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Consumer Protection Newsletter
By Ronald
London, James
M. Smith, Suzanne
Toller and Treg
Tremont
[May 2005]
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FCC’s Truth in Billing Rules
TCPA/Telemarketing Developments
CAN-SPAM Developments
Advertising Developments
State Actions
Cable
911 Developments
FCC Enforcement Corner
FCC Personnel Changes
FCC’s Truth in Billing Rules
FCC Extends Truth-in-Billing Rules
to Wireless
In the previous edition of the Consumer Protection Newsletter,
we discussed the request by the National Association of State
Utility Consumer Advocates (NASUCA) for a declaratory ruling
from the FCC that both wireline and wireless telecommunications
carriers are prohibited from imposing monthly line-item charges
on customers’ bills unless the charges have been expressly
mandated by a regulatory agency. (CG Dkt. No. 04-208). The FCC
took action on the NASUCA petition and other matters in a Second
Report and Order, Declaratory Ruling, and Second
FNPRM in its Truth-in-Billing proceeding (CC Dkt. 98-170).
The FCC expanded the federal consumer protection rules that
apply to wireless carriers. The FCC took the following action:
1) removed the existing exemption for Commercial Mobile Radio
Service (CMRS) carriers from 47 C.F.R. § 64.2401(b) –
requiring that billing descriptions be brief, clear, non-misleading
and in plain language; 2) reiterated that non-misleading line
items are permissible under the rules; 3) reiterated that it
is misleading to represent discretionary line item charges in
any manner that suggests such line items are taxes or charges
required by the government; 4) clarified that the carrier bears
the burden of demonstrating that any line item that purports
to recover a specific governmental or regulatory program fee
conforms to the amount authorized by the government; and 5)
clarified that state regulations requiring or prohibiting the
use of line items for CMRS constitute rate regulation and are
preempted under section 332(c)(3)(A).
In the FNPRM, the FCC seeks comment on the following: 1) the
tentative conclusion that where carriers choose to list charges
in separate line items on their customers’ bills, government
mandated charges must be placed in a section of the bill separate
from all other charges; 2) the distinction between government
“mandated” and other charges; 3) whether it is unreasonable
to combine federal regulatory charges into a single line item;
and 4) the tentative conclusion that carriers must disclose
the full rate, including any non-mandated line items and a reasonable
estimate of government mandated surcharges, to the consumer
at the point of sale, and that such disclosure must occur before
the customer signs any contract for the carrier’s services.
The FCC also tentatively concludes that it should reverse its
prior holding permitting states to enact and enforce telecommunications
carrier-specific truth-in-billing rules, and that it should
preempt inconsistent state regulation (emphasizing that no such
action would limit states’ ability to enforce their own
generally applicable consumer protection laws).
Comments on the issues raised in the FNPRM will be due 30 days
after publication of notice in the Federal Register,
which has not yet happened. Reply comments will be due 60 days
after publication of such notice.
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TCPA/Telemarketing Developments
FCC Largely Denies Further Reconsideration
in Do-Not-Call Registry Rulemaking
The Commission has issued a Second Order on Reconsideration
in the rulemaking proceeding in which it adopted rules pertaining
to the National Do-Not-Call Registry (NDNCR). For the most part,
the FCC made no major changes, but there were a few minor tweaks
and points of clarification.
With regard to calls to wireless numbers, while the FCC previously
determined not to prohibit live solicitations to wireless numbers,
it clarified that no calls can be made to wireless
numbers using a predictive dialer or other autodialer, even
if the calls are placed to make a “live” solicitation.
Telemarketers are not, however, subject to liability for calls
forwarded by the subscriber from a wireline to a wireless phone.
The Commission further noted that, to the extent some business
numbers have been placed on the NDNCR, calls made to them will
not be considered rule violations – however,
there will be no blanket exception for calls to “home-based
businesses,” rather such calls will be subject to case-by-case
determinations.
The Commission “cautioned” that the recorded message
for abandoned calls must be limited to name, phone number and
notice that the call is for “telemarketing purposes”
and should not be used to deliver an unsolicited advertisement.
It clarified that words other than “telemarketing purposes”
may be used, but that language such as “Hi, this is Company
A, calling today to sell you our product/services” constitutes
an unsolicited ad introducing a product or service, and it “strongly
encouraged” telemarketers to use the words “telemarketing
purposes” instead to avoid inadvertently delivering impermissible
unsolicited ads. The Commission also reaffirmed that messages
purporting to deliver “information only” to describe
a new product, a vacation destination, or a company that will
be in “your area,” are part of an effort to sell
goods and services.
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FTC Proposes to Raise Do-Not-Call Registry
Fees. Again.
The FTC has adopted a Notice of Proposed Rulemaking (NPRM)
proposing to increase annual fees for accessing the National
Do-Not-Call Registry (NDNCR) by 40 percent, from $40 per area
code with a maximum of $11,000, to $56 per area code with a
maximum of $15,400, with up to (or the first) five area codes
remaining available at no cost to all entities, and all NDNCR
data remaining available at no cost to entities that wish to,
but are not required to, avoid calling phone numbers on the
registry. The FTC seeks public input on the proposed increase,
with comments due on or before June 1, 2005,
though the NPRM sets Sept. 1, 2005, as the effective date of
the fee increase, subject to the outcome of the rulemaking.
The fee increase represents not just a 40 percent increase
over last year's annual NDNCR fees, but also an almost 125 percent
increase in the time since the NDNCR became active less than
two years ago. Specifically, when the FTC (and FCC) first instituted
the NDNCR, annual fees were set originally at $25 per area code
with a maximum of $7,375 (based on 300 area codes), with the
first five area codes free and completely free access to entities
that are exempt from NDNCR rules but wish to access the registry
to avoid calling registrants on it. Last summer, based on experience
through June 1, 2004, the FTC raised the annual fee to $40 per
area code with a maximum of $11,000 (based on 280 area codes)
while maintaining the first-five-area-codes-for-free and exempt-entity-free-access
rules. It claimed the increase was based on its experience that
more than 65,000 entities accessed the registry, but more than
57,000 of them obtained five or fewer area codes of data at
no charge and another 1,100 exempt entities gained access at
no charge, such that 7,100 entities paid to access the registry,
with only approximately 1,200 paying for the entire registry
worth of data. In proposing the current NDNCR fee increase,
the FTC reports that from March 1, 2004, through Feb. 28, 2005,
more than 60,800 entities accessed all or part of the data in
the registry, but 52,700 entities accessed five or fewer area
codes of data and another 1,300 are exempt and thus accessed
the NDNCR at no charge. As a result, approximately 6,700 entities
paid for access, with slightly less than 1,100 of them paying
for the entire registry. Notwithstanding the significant disparity
between the number of entities paying to access NDNCR data and
those doing so at no cost, and despite the facts that fewer
than 1,100 out of 65,00 entities pay for access to the entire
registry and that the number of entities paying for access is
declining, the FTC proposes to retain the ability for companies
to access up to five area codes for free (or the first five
for free for those who access, and pay for, more data), and
to maintain as well the ability of exempt entities to access
as much NDNCR data as they like at no charge.
However, the NPRM notes that if all entities accessing the
NDNCR were charged for the first five area codes of data, the
cost per area code would drop more than one-third to $37, while
the maximum for the entire registry would be $10,360 rather
than $15,400. In view of this fact, and the above-noted disparity,
the NPRM seeks comment on whether telemarketers should still
be permitted to access a certain number of area codes for free,
and on the potential impact of a change to this provision. It
specifically indicates that the FTC is open to comments on other
alternatives that would balance more equitably potential NDNCR
burdens on small businesses with the need to raise fees to fund
the registry. The NPRM notes that, because implementation and
enforcement costs are borne by a small percentage of entities
that access the registry, the FTC is particularly interested
in comments addressing the propriety of changing or eliminating
the number of area codes for which there is no charge, and the
impact, if any, on entities that access the registry, including
small businesses. In this regard, the FTC notes that the cost
of accessing small amounts of registry data is relatively modest,
offering the example that, if the fee was $37 per area code,
and none were offered for free, the total fee for a full year
of access to five area codes would be only $185. Given the modest
nature of the fees, along with the increasing burden borne by
entities that pay for NDNCR access, the FTC states that it is
especially interested in comments addressing the nature and
type of entities accessing five or fewer area codes at no cost,
and what the impact would be on them if they had to pay for
five area codes of data, or perhaps some area codes but fewer
than five. It also seeks comment on the efficacy of its proposal
to continue allowing exempt entities to access the registry
at no charge, on the theory that if such entities are not subject
to the NDNCR rules they should not have to pay for "voluntarily"
refraining from calling registrants who have indicated a desire
not to receive unsolicited calls.
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FCC Safe Harbor for Telemarketing
to Wireless Phones and Other TCPA Rule Changes
The FCC revised its rules implementing the Telephone Consumer
Protection Act (TCPA) to create a limited safe harbor from the
ban on calls placed using automatic dialing systems (or “autodialers”)
to phone numbers assigned to wireless services. The rule change
was necessitated by the implementation of wireless number portability
that allows consumers to move their wireline numbers to wireless
phones, thereby rendering unreliable traditional means for telemarketers
to identify which telephone numbers reach off-limits wireless
services.
The new rules preclude liability for placing autodialed, predictive
dialed or prerecorded message calls to a wireless number ported
from wireline service within the previous 15 days, starting
from the time the ported number appears in the Neustar ported
number database as a wireless number. In addition, the safe
harbor applies only if the number in question is not on the
national Do-Not-Call Registry or the caller’s company-specific
do-not-call list. Further, the safe harbor does not insulate
against “willful” violations of the ban. (The safe
harbor also only applies to voice calls, not text messages,
which are subject to separate rules.)
In the same order, the FCC also amended its rules regarding
how frequently telemarketers must download data from the national
registry from quarterly to monthly. The FCC also clarified that
small telemarketers that register and pay the annual registry
fee are not required to undertake either initial or subsequent
downloads of the entire database if they use only the single
number lookup feature to screen solicitations (if they do so,
however, they must maintain and record a list of “off-limits”
numbers obtained using the single number feature, and they must
document the process).
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Update on Removal of Established Business
Relationship Exemption from FCC Unsolicited Fax Rules and Status
of Junk Fax Prevention Act
The FCC has extended the stay of its rule change removing the
established business relationship (EBR) exception to the prohibition
on unsolicited commercial faxes, i.e., “junk faxes.”
Until last summer, the FCC interpreted the Telephone Consumer
Protection Act’s junk fax ban as not applying to faxes
where there is an EBR between the sender and recipient. When
it amended its rules in mid-2003 to adopt, among other things,
National Do-Not-Call Registry and abandoned call rules, it also
eliminated the EBR exception from the junk fax prohibition.
Shortly thereafter, however, in response to an outcry from businesses
and trade associations, the FCC suspended the effective date
of elimination of the junk fax EBR exemption until Jan. 1, 2005,
to give businesses an opportunity to implement the rules, and
in particular to secure whatever necessary prior consents they
required from their existing customers.
The FCC later extended the EBR exemption through June 30, 2005,
in response to the introduction of a bill, the Junk Fax Prevention
Act of 2004, that proposed to reinstate the junk fax EBR exemption
while at the same time adopting do-not-fax requirements similar
to the company-specific do-not-call rules with which telemarketers
must comply. Though that bill did not make it out of the Senate
before the end of the 108th Congress, new legislation, the Junk
Fax Prevention Act of 2005, has been introduced in the Senate
this year. The pendency of this legislation has spurred a broad
coalition of businesses to petition the FCC for a further extension
of the effective date of the rule change, through the end of
2005, to allow Congress to act. If the FCC remains true to form,
it will grant (or otherwise rule on) the extension request not
long before the stay is set to expire and the rules are scheduled
take effect.
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Development of Wireless Directory
Spurs Misplaced Concerns
The FCC and FTC have each issued advisories to quell public
concern that a planned wireless directory could permit significant
increases in telemarketing to wireless subscribers. The advisories
confirm that such concerns are largely unwarranted. Telemarketers
always have had access to phone numbers assigned to wireless
services. The reason subscribers have not received telemarketing
calls on their wireless phones historically was because of prohibitions
against auto-dialed calls to wireless services that have been
in effect for over a decade. Having the numbers in a directory
should not significantly change this state of affairs, as the
TCPA’s legal protections will continue to apply, along
with new protections that took effect last year. In this regard,
the advisories reminded consumers that they able to register
wireless phone numbers on the national registry as an added
measure of protection against receipt of unwanted wireless calls.
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CAN-SPAM Developments
FTC Defines “Primary Purpose”
for CAN-SPAM Commercial Emails
The FTC has issued a Final Rule in fulfillment of its obligation
under the Controlling the Assault of Non-Solicited Pornography
and Marketing (CAN-SPAM) Act to define the criteria for whether
the “primary purpose” of an email is commercial
advertisement or promotion of a product or service subject to
the Act. The criteria established by the FTC control, among
other things, when email senders must comply with the CAN-SPAM
Act prohibition on false or misleading subject headings, the
requirement for a functioning return email address for recipients
to “opt out” of future commercial emails, and the
requirements that commercial emails include identification that
the message is an advertisement, notice of the opt-out right,
and a valid physical postal address for the sender. The criteria
also govern rules adopted by the FTC regulating warning labels
for commercial email containing sexually oriented material,
and rules adopted by the FCC governing text messages to email
addresses assigned to cellular, paging and similar FCC-licensed
wireless services.
The rules divide all email containing commercial content into
categories based on whether it is a single-purpose email with
only commercial content or only “transactional or relationship”
content, or a dual-purpose email containing either commercial
and “transactional or relationship” content, or
commercial and neither commercial nor transactional or relationship
content. “Commercial” content is “the commercial
advertisement or promotion of a commercial product or service”
(with repetition of “commercial” meant to distinguish
between email by a sender engaged in commerce and individuals
who send emails about products or services – to, e.g.,
friends, acquaintances or other personal contacts). “Transactional
or relationship” content is that which (i) facilitates,
completes, or confirms a transaction the recipient previously
agreed to; (ii) provides warranty, recall, or safety or security
information regarding a product or service the recipient already
uses or purchased; (iii) involves a subscription, membership,
account, loan, or comparable ongoing relationship and provides
notice of a change in terms or features or in the recipient’s
standing or status, or balance or similar account information
at regular periodic intervals; (iv) provides information directly
related to an employment relationship or related benefit plan
in which the recipient is currently involved or enrolled; or
(v) delivers goods or services, including product updates or
upgrades, to which the recipient is entitled under the terms
of a transaction previously entered with the sender.
For emails that contain both commercial content and “transactional
or relationship” content, the primary purpose is commercial
if either a recipient reasonably interpreting the email’s
subject line would likely conclude it contains the commercial
advertisement or promotion of a commercial product or service,
or the email’s “transactional or relationship”
content does not appear in whole or substantial part at the
beginning of the body of the message. The primary purpose of
emails that contain both commercial content and content that
is neither “commercial” nor “transactional
or relationship” is commercial if either (1) a recipient
reasonably interpreting the email’s subject line would
likely conclude it contains the commercial advertisement or
promotion of a commercial product or service; or (2) a recipient
reasonably interpreting the body of the email would likely conclude
the primary purpose is the commercial advertisement or promotion
of a commercial product or service.
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FCC Adopts Rules Regulating “Spam”
to Wireless Phones
The FCC adopted rules under the CAN-SPAM Act relating to the
sending of unsolicited commercial messages to wireless phones
and pagers. The new FCC rules establish a general prohibition
on sending commercial messages to any email address referencing
an Internet domain associated with wireless subscriber messaging
services unless the addressee has given express authorization.
To allow senders of such messages to identify those subscribers,
the FCC required commercial mobile radio service (CMRS) providers
to submit the domain names they use to provide email service
to their subscribers. The FCC clarified that the CAN-SPAM rules
apply to any email messages to wireless Internet domains. Text
messages (which are sent to telephone numbers) continue to be
governed by the TCPA and the FCC’s implementing rules.
Under the new rules, the FCC interpreted the scope of material
covered under the definition of “mobile service commercial
messages” (MSCMs) to which the CAN-SPAM Act wireless service
prohibitions apply to include any commercial message sent to
an email address provided by a CMRS provider specifically for
delivery to subscribers’ wireless devices. While the FCC
provided guidance on what falls within the definition of “commercial”
for purposes of the MSCM rules, it emphasized that the FTC ultimately
is responsible for determining the criteria for “commercial”
and what are excluded as “transactional or relationship”
messages (and the FCC noted the FTC’s rulemaking on this
issue, which is summarized above).
The new rules effectively prohibit sending MSCMs unless the
individual addressee has given the sender express prior authorization,
which may be provided orally, in paper or electronically. The
rule prohibits sending any commercial messages to addresses
that contain domain names that have been listed for at least
30 days on the official list that the FCC will make publicly
available, or at any time prior to 30 days if the sender otherwise
knows the message is addressed to a wireless device. The new
rules will take effect after the Office of Management and Budget
approves the FCC’s collection of information for purposes
of obtaining and maintaining the list of CMRS domain names,
which approval had not yet been granted (but was not expected
to be denied) as of this writing.
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Advertising Developments
FTC Declines Request to Investigate
Product Placements on TV Programs
The FTC staff has issued an opinion letter announcing its decision
to take no formal action on a request for investigation by consumer
advocate group Commercial Alert regarding product placement
practices in television programs, i.e., the form of promotion
by which advertisers insert branded products into TV shows in
exchange for fees or other consideration paid to the program’s
producer(s). With the rise in penetration of TiVo and other
personal video recorders, and the fragmenting of mass media
audiences, product placements have become an increasingly popular
means for advertisers to attempt to reach consumers. The opinion
letter reaffirms the permissibility of product placements, and
stresses that they need to be disclosed for FTC purposes only
where they otherwise might be misleading or deceptive to consumers.
The opinion included a separate discussion of “Product
Placement and Children” rejecting Commercial’s Alert
attempt to leverage children’s obesity and “nag
factor” issues involved in children’s advertising
to convince the FTC to act on its request.
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FTC Continues Crackdown on Fraudulent Weight-Loss
Ads
The FTC has announced the launch of “Operation Big Fat
Lie,” a nationwide enforcement sweep against false weight-loss
ads in national media. Operation Big Fat Lie, the latest step
in FTC efforts to halt bogus weight-loss ads, consists primarily
of the FTC filing complaints in courts across the country in
which it alleges defendants used at least one of seven weight-loss
claims the FTC identified as incapable of being accurate in
its “Red Flag” weight-loss ad education campaign
announced late last year. The FTC announced that the cases challenge
ads for a variety of products, including pills, powders, green
tea, topical gels, and diet patches that run in a variety of
newspapers and magazines. In a move viewed as ominous among
some media companies, the FTC also sent “reminder letters”
under the banner of the “Red Flag” initiative to
the newspapers and magazines that ran the ads challenged in
the lawsuits, with the stated purpose of “assisting”
the companies to identify and reject ads that contain facially
false claims.
The FTC alleges in each case that the weight-loss claims are
false, that on their face there was no way they possibly could
be true, and that the defendants did not have adequate substantiation
for their claims. In each case, the FTC seeks to stop the ads
and to secure redress for consumers. The FTC also announced,
in publicizing “Big Fat Lie,” that the agency is
launching a campaign to help consumers spot claims that “almost
always signal a diet rip-off.” The new campaign, “Weighing
the Evidence in Diet Ads,” warns consumers to avoid pills,
patches, creams, or other products that offer quick weight-loss
without diet or exercise; that claim to block the absorption
of fat, calories, or carbohydrates; or that promise that consumers
can eat all they want of high-calorie foods and still lose weight.
These and other “tips,” are available at a new FTC
website, and the agency launched a new “teaser”
site as well to reach consumers web-surfing for weight-loss
products. The FTC sites mimic real commercial websites and use
common buzz words to make the kind of exaggerated claims the
FTC targets. At first glance, the FTC site appears to advertise
a new pill promising to help consumers, but once consumers try
to order the product they learn the ad is actually a government
“education” piece.
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State Actions
California Considers Interim Consumer Protection
Rules
In May 2004, the California Public Utilities Commission (CPUC)
adopted General Order 168 (GO 168) setting forth a broad new
set of consumer protection rules for both wireline and wireless
carriers. (D.04-05-057) The new rules would govern many aspects
of the carrier-customer relationship, including service initiation
procedures and disclosures, contract modifications, format and
content of bills and resolution of billing disputes.
In January 2005, the CPUC stayed application of GO 168 in part
to assess the impact on carriers of efforts to implement the
new rules. (D.05-01-058) In this decision, the CPUC stated that
the stay would remain effective until it issued a new decision
on consumer protection rules for California and that it intended
to do so by the end of 2005.
On March 10, 2005, the CPUC Commissioner assigned to this proceeding
issued a ruling that the CPUC will consider whether it should
reinstate certain of the GO 168 rules pending its adoption of
the new decision on consumer protection issues referenced in
the preceding paragraph. It is possible that, pursuant to this
ruling, certain rules will be reinstated on an interim basis
within the next several months. The proposed schedule for the
proceeding establishes the Fourth Quarter of 2005 as a target
date for the issuance of a decision about what consumer protection
framework, if any, should be adopted on a permanent basis.
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New York Attorney General and Verizon Enter
“Cramming” Settlement
On April 4, New York Attorney General Eliot Spitzer announced
a settlement that requires Verizon to resolve New York customers’
complaints of unauthorized non-telephone charges on Verizon
telephone bills (“cramming”) directly, and to deduct
such disputed charges from customer bills. Spitzer said that
an investigation revealed that Verizon’s “cramming”
policies were inadequate and that its customer service representatives
often were unaware of how to resolve customer complaints. Under
the settlement, Verizon must terminate billing relationships
with third-party providers that are the subject of “persistent”
cramming complaints, assure that Verizon bills include the toll-free
numbers of providers included on the bills, provide retroactive
credits to past “cramming” victims, and remit about
$100,000 in penalties and costs of the investigation.
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Eighth Circuit to Schedule Oral
Argument on Minnesota Wireless Contract Statute
Last year Minnesota enacted statutory provisions which in part
will require wireless carriers to notify customers in writing
60 days in advance of any proposed “substantive change"
in the contract. A “substantive change” includes
any modification that would result in an increased charge or
extend the term of the contract. If the subscriber does not
affirmatively accept the change (orally or in writing), the
original terms of the contract remain in force. The rules are
to be codified at Minnesota Statutes, § 325F.695.
The major wireless carriers filed suit in federal district
court in Minneapolis in an effort to prevent enforcement of
the rules (Case No. 04-2981, D. Minn.). On Sept. 3, 2004, the
District Court denied the carriers’ request for a preliminary
injunction. The court ruled in part that the new law simply
addresses notice and consent for contract changes and does not
constitute impermissible rate regulation. However, the court
agreed with the carriers that application of the new statute
in a manner that impedes pass-through of federal regulatory
fees which the FCC allows carriers to recover would interfere
with federal policy. The court therefore enjoined that portion
of the statute.
The carriers have appealed the District Court’s ruling
to the United States Court of Appeals for the Eighth Circuit
(Dkt. No. 04-3198). On Oct. 14, 2004, the Court of Appeals granted
the carriers’ motion for stay of the provisions pending
the outcome on appeal. The FCC filed an amicus brief arguing
that the statute’s requirement of a 60-day waiting period
and customer consent before a wireless carrier may increase
its rates constitutes impermissible state regulation of wireless
rates. Briefing has concluded and the court will schedule oral
argument for some time in May 2005.
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Cable
FCC
Pans à la Carte
The FCC has reported to Congress concerning the packaging and
sale of video programming by cable and satellite television
providers, including the possibility of rules requiring or facilitating
à la carte and/or theme-tier offerings. The
FCC issued the report in response to requests by members of
the House Energy and Commerce Committee and by Senator John
McCain, Chairman of the Senate Commerce, Science, and Transportation
Committee. In the report, the FCC disavows that à
la carte would have significant benefits for consumers,
finding that it would not reduce cable prices and that mandatory
à la carte would be a problem for cable operators
– big and, small alike – and cable programmers as
well.
The report indicates that the record before the FCC supported
neither the factual predicates nor the assumptions offered by
consumer advocates that suggested à la carte
could address consumer concerns over rising cable prices and
controlling the programs that enter their homes. This much is
evident from the FCC’s bottom-line recommendation that
“the government should implement policies that unleash
competition and motivate cable and satellite providers to innovate,
rather than to force [them] to offer programming on a per channel
or themed-tier basis” and it should “not displace
the current economic model,” which is working to the benefit
of the industry and their customers, “with regulations
which will likely distort the marketplace and slow down advances
in technology.”
Regarding the likely impact of à la carte,
the FCC concluded that although current models result in some
consumer dissatisfaction, intervention through à
la carte rules likely would harm cable and satellite providers
as well as subscribers. It estimated that offering networks
à la carte or in themed tiers would lead to
rate increases of up to 15 percent, for subscribers that continue
to purchase existing packages. Those opting to maintain the
same service presently received on a bundled basis likely would
pay more if some or all of them were offered à la
carte, while consumers choosing to pay the same fee presently
incurred would receive less service. Meanwhile, the report concluded,
it is unclear à la carte would lower prices
for many households. Based on a finding that the average cable
household watches about 17 channels (including broadcast), the
FCC found that consumers purchasing at least 9 networks likely
would face increased monthly bills, and that to pay no more
than they pay today, à la carte subscribers
would have to limit themselves to no more than six cable channels.
The report further concluded that à la carte
and/or themed tiers would cause widespread failure among existing
networks, especially among newer and “niche” networks,
and thus have a significant negative impact on consumer choice.
They would reduce viewership of nearly all program networks
and likely will cause significantly greater “churn”
in subscribers, making it almost impossible to estimate audience
size for purposes of selling advertising time.
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911 Developments
U.S., Canadian Regulators Press VoIP Providers
and Bells on 911 Availability
On March 22, in the first state action to enforce consumer
protection and deceptive practices rules against VoIP providers,
the Texas Attorney General sued Vonage for failing to clearly
inform subscribers that 911 access is not necessarily included
in its service. The action stemmed from an incident in which
a Houston subscriber was unable to reach police after her parents
had been shot. The suit seeks a $20,000 penalty per violation.
On April 26, during congressional testimony, new FCC Chairman
Kevin Martin announced that he will propose requiring all VoIP
providers to provide emergency 911 services to their customers.
Meanwhile, the Canadian Radio-Television and Telecommunications
Commission (CRTC) ordered VoIP companies there to establish
viable 911 service support by early July or shut down.
These actions come as VoIP providers, LECs and state and federal
authorities all wrestle with the increasingly urgent question,
as VoIP services find ever-greater acceptance and subscribership,
of how to assure that VoIP customers have effective access to
emergency 911 service. On April 19, Vonage and Qwest announced
an agreement to permit Vonage customers to directly access Qwest’s
911 infrastructure across its 14-state region, the first agreement
of its kind. FCC officials have met with the other Bell Companies
and VoIP companies to jawbone for similar agreements, and on
April 26, Verizon announced that it would open up its 911 infrastructure
in New York City, this summer, with expansion to the rest of
its region possible thereafter. One obstacle is the unclear
regulatory classification of VoIP providers, since 911 interconnection
is typically restricted to “telecommunications carriers.”
In November the FCC ruled that Vonage’s service is purely
interstate and so exempt from state public utility regulation,
and the FCC has yet to rule definitively whether VoIP is a “telecommunications”
service.
On Nov. 9, 2004 the FCC ruled that Vonage’s “DigitalVoice”
form of Voice Over Internet Protocol (VoIP) service is purely
interstate in nature, and so not subject to state public utility
regulation. In so doing the FCC preempted a contrary finding
by the Minnesota Public Utilities Commission. The FCC found
that the Vonage service and “other types of IP-enabled
services, such as those offered by cable companies, that have
the same basic characteristics” are also exempt from traditional
state utility rate and entry regulation. Those characteristics
are: (1) the need for a broadband connection from the user’s
location, (2) a need for a special IP-compatible handset, and
(3) the offering of “a suite of integrated capabilities
and features, able to be invoked sequentially or simultaneously,
that allows customers to manage personal communications dynamically”
by combining voice and other capabilities from either a fixed
location or remotely.
However, while the FCC declared that such VoIP services
that do not originate or terminate on the public switched telephone
network (PSTN) are “not subject to the patchwork of state
regulations governing telephone companies,” it did not
decide many important related issues—particularly, whether
VoIP is an “information” rather than “telecommunications”
service, which would subject it to less federal as well as state
regulation. The FCC, the states and Congress all seem inclined
to apply at least some consumer protection, public safety and
law-enforcement related regulation on VoIP services: Last July,
the Chairman of NARUC’s Telecommunications Committee laid
out a laundry list of such rules in Congressional testimony,
including slamming and cramming, truth-in-billing, deceptive
marketing, 911 and E911, access to the handicapped, universal
service, customer privacy, and law enforcement eavesdropping
("CALEA"). All of these issues are still pending,
as the FCC lurches toward a further VoIP order sometime in 2005.
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- The FCC has proposed a forfeiture of $770,000 against a
mortgage telemarketing company for at least 70 violations
of the national Do-Not-Call (DNC) Registry Rules, the first
such proposed forfeiture against a company for calling consumers
who registered their telephone numbers on the Registry. According
to the FCC’s Notice of Apparent Liability, Dynasty Mortgage
did virtually nothing to comply with the DNC rules, even after
the FCC issued it a “warning” citation alleging
violations of the rules and stating that further violations
would be subject to fines.
- In March, the FCC also issued a do-not-call “warning”
citation to American Express, citing 53 apparent violations.
Importantly, the FCC asserted that AmEx’s general defense
that its financial advisors apparently failed to “scrub”
consumer phone numbers against the National DNC Registry did
not satisfy the DNC rules’ “safe harbor”
applicable to inadvertent violations due to errors that occur
despite the maintenance of practices designed to ensure compliance
with the rules.
- On March 15, the Enforcement Bureau entered into a Consent
Decree with Publix Companies that revoked Publix’s authorization
to operate as a common carrier and required it to reimburse
the Telecommunications Relay Service (TRS) Administrator $7.9
million, settling allegations that Publix had falsely obtained
monies from the TRS Fund, which reimburses carriers for equipment
and services provided for the hearing-impaired.
- On March 10, the FCC adopted a consent decree with Sprint,
settling an investigation which alleged numerous “slamming”
violations arising from transactions in Sprint and Sprint
PCS stores. Sprint agreed, among other things, to institute
a compliance plan involving marketing changes, more effective
verification procedures and employee training, and to remit
a voluntary contribution of $4 million to the U.S. Treasury.
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- FCC Commissioner Kevin Martin has succeeded Michael Powell
as chairman of the agency. Chairman Martin’s ascension
creates at least one Republican FCC commissioner vacancy,
and a second Republican vacancy is possible upon the expected
departure of Commissioner Kathleen Abernathy.
- Jay Keithley has been named acting chief of the FCC’s
Consumer & Governmental Affairs Bureau, succeeding K.
Dane Snowden. Erica McMahon has been named acting chief of
staff of the bureau.
- On March 8, the FCC announced the appointment of 35 members
to two-year terms to its reconstituted Consumer Advisory Committee
(CAC). The next CAC meeting is scheduled for June 10, 2005.
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This Consumer Protection Newsletter
is a publication of the Telecommunications Department of Davis
Wright Tremaine LLP. Our purpose in publishing this Newsletter
is to inform our clients and friends of recent developments
in the telecom industry. It is not intended, nor should it be
used, as a substitute for specific legal advice as legal counsel
may be given only in response to inquiries regarding particular
situations.
Copyright © 2005, Davis Wright
Tremaine LLP.
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