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, compliance, legislation, and litigation. Follow our Telecom Group on Twitter. Click here.

Federal Communications Commission (FCC) Announcements

• Hewlett-Packard has agreed to pay $16.25 to the federal Treasury to settle the joint E-Rate fraud investigation by the FCC and the US Department of Justice. The case involved allegations that HP personnel provided gifts to school employees in Dallas and Houston in order to secure contracts for the purchase of HP computers with Universal Service grants. Most of the settlement funds will go to the E-Rate program. For further information, click here.
• The FCC has released the Tentative Agenda for its next Open Meeting to be held November 30, 2010. It contains three items: a Notice of Proposed Rulemaking on using UHF and VHF spectrum for mobile broadband; a Notice of Proposed Rulemaking on experimental wireless licenses; and a Notice of Inquiry on the “opportunistic use” of underdeveloped spectrum. To view the Tentative Agenda, click here.

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

Federal Trade Commission (FTC) Developments

• Both the FTC and the US Department of Commerce are preparing to release separate, independent reports on online privacy issues. The two reports are likely to conflict with each other in significant ways. Top Commerce officials have indicated that the Department favors letting the industry regulate itself, building on the common practice of companies posting their privacy policies online and consumers checking a box if they agree to abide by them. The FTC, by contrast, wants to continue to explore the creation of a “do not track” list, similar in concept to the “do not call” lists used in the telecommunications industry, that would prohibit Internet users from being tracked online. The two agencies have reportedly clashed over which will release its report first in hopes of leading the national discussion. The issues may also be ripe for congressional action, as members of both parties in the House and Senate have recently called on companies to account for online intrusions and breaches of consumer privacy.

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

Developments in Intercarrier Compensation

• On November 8, 2010, the Missouri Public Service Commission arbitrator issued a recommended decision in the case brought by AT&T Missouri against Global Crossing regarding whether Voice-over-Internet Protocol traffic is compensable under the access regime. AT&T argued that all VoIP traffic should be subject to access charges, because Global Crossing can “identify the geographic location of its retail VoIP services customer when the customer places a call.” Global Crossing argued that all VoIP traffic should be subject to reciprocal compensation. The arbitrator rejected Global Crossing’s position, stating that the information service exception relied upon by Global Crossing was inapposite because it “does not classify services, it classifies companies.” The arbitrator accepted AT&T’s argument with respect to fixed interconnected VoIP traffic “when it demonstrably originates and terminates in Missouri” and therefore such traffic would be subject to access charges. The arbitrator disagreed with AT&T’s position with respect to nomadic VoIP traffic, however, finding that for such traffic it is “generally impossible to prove” its jurisdictional nature. He therefore proposed the following language be adopted in the parties ICA: “Missouri law provides that interconnected voice over Internet protocol traffic that is not within one calling scope is subject to access charges as is any other switched traffic, regardless of format.” Docket No. IO-2011-0057.
• On November 3, 2010, the Public Utilities Commission of Ohio (PUCO) unanimously voted to establish a generic investigation into intrastate carrier access rates as a follow-up measure to the legislation signed on June 13, 2010, by outgoing Gov. Strickland (D). The bill essentially deregulated the intrastate access rates of incumbent local exchange carriers (ILECs) provided that their intrastate rates mirror their interstate rates. The PUCO proposes to establish an Access Restructuring Plan in order to “maintain the affordability of local service rates for end-user customers while allowing rural incumbent telephone companies to reduce access charges, on a revenue-neutral basis, thereby encouraging greater competition.” The plan would be financed by compulsory monthly contributions from carriers operating in Ohio. The PUCO invited interested parties to file comments regarding the proposal no later than December 20, 2010, with reply comments due January 19, 2011. Docket No. 10-2387-TP-COI.

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

Compliance Notes

• All providers of interconnected fixed or non-nomadic Voice over Internet Protocol (VoIP) services as of December 1, 2010 will be required to register with the Illinois Commerce Commission (ICC) by January 1, 2011, in accordance with 220 ILCS 5/13-401.1. Thereafter, new providers will be required to register with the ICC at least 30 days prior to their provision of service within Illinois. The ICC has posted a copy of the registration form here.
• Companies that hold only a Non-Dominant Interexchange Carrier (NDIEC) Registration License in California are required to post a performance bond in the amount of $25,000 or 10 percent of the NDIEC’s intrastate revenue as reported to the California Public Utilities Commission (CPUC) in the previous year, whichever is greater, by December 3, 2010. In addition, NDIECs are required to pay an annual user fee of $100 each year by January 15, 2011. The CPUC ordered these new compliance requirements as a result of a California State Controller’s 2007 Audit report that stated the CPUC’s registration process for NDIECs did not sufficiently scrutinize NDIEC registrants, and that the CAPUC’s collection efforts for monies owed to the CPUC by NDIECs were ineffective when NDIECs ceased operations in California or declared bankruptcy. Carriers that also hold a Certificate of Public Convenience and Necessity in addition to an NDIEC Registration License are not affected by the new requirements. A copy of the order can be found here. The CAPUC has posted a list of NDIECs affected by this decision, which can be found here. Docket 09-07-009, Decision 10-09-017.

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

Stimulus This Week

• On November 4, 2010, the US Department of Commerce Office of the Inspector General (DOCIG) released a report regarding the National Telecommunications and Information Administration’s (NTIA’s) ability to oversee and monitor post-grant activities of the Broadband Technology Opportunities Program (BTOP). In this report, DOCIG stated, “The uncertainty regarding oversight funding... raises significant concerns about the adequacy of future BTOP oversight.” This cause for concern stems somewhat from the fact that NTIA is currently funded under a continuing resolution from Congress that will keep NTIA’s spending at the same level as that of the last fiscal year, and the present budget does not contemplate the costs of BTOP oversight and monitoring.
  
  The report further states that although NTIA has taken significant steps to develop processes to assist BTOP grant recipients with post-award activities, more needs to be done to ensure that some aspects of award monitoring are completed promptly and efficiently. A copy of the abstract of the report may be found here. A copy of the entire report may 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

• Comment dates have been set for the Mobility Fund Notice of Proposed Rulemaking (see October 18 edition of This Week in Telecom). The NPRM “proposes the creation of a new Mobility Fund to make available one-time support to significantly improve coverage of current-generation or better mobile voice and Internet service for consumers in areas where such coverage is currently missing. The [FCC] seeks comment on creating the Mobility Fund using reserves accumulated in the Universal Service Fund and on the use of a reverse auction to make one-time support available to service providers to cost-effectively extend mobile coverage in specified unserved areas.” Comments are due December 16, 2010, and Reply Comments are due January 18, 2011. More details are available here.
• On November 8, 2010, NTIA and the Economic and Statistics Administration (ESA) of the Department of Commerce released a report on broadband adoption stating that “income and education are strongly associated with broadband Internet use at home but are not the sole determinants.” The report is based on data collected by the US Census Bureau in October 2009 from 54,000 households. “Lack of need or interest, lack of affordability, lack of an adequate computer, and lack of availability were all stated as the main reason for not having home broadband Internet access.” Of these, lack of interest was the most cited reason for not having home broadband. Affordability became a higher factor for those households that did not use the Internet at home, but did use the Internet outside of the home. The report is available here.

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

Telecom Privacy News

• The FCC’s Enforcement Bureau announced last week that it is investigating Google, Inc., regarding the collection of data from unsecured Wi-Fi networks by its Street View vehicles. Google’s acknowledgment on October 22 that, contrary to its earlier suggestions, some of the captured data may include complete e-mails and other information in large enough blocks to be meaningful has spurred renewed interest in Street View. “In light of their public disclosure, we can now confirm that the Enforcement Bureau is looking into whether these actions violate the Communications Act. As the agency charged with overseeing the public airwaves, we are committed to ensuring that the consumers affected by this breach of privacy receive a full and fair accounting,” Enforcement Bureau Chief Michele Ellison said in a statement. Just last month, the FTC concluded a separate inquiry, attributing the decision to Google’s “commitments” to improve internal processes for assuring privacy protections, to “delete the inadvertently collected payload data as soon as possible,” and to not use the data for any Google product or service “now or in the future.” Google’s data-collection practices have also come under scrutiny from some key lawmakers in Congress, and Connecticut Attorney General Richard Blumenthal (D), who was elected to the US Senate earlier this month, is also leading a multi-state investigation of Google. Authorities in a number of other countries, including those in the United Kingdom, Germany, Australia, and Canada, have also announced investigation and some have concluded that Google violated privacy laws.
• Canada’s privacy commissioner plans seek increased enforcement authority next year. “I am probably going to ask for greater powers, in terms of having new tools,” Commissioner Jennifer Stoddart said on an American Bar Association teleconference. The legal requirement to prove of concrete harm have “generally led to very few sanctions” in private lawsuits and regulatory action, Stoddart said. “Self-regulation in all areas has its limits,” Stoddart said. Canadian law allows some action concerning behavioral advertising, but “we may need to have some kind of legislation” to ensure that consumers know when and why they're tracked online and can opt out, she said.

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

In the Courts

• On November 9, 2010, the US Supreme Court heard oral argument in AT&T Mobility v. Concepcion, a case that pits the Federal Arbitration Act’s (FAA’s) statutory preference for enforcing arbitration agreements against state laws that strike down contractual arbitration clauses when they are deemed unconscionable. In Concepcion, a California federal district court found that AT&T Mobility’s arbitration clause in its customer agreement – which allows customers to challenge the carrier only in individualized arbitration proceedings, and thus never in class action litigation in court or arbitration – was unconscionable under California law, and thus unenforceable. The Ninth Circuit Court of Appeals agreed. Without the right to bring suit as a class action, the courts found, it is unlikely that any plaintiff would undertake the cost and effort to challenge the carrier’s practice – here, AT&T’s charging sales tax on a purportedly “free” phone. At oral argument, questions from several Justices seemed to undercut AT&T’s position that federal law can displace state unconscionability law. Justice Scalia asked, “Are we going to tell the State of California what it has to consider unconscionable?” Justice Kagan echoed the view that the FAA was not meant to create a uniform state law on unconscionability: “It may be good unconscionability doctrine, and it may be bad unconscionability doctrine, but it’s the state’s.” Chief Justice Roberts, however, asked whether California’s unconscionability law became more strict in the area of arbitration agreements than in other aspects of its unconscionability law, such that its unconscionability jurisprudence as to arbitration clauses may not warrant deference under the FAA’s savings clause for state law. This case is being widely followed, because several other carriers have similar arbitration clauses, and thus the Supreme Court’s decision is likely to have a significant impact on the ability of carriers to avoid class actions in the future. No. 09-893.
• On November 5, 2010, the US District Court for the District of Kansas narrowed the scope of a putative class action against AT&T Corp. for “cramming,” or adding improper charges to the customers’ telephone bills without their permission. The plaintiffs allege that AT&T Billing Solutions, a wholesale service, allowed other media, information, and communications service providers to place charges on AT&T’s customer bills that were improper. AT&T typically keeps a portion of such charges. The court granted AT&T’s motion to dismiss the business customers’ claims under Kansas consumer protection law, but denied the motion as to the business customers’ other state law claims. The individual consumer’s claims – and those of the class he represents – also will proceed in the case. AT&T argued that plaintiffs’ cramming allegations were barred by the “voluntary payment” doctrine, such that once these plaintiffs paid their phone bills, they could never sue to recover amounts paid to AT&T. At this stage of the case, the court disagrees: “Whether a payment is voluntary depends on the facts of the particular case. Because resolution of contested facts is essential to the resolution of defendants’ affirmative defense of voluntary payment, the court cannot grant the motion to dismiss on this basis.” Midland Pizza LLC v. Sw. Bell Tel. Co., No. 10-2219.

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

Legislative Outlook

• Both the US House of Representatives and the Senate are expected to return today, November 15, 2010.

Upcoming Events

• The Federal Communications Bar Association will hold the 24th Annual Chairman’s Dinner on Thursday, December 9, 2010, at the Washington Hilton. For more information or to register, click here.

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