rules will adversely affect consumers, and provides a guide for Internet service providers (ISPs) and other stakeholders to understand which agency will be taking the lead on oversight and enforcement going forward. However, the extent to which the MOU takes effect will depend upon, among other things, the pending case interpreting section 5 of the FTC Act that is before the Ninth Circuit Court of Appeals.

The MOU generally divides FCC and FTC jurisdiction over BIAS providers as follows:

FCC

FTC

  • Monitor the broadband market and identify market entry barriers by, among other activities, reviewing informal complaints filed by consumers.
  • Take enforcement actions against ISPs that fail to comply with the Transparency Rule’s posting requirement. FCC enforcement would not address the adequacy of the disclosure, however.
  • Investigate and take enforcement action against ISPs for unfair, deceptive, or otherwise unlawful acts or practices, including but not limited to, actions pertaining to the accuracy of the disclosures required under the Transparency Rule, as well as their marketing, advertising, and promotional activities.
The agencies have made clear that they will coordinate their activities “to promote consistency in law enforcement and to prevent duplicative or conflicting actions.” They will also continue to share consumer complaints with each other and will collaborate on consumer and industry outreach and education efforts. FCC Chairman Ajit Pai said in a statement that the MOU “outlines the robust process by which the FCC and FTC will safeguard the public interest,” but Commissioner Mignon Clyburn (a Democrat) called the MOU “a smoke and mirrors PR stunt, distracting from the FCC’s planned destruction of net neutrality protections later this week.”

Despite the MOU and upcoming Restoring Internet Freedom Order, significant questions will remain about the appropriate jurisdiction of the FCC and FTC with respect to BIAS and ISPs. For example, less than three months ago, the Ninth Circuit received arguments in a rehearing en banc of the court’s earlier decision to dismiss an FTC case against AT&T Mobility over allegedly “unfair and deceptive” throttling practices in connection with wireless data services provided to AT&T’s customers with unlimited data plans. Implementation of the MOU may be impacted by how the Ninth Circuit resolves this jurisdictional dispute. If the Ninth Circuit finds the common carrier exemption to be activity-based, then the FCC’s expected decision to walk back from “common carrier” designation for BIAS will open the door for FTC oversight. On the other hand, if the Ninth Circuit finds that exemption to be status-based – or resolves the case without resolving the question – then the FTC’s ability to proceed under the MOU may be in question. Thus, even after the MOU is finalized, we may have to wait to see the final impact of the agreement.

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House Antitrust Subcommittee Explores the Role of Antitrust Law in Net Neutrality https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/house-antitrust-subcommittee-explores-the-role-of-antitrust-law-in-net-neutrality https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/house-antitrust-subcommittee-explores-the-role-of-antitrust-law-in-net-neutrality Mon, 06 Nov 2017 17:26:12 -0500 On November 1, 2017 the House Antitrust Law Subcommittee held a hearing to discuss the role of federal agencies in preserving an open Internet.

The core question discussed at the hearing was whether current antitrust law is sufficient to ensure net neutrality absent FCC rules. The panelists—including FTC Acting Chairman Maureen Ohlhausen and Commissioner Terrell McSweeney; former FCC Commissioner Robert McDowell; and Michael Romano, NTCA Senior Vice President of Industry Affairs and Business Development—and committee members were generally divided down party lines, with Republicans arguing that FCC rules were both unnecessary and counterproductive and Democrats arguing that rules were necessary to ensure an open Internet, free expression, and innovation.

At the same time, all panelists agreed that Congress should eliminate the so-called “common-carrier exemption,” which exempts Title II common carriers from FTC jurisdiction. By eliminating the exemption, the panelists argued that the FTC could assume a greater role in enforcing net neutrality and other consumer protection violations related to the communications industry.

The hearing took place in the midst of ongoing regulatory and judicial proceedings that would define the contours of FTC and FCC jurisdiction with respect to broadband providers. Specifically, the FCC is considering a Notice of Proposed Rulemaking that would dramatically scale back the FCC's earlier 2015 open Internet order--reclassifying broadband internet access as a lightly regulated “information service” and returning primary jurisdiction over broadband services to the FTC. At the same time, the Ninth Circuit has before it a pending rehearing en banc of a 2016 decision that broadly interpreted "common carrier exemption” as applying to all activities of common carrier entities, not just common-carrier activities. As we discussed in an earlier blog post, the original ruling was controversial, and FCC Chairman Ajit Pai has praised the decision to rehear the case.

For more information on the state of play with the current boundaries between FCC and FTC jurisdiction (in the context of consumer privacy), please join us for an ABA Antitrust Section webinar sponsored by the Privacy and Information Security and Media and Technology Committees on November 13, 2017 featuring:

  • Jennifer Tatel, Partner, Wilkinson Barker Knauer
  • Neil Chilson, Chief Technologist, Federal Trade Commission
  • Rick Chessen, Senior Vice President, Law and Regulatory Policy, NCTA – The Internet & Television Association
  • Yosef Getachew, Policy Fellow, Public Knowledge
If you are interested in joining the webinar, you may register here.

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Ninth Circuit Grants FTC Request for Rehearing En Banc of AT&T Throttling Case, Setting Aside Earlier Opinion https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ninth-circuit-grants-ftc-request-for-rehearing-en-banc-of-att-throttling-case-setting-aside-earlier-opinion https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ninth-circuit-grants-ftc-request-for-rehearing-en-banc-of-att-throttling-case-setting-aside-earlier-opinion Tue, 09 May 2017 23:55:37 -0400 On May 9, 2017, the U.S. Court of Appeals for the Ninth Circuit issued an order granting a Federal Trade Commission (FTC) request for rehearing en banc of the court’s earlier decision to dismiss an FTC case against AT&T Mobility over allegedly “unfair and deceptive” throttling practices in connection with wireless data services provided to AT&T’s customers with unlimited data plans. In a brief order, Chief Judge Thomas noted that “[t]he three-judge panel disposition in this case shall not be cited as precedent by or to any court of the Ninth Circuit.”

The original Ninth Circuit decision was notable because it held that the “common carrier exemption” in section 5 of the FTC Act—which excludes common carriers from FTC jurisdiction—was “status based” rather than “activity based,” and as such AT&T was not subject to the FTC’s jurisdiction even for non-common-carrier activities. The original decision had the effect of resetting the jurisdictional boundaries between the FTC and the Federal Communications Commission (FCC) and removing a wide swath of the telecommunications and technology ecosystem from the FTC’s jurisdictional reach.

In a statement, FCC Chairman Ajit Pai applauded today’s order, noting that it will make it “easier for the FTC to protect consumers’ online privacy” and “strengthens the case for the FCC to reverse its 2015 Title II Order,” which classified broadband Internet access service (BIAS) as a common carriage "telecommunications service" and established the FCC's current open Internet rule framework. The 2015 Title II Order is now the subject of a draft Notice of Proposed Rulemaking scheduled for a Commission vote at its May 18, 2017 open meeting.

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FTC Announces Two Telemarketing Cases https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ftc-announces-two-telemarketing-cases https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ftc-announces-two-telemarketing-cases Thu, 19 Jan 2017 16:26:10 -0500 On January 13, 2017, the Federal Trade Commission (FTC) announced that it filed two lawsuits against more than a dozen individual and corporate defendants allegedly coordinated by two individuals. In the complaints, the FTC alleges multiple violations of the FTC’s Telemarketing Sales Rule (TSR). Specifically, the complaints allege that over a period several years, the defendants made unauthorized prerecorded calls using auto-dialer software to consumers throughout the U.S. in an attempt to sell or generate leads for goods or services such as extended auto warranties, search engine optimization services, and home security systems. The FTC contends that these actions violated the TSR’s prohibition against abusive telemarketing acts or practices and initiating or causing the initiation of unlawful prerecorded messages. The complaints further claim that many of these calls were made to phone numbers on the national Do Not Call Registry, which is a separate TSR violation.

The FTC has asked the court in each case to impose injunctive relief and unspecified monetary relief against the defendants. The FTC’s press release announcing the actions notes that several of the named defendants have agreed to settle with the FTC, agreeing to a permanent ban on making autodialed calls and to settlement payments of more than $10 million (although almost all of the judgment amounts are suspended due to the settling parties’ inability to pay).

These actions, coupled with the Federal Communications Commission’s continued focus on enforcing the Telephone Consumer Protection Act, serve as a reminder to companies that engage in telemarketing that compliance with the relevant laws and regulations is key in order to avoid unwanted attention from both state and federal law enforcement and regulatory agencies.

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Citing an “Enforcement Gap,” FTC Seeks Rehearing En Banc of Dismissal of AT&T “Throttling” Case https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/citing-an-enforcement-gap-ftc-seeks-rehearing-en-banc-of-dismissal-of-att-throttling-case https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/citing-an-enforcement-gap-ftc-seeks-rehearing-en-banc-of-dismissal-of-att-throttling-case Wed, 19 Oct 2016 13:33:33 -0400 On October 13, 2016, the Federal Trade Commission (FTC) filed a petition in the U.S. Court of Appeals for the Ninth Circuit requesting a rehearing en banc of the court’s decision in the FTC’s case against AT&T alleging that the company dramatically reduced – or “throttled” – data speeds for certain customers on unlimited data plans once those customers had used a certain level of data. A three-judge panel for the Ninth Circuit determined in August 2016 that the case should be dismissed because AT&T was not subject to an FTC enforcement action due to the company’s status as a common carrier. As we noted in a previous blog post, this case could reset the jurisdictional boundaries between the FTC and the Federal Communications Commission (FCC) with respect to phone companies, broadband providers and other common carriers.

As expected, the FTC asked the Ninth Circuit to rehear the case en banc. The request, if granted by the court, would result in the full contingent of judges hearing the case, likely early next year. The FTC advances three primary arguments in support of rehearing, but the most interesting by far is its claim of a gap in consumer protection jurisdiction as a result of the ruling.

The FTC’s lead argument is that the decision allegedly “creates an enforcement gap” because “no other federal agency has the FTC’s breadth of authority to protect consumers from many unfair or deceptive practices across the economy and to obtain redress for consumer harm.” In support, the FTC argues that the FCC’s jurisdiction “is limited to matters ‘for and in connection with’ common-carrier service” and, unlike the FTC, the FCC cannot collect consumer redress and is subject to a one year statute of limitations. The FTC further argues that the Ninth Circuit panel’s status-based approach to determining FTC jurisdiction has wide-reaching implications for any company who can claim to be a “common carrier” in some aspect of its business to avoid enforcement actions for non-common-carriage activities. (We noted this open question in our previous post as well.) Such entities – which the FTC identified to include large cable companies, satellite service providers, internet companies and energy utilities – may manipulate their common carrier status to avoid FTC jurisdiction. Finally, the FTC claims that the ruling “threatens the FTC’s ability to enforce other important consumer protection statutes including the Children’s Online Privacy Protection Act, the Telemarketing and Consumer Fraud and Abuse Act, and the Restore Online Shoppers’ Confidence Act, and several others.”

Notably, the FTC’s position was previewed by FTC Chairwoman Edith Ramirez in her written testimony for an FTC oversight hearing before the Senate Committee on Commerce, Science and Transportation on September 27, 2016. As we predicted, Chairwoman Ramirez argued that the case supported the FTC’s long-time effort to repeal the common carrier exception, stating in part that following the Ninth Circuit’s ruling, coupled with the FCC’s 2015 decision to reclassify broadband Internet access as a common carriage service, “[a]ny company that has or acquires the status of a common carrier will be able to argue that it is immune from FTC enforcement against any of its lines of business by virtue of its common carrier status.”

Whether the FCC agrees with the FTC’s characterization of its jurisdiction is yet to be determined. Nevertheless, the fault line is clearly identified in the FTC’s filing. We will continue to monitor this case and will post any new developments here.

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FCC Chairman Outlines Proposal for New Broadband Privacy Rules https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-chairman-outlines-proposal-for-new-broadband-privacy-rules https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-chairman-outlines-proposal-for-new-broadband-privacy-rules Thu, 06 Oct 2016 19:28:14 -0400 On October 6, 2016, Federal Communications Commission (FCC or Commission) Chairman Tom Wheeler published a blog entry on the Commission’s website outlining proposed privacy rules for broadband Internet Service Providers (ISPs). The proposed rules are scheduled to be considered by the full Commission at its monthly meeting on October 27, 2016. These rules come after the Commission received substantial public comment on its March notice of proposed rulemaking (discussed in an earlier blog post) from stakeholders representing consumer, public interest, industry, academics, and other government entities including the Federal Trade Commission (FTC). The proposed rules appear to soften several elements of the Commission's initial proposal, which received considerable industry criticism.

The actual text of the proposed order is not available, however, a fact sheet along with the Chairman’s blog post outlines the details of the proposal. Under the proposal, mobile and fixed broadband ISPs would have the following requirements:

  • Clear Notification. ISPs would be required to notify consumers about the type of information they collect; explain how and for what purposes that information can be shared or used; and identify the types of entities with which they share information. ISPs will also be responsible for providing this information to customers when they sign up for a service and regularly informing them of any significant changes. The Commission’s Consumer Advisory Committee will be tasked with creating a standardized privacy notice format that will serve as a “safe-harbor” for those ISPs that choose to adopt it.
  • Information Sensitivity-Based Choice. ISPs must get a customer’s “opt-in” consent before using or sharing information deemed sensitive. Geo-location information, children’s information, health information, financial information, social security numbers, web browsing history, app usage history, and communications content are the broad categories of data that would be considered sensitive. All other individually identifiable customer information would be deemed non-sensitive, and will be subject to an “opt-out” approval requirement. For example, the use of service tier information to market an alarm system would be considered non-sensitive and opt-out policies would be appropriate, consistent with customer expectations. Finally, the rules will infer consent for certain purposes identified in the Communications Act, including the provision of broadband service or billing and collection.
  • Security.
    • Protection: ISPs must take reasonable measures to protect consumer information from vulnerabilities. To help ensure reasonable data protection efforts, ISPs may: a) adopt current industry best practices; b) provide accountability and oversight for security practices; c) use robust customer authentication tools; and d) conduct data disposal consistent with FTC best practices and the Consumer Privacy Bill of Rights.
    • Breach Response: ISPs must notify customers when data is compromised in a way that results in unauthorized disclosure of personal information. ISPs must notify a) the customer no later than 30 days after discovery of the breach; b) the FCC no later than 7 business days after discovery; and c) if it affects more than 5,000 customers, the FBI and U.S. Secret Service no later than 7 business days after discovery.
The proposal addresses other issues, such as,
  • sharing and using de-identified information consistent with the FTC framework;
  • the use of take-it-or-leave-it data usage or sharing policies; and
  • heightened disclosure requirements for discount plans based on consent to data use.
The proposal emphasizes its focus on broadband services. The proposed rules will not apply to the privacy practices of websites or apps, including those operated by ISPs for their non-broadband services, as the Commission believes this is the purview of the FTC. This is particularly notable in light of the recent 9th Circuit AT&T decision, which has further blurred the boundaries of the FCC and FTC’s jurisdiction (addressed in an earlier blog post). In that case, the Court determined that the FTC’s “common carrier exemption” is "status-based," and as such exempts telecommunications carriers (like ISPs) from FTC jurisdiction, regardless of whether the company in question is engaging in common carrier activities. Presumably, the 9th Circuit's reading of the common carrier exemption would extend to websites and apps provided by an ISP, although Chairman Wheeler appears to take a different reading in his privacy proposal.

In response to Chairman Wheeler’s proposal, FTC Chairwoman Ramirez expressed her pleasure with the FCC’s efforts to protect consumer privacy.

We will be tracking this proceeding as it develops, and will follow up with a client advisory when the Commission releases its final rules.

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Ninth Circuit Decision in AT&T “Throttling” Case May Reset Boundaries Between FTC and FCC Jurisdiction https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ninth-circuit-decision-in-att-throttling-case-may-reset-boundaries-between-ftc-and-fcc-jurisdiction https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/ninth-circuit-decision-in-att-throttling-case-may-reset-boundaries-between-ftc-and-fcc-jurisdiction Tue, 30 Aug 2016 12:26:13 -0400 On Monday, August 29, 2016, the Ninth Circuit Court of Appeals issued an opinion that may dramatically alter the boundaries between the Federal Trade Commission’s (FTC) and Federal Communications Commission’s (FCC) authority over phone companies, broadband providers, and other common carriers. The Ninth Circuit dismissed a case that the FTC brought against AT&T over its practices in connection with wireless data services provided to AT&T’s customers with unlimited data plans. The FTC had filed a complaint against AT&T for “throttling” the data usage of customers grandfathered into unlimited data plans. Once customers had used a certain level of data, AT&T would dramatically reduce their data speed, regardless of network congestion. The FTC asserted that AT&T’s imposition of the data speed restrictions was an “unfair act or practice,” and that AT&T’s failure to adequately disclose the policy was a “deceptive act or practice.”

The Ninth Circuit’s decision is the latest in a series of actions attempting to identify the jurisdiction over Internet access services and Internet-based services. As providers and regulators have struggled to identify the proper regulations applicable to such services, the Ninth Circuit’s decision could force significant shifts by both the FTC and FCC for at least a large segment of the industry.

Background

At issue before the Ninth Circuit was the scope of the FTC Act’s exemption of “common carriers” from the FTC’s authority. The FTC argued, and the trial court held, that the common carrier exemption only applied to the extent that the service in question is a common carrier service (i.e., an “activity-based” test that precluded FTC jurisdiction only where a common carrier is engaging in common carrier activities). Because the service that the FTC challenged (wireless broadband Internet access service (“BIAS”)) was not a common carrier service at the time that the FTC brought its action against AT&T, the trial court held AT&T was not engaging in common carrier activity and therefore the FTC had authority to bring its lawsuit.

AT&T appealed the decision, arguing that the FTC Act’s exemption of common carriers should be based on their status, and thus telecommunications service providers like itself are exempt from the FTC’s authority regardless of whether the activity at issue is a common carrier service.

The Ninth Circuit noted two things related to the dispute. First, the court noted that “it is undisputed that AT&T is and was a ‘common carrier[] subject to the Acts to regulate commerce’ for a substantial part of its activity.” Further, the court noted that, during the time period in question, AT&T’s mobile data service “was not identified and regulated by the FCC as a common carrier service” although, since the FCC’s 2015 Open Internet Order, the FCC has classified the service as a common carrier service.

The Ninth Circuit sided with AT&T, and remanded the case for an entry of an order for dismissal. The court held that under the plain language of the statute, the exemption is based on a company’s status and applies regardless of the activity at issue. The “literal reading of the words Congress selected,” the court wrote, “simply does not comport with an activity-based approach [to the common carrier exemption].” The court compared the common carrier exemption to the other exemptions in the statute (for banks, savings and loan institutions, federal credit unions, air carriers and foreign air carriers) that are admitted by the FTC to be status-based, and to the exemption for meatpackers “insofar as they are subject to the Packers and Stockyards Act,” which the court found to be activity-based. The court held that amendments enacted in 1958 to Section 5 – which added the “insofar as” language – indicated an activity-based exemption for that provision but affirmed status-based exemptions for the remainder “then and now.”

Notably, the Ninth Circuit chose to address the status question, rather than addressing a more narrow issue of whether the FCC’s 2015 reclassification of BIAS as a telecommunications service applied to AT&T’s service retroactively.

Implications

The FTC issued a statement that it is “disappointed” and “considering [its] options,” but it is unclear whether it will appeal the ruling to the Supreme Court. It is worth noting that, although the Ninth Circuit did not discuss the decisions, this is the third time that a court of appeals has faced status-based arguments relating to the common carrier exemption. The Seventh Circuit’s 1977 decision in U.S. v. Miller, and the Second Circuit’s 2006 decision in FTC v. Verity Int’l, Ltd., both involved entities claiming common carrier status, although neither decision brought finality to the question. If the FTC pursues the issue further, industry and practitioners could receive welcome guidance on the issue.

More broadly, the FTC has openly called for the end of the common carrier exemption in the past few years. This decision may add fuel to the agency’s efforts in that regard.

As is, the decision makes it more difficult for the FTC to bring an action against a company that can claim to be a common carrier. The Ninth Circuit’s decision noted that AT&T unquestionably was a common carrier “for a substantial part of its activity” and at one point distinguished a case, noting that AT&T’s status “is not based on its acquisition of some minor division unrelated to the company’s core activities.” Nevertheless, the court’s analysis leaves open the possibility that even providing only a small amount of common carrier service may be enough to qualify all of a company’s activities for the common carrier exemption.

On the FCC side, there are equally broad questions raised by the decision. The FCC recently has broadly construed its own authority under Section 201(b), to a fair degree of controversy, to address practices of common carriers “for or in connection with” their services, such as advertising and billing. Presumably, these efforts will continue after the Ninth Circuit’s ruling. The Ninth Circuit’s ruling, however, may encourage the FCC to fill any potential gap in coverage by taking a broader view of its own authority to regulate non-common carrier services that common carriers offer to consumers. This could have significant implications for a number of ongoing FCC proceedings, including a proceeding to overhaul the FCC’s privacy rules after the Open Internet Order and requests to classify SMS messaging and interconnected voice-over-Internet-Protocol (VoIP) service as telecommunications services subject to common carrier regulation. This also might color the FCC’s approach to regulation of over-the-top services provided by non-carrier entities using telecommunications or Internet services.

Time will tell how this plays out, but for now, the Ninth Circuit appears to have significantly reset the boundaries between the agencies’ jurisdictions. AT&T is not off the hook yet, however, as it faces a parallel action from the FCC, which has issued a Notice of Apparent Liability to AT&T, alleging that its disclosures in connection with its unlimited data plans violated the FCC’s “transparency” rules. The FCC proposed $100 million in forfeitures for the violation, which sparked vigorous dissent by the two Republican commissioners and was opposed by AT&T in a strongly-worded response. The FCC forfeiture proceeding remains pending.

Alysa Hutnik and Spencer Elg, of Kelley Drye’s Advertising Group, co-authored this post.

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FCC and FTC Reach Consumer Protection Memorandum of Understanding (MOU): Agencies Promise Cooperation, Express Shared Jurisdiction over Carrier Activities https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-and-ftc-reach-consumer-protection-memorandum-of-understanding-mou-agencies-promise-cooperation-express-shared-jurisdiction-over-carrier-activities https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/fcc-and-ftc-reach-consumer-protection-memorandum-of-understanding-mou-agencies-promise-cooperation-express-shared-jurisdiction-over-carrier-activities Tue, 17 Nov 2015 23:21:34 -0500 iStock_000036215158Large

On November 16, 2015, the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) reached a Memorandum of Understanding (MOU) in which the two agencies agreed to engage in greater coordination and collaboration on consumer protection issues, with greater respect for each agency’s jurisdiction. The MOU comes at a time when both agencies are seeking to position themselves as protectors of consumers in the digital economy.

In the MOU, the agencies agreed to coordinate with one another “to protect consumers from acts and practices that are deceptive, unfair, unjust and/or unreasonable.” Among other things, the agencies agreed to:

  • Coordinate on initiatives where one agency’s action will have a significant effect on the other agency’s authority or programs;
  • Consult on investigations or actions that implicate the jurisdiction of the other agency;
  • Meet regularly to review current marketplace practices, to share each agency’s work on consumer protection matters of common interest, and to exchange information about “the evolution of communications markets;”
  • Share enforcement techniques, tools, intelligence, expertise, and best practices in response to reasonable requests for assistance;
  • Collaborate on consumer and industry outreach and education initiatives;
  • Engage in joint enforcement actions, where appropriate, and coordinate public statements;
  • Share data regarding consumer complaints to the extent feasible, including through the FTC’s Consumer Sentinel Network.
The agencies also addressed the scope of the "common carrier exemption," which exempts from the FTC’s jurisdiction common carriers subject to the Communications Act of 1934. Specifically, the FCC and FTC “expressed their belief” that the exemption does not extend to non-common carrier activities engaged in by common carriers, and that exercise of enforcement authority within one agency’s jurisdiction should not be taken to limit the authority of the other. While approaching jurisdictional issues more gingerly will certainly promote better relations between the agencies in the near term, ultimately, the scope of the “common carrier exemption” is an issue for the courts and Congress, and is unlikely to be solved soon.

The agencies each appointed Designated Liaison Officers (DLOs) to serve as the primary points of contact for the agencies. Travis LeBlanc (Chief, Enforcement Bureau) and Alison Kutler (Acting Chief, Consumer & Governmental Affairs Bureau) will serve as the DLOs for the FCC, while Jessica Rich (Director, Bureau of Consumer Protection) will serve as the DLO for the FTC.

The MOU comes after an unprecedented year of consumer protection activity at the FCC (and has been in the works for nearly a year and a half). Earlier this year, the FCC reclassified broadband Internet access service (BIAS) as a common carrier service—effectively bringing BIAS-related activities outside the scope of FTC jurisdiction—and imposed a host of “open Internet” and other consumer protection obligations on BIAS providers. Some of these open Internet issues were the subject of ongoing FTC enforcement actions, including a lawsuit challenging AT&T’s throttling practices for its “unlimited” plans, which is now the subject of a $100 million FCC proposed forfeiture. The FCC also has dramatically expanded its privacy and data security enforcement activities against carriers (including TerraCom/YourTel, AT&T, and Cox Communications). Indeed, the FCC’s Enforcement Chief has stated that he views Section 201(b) of the Communications Act—which prohibits “unjust and unreasonable” practices of common carriers—as coextensive with Section 5 of the FTC’s animating statute—which prohibits “unfair and deceptive trade practices.” No wonder, then, that the FCC’s recent privacy and security enforcement actions have taken on the look and feel of traditional FTC enforcement actions, including settlements with comprehensive and multi-year compliance plans designed to send signals to the broader market about agency expectations.

The MOU will have a number of benefits for the two agencies. For the FCC, the MOU will enable it to learn from the wealth of institutional knowledge that the FTC has gained from years of privacy and data security enforcement under Section 5. As the consumer protection provisions of the 2015 Open Internet Order take an increasingly central role in FCC enforcement actions, this sort of information sharing will be critical. For the FTC, the agency will gain some assurance that the FCC will not further expand its own jurisdiction—as it did in the 2015 Open Internet Order—before coordinating and consulting with its sister agency. Above all, the MOU will promote administrative efficiency, a goal that underlay a similar MOU between the FTC and the Consumer Financial Protection Bureau, which, like the FCC, shares some jurisdiction with the FTC. This administrative efficiency may inure to the benefit of regulated entities, which may now avoid the burden of responding to duplicative and uncoordinated investigations.

Kelley Drye’s attorneys have significant experience representing clients before the FCC and FTC on a wide range of consumer protection issues. Should you have any questions about this MOU and what it means for your business, feel free to contact the authors of this post or your usual Kelley Drye contact.

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“Throttled” Motion to Dismiss; FTC Case Against AT&T for “Unlimited” Data Promises Continues https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/throttled-motion-to-dismiss-ftc-case-against-att-for-unlimited-data-promises-continues https://www.kelleydrye.com/viewpoints/blogs/commlaw-monitor/throttled-motion-to-dismiss-ftc-case-against-att-for-unlimited-data-promises-continues Thu, 02 Apr 2015 04:37:13 -0400 Modern mobile devicesOn March 31st, a federal judge in California District Court issued an Order denying AT&T's motion to dismiss the Federal Trade Commission's (FTC’s) lawsuit against the company concerning its advertising and business practices for its mobile wireless data plans. This case presented an increasingly common question concerning the dividing line between jurisdiction of the FTC and the Federal Communications Commission ("FCC") over activities of telecommunications companies. With the order, the FTC’s case against AT&T will now move forward on the merits.

The FTC initiated the suit in October 2014, accusing AT&T of misleading millions of its customers by marketing and selling “unlimited” data plans, while reducing data speeds for certain unlimited plan customers by up to 90 percent through a practice known as “throttling.” The FTC alleged that AT&T failed to adequately disclose to its customers who purchased unlimited data plans that, once a customer uses a certain amount of data (two gigabytes, in some cases) in a given billing cycle, AT&T reduces, or “throttles,” the customer’s data speeds so that popular smartphone applications such as GPS navigation and streaming video fail to function as intended. The FTC asserts that AT&T has been throttling data speeds for unlimited data customers since 2011, and has throttled at least 3.5 million customers a total of more than 25 million times.

The FTC further alleged that AT&T’s practices were unfair under Section 5 of the FTC Act because AT&T changed the terms of customers’ unlimited data plans while customers were still under contract, and then charged early termination fees (ETFs) to customers who attempted to cancel their unlimited plan as a result of the reduced data speeds.

AT&T denied the allegations, arguing its practices are not uncommon for the industry and it has been transparent with customers from the beginning. It filed a motion to dismiss the case, claiming that AT&T's business is regulated as a common carrier under the Communications Act and therefore is exempt from FTC jurisdiction.

Unfortunately for AT&T, Judge Edward Chen disagreed. The Order denying AT&T’s motion stated, “Contrary to what AT&T argues, the common carrier exception applies only where the entity has the status of common carrier and is actually engaging in common carrier activity." The court sided with the FTC's “activity-based” view of its jurisdiction over common carriers. (AT&T had argued for an "entity-based" test of jurisdiction).

This case is further complicated by the FCC’s March 12 Open Internet Order, released the same day as AT&T and FTC’s oral arguments on the motion, which classifies mobile broadband internet access service as common carriage service under Title II of the Communications Act. AT&T argued that once the Title II reclassification takes effect, the FTC will no longer have jurisdiction. Again, the California court disagreed, finding that the FCC’s Order does not prevent the FTC from pursuing past actions that were under its jurisdiction before the Title II reclassification.

This, of course, is not the end of the throttling issue. AT&T has vowed to appeal the disctrict court's ruling. Moreover, AT&T claims that the FCC is investigating the same activity and may proced with its own case. But for now, the FTC claim will proceed to the merits of AT&T's activities.

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