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.

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.

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 Provides Invoicing Guidance for COVID-19 Telehealth Program Fund Recipients, Begins Approving Funding Requests

On April 17, 2020, the FCC’s Wireline Competition Bureau (“WCB”) and Office of Managing Director provided guidance (DA 20-425) for funding recipients on how to invoice the FCC for COVID-19 Telehealth Program-funded services and/or connected devices. Under the COVID-19 Telehealth Program, disbursements are issued directly to the participating health care providers, rather than to the service providers or vendors that have provided the eligible services and/or connected devices to participating health care providers. Participating health care providers therefore need to invoice the FCC to be reimbursed for the eligible services/connected devices they purchased under the program. Participating health care providers will need to submit a COVID-19 Telehealth Program Request for Reimbursement Form (found here) to the U.S. Department of the Treasury’s Bureau of the Fiscal Service Invoice Processing Platform (“IPP”) (located here). The guidance provides important details on how to fill out a reimbursement request as well as how to register and use the IPP.

On April 16, 2020, the WCB approved six funding applications for the COVID-19 Telehealth Program. The applications generally focused on diagnosis and preventing the spread of COVID-19 among vulnerable populations, such as low-income or elderly persons. Congress appropriated $200 million for the FCC to support health care providers’ use of telehealth services as part of the recently-enacted CARES Act. The FCC began accepting applications on Monday, April 13. It is continuing to evaluate applications and will distribute additional funding on a rolling basis. The FCC will disburse funding until the program’s funds have been expended or the COVID-19 pandemic has ended. Demand for COVID-19 Telehealth Program funding is expected to be high and stakeholders should take action now to prepare and submit funding applications.

FCC Tasks BDAC Working Group with Addressing COVID-19 Challenges

On April 16, 2020, Chairman Ajit Pai announced (DA 20-420) additional duties for the Disaster Response and Recovery Working Group of the Broadband Deployment Advisory Committee (“BDAC”). The BDAC makes recommendations to the FCC on how to accelerate the deployment of high-speed broadband access. The Working Group will assist the BDAC in documenting the strategies and solutions that stakeholders are developing and implementing in real time to address deployment-related challenges presented by COVID-19. It will also enable the BDAC to report on best practices and lessons learned from the response to COVID-19 to help with the ongoing response to the pandemic, and to assist stakeholders, including the FCC, in preparing for and responding to any comparable future crises. Nominations for new members of the Working Group should be submitted to the FCC no later than April 27, 2020.

FCC Grants Navajo Nation Request to Use Unassigned Spectrum

On April 17, 2020, the FCC’s Wireless Telecommunications Bureau (“WTB”) granted an emergency Special Temporary Authority (“STA”) request filed by the Navajo Nation to use unassigned spectrum in the 2.5 GHz band to provide wireless broadband service over its reservation as part of its emergency COVID-19 response. The Nation is located within parts of Arizona, New Mexico, and Utah. The STA is effective for 60 days. In addition to supporting emergency relief to meet increased broadband demands during the pandemic, the Commission continues to accept applications from eligible Tribal entities for licensed access to unassigned 2.5 GHz spectrum over their rural Tribal Lands in the Rural Tribal Priority Window, which closes August 3, 2020. The grant signals the FCC’s continued openness to STAs that allow service providers access to spectrum to improve communications and broadband service in rural and other hard-to-serve areas during the crisis.

FCC Extends Certain Wireless Construction Deadlines

On April 15, 2020, the WTB and Public Safety and Homeland Security Bureau released an Order (DA 20-414) granting all site-based and mobile-only wireless licensees with construction deadlines between March 15, 2020 and May 15, 2020 (“Licensees”) an additional 60 days to meet their existing deadlines. This Order addresses a March 27, 2020 Enterprise Wireless Alliance (“EWA”) petition for waiver of construction requirements for certain site-based and mobile-only wireless licenses in light of the disruptions caused by COVID-19. The FCC is continuing to monitor the situation and may consider further extensions. The action is just the latest example of the FCC waiving or postponing deadlines covering everything from network buildouts to comment submissions.

Senators Introduce Bill to Increase Seniors' Telehealth Access

On April 14, 2020, Senators Shelley Moore Capito (R-WV), Amy Klobuchar (D-MN), and Bob Casey (D-PA) introduced legislation to increase senior citizens’ access to telehealth during COVID-19. The Advancing Connectivity during the Coronavirus to Ensure Support for Seniors (“Access”) Act would authorize $50 million for the Department of Health and Human Services’ Telehealth Resource Center to assist nursing facilities receiving funding through Medicare or Medicaid in expanding their use of telehealth services.

Commissioners Call for Free ICS Calls, More Lifeline

On April 17, 2020, FCC Commissioners Jessica Rosenworcel and Geoffrey Starks said that the growing number of newly unemployed need access to broadband and voice services more than ever, during a MediaJustice online event. Commissioner Rosenworcel urged the FCC to bolster Lifeline benefits and enrollment, close the homework gap, and lower inmate calling service (“ICS”) rates, while Commissioner Starks backed the push to make ICS free for those in local and state jails and prisons, and not just federal facilities. On April 14, 2020, 27 Democratic Senators sent a letter to Congressional leadership calling on them to increase funding for Lifeline by at least $1 billion in any future coronavirus packages to increase reimbursement rates and the levels of service needed because “[s]ocial distancing, school closures, layoffs, and shelter-in-place rules have spurred a dramatic new reliance on telework, distance education, online employment, and telehealth.”

If you have any questions, please contact your usual Kelley Drye attorney or any member of the Communications Practice Group. For more information on labor, advertising, and other issues, visit Kelley Drye’s COVID-19 Response Resource Center.

Over 500 Service Providers Pledge to “Keep Americans Connected”

On March 13, 2020, FCC Chairman Ajit Pai called on broadband and telephone service providers to forgo service terminations due to inability to pay, waive late fees, and open Wi-Fi hotspots for those who need them for the next 60 days. As of March 31, 2020, the FCC’s Keep Americans Connected page lists 550 participating service providers and 10 trade associations. The providers that have taken the pledge have agreed to, for the next 60 days: (1) not terminate service to any residential or small business customers because of their inability to pay their bills due to the disruptions caused by the coronavirus pandemic; (2) waive any late fees that residential or small business customers incur because of their economic circumstances related to the coronavirus pandemic; and (3) open their Wi-Fi hotspots to any American who needs them.

The Pledge applies only to residential and small business customers. “Small business” is not defined in the Pledge and may be subject to some variation depending upon the service provider. The Pledge does not apply to enterprise customers.

Additional Voluntary Actions for Low-Income Consumers

Chairman Pai also asked providers to expand or implement programs for low-income Americans, and to relax data cap policies in appropriate circumstances. Several carriers have already rolled out modified service offerings aimed at providing Internet access for free or at a reduced cost to low-income individuals and households, as well as K-12 households. Consumers and small businesses should review the list of service providers to determine if additional offerings are available in your area.

FCC Pauses Most Lifeline De-Enrollments for 60 Days

The FCC also has taken actions designed to protect customers of the FCC’s Universal Service Program providing wireless service to low-income customers. On March 17, 2020, the Wireline Competition Bureau issued an order (DA 20-285) waiving the Lifeline program’s recertification and reverification requirements (sections 54.405(e)(4) and 54.410(f) of the Commission’s rules) until May 16, 2020. This FCC order follows several state orders and decisions prohibiting or discouraging public utilities from disconnecting a consumer’s communications services. The FCC order also postpones the March 26, 2020 effective date of the requirement under section 54.406(a) of the Commission’s rules that eligible telecommunications carriers must require their enrollment representatives to register with USAC to May 25, 2020. On March 30, 2020, the FCC also waived the de-enrollment requirement for non-usage of the Lifeline service until May 29, 2020 and extended the previous waivers to May 29 as well so that all of the waivers would expire at the same time.

FCC Eases Rules for Providers of Video Relay Services for the Deaf and Hearing Impaired

On March 16, 2020, the Consumer and Government Affairs Bureau issued an order (DA 20-281) waiving several telecommunications relay services ("TRS") rules and at-home Video Relay Service ("VRS") pilot program requirements in response to increased demand for communications assistants ("CAs") and an anticipated reduction in the number of CAs able to work from call centers. Under the order, rules that limit the number of at-home minutes a CA can handle, that require CAs to have at least three years of experience, and multiple other rules designed to protect against fraud by CAs are waived for 60 days. In addition, the waiver permits a VRS CA to handle international calls (otherwise prohibited under the pilot program) and, in the traditional TRS program, waives the speed-of-answer call requirements. The applicable provisions of the Commission’s rules are waived through May 15, 2020. These actions should enable TRS and VRS providers to keep up with increased demand and to better utilize workforces that are unable to report to a traditional call center during the COVID-19 outbreak.

FCC Temporarily Grants Wireless Carriers Access to Additional Spectrum

The FCC has taken several actions designed to expand the ability of wireless service providers to handle the anticipated increase in demand from remote workers and distance learning in schools. On March 15, 2020, the FCC began granting Special Temporary Authority to several U.S. carriers, allowing them access to additional spectrum for the next 60 days in order to handle the increase in network traffic because of social distancing and stay-at-home orders issued in response to the COVID-19 pandemic. T-Mobile, Verizon (also here), U.S. Cellular, AT&T, rural wireless ISPs, and a tribal service provider in New Mexico have all received permission to utilize additional spectrum. Commissioner Jessica Rosenworcel, in a tweet, questioned whether U.S. networks can handle increased traffic and called on the FCC to utilize the disaster reporting system for COVID-19 and expand reporting requirements beyond telephone service to reflect the “broadband age.”

FCC Actions to Promote Service to Schools, Libraries, and Rural Healthcare Providers

Recognizing the likely increase in distance learning and telehealth services, the FCC has taken multiple actions designed to ease its rules applicable to existing FCC subsidies and is planning to accelerate new programs to support telehealth applications. Schools, libraries, and rural healthcare providers should review these actions carefully to determine their impact on their current operations.

The FCC’s primary actions are as follows:

On March 18, 2020, the Wireline Competition Bureau released an order (DA 20-290) waiving gift rules in the Rural Health Care and E-Rate programs to “enable service providers to offer, and RHC and E-Rate program participants to solicit and accept, improved broadband connections or equipment for telehealth or remote learning.” The order is intended to allow schools, libraries, and rural healthcare providers to meet anticipated short-term demands outside of the restrictions of the programs. By waiving the gift rules, applicants are free to accept – and service providers are free to offer – arrangements that would otherwise qualify as gifts. For example, a service provider might make significantly discounted service available, might waive data caps, or might provide free (or loaner) equipment to meet additional demand, all of which might have disqualified the service provider from future E-Rate or RHC bidding. Under the order, the gift rules (47 C.F.R. sections 54.503(d)(1), 54.603(b), 54.611(b)(2), 54.622(h)(1), 54.623(a)(1)(vi), 54.627(c)(3)(ii)(H), and 54.627(d)(1)(ii)(F)) will be waived through September 30, 2020.

On March 26, 2020, the Wireline Competition Bureau 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.

On March 30, 2020, the FCC announced that the Commission would consider two actions providing up to $300 million in new support for telehealth services. The Commission first will consider an order implementing a $100 million Telehealth Pilot Program first proposed in 2019. In addition, the Commission will consider an order that implements the recently-passed CARES Act, which provided $200 million to support telehealth applications. The $200 million may be used by healthcare providers for telecommunications services, information services, and devices to support telehealth and will be allocated via streamlined applications for the duration of the crisis. The news release does not specify timing for these actions, but they likely would be voted upon by the Commissioners soon.

FCC Clarifies that the TCPA Does Not Restrict Hospital, Healthcare Provider, and Government COVID-Related Communications

Finally, the FCC’s Consumer and Governmental Affairs Bureau issued an order that will enable many enterprises and small businesses to send certain emergency related communications under the Telephone Consumers Protection Act’s ("TCPA’s") “emergency purposes” exception. On March 20, 2020, the Bureau released a Declaratory Ruling (DA 20-318) regarding the TCPA’s “Emergency Purposes” exception to the consent requirement. The Bureau order declares that COVID-19 constitutes an emergency under the TCPA’s exception, thus allowing communications (voice calls and texts) related to the emergency without consent. The order specifically permits calls/texts where (1) the communication is made by a hospital, healthcare official, state, local or federal government official, or a person or entity acting on their behalf; and (2) the communication is informational, directly related to the COVID-19 pandemic, and related to the imminent health or safety risk of the pandemic. The order provides several non-exhaustive examples of communications that would fall within the emergency purposes exception. The Bureau made clear, however, that marketing messages may not be included in the communications. Indeed, on the same day, the Bureau released a warning identifying several COVID-related scams that had arisen.

It is important to note that this clarification applies to both voice calls and text messages that are sent by the designated entities (so long as the content is related to the COVID-19 crisis). The order is designed to ensure that time-sensitive messages are delivered promptly and are not impeded by the TCPA’s consent requirements. For entities not identified in the Bureau’s clarification, we recommend that you obtain the advice of counsel to determine how the TCPA applies to the proposed call or message. On March 30, 2020, a group of banking interests petitioned the FCC to extend its declaratory ruling to COVID-related communications from banks and financial institutions.

In the October 2018 Report and Order, the Commission sought to promote greater investment in the band, by 5G proponents in particular, by making PALs more attractive to commercial mobile service providers. The Order sought to accomplish this by, among other things, increasing the size of PAL license areas from census tracts to counties (with the potential opportunity for package bidding in MSAs), and extending license terms from three to ten years with a renewal expectancy.

Since that Order, the Commission has moved forward with testing and approvals for three Environmental Sensing Capability (“ESC”) operators (Commscope, Federated Wireless and Google) to facilitate dynamic spectrum sharing (“DSS”) in the 3.5 GHz Band and six Spectrum Access System (“SAS”) Administrators (Amdocs, Commscope, Federated Wireless, Google and Sony) for initial commercial deployments. At a September 18, 2019 event, the FCC marked the launch of commercial services in the band – the General Authorized Access (“GAA”) operators that are licensed by rule and must avoid interference to both PALs and incumbents in the band.

In the Public Notice, the Commission seeks comment (penciled in for October 28, and replies by November 12), on the procedures for Auction 105 for the PALs. Individual licensees can hold up to four PALs out of the seven within the band in any license area at any given time. The Commission is proposing to use an ascending clock auction design in which anonymous bidders indicate their demands for generic license blocks in license areas. Unlike Auctions 102 and 103 for the millimeter wave Spectrum Frontiers bands, in the so-called 28 and 24 GHz Bands, respectively, PALs will not be assigned specific frequencies during the auction and instead will be authorized to use frequencies associated with their licenses as they are dynamically assigned by SAS Administrators, in accordance with the three-tier dynamic sharing arrangement in the band. The Commission plans to start the auction on June 25, 2020.

Perhaps the most politically controversial aspect of the Public Notice will be its proposal to allow bidders to elect, prior to the start of the auction, to bid at CMA-level for blocks in all of the counties comprising MSAs, which are the largest CMAs in the large metropolitan areas that incorporate multiple counties. In her dissent to the October 2018 Report and Order, Commissioner Rosenworcel (the lone Democrat at the time) lamented the “lost opportunity” in the band to auction smaller licenses for shorter terms as the original Obama-era rules provided for, which she believed would foster innovative and flexible new services and sensors. She criticized increasing the geographic size of licenses from census tracts to counties, and may well question allowing bidders seeking PAL MSA-wide access in the large metropolitan areas. Whether there will be a significant opposition to this concept in response to the new Public Notice, once it is adopted, will be one of the things to watch for as this long-anticipated auction draws near in what is recognized as a key candidate band for 5G deployment.

Part one of this episode focuses on the significance and implications of Commissioner-led investigations, such as Commissioner O’Rielly regarding E-Rate overbuilding, Commissioner Carr regarding use of educational broadband services (EBS) spectrum, and Commissioner Rosenworcel regarding the sale of customer location information by the major nationwide carriers. Part two focuses on the recent flurry of enforcement items, including the first pure “cramming” action of Rosemary Harold’s tenure as Chief of the Enforcement Bureau, a Consent Decree violation, and the alleged misuse of emergency alert tones by CBS, ABC, AMC Networks, and Discovery.

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The release of the NPRM was our first look at the specifics of a proposal that broke a month ago. The NPRM does not propose a specific budget, primarily raises questions about how to proceed, and does not contain any proposed rules. Nevertheless, opponents of the proposal have been most vocal since word of the NPRM came out, and we expect those USF stakeholders to continue in opposition to the approach. Meanwhile, proposals to reform USF contributions remain stalled (and lacking any consensus), while the contribution factor hovers around 20% of assessable revenues.

Section 254 of the Communications Act requires the FCC to establish “sufficient and predictable” mechanisms to promote universal service goals. Funding must be explicit (ending the pre-1996 Act era of implicit USF subsidies) and funding must be available on an equitable and nondiscriminatory basis, among other things. Through the USF, financial support is provided to reimburse the cost of services under four separate programs—High-Cost (aka “the Connect America Fund”), the Low Income Program (aka “Lifeline”), Schools and Libraries (aka “E-rate”), and Rural Health Care—that implement the FCC’s mandate of ensuring all Americans have access to universal service. Presently, each program operates with some form of annual funding cap or estimated budget but the total amount differs based on the specific needs or demand.

With the NPRM, the FCC proposes for the first time to establish an overall cap on the Universal Service Fund. The NPRM states at the outset of the discussion that one of its goals is to promote a debate about the relative effectiveness of the USF programs—indicating that there may be some basis to the reservations USF stakeholders have expressed. The FCC seeks comment on whether the overall cap should be set at $11.42 billion—the total of the 2018 authorized budgets for the individual programs (and $3 billion above the actual expenditures of the programs).

The NPRM contains a number of questions about how a cap should operate, whether to index the cap to inflation, whether one-year projections or five-year projections should be used and what would happen if the budget cap is reached. In addition, in a surprise, the NPRM asks whether the budgets for the E-rate program and the Rural Health Care program should be combined in a single budget. Commissioner Starks called out this proposal as raising “an alarm for me” and even Commissioner O’Rielly pronounces himself “not sold” on the proposal. With respect to Lifeline, the NPRM does not propose any changes to the program. Commissioner O’Rielly claims the proceeding is not a “back door” cap on Lifeline – although he states he would be willing to establish such a cap directly.

Looking Ahead

This is setting up to be a particularly contentious debate. One side downplays the proposal as simply encouraging a “healthy debate” and not placing any immediate limits on expenditures, while the other side argues that the proposal would undermine universal service policies and eventually pit one program against another in competition for funds. Now that the details of the proposals are out, USF stakeholders are expected to weigh in. Already, many USF-focused organizations have expressed concern about the proposal, and the NPRM is not likely to allay any of those concerns.

Notably missing from the NPRM is a discussion of USF contributions. Although logically distinct from operation of the programs themselves, it is no secret that even the current size of the Fund places pressure on the current system of supporting USF through end user interstate and international telecommunications revenues. For half of 2018, the USF contribution factor exceeded 20%, and early demand projections for the Third Quarter of 2019 make a return to a 20% factor a distinct possibility. The FCC last seriously considered contributions reform in 2008, but proposals have stalled and the Federal-State Joint Board is deeply divided on how to proceed. Changes to the contribution system do not appear likely any time soon, regardless of what happens with this NPRM.

This report prompted commentary from Commissioner Rosenworcel, who tweeted that these “measly efforts” were “not making a dent in this problem” and called for carriers to provide free call blocking tools to consumers. In our view, however, the report really doesn’t relate to the vigor – or alleged lack thereof – of FCC robocall enforcement efforts. Instead, the small amount of assessed fines that are actually collected starkly demonstrates the internal and external hurdles faced by the FCC, which impact all types of enforcement actions, not just robocalls. The report likely will rekindle Congressional criticism of FCC enforcement processes and calls for more systematic solutions to the problem of unwanted calls.

The collection issues outlined in the report are not unique to robocalling enforcement. Rather, the low collection rates are a function of the process for collection and the parties against whom cases typically proceed to forfeiture (versus those settled by consent decrees). These problems predominate in all areas of FCC enforcement.

First, the FCC faces significant procedural hurdles, both inside and outside the agency, to forcing violators to pay assessed fines. As we previously highlighted in our podcasts, unlike many other federal agencies, the FCC does not have the authority to sue violators directly in court to collect unpaid fines. Instead, the agency must refer unpaid penalties to the Department of Justice (“DOJ”), which has the final say on whether or not to bring a collection action in court. In many cases, DOJ attorneys may be unwilling or unable to take on FCC collection action referrals due to resource constraints or higher-priority cases. If the DOJ sues, the party against whom the collection action is brought is entitled to a “trial de novo,” which presents the potential for complicated litigation over the facts of the violation and the FCC’s legal conclusions in assessing the fine. Perhaps as a result of this, in our experience, even when federal prosecutors do act on referrals, they often agree to settlements below the penalty originally assessed by the FCC. Moreover, in the case of robocall enforcement, some of the targets against whom the fines were assessed are foreign persons or corporations. Collection actions against foreign nationals raise complicated process issues, and often at a minimum involve significant delay before a collection action can be commenced.

Second, the parties against whom forfeiture actions are taken play into this. Most FCC enforcement is against entities that hold licenses or other authorizations from the agency. These entities often are motivated to resolve an enforcement allegation by consent decree, many times even before a formal action is brought. Given the importance of a good relationship with one’s primary regulator, it is not hard to understand why most parties may settle allegations even if they disagree with the FCC’s factual findings or legal conclusions. However, in some cases, the FCC’s posture makes settlement unattractive or, potentially, impractical. It is here where the FCC arguably deserves some of the blame for the dearth of fine collections, at least in the context of robocall violations. Nearly all of the recent robocall-related enforcement actions targeted small companies and/or individuals. The FCC imposed millions in penalties in these cases despite (likely credible) claims by the violators that they could not pay the proposed amounts. The Communications Act requires the FCC to consider a violator’s ability to pay when assessing fines. But the FCC found in the robocall cases that the violator’s inability to pay was outweighed by other statutory factors, including the alleged egregiousness of the violations, warranting the hefty penalties regardless. As a result, the FCC assessed fines for robocall-related violations and other misconduct that it very likely knew were uncollectible, possibly in order to send a message, set precedent, and/or to push the offending companies out of business. As most FCC collection actions result in settlement, very few cases see the inside of the courtroom and the agency’s practice of assessing fines far beyond a violator’s ability to pay thus far has escaped judicial scrutiny.

As a result, in some ways all FCC fines face obstacles to collection, and the FCC’s choice of targets thus far in robocall enforcement made collection even more unlikely. With this situation unlikely to change, the report may inject new life into FCC policy proposals to curb unwanted calls. In particular, the FCC recently began using its bully pulpit to push changes by service providers to limit robocalling opportunities. In November 2018, Chairman Pai issued a letter asking service providers about their efforts to implement call-verification systems like SHAKEN/STIR and threatened regulatory action in 2019 if carriers do not voluntarily implement such systems. The Chairman also urged all carriers to participate in USTelecom’s Traceback Group, which helps identify sources of unwanted calls. Commissioner Rosenworcel’s call (joined by some consumer advocacy groups) to require carriers to block robocalls fits in this same vein. The FCC has not teed up any rulemakings on these proposals yet, but whether a carrier has sufficient “safeguards” in place to limit unlawful robocalls will be a major FCC policymaking focus area this year.

More broadly, the factors limiting FCC collection of fines will remain. Until there is an easier path to judicial review of FCC enforcement actions, and unless and until parties against whom forfeitures are assessed have the means to dispute and, ultimately, pay, FCC fines, we don’t expect material differences in FCC collection rates. Perhaps it is time to examine fundamental reform to the FCC’s enforcement authority and procedures.

The FCC imposed the rate floor in 2011 due to concerns that rural carriers could use USF support to offer rates below those found in urban areas for comparable services. The agency found such action would undermine its duty to support “reasonably comparable” services between rural and urban areas. The rate floor reduces the USF support for carriers whose basic voice rates (plus state-mandated fees) fall below a FCC-set floor based on charges for comparable service in urban areas. However, the rural rate floor continued to increase following its adoption, eventually surpassing the charges for service in some urban areas. In response, the FCC froze the rate floor in 2017 (at $18) while it considered reforms to the policy. In the absence of further action by the agency, the rate floor would jump to nearly $27 in July 2019, likely leading to concomitant price increases for rural customers.

In support of the rate floor elimination, the FCC plans to conclude that the policy created a perverse incentive for carriers to raise rural rates to avoid losing USF support. The agency also would find that this incentive particularly hurt older consumers and Tribal area residents by hampering access to affordable telecommunications services. The FCC anticipates finding that the rate floor places unnecessary regulatory burdens on rural carriers, who must seek authorization from state authorities and satisfy customer notification requirements for rate hikes. Finally, the agency would question prior claims that rural carriers used USF support to offer artificially low rates and note that CAF recipients must meet strict buildout obligations that prevent carriers from failing to put their subsidies to use.

The rural rate floor would be eliminated 30 days after publication of the proposed order in the Federal Register. All rural carriers subject to the rate floor, as well as consumer advocacy groups, should closely review the proposed order and work with counsel to assess its impact. It remains to be seen what level of support the proposed order receives at the meeting. Both Republican Commissioner O’Rielly and former Democratic Commissioner Clyburn strongly opposed eliminating the rural rate floor when the FCC froze it in 2017. At the time, the Commissioners argued that rural carriers should recoup some revenue from their subscribers first before relying on USF support and called for means-testing CAF support in lieu of eliminating the rate floor. While there is no indication that Commissioner O’Rielly has softened his views or whether current Democratic Commissioners Rosenworcel and Starks oppose the elimination of the rate floor, it is likely that the proposed order will draw at least some dissent. Such dissent may fuel calls for reconsideration or subsequent appeals of the rural rate floor elimination following the April meeting.

Commissioner Starks most recently served as an Assistant Bureau Chief in the FCC’s Enforcement Bureau, where he primarily worked on competition and Universal Service Fund matters. He joined the Commission in 2015 from the Department of Justice, where he was Senior Counsel in the Office of the Deputy Attorney General. Prior to that, he was an associate attorney in private practice, a clerk for the U.S. Court of Appeals for the Eighth Circuit, a legislative staffer in the Illinois State Senate, and a financial analyst at Goldman Sachs. He earned a degree in social studies and graduated magna cum laude from Harvard College, and then graduated from Yale Law School.

Joining Commissioner Starks’ staff are three FCC veterans. Daudeline Meme will serve as Acting Chief of Staff and Acting Legal Advisor for wireless and international matters. She previously served as Deputy Chief in the FCC’s International Bureau, Legal Advisor to Commissioner Clyburn, Chief of Staff and Assistant Chief for spectrum issues in the Enforcement Bureau, and in the Office of former Chairman Tom Wheeler. Michael Scurato will be Acting Legal Advisor for media and consumer protection matters. He comes from the Enforcement Bureau, where he served as Special Counsel for the Bureau Chief. He previously served as Legal Advisor for Commissioner Clyburn and as Vice President of Policy at the National Hispanic Media Coalition. Commissioner Starks’ Acting Legal Advisor for wireline and public safety matters will be Randy Clarke, who most recently served as FCC counsel to the Senate Committee on Commerce, Science, and Transportation. Before that he was Acting Deputy Chief of the Wireline Competition Bureau, where he served in various roles since 2004.

Mr. Starks’ swearing in occurred just prior to his first Commission meeting on January 30—a truncated meeting containing no item votes due to the recently-concluded partial government shutdown. Commissioner Starks takes his seat after a long-delayed confirmation process. He was nominated by President Trump on June 4, 2018, and was slated for a quick confirmation alongside the reconfirmation of Republican Commissioner Brendan Carr. In September 2018, Republican Senator Dan Sullivan placed a hold on Commissioner Carr’s reconfirmation due to concerns over the FCC’s management of the Universal Service Fund Rural Health Care Program. Mr. Starks’ confirmation was delayed as a result, as the Senate intended to vote on the nominees as a package. The hold was lifted in late-December 2018 and Congress confirmed both Mr. Starks and Mr. Carr on January 2, 2019, the last full day of the 115th Congress. Mr. Starks’ swearing in was further delayed due to the government shutdown.

The R&O will establish a database noting the date of the most recent “permanent disconnection” of a number. Permanent disconnection refers to when a subscriber permanently relinquishes a number, or the provider permanently reverses the assignment of the number to a particular subscriber and disassociates that subscriber with active service to that number. A number must have a permanent disconnection age of at least 45 days before it can be reassigned to another person. Thus, the information in the database is not supposed to contain temporary disconnections (such as for non-payment) or when a number is ported to another provider.

Parties would query the database with two pieces of information: the number to be checked and a date the party knows the subscriber last had the number. This latter date could be the date consent was obtained, the date the subscriber last accepted a call at the number, or some other date that the party contends is associated with the subscriber. Upon a query, the database will respond with a “yes,” “no,” or “no data” response indicating whether the number has been reassigned after that date. Parties will be able to query the database on an individual number basis or though bulk queries. Both a caller and “agents acting on behalf of a caller” may query the database.

Notably, in a late change, the FCC added a safe harbor for callers using the new database. This safe harbor provides protection from TCPA liability where “database errors” lead to an incorrect call to a consumer.

All voice providers that receive numbers from either the North American Numbering Plan or the Toll Free Numbering Administrator will be required to report information to the database on the 15th of each month. Covered providers will be required to start keeping permanent disconnection records as soon as the information collection is approved by OMB even if the database has not yet launched. The R&O directs for the FCC to use a competitive bidding process to identify a third party administrator to operate the database which will be responsible for collecting fees to fund the database’s operation. The Administrator’s costs to operate the database following its establishment will be recovered through usage charges that the Administrator will collect from callers that choose to use the database. The R&O also directs the North American Numbering Council to make recommendations on some technical and operational matters related to establishment of the database. The FCC has not specified exactly when the database will be operational.

Commissioner Rosenworcel voted in support of the item but also announced a desire for carriers make robocall blocking tools available to every consumer where technically feasible. In conjunction with her vote, she announced that her office had sent letters to major phone companies asking for information about any tools that the company offers today and associated costs.

The FCC used the current process for complaints against common carriers as the model for reforming the pole attachment and disabilities access formal complaint rules. The FCC adopted a uniform deadline of 30 days for responding to a formal complaint, expanding the current answer period by 10 days for complaints against common carriers and disabilities access complaints. The FCC also eliminated the burdensome requirement to include proposed findings of fact and conclusions of law in complaint filings, noting that the agency already waived this obligation in most proceedings. Moreover, the FCC expanded its discovery procedures, allowing parties in all types of formal complaint proceedings to ask questions through written interrogatories. To encourage more settlements, the FCC now will require all formal complaints to certify that the complainant engaged in “executive-level” discussions with the other party before filing. Critically, the FCC established a 270-day “shot clock” for its decisions on formal complaints, although the agency did not indicate what would happen if it exceeded the deadline. While the FCC aimed to make formal complaint procedures more uniform, it decided to retain certain evidentiary rules for pole attachment complaints - including the requirement to submit information regarding pole costs - that the agency found critical to resolving disputes.

The Order generally adopted the proposals put forward last year to streamline the complaint process, but it drew a harsh rebuke from Commissioner Rosenworcel, who questioned whether certain changes undermined consumers’ ability to receive proper consideration of their informal complaints of industry practices with the FCC. Besides its formal complaint reforms, the FCC also adopted a proposal to clarify its informal complaint rules. Currently, the FCC’s informal complaint rules state that, “[i]f the [informal] complainant is not satisfied by the carrier’s response and the Commission’s disposition, it may file a formal complaint.” In a footnote in the Order, the FCC deleted the phrase “and the Commission’s disposition,” stating that it was not FCC practice “to dispose of informal complaints on substantive grounds.” Commissioner Rosenworcel dissented and expressed concern that this change was inconsistent with the FCC’s longstanding practice of studying informal consumer complaints and working with providers to resolve the problem. In response, Chairman Pai argued that the wording change would not impact current informal complaint procedures or prevent the FCC from relying on informal complaints in enforcement actions. Thus, it remains to be seen whether the changes will result in more informal complaints being shunted into the new formal complaint process.

The Truth in Caller ID Act prohibits certain forms of “spoofing,” which involves the alteration of caller ID information. While Congress recognized certain benign uses of spoofing, federal law prohibits the deliberate falsification of caller ID information with the intent to harm or defraud consumers or unlawfully obtain something of value. Back in June 2017, the FCC accused Mr. Abramovich and his companies of placing millions of illegal robocalls that used spoofing to make the calls appear to be from local numbers to increase the likelihood that the called party would pick up, a practice known as “neighbor spoofing.” The robocalls indicated that they came from well-known travel companies like TripAdvisor, but in reality the robocalls directed consumers to foreign call centers that had no relationship with the companies. Mr. Abramovich did not deny that his companies placed the spoofed robocalls, but argued that he lacked the requisite intent to defraud or cause harm, and noted that only a fraction of the consumers targeted actually answered the robocalls. Mr. Abramovich also argued that the third-party companies that hired to him to run the robocall campaign and the carriers that transmitted the robocalls should share in the liability for the violations.

The FCC disagreed. First, the FCC found that the use of neighbor spoofing and the references to well-known travel companies demonstrated an intent to defraud consumers. The FCC also found that Mr. Abramovich intended to harm the travel companies by trading on their goodwill and harmed consumers by spoofing their phone numbers, resulting in angry return calls by robocall recipients. Second, the FCC rejected the argument that liability should be based on the number of consumers who actually answered, explaining that the Truth in Caller ID Act only requires that a spoofed call be placed with fraudulent intent, not that the call actually reach a consumer. Finally, the FCC emphasized that Mr. Abramovich and his companies, not the third-party travel companies or the carriers, actually placed the spoofed robocalls and therefore bore sole responsibility for the violations. In fact, the FCC stated that the spoofed robocalls harmed the carriers by burdening their networks and engendering consumer complaints.

The fine is important for reasons beyond its size. For one, the fine came less than a year after the FCC issued the associated notice of apparent liability – an unusually quick turnaround for such a complex case that represents a shift to accelerated enforcement in line with Chairman Pai’s prior calls for a one-year deadline for forfeiture orders. Moreover, the FCC imposed the record-setting fine despite Mr. Abramovich’s claims that he cannot pay it. The FCC is required by the Communications Act to consider a party’s ability to pay when assessing forfeitures. As a result, the FCC historically will reduce a fine to approximately 2-8% of a party’s gross revenues in response to an inability to pay claim and significantly lowered fines under this framework just over a year ago. However, inability to pay is just one factor in the FCC’s forfeiture analysis and the agency determined that the repeated, intentional, and egregious nature of Mr. Abramovich’s violations warranted the unprecedented fine. While the FCC’s rejection of the inability to pay claim is not unprecedented, it leaves open the question of whether and how the FCC expects Mr. Abramovich to pay the fine. In many cases, parties receiving large fines can negotiate lower settlements with the Department of Justice when it brings a collection action on behalf of the FCC, but such settlements are not guaranteed. As a result, it appears the FCC’s primary goal was to establish a strong precedent to deter future violators rather than to actually receive payment.

Two Commissioner statements on the item also deserve attention. Although voting to approve the fine, Commissioner O’Rielly dissented in part, questioning the FCC’s assertion that spoofed robocalls cause harm regardless of whether consumers actually hear the message. Commissioner O’Rielly agreed that Mr. Abramovich and his companies intended to defraud call recipients, but he did not find sufficient evidence to indicate that Mr. Abramovich and his companies specifically considered the potential harm to consumers with spoofed numbers or the referenced travel companies. The dissent appears concerned that the FCC automatically will infer an intent to harm any time neighbor spoofing is used, even when such spoofing does not involve fraud, creating a strict liability regime. Meanwhile, Commissioner Rosenworcel highlighted the need for comprehensive regulatory reform to combat illegal robocalls. Specifically, Commissioner Rosenworcel noted the recent federal court decision setting aside key aspects of the FCC’s robocalling rules and requiring the FCC to revisit its definition of an autodialer. The Commissioner also pointed to the glut of outstanding petitions at the agency seeking exemptions and technical limitations to the robocalling rules. The Commissioner signaled that the FCC’s focus on robocalling issues will involve as much rulemaking as enforcement.

We will continue to follow the actions of the FCC and lawmakers and post any new developments regarding robocalling and spoofing here.

Stressing the importance of receiving truthful and accurate information, the Federal Communications Commission (“FCC”) reached a $1.7 million settlement with inmate calling services provider Securus Technologies, Inc. and related entities (“Securus”) to resolve allegations that Securus submitted misleading information to the FCC in support of a pending transfer of control. Although the settlement cleared the way for the transfer’s approval, the FCC held up the deal for months while it investigated statements made by Securus representatives. As a result, the FCC’s action supports the adage that “haste often makes waste” in telecommunications-related deals and that submitting misleading information to the FCC can come with significant consequences.

Federal regulations prohibit FCC regulatees from submitting misleading material information or omitting material information in order to mislead the FCC. In addition, transfer of control applicants must ensure the continuing accuracy and completeness of their FCC filings. In support of an application to transfer control of licenses as part of a planned acquisition, Securus’s CEO and other executives submitted a letter to FCC Chairman Pai requesting his help in expediting approval for the deal. The letter indicated that Securus already had received all necessary approvals from state regulators for the transaction. However, the FCC subsequently determined that a number of state regulators had not yet approved the transfer when Securus submitted the letter. Although Securus argued that it meant to limit its statements to certain state regulators specified in its acquisition agreement, the FCC found the letter facially inaccurate and misleading.

In addition to paying $1.7 million to resolve the investigation, Securus agreed to a number of boilerplate settlement compliance conditions, including appointing a compliance officer, developing compliance procedures/training programs, and submitting periodic compliance reports. The FCC also required Securus to ensure that its future FCC filings are reviewed and approved by internal legal counsel before submission, a somewhat rare settlement condition. The compliance conditions will apply not only to Securus, but also to any successor company following the transfer of control. Importantly, despite finding the Securus letter facially inaccurate, the settlement did not contain an admission of liability, which was often a requirement for settlements under prior FCC leadership.

Chairman Pai stated that the fine reflected the seriousness of candor when dealing with the FCC and should serve as a strong deterrent. The Chairman further noted that the misrepresentations submitted by Securus in order to expedite approval of the deal ended up having the opposite effect by resulting in months of investigation and delays. Meanwhile, Commissioner Clyburn and Commissioner Rosenworcel filed a joint dissent criticizing the settlement and fine as negligible compared to the deal’s value and setting a dangerous precedent of approving a transaction where an applicant misled the FCC. Consequently, even if a lack of candor does not completely derail a transaction, submitting misleading information to the FCC may result in significant delays and enforcement penalties. FCC regulatees therefore should seek legal counsel when necessary to ensure the truthfulness and accuracy of their agency filings.