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.

Federal Communications Commission (FCC) Announcements

• The FCC has announced its Tentative Agenda for its next Open Meeting on January 25, 2011. It contains two items: a Further Notice of Proposed Rulemaking on interoperability in the the public safety broadband network; and a presentation on the FCC’s Data Innovation Initiative. To view the agenda, click here.
• The Notice of Inquiry in ET Docket No. 10-237, Promoting More Efficient Use of Spectrum Through Dynamic Spectrum Use Technologies, has been published in the Federal Register. Comments due February 28, 2011, and Reply Comments due March 28, 2011. Our summary of this item, released December 1, 2010, is available here. To view the Notice of Inquiry, click here. To view the Federal Register entry, click here.
• The FCC has released a Notice of Proposed Rulemaking seeking comment on proposed changes to the Commission’s Registration System, or “CORES”. Comments are due 30 days after publication in the Federal Register, and Reply Comments are due 15 days thereafter. MD Docket No. 10-234. To view the item, click here.
• Comments in the “bill shock” proceeding are due today, January 10, 2011. Reply Comments are due February 8, 2011. CG Docket Nos. 10–207 and 09–158, Empowering Consumers to Avoid Bill Shock; Consumer Information and Disclosure, Notice of Proposed Rulemaking, FCC 10–180 (rel. Oct. 14, 2010). More information may be found here.

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

Federal Trade Commission (FTC) Developments

• On December 23, 2010, Mozilla announced that the new version of its popular web browser, Firefox, due for release in early 2011, will not include a “do-not-track” mechanism despite the FTC’s recent call for the development of such an option. In making this announcement, Mozilla stated that it had yet to “[find] a way of combining a ‘do not track’ option with a good user experience.” Specifically, the company is finding that web pages will not load properly if a user enables the prototype Firefox “do-not-track” mechanism. Mozilla’s statements stand in contrast to Microsoft’s announcement in early December that the next version of Internet Explorer will include “do-not-track” which it claims will “help keep third-party websites from tracking [a consumer’s] Web behavior.” FTC Chairman Jon Leibowitz has previously pointed to Microsoft’s and Mozilla’s implementation of these features as an example of how the proposed mechanism might be implemented. Both Microsoft and Mozilla expect to release new versions of their respective browsers early this year.
• Comments on the FTC’s Caller ID Advanced Notice of Proposed Rulemaking are due January 28, 2011. A link to the NPRM can be found here.
• Comments on the privacy report issued December 1, 2010, by FTC staff are due January 31, 2011. A copy of the report can be found here.

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

Developments in Intercarrier Compensation

• On January 4, 2011, the Nebraska Public Service Commission (PSC) dismissed, in part, the complaint of AT&T Communications of the Midwest, Inc. against several rural LECs after several of the LECs settled with AT&T. AT&T filed its formal complaint on November 17, 2010, alleging that the rural LECs were charging unfair and unreasonable intrastate switched access rates and were maintaining inefficient network architecture. Due to ongoing settlement negotiations, the LEC defendants were granted until January 12, 2011 to notify the PSC of any settlement with AT&T, or in the alternative, to answer AT&T’s complaint by January 31, 2011. The dismissed LEC defendants are Arapahoe Telephone Company, Benkelman Telephone Company, Inc., Cozad Telephone Company, Diller Telephone Company, Hartman Telephone Exchanges, Inc., Henderson Cooperative Telephone Company, and Wauneta Telephone Company. The remaining LEC defendants are Cambridge Telephone Company, Eastern Nebraska Telephone Company, Great Plains Communications, Inc., Hartington Telecommunications Company, Southeast Nebraska Communications, Rock County Telephone Company, and Three River Telco. Docket No. FC-1348.
• On January 6, 2011 the Kansas Corporation Commission (KCC) dismissed a suit between Twin Valley Telephone, Inc. and Level 3 Communications, LLC after the parties informed the KCC that they had reached a settlement. Twin Valley brought the complaint against Level 3 in May 2010, alleging that Level 3 was refusing to pay for special access service charges. Level 3 moved to dismiss the complaint, arguing that special access circuits are interstate in nature and therefore the KCC lacked jurisdiction to adjudicate the dispute. The terms of the settlement were not disclosed. Docket No. 10-L3CT-732-COM.

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

Compliance Notes

• FCC Form 499-Q is due February 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 fourth quarter of 2010 and projected revenues for the second quarter of 2011. A copy of the current FCC Form 499-Q can be found here.
• The Universal Service contribution factor for the first quarter of 2011 will be 15.5 percent. A copy of the notice can be found here. DA 10-2344.
• Carriers providing tariffed services in California as of January 1, 2011 are required to file a complete copy of their tariffs on file with the California Public Utilities Commission (PUC) by February 1, 2011 on CD-ROM. This is an annual filing requirement at the PUC. A copy of the notice letter, which includes specific filing instructions, can be found here.

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

Stimulus This Week

• All recipients of funds under the Broadband Technology Opportunities Program (BTOP), administered by the National Telecommunications and Information Administration (NTIA), are required to file their annual reports with NTIA by January 30, 2011. Information about this filing requirement can be found here; for Public Computer Center projects can be found here; and for Sustainable Broadband Adoption projects can be found here.

Please contact Ross Buntrock, Jon Canis, Alan Fishel, or Jeffrey Rummel (contact information below) for further information regarding stimulus funding.

Broadband News

• On January 5, 2011, the FCC announced the Open Internet Challenge designed to encourage the public to create applications to monitor Internet providers’ compliance with the Open Internet rules. One winner will get a trip to Washington, DC and will be honored at an FCC Chairman’s reception. The submission deadline is June 1, 2011, and winners will be chosen by a public vote and a panel of experts. More information can be found here.
• On January 6, 2011, the FCC released a report “on the state of broadband connectivity at schools and libraries receiving funds from the federal E-rate program.” The report, based on a 2010 survey, found that although most E-rate recipients have access to broadband, faster speeds are needed, and that e-books are poised to be widely adopted in the next two to three years. The survey found, for example, that “95% of all E-rate survey respondents have some form of terrestrial broadband connection to at least one facility, while 2 percent use satellite and 3 percent use dial-up.” The report may be found here.
• In the wake of the Open Internet rules adopted by the FCC in December, new cell phone plans announced by MetroPCS last week raised protests that MetroPCS may be violating the Open Internet rules, if the same wireline rules applied to wireless carriers. Free Press called on the FCC to investigate the MetroPCS plans, because they appear to favor YouTube over Netflix and could block Skype. Such practices would likely violate the nondiscrimination rule applicable to wired broadband providers, but could be acceptable under the wireless provider rules. Free Press’s press release is available here. More information can be found here.

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

Telecom Privacy News

• Citing US Supreme Court precedent, the California Supreme Court has determined that police can search a mobile phone if it is found on a person who is taken into police custody. The Ohio Supreme Court last year reached the opposite conclusion, finding that the police do not have the right to conduct warrantless searches of phones. “The loss of privacy upon arrest extends beyond the arrestee’s body to include ‘personal property … immediately associated with the person of the arrestee’ at the time of arrest,” the majority opinion states. The case stems from the warrantless search of a phone belonging to individual taken into custody on drug-related charges in 2007. A text message found on the phone linked a defendant to drug deal. The majority relied upon cases in which the US Supreme Court upheld searches of cigarette packages and clothing that were seized during an arrest and examined without a warrant.
• The US Court of Appeals for the Sixth Circuit has referred a lawsuit regarding EchoStar Satellite LLC’s liability for telemarketing calls made by third parties selling EchoStar’s services to the FCC. The decision follows a lawsuit alleging that the plaintiff received 30 telemarketing calls by agents working on behalf of EchoStar trying to sell the company's Dish Network satellite television service, despite repeatedly requesting to be placed on the Do-Not-Call list. The complaint lodged claims against EchoStar for multiple violations of the Telephone Consumer Protection Act (TCPA) and the Ohio Consumer Sales Practices Act, and also for invasion of privacy and nuisance. On December 15, 2009, the US District Court for the Southern District of Ohio dismissed the claims, finding that EchoStar had no control over the advertising methods used by the third-party companies to sell its services and therefore could not be liable under TCPA. On appeal, the Sixth Circuit referred the case to the FCC to resolve ambiguities regarding liability under TCPA.

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

In the Courts

• On January 4, 2011, the US Court of Appeals for the Fifth Circuit affirmed the holding of a district court that AT&T, Inc. owes federal income tax on the federal and state universal service funds (USF) it received in 1998 and 1999, or roughly $500 million of income tax on over $1.5 billion of USF monies it received in those two years. AT&T argued that the USF funds should have been classified as non-shareholder capital contributions, but both the federal district court and court of appeals disagreed. The district court granted summary judgment to the government on the ground that “nothing in the payment structure for servicing high-cost or low-income customers directly implicates capital contributions.” The Fifth Circuit affirmed, reasoning that “whether a payment to a corporation by a non-shareholder is income or a capital contribution to the corporation is controlled by the intention or motive of the transferor,” and when, as here, the “transferor is a governmental entity, its intent may be manifested by the laws or regulations by which it effectuates the payment to the corporation.” The Fifth Circuit concluded that “the statutes authorizing the universal service programs, the administrative orders establishing the USFs, and the regulations implementing the raising of revenues for the USFs and the payments from them to AT&T and its subsidiaries, taken together, demonstrate an intent to supplement the income of the telephone companies, rather than to make capital contributions to them.” AT&T, Inc. v. United States, No. 09-50651 (5th Cir.).
• On December 29, 2010, Judge Richard Posner of the US Court of Appeals for the Seventh Circuit issued an opinion, joined by Circuit Judges Diane Wood and John Tinder, denying an interlocutory appeal of a district court’s refusal to dismiss a putative class action against the wireless arms of Verizon, AT&T, Sprint & T-Mobile for conspiring to fix the prices of text messages in violation of federal antitrust laws. After agreeing that it should entertain this interlocutory appeal because the “pleading standards in federal litigation are in ferment after [the Supreme Court’s decisions in] Twombly and Iqbal,” the Seventh Circuit proceeded to the merits of the appeal. Oral argument was denied. In his opinion, Judge Posner rejected the defendants’ argument that plaintiffs had not pled sufficient facts to state a conspiracy claim, noting that the complaint “alleges a mixture of parallel behaviors, details of industry structure, and industry practices, that facilitate collusion.” From those allegations he observed that “there is nothing incongruous about such a mixture. If parties agree to fix prices, one expects that as a result they will not compete in price – that’s the purpose of price fixing.” Judge Posner also found significance in plaintiffs’ allegation that “the defendants belonged to a trade association and exchanged price information directly at association meetings. This allegation identifies a practice, not illegal in itself, that facilitates price fixing that would be difficult for the authorities to detect.” He also highlighted plaintiffs’ allegation that “in the face of steeply falling costs, the defendants increased their prices. This is anomalous behavior because falling costs increase a seller’s profit margin at the existing price, motivating him, in the absence of agreement, to reduce his price slightly in order to take business from his competitors, and certainly not to increase his price.” Finally, he took note of the allegation that “all at once the defendants changed their pricing structures, which were heterogeneous and complex, to a uniform pricing structure, and then simultaneously jacked up their prices by a third.” The court rejected the notion that all of this circumstantial evidence was insufficient to state an antitrust claim: “direct evidence of conspiracy is not a sine qua non … Circumstantial evidence can establish an antitrust conspiracy.” The Seventh Circuit held that the case can proceed to discovery. In re Text Messaging Antritrust Litigation, No. 10-8037 (7th Cir.).

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

Legislative Outlook

• Congressman Fred Upton, R-Mich., new Chair of the House Commerce Committee, has announced his Committee Staff. Neil Fried, who has staffed the Committee since August 2003, will be Chief Counsel to the Communications Subcommittee. To view the full list, click here.

Upcoming Events

• The Federal Communications Bar Association is hosting a breakfast with Scott Blake Harris, General Counsel of the US Department of Energy, on January 18, 2011, and a luncheon with FCC Commissioner Michael Copps on February 15, 2011. For more information or to register, click here.

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