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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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).

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

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.

Return to top of page

FCC ENFORCEMENT CORNER

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.

Return to top of page

FCC PERSONNEL CHANGES

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.

Return to top of page

Consumer Protection Newsletter: 2nd Quarter

Related Articles