The case stems from 2014, when Timothy Carpenter was sentenced for his alleged role in coordinating a series of armed robberies of smartphone vendors. To support its case, law enforcement obtained access to 127 days’ worth of Mr. Carpenter’s cell-site location records through what is commonly referred to as a “D order” (after the subsection of the act under which the records were requested). Whereas warrants require the government to show probable cause, under the Stored Communications Act, a D order merely requires that law enforcement present “specific and articulable facts showing that there are reasonable grounds to believe” that the records requested “are relevant and material to an ongoing criminal investigation.” 18 U.S.C. § 2703(d).

By utilizing historical cell-site location records, law enforcement was able to identify a pattern of contact between Carpenter and his alleged co-conspirators in close proximity to the locations of the robberies at the time they occurred. The prosecution built its case in part around such location information and successfully obtained a conviction before a U.S. District Court in Michigan. Carpenter challenged his conviction in the Sixth Circuit.

Reasonable Expectations of Locational Privacy?

On appeal, a panel of the Sixth Circuit upheld Carpenter’s conviction. In the majority opinion, Judge Kethledge concluded that the Fourth Amendment does not require a warrant for law enforcement officers to request historical cell-site location information. In reaching this conclusion, Judge Kethledge relied on the third-party doctrine, which stands for the proposition that individuals do not have a reasonable expectation of privacy in information that they voluntarily disclose to third parties such as mobile carriers.

Notably, in a concurring opinion, Judge Stranch expressed concern about applying the third-party doctrine to records which reveal personal location information, noted that “[d]etermining the parameters of the Fourth Amendment is the task of the judiciary”, and stated that the courts “have more work to do to determine the best methods for assessing the application of the Fourth Amendment in the context of new technology.”

Judge Stranch is far from the first to invite reexamination of the third-party doctrine. To give but one example, in a concurring opinion in the 2012 GPS-tracking case United States v. Jones, Justice Sotomayor wrote, “I would not assume that all information voluntarily disclosed to some member of the public for a limited purpose is, for that reason alone, disentitled to Fourth Amendment protection.”

The FCC’s Role in Cellular Locational Privacy

Regardless of whether the Supreme Court accepts Judge Stranch’s invitation, Carpenter v. United States may hold important compliance implications for carriers.

Historically, the Federal Communications Commission (“FCC”) has played an important role in location privacy matters:

• In its Third CALEA Compliance Report & Order (vacated in part by the D.C. Circuit in 2000), the Commission adopted technical standards that required carriers to be capable of providing location information to law enforcement.
• In its E911 Phase II program, the Commission requires wireless carriers to provide location information to Public Safety Answering Points (“PSAPS”) under accuracy standards generally within 50 to 300 meters, depending on the particular technology used.
• In its 2013 Mobile Device Customer Proprietary Network Information (“CPNI”) Declaratory Ruling, the FCC concluded that “[t]he location of a customer’s use of a telecommunications service… clearly qualifies as CPNI.”
• Most recently, in the newly repealed 2016 Broadband Privacy Order the Commission categorized geo-location information as sensitive customer proprietary information pursuant to section 222 of the Communications Act.

The Supreme Court’s decision in Carpenter may alter existing carrier obligations or serve as an impetus for rulemaking activity on related matters.

Although the Court accepted the Carpenter case for argument next term (which starts in October), the argument date has not yet been established. Typically, we would not see a SCOTUS opinion until January of next year at the earliest.

We will continue to monitor this case, with particular attention to CALEA and CPNI ramifications.

In 2012, Congress passed the FAA Modernization and Reform Act (“FMRA”), which prohibited the FAA from creating “any rule or regulation regarding a model aircraft.” Under the FMRA, a model aircraft is a UAS that is:

• capable of sustained flight in the atmosphere;
• flown within visual line of sight of the UAS operator; and
• flown for hobby or recreational purposes.

Background:

In December of 2015, despite the prohibition in the FMRA, the FAA rushed to create a rule requiring owners of drones between 0.55 and 55 pounds to register said drones with the agency for a five dollar fee. As a result of the Registration Rule, approximately 760,000 hobbyists have registered model aircraft with the FAA.

However, a D.C. area drone hobbyist named John Taylor challenged the FAA registration regime on two grounds: (1) under the FMRA, the FAA lacked the legal authority to issue the Registration Rule; and (2) a public notice issued by the FAA prohibiting drone operations in select geographic areas violated the FMRA.

On the first point, the D.C. Circuit sided with Taylor – given that Section 336(a) of the FMRA says that the FAA “may not promulgate any rule or regulation regarding a model aircraft,” the Registration Rule was invalid insofar as it applied to model aircraft.

On the second point, however, the D.C. Circuit never reached the merits of the issue and sided with the FAA, because Taylor failed to challenge the public notice in a timely manner.

Next Steps:

Despite the D.C. Circuit’s ruling, there might still be a future for recreational drone registration. Although the stereotypical regulatory posture of corporate enterprises is to oppose federal regulation of their products and services, the nascent drone industry is an exception. In response to the ruling, the Drone Manufacturers Alliance (“DMA”), a coalition comprised of leading consumer drone companies such as 3DR, DJI, and Parrot, put out a statement:

“DMA is studying implications of ruling closely, but believes the existing system has worked well to protect the interests of safe and responsible pilots as well as the interests of society at large.”

Given the dangers associated with drone operations by untrained or careless users, UAS companies appear to generally favor the educational functions and accountability associated with registration regimes.

DJI appears to be going even further – they just announced that all of their customers must register their drones with the company, and that customer drones will not fully function until after registration is complete.

Moving forward, the FAA still has two options – appeal this decision for en banc review by a panel of judges, or work with Congress to amend the text of the FMRA. In the interim, however, the small UAS registration regime has been grounded.

In the BDS Order, as we described in an earlier blog post, the Commission eliminated price caps for significant portions of the BDS marketplace, created a competitive market test to retain price cap regulation for select services in non-competitive geographic areas, mandatorily detariffed competitive BDS, refrained from adopting specific rules to regulate the wholesale BDS market, and clarified that select competitive BDS offerings constitute private carriage offerings.

Sprint and Windstream allege that the BDS Order is arbitrary and capricious, procedurally inconsistent with the notice-and-comment requirements of the Administrative Procedure Act (“APA”), and in violation of the Communications Act and FCC rules.

Ordinarily, parties cannot challenge rulemaking orders that set forth rules of general applicability until such time as those rules are published in the Federal Register (which has not occurred with the BDS Order as of May 15, 2017). This publication generally represents public notice of a rulemaking order. However, Sprint and Windstream contend that the DBS Order also contained narrower adjudicatory determinations deciding matters particular to specifically–named companies, such as the conclusion that a specific business data service offered by Comcast may be treated as private carriage rather than common carriage, and the changes in scope of regulatory forbearance previously granted to certain business data services provided by Verizon affiliates. According to Sprint and Windstream, the adjudicative elements of the BDS Order render the decision as a whole subject to the public notice rules subject to adjudicatory actions – upon release of the decision. Thus, the petitioners contend that their challenge of the BDS Order prior to Federal Register publication is permissible and qualifies their petition for the judicial lottery procedure to determine the forum for review should additional parties seek review in other appellate venues.

As of this posting, no other parties have sought judicial relief from the BDS Order. While it remains to be seen how the D.C. Circuit responds procedurally to Sprint’s and Windstream’s protective petition, it is clear that the BDS Order will face scrutiny by the courts.

Most of the provisions of the Order become effective on June 12, 2015, but others require approval from the Office of Management and Budget (OMB) before becoming effective. Specifically, the requirements adopted as part of the Commission’s enhanced transparency rule will only become effective upon the completion of the OMB review and a subsequent FCC public notice in the Federal Register. These requirements include enhancements to the current transparency disclosures that must be made by fixed and mobile broadband Internet access providers, such as additional disclosures related to commercial terms, performance characteristics, and network practices, as well as safe harbors related to the form of such disclosures.

The Order’s temporary exemption from the enhanced transparency rule obligations otherwise applicable to smaller providers (with 100,000 or fewer subscribers) is also delayed pending OMB approval. (For a complete list of paragraphs in the Order requiring OMB approval, see ¶¶164, 166, 167, 169, 173, 174, 179, 180, and 181.) While OMB approval is pending, the transparency rule pre-dating the recent Order remains in full effect for all fixed and mobile providers.

Today’s publication in the Federal Register triggers the 60-day deadline for appeals and the 30-day deadline for petitions for reconsideration. At present, no entities have filed a petition for reconsideration or clarification with the FCC itself, but the United States Telecom Association (USTelecom) and Alamo Broadband had already filed appeals in two different federal appellate courts. After a circuit court lottery, the United States Court of Appeals for the D.C. Circuit was selected as the court that will hear these open Internet appeals. USTelecom re-filed its petition for review with the upon the Federal Register publication today. We expect other trade associations, such as CTIA-The Wireless Association, also to appeal by the June 12, 2015, deadline.

Should you have any questions about the Order and its implications for your organization or the broadband industry in general, feel free to contact any one of the attorneys in the Kelley Drye Communications practice.

NAB argued that the Bureau does not have the authority to change the level of scrutiny for broadcast transactions that were otherwise “presumptively valid” under the Commission’s existing media ownership rules. The Association viewed the Public Notice as a “de facto” rule, effectively imposing new regulations without following the proper notice and comment requirements. NAB believed that the Media Bureau exceeded its delegated authority in issuing the Public Notice and that the Notice was “arbitrary, capricious, and an abuse of discretion,” violating the Administrative Procedure Act.

On September 9, the D.C. Circuit granted the FCC's motion to dismiss, finding that the Court did not have the authority to review the Media Bureau’s Public Notice. The Court agreed with the FCC, stating that the Court only has the jurisdiction to review a “final agency order” and that the Public Notice in question was not a final agency order. Moreover, the Court pointed to a “clear statutory requirement” that the FCC must review a decision by its staff before that decision (or the underlying action) is reviewable by the Court.

Prior to filing its petition, NAB wrote two letters to the FCC’s Secretary, outlining why the Association disagreed with the FCC’s Public Notice. One of the letters ended with a “respectful request” that the “Commission direct the Bureau to withdraw the Public Notice and immediately cease and desist application of the strict scrutiny standard to sharing arrangements that involve contingent interests.” Despite this request, the Court found that the Association’s letter was not the “functional equivalent” of an application for review. To properly obtain judicial review, NAB should have filed a formal application for review with the FCC and waited for the Commission to rule on the application. The outcome of that ruling would then constitute a “final order,” reviewable by the Court.

In its original petition for review, NAB stated that it would be futile to petition the FCC regarding a Public Notice because by virtue of being published, the Notice was implicitly approved by the Commission. The D.C. Circuit did not buy this argument and required more concrete evidence to support NAB’s claim of “futility.”

The Court’s decision sends a strong signal to all parties before regulatory agencies, especially those in front of the FCC. Now, it is clear that if a party disagrees with an agency’s position in a Public Notice, it must file a formal petition for review by the Commission. Only then, will the Court find it has the jurisdiction to review the agency’s action and possibly the underlying Notice. Applications for review must be filed within 30 days of a Public Notice and according to the FCC, the party's application should explicitly state that the petitioner is submitting an application for review pursuant to 47 C.F.R. § 1.115.

If successful, Verizon's preemptive move would have prevented a lottery from deciding which court of appeals considered the Net Neutrality order. Yesterday, however, the D.C. Circuit dismissed Verizon's appeal as premature.

The Court's brief opinion is available here. The key portion is as follows:

The challenged order is a rulemaking document subject to publication in the Federal Register, and is not a licensing decision “with respect to specific parties.”

Accordingly, the statutory provision granting the D.C. Circuit exclusive jurisdiction over certain appeals does not apply. Verizon may challenge the order after it appears in the Federal Register. At that point, we expect many parties to file appeals (both supporting and opposing net neutrality rules). A lottery will then decide which court actually hears the case.

The FCC has moved to dismiss both petitions as premature. Verizon opposed the motion and the FCC filed its reply yesterday. At this time, the court has not ruled on the motion. However, the D.C. Circuit issued a brief order denying Verizon's motion to refer the case to the Comcast panel of judges.

Meanwhile, the FCC's order still has not been published in the Federal Register. Once it is published, we expect multiple appeals to be filed, most likely in several circuit courts of appeal. Such appeals would trigger the lottery process to determine where to consolidate the cases.

Links to the pleadings relating to the FCC's motion to dismiss are available below.

Here is the FCC motion to dismiss. An identical motion was filed in the MetroPCS case.

Verizon filed an opposition to the FCC motion, and the FCC replied to Verizon's opposition. (MetroPCS did not file a response to the motion). The court has not ruled on the motion yet.

We will update this blog as significant developments occur.

Verizon's appeal is controversial because it was filed before the FCC has published notice of the Net Neutrality Order in the Federal Register. Appeals taken under the more common review provision -- section 402(a) of the Communications Act -- may not be filed prior to Federal Register publication, and the courts will conduct a lottery among all courts where appeals were filed within the first 10 days to determine which circuit will hear the case. Verizon's move is an attempt to force review in the D.C. Circuit, where the Comcast decision also was considered.

Verizon's petition for review is available here. Verizon's appeal relies upon section 402(b) of the Communications Act, asserting that the Net Neutrality Order modified Verizon's wireless licenses and thus that 402(b) applies. Verizon's motion for consideration of the appeal by the Comcast panel is available here.

To win the support of the other Democratic Commissioners, the Chairman agreed to several changes from his proposal last month. Most notably, the Order applies the transparency rule and a limited blocking prohibition to wireless carriers, and -- although the exact extent is unclear -- appears to bar wireline broadband service providers from engaging in paid prioritization of Internet content. The Order also adopts a definition of the "broadband Internet access services" to which the rules apply.

Commissioners Copps and Clyburn pronounced this action imperfect but sufficient to enable them to permit adoption of the Chairman's proposal. On the other hand, both Commissioners McDowell and Baker dissented from the Order. Both strongly objected to the Commission's claim of exisiting authority over Internet network management. Commissioner McDowell also asserted that the Order would create "irreparable harm" -- a factor considered by courts in granting a stay of agency orders.

The FCC action is described in more detail below. UPDATED: A PUBLIC NOTICE WITH THE RULES WAS RELEASED. SEE BELOW

As of this posting, the FCC has not released the text of its Order. (However, a Public Notice and the text of the New Rules will be was released shortly after the meeting.) As described at the FCC meeting, the Order adopts three general rules:

1. to require transparency by all broadband Internet access providers (including wireless broadband providers) of their network management practices and the performance characteristics of their networks;
2. to prohibit, subject to "reasonable network management," wireline broadband providers from blocking any lawful content, applications, or services, and to prohibit (also subject to reasonable network management) wireless broadband providers from blocking certain types of content -- specifically, access to lawful websites and competing voice and “video telephony” services. All providers are permitted to offer "specialized services," so long as they do not impede the open Internet; and
3. to prohibit unreasonable discrimination by fixed broadband providers. (The Commission did not apply this non-discrimination requirement to wireless providers.)

Notably, the Order designates net neutrality complaints as eligible for the Commission's expedited "Accelerated Docket" complaint procedures. The Accelerated Docket generally provides for a decision to be issued within 90 days of acceptance of the complaint on the docket.

From an enforcement/litigation perspective, the most significant aspect of this decision is its reliance on the FCC's "Title I" (or ancillary) authority. In April, the US Court of Appeals for the DC Circuit reversed a previous FCC decision that relied on ancillary authority to prohibit Comcast's blocking of P2P traffic.

The Commission majority's approach relies upon this same ancillary authority, but offers a different explanation of the basis for authority and the relationship between the FCC's action and areas within its Title II (common carrier), Title III (broadcast/wireless) and Title VI (multichannel video programming) grants of regulatory authority. We also understand that the Order re-interprets Section 706 of the Telecommunications Act of 1996, which directs the FCC to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." The FCC previously interpreted this section not to provide an independent grant of authority. We understand that the majority is reconsidering this interpretation and concludes that Section 706 provides authority for the FCC to act to preserve an open Internet marketplace. The sufficiency of this explanation of authority will be the key issue in the expected appeal.

Reaction to the FCC's proposed rules has been mixed. Some large broadband providers have endorsed Genachowski's proposal, or have been noticeably silent. The same is true for Internet content providers -- some have supported the rules, but others are objecting to them as being too lenient. Public interest groups sought a strengthening of the rules, while wireless providers and their trade associations have opposed application of the rules to wireless broadband services.

Immediately, there will be efforts by Republican leaders in the new Congress to overturn or prevent implementation of the new rules, but support for net neutrality by the President and Democratic leaders in Congress may prevent any such action in the near term.

Another review in the US Court of Appeals is certain. This review ultimately will decide whether the new rules are enforceable. We will follow this case as it moves through the appellate process.

Genachowski's speech abandons his prior proposal for a "third way" to resolve this issue. His current approach relies upon the same Title I authority that the court of appeals found lacking, although presumably the Chairman intends to provide a better rationale connecting the rules to the Commission's authority. One issue that should not get lost in the shuffle, however, is that Chairman Genachowski is proposing to adopt enforceable rules that bind broadband providers for the first time. This would replace the 2005 Policy Statement, which, as we've pointed out, creates enforcement problems of its own.

Follow the jump below to read the statements released today.

All five Commissioners responded to the inclusion of a net neutrality order on the December 21 agenda. Their statements are available below.

December tentative agenda

Genachowski Speech

McDowell Statement

Baker Statement

Copps Statement

Clyburn Statement

The NOI seeks comment in three areas. First, the FCC seeks input on whether the current "information service" classification remains adequate for the Commission to perform its mission. Second, it seeks comment on the legal and practical consequences of "reclassifying Internet services used to communicate with others that have Internet connections" as "telecommunications service" and then applying all of the regulatory requirements of Title II. Finally, and most importantly, the Commission seeks comment on the "third way" position by which so-called "Internet connectivity service" that is offered as part of a wired broadband Internet service would be reclassified as a "telecommunications service", but that the Commission would forbear from applying all Title II regulatory authority over it except such as necessary to implement a set of discrete rules applicable to universal service, consumer protection, competition and small business opportunity.

The Commission has fast-tracked the comment cycle in this case. Comments will be due by July 15, with replies due August 12.

No one knows for sure, but the many pending cases and disputes on VoIP access charges collectively probably have hundreds of millions of dollars at stake. The FCC has exerted much effort to avoid making a decision on the court referrals and various petitions that it has received on the subject since 2005.

Always hopeful that it will moot the question with a comprehensive reform of "intercarrier compensation" within the next 12 months, the FCC has allowed the issue to stay undecided for five years and counting. Paetec and the 14 organizations on the Joint Brief, believe things have dragged on long enough and want the Court of Appeals to rule where the FCC is apparently afraid to tread.

As described in our February 19 posting on the Paetec case, Paetec sued CommPartners in federal district court seeking to collect terminating access charges on interconnected VoIP traffic sent to Paetec by CommPartners. The district court ruled against Paetec, concluding that "the access charge regime is inapplicable to VoIP-originated traffic" because such transmissions qualify for the FCC's "information services" exemption from access on the basis that IP-to-TDM calls involve "net protocol conversion." The district court went on to deny Paetec's claims on unjust enrichment and quantum meruit as well, concluding that the Telecom Act's access charge regime creates a statutory bar to those equitable legal arguments. This ruling, if allowed to stand, would be a huge policy victory for VoIP providers and ISPs and a very expensive defeat for ILECs.

Paetec sought and was granted permission to file an immediate appeal of the Court's rulings. Because the case is not complete, the appeal is "interlocutory" and may be heard only if the district court allows it (it did) and the Court of Appeals agrees to hear it. Paetec has filed its request with the Court of Appeals in D.C. The Joint Brief in support was filed May 20.

The battle has only begun.

The key to Genachowski's view is to classify the transmission component of broadband internet access as a telecom service, while leaving the internet access functionalities unregulated. (This is similar to an approach I suggested in my post on the Comcast decision).

Genachowski proposes "light touch" regulation of the transmission component using Sections 201, 202, 208, 222, 254 and 255 of the Communications Act. Notably, these sections encompass most of the key obligations of telecom carriers, including non-discrimination, "just and reasonable" rates and practices, customer privacy (CPNI), universal service contributions and access by customers with disabilities. He also proposes to forbear from other obligations that might apply -- principally section 251 unbundling obligations.

In other reports, Genachowski is said to plan to present an order for Commission review within the next 30 days.

Click here to download the Court's decision. We will post a discussion of the jurisdictional issue later.

UPDATE 4/6/10: The Court of Appeals vacated the FCC Order because the Commission had not adequately justified its exercise of Title I "ancillary" authority over Comcast's network management practices. Discussing at length appellate Title I jurisdiction cases over the last 40 years, the Court in essence held that the FCC failed to relate Internet network management to common carrier telephone service (Title II), broadcast service (Title II) or cable TV service (Title VI). One quote from the decision sums up the conclusion: "On the record before us, we see 'no relationship whatever' between the Order and services subject to Commission regulation." In other words, the FCC must connect its assertion of authority to something that it indisputably can regulate.

Since the decision was released, there has been much discussion about whether the FCC will reclassify Internet access services as Title II common carrier services. While it is premature to predict these issues with any confidence, one alternative not being discussed is to accept the Court's invitation to connect regulation of Internet access service with regulation of pure transmission services. In the Wireline Broadband Order, the Martin Commission concluded that Internet access did not have a separate transmission component. The decision today may lead the Commission to reverse that determination -- and find that a separate transmission component is inherent in the offering -- so that it may then regulate bundled Internet access due to its impact on stand alone transmission services.

Finally, I note that the Court did not address the enforceability of the Policy Statement itself. As a result, the potential impact on the Universal Service Fund's Form 499-A instructions did not come to pass. Maybe next time.

The D.C. Circuit has examined the issue several times since 1999, including a 2002 decision that the FCC rate cap could not be justified on the basis of 47 USC 251(g). WorldCom, Inc. v. FCC, 288 F.3d 429 (D.C. Cir. 2002). In that case, the Court rejected and remanded the FCC's rationale for the rate cap but did not vacate it, recognizing that there might be other legitimate bases for the policy. Subsequently, in June 2004, Core Communications asked the Court to order the FCC to respond to the remand, which remained pending. The Court declined, but in 2007 granted a renewed request for mandamus from Core. The FCC followed that order with the November 5, 2008 ruling which was the subject of the recent Court affirmation. The key legal discussion in the new decision is Court agreement that the FCC is legally empowered to rely on Section 201 of the Communications Act as the supporting basis for the rate cap.

The January 12 opinion reviews and rejects each of the Core Communications challenges to the FCC action. First, the Court finds that Section 201 is not a "general" provision superceded by the more specific Sections 251 and 252 in the area of compensation for ISP bound traffic (which has been found to be interstate, not local in nature). It also rejected arguments that the calls are "local" rather than interstate because they terminate at the ISP. The Court found that it has already been established and accepted that dial up internet calls do not stop at the ISP interface, but instead continue on to the websites being contacted. Similarly, the Court rejected a claim that the FCC was impermissibly discriminating against ISP bound calls by treating them differently from other calls. Finally, the Court rejected other arguments without discussion because they had been improperly raised before the Court.