Welcome to the latest edition of Arent Fox’s This Week in Telecom, our weekly newsletter designed to keep you apprised of recent developments in telecommunications policy, legislation, and litigation. Follow our Telecom Group on Twitter! Click here.

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FCC Announcements l The Mobile Market l FTC and Privacy Regulation l Intercarrier Compensation l Compliance Notes l Broadband News l In the Courts l Legislative Outlook l Events

Federal Communications Commission (FCC) Announcements

• The next FCC Open Meeting is August 9, 2011. The tentative Agenda contains four items: a Report and Order and Further Notice of Proposed Rulemaking on using spectrum for wireless backhaul; and three items related to foreign ownership guidelines and review, including an Order on Reconsideration of prior orders regarding Verizon’s acquisition of Rural Cellular Corporation and Alltel. To view the tentative Agenda, click here.
• The FCC is seeking nominations for persons to serve on the Open Internet Advisory Group which was created by the Open Internet Order adopted in December 2010. Nominations are due September 1, 2011. For more information, click here.

Please contact Ross Buntrock, Alan Fishel, Michael Hazzard, or Jon Canis (contact information below) for further information.

The Mobile Market

• The United States Food and Drug Administration (FDA) this week announced the availability of draft guidelines for “Mobile Medical Applications”. Due to the increasing use and expansive applicability of mobile applications, the FDA has issued the draft guidance to “clarify the types of mobile apps to which FDA intends to apply” its regulatory requirements. Consumers and interested parties may submit comments on the draft through October 19, 2011. The draft guidelines are available here. Filing instructions are provided in the document.
• According to a new report from Rutberg & Company, LLC, venture capital investments in the mobile industry are at the highest level since the company initiated the report in 2001. In the first half of this year, a total of $3 billion in venture capital has been invested in 358 deals, and currently mobile represents 42% of overall tech-venture capital. Media and applications accounted for $960 million of that amount. Sequoia Capital, Kleiner Perkins, Intel Capital, New Enterprise Associates, and Draper Fisher Jurvetson comprise the list of investors that were most active in mobile in January through July of 2011. In addition, mergers and acquisitions have increased throughout the past 18 months, with 222 transactions announced in the mobile industry, up 73% from a year ago.
• The Staffs of the Louisiana Public Service Commission (LAPSC) and the West Virginia Public Service Commission (WVPSC) have recommended approval of the AT&T/T-Mobile merger. LAPSC Staff cited the companies’ commitment to make investments, increase broadband coverage, and create jobs in Louisiana. LAPSC Staff also noted that much of Sprint’s position opposing the merger focused on the impact the deal might have nationwide, rather than in Louisiana, and concluded that “nothing submitted herein supports a finding that this acquisition should be found to be contrary to the public interest.” Staff of the WVPSC approved the merger subject to the condition that existing T-Mobile customers be given 90 days to change service providers without incurring early termination fees. The LAPSC Staff recommendation is available here. The WVPSC Staff recommendation is available here.

Please contact Ross Buntrock, Michael Hazzard, or G. David Carter (contact information below) for further information.

Federal Trade Commission (FTC) and Privacy Regulation

• On July 27, 2011, the FTC and the Antitrust Division of the Department of Justice announced that they signed an antitrust memorandum of understanding (MOU) with China’s three antitrust agencies to “promote communication and cooperation among the agencies in the two countries.” On the Chinese side, the MOU was signed by representatives from the Ministry of Commerce, the National Development and Reform Commission, and the State Administration for Industry and Commerce. The MOU provides for “periodic high-level consultations” and separate communications between agencies. The MOU also provides for cooperation on “exchanges of information and advice about competition law enforcement and policy developments; training programs, workshops and other means to enhance agency effectiveness; providing comments on proposed laws, regulations and guidelines; and cooperation on specific cases or investigations, when in the investigating agencies’ common interest.” More information is available here.
• EXTENSION GRANTED: The FTC is allowing more time for public comment on a proposed safe harbor program that Aristotle International, Inc. has submitted for approval under the agency’s Children’s Online Privacy Protection Act (COPPA) rules. The rules allow industry groups and others to request FTC approval of self-regulatory guidelines that implement the protections of the Act. Comments are now due August 15, 2011. More information is available here.

Please contact Ross Buntrock, Alan Fishel, Stephanie Joyce, or Jason Koslosfky (contact information below) for further information.

Developments in Intercarrier Compensation

• On July 22, 2011, Core Communications, Inc. filed a petition with the Pennsylvania Public Utility Commission seeking an emergency order to require Verizon Pennsylvania, Inc. and Verizon North, Inc. to pay intercarrier compensation that Core has invoiced pursuant to the parties’ interconnection agreement. Core states in its petition that Verizon notified Core “without warning” that it would be withholding payment on Core’s May 2011 invoice for charges associated with the same type of traffic that Verizon has been paying for since 2004 on the ground that “the traffic billed … is not in fact compensable to Core as reciprocal compensation traffic.” To demonstrate the need for an emergency order, Core stated that Verizon’s intercarrier compensation payments account for 50 percent of Core’s operating revenues, and thus Verizon’s refusal to pay “jeopardizes Core’s ability to maintain its network operations, serve its customers, and pay ordinary expenses associated with its business operations, including the paychecks of its Pennsylvania-based employees.” Docket No. P-2011-2253650.

Please contact Ross Buntrock, Jon Canis, Michael Hazzard, Stephanie Joyce, or Adam Bowser (contact information below) for further information regarding intercarrier compensation matters.

Compliance Notes

• FCC Form 499-Q is due today, August 1, 2011 for all filers that are not considered to be de minimis for Universal Service filing purposes. This filing encompasses historical revenues from the second quarter of 2011 and projected revenues for the fourth quarter of 2011. A copy of the current FCC Form 499-Q can be found here.
• The Universal Service contribution factor for the Third Quarter of 2011 is 14.4%. A copy of the notice can be found here.
• Voice over Internet Protocol (VoIP) providers and Commercial Mobile Radio Service (CMRS) providers who rely on traffic studies to report interstate revenues on FCC Form 499-Q must submit these studies today, August 1, 2011 to the Universal Service Administrative Company (USAC) and the Chief, Industry Analysis and Technology Division of the FCC. The instructions to Form 499-A, which lists filing deadlines at page 5, can be found here.

Please contact Ross Buntrock, Jon Canis, or Michael Hazzard (contact information below) for further information regarding compliance matters.

Broadband News

• On July 27, 2011, ten Republican Senators, including Sen. Kay Bailey Hutchison, R-Tex., Ranking Member of the Senate Commerce Committee, sent Chairman Genachowski a letter requesting a “retrospective review” and cost-benefit analysis of the Open Internet Order. This letter also supports the July 12 letter from Senator Dean Heller, R-Nev., requesting a similar review based on a recent Executive Order in which President Obama asked independent agencies, like the FCC, to review regulations to determine the burden of such regulations under an outlined review process.

Please contact Ross Buntrock, Alan Fishel, Michael Hazzard, Jeffrey Rummel, or Jason Koslofsky (contact information below) for further information.

In the Courts

• On July 25, 2011, the United States District Court for the Southern District of California dismissed another putative class action that was pending against AT&T Mobility on the basis of the Supreme Court’s decision in AT&T Mobility v. Concepcion that the Federal Arbitration Act preempts state laws or court rulings that invalidate class-arbitration waivers in consumer contracts. This class action alleged that AT&T fraudulently induced plaintiffs to purchase a $45/month data plan by telling them that the unlimited data plan for $30/month would not provide access to the same applications, when in fact it did. Plaintiffs attempted to avoid Concepcion by arguing that the arbitration clause should not apply in the circumstance of fraudulent inducement. The S.D. Cal. nonetheless ruled that “fraudulent inducement claims should be submitted to arbitration when the issue is fraud in the inducement of the contract itself, like the claim at issue here, rather than fraud in the inducement of the arbitration agreement.” The court likewise refused to “find the arbitration agreement unenforceable for public policy reasons,” relying on the Supreme Court’s statement in Concepcion that “States cannot require a procedure that is inconsistent with the FAA, even if it is desirable for unrelated reasons.” Boyer v. AT&T Mobility Servs., LLC, No. 10-cv-1258 JAH (S.D. Cal.).
• On July 22, 2011, the United States Bankruptcy Court for the Southern District of New York granted in part and denied in part Global Crossing’s motion for summary judgment in the adversary proceeding between it and debtor CCT Communications, with the remaining issues to be addressed at a future trial. Global Crossing and CCT had entered into a series of agreements under which CCT agreed to resell certain of Global Crossing’s long-distance and international telecommunications services for a fixed, non-volume-sensitive price. Global Crossing apparently lost money on the deal and, as the court explained, “blocked calls and withheld service to limit its losses under an Amendment that it regretted from the moment it was signed. The consequence of the course Global Crossing chose to follow — assuming Global Crossing breached the parties’ agreements — is to pay damages, except to the extent that the limitation of liability in § 6.2 of the RCA frees it from the debt.” With regard to that limitation-of-liability provision, the court held that “the parties may agree to limit their respective damage remedies for violations of New York law and the Communications Act except in the case of gross negligence or willful misconduct.” The court found it undisputed that, though Global Crossing’s actions were willful, they were motivated by “financial self-interest” and thus did not constitute misconduct. The court thus concluded that the limitation-of-liability provision barred CCT’s recovery of consequential damages. But the court found the clause that limits liability for “lost revenues, lost savings, lost business opportunity or lost profits of any kind” to be ambiguous, and ordered that matter to be resolved at trial. In re CCT Commc’ns, Inc., No. 07-10210 (S.D.N.Y. Bankr.).

Please contact Ross Buntrock, Jon Canis, Michael Hazzard, Stephanie Joyce, or Joseph Bowser (contact information below) for further information.

Legislative Outlook

• On July 26, 2011, the Oversight Subcommittee of the House Commerce Committee held a hearing titled “Cybersecurity: An Overview of Risks to Critical Infrastructure”. Witnesses included Roberta Stempfley, Acting Assistant Secretary at the Department of Homeland Security, who stated that “We face threats that could significantly compromise the accessibility and reliability of our information infrastructure.” Subcommittee Chair Cliff Stearns, R-Fla., noted that “Our systems are interconnected and depend on one another to operate. A vulnerability in one critical infrastructure naturally exposes other critical infrastructures to the same threats and risks[.]” For more information, click here.
• The Senate Judiciary Committee will hold a hearing titled “Cybercrime: Updating the Computer Fraud and Abuse Act to Protect Cyberspace and Combat Emerging Threats” on August 3, 2011, at 10:00 am Eastern in 226 Dirksen Senate Office Building. Scheduled witnesses are James A. Baker, Associate Deputy Attorney General, DOJ, and Pablo A. Martinez, Criminal Investigative Division, U.S. Secret Service. For more information, click here.

Please contact Stephanie Joyce (contact information below) for further information.

Upcoming Events

• Jeffrey Rummel, a Partner in our Group, will speak at the 8th Military Antennas Summit held by the Institute for Defense & Government Advancement September 12-15, 2011, in Washington, DC. For more information, click here.
• Jonathan Canis and Ross Buntrock, Partners in our Group, will speak at CompTel Plus in Orlando, Florida on October 3, 2011, on a topic titled “Mediation, Complaints and Referrals: What Does It Take to Get Disputes Resolved Before the FCC?” For further information, click here.

Please contact Ross Buntrock, Jonathan Canis, or Jeffrey Rummel (contact information below) for further information.

For further information, please contact any of our attorneys in the Arent Fox Telecommunications Group.