Articles Posted in Telecommunications

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March 2015

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Deceptive Practices Yield Multi-Million Dollar Fines for Telephone Interexchange Carriers
  • LPFM Ads Cost $16,000
  • Multiple TV Station Licensees Face $6,000 Fines for Failing to File Children’s TV Programming Reports

Interexchange Carriers’ “Slamming” and “Cramming” Violations Yield Over $16 Million in Fines

Earlier this month, the FCC imposed a $7.62 million fine against one interexchange carrier and proposed a $9 million fine against another for changing the carriers of consumers without their authorization, commonly known as “slamming,” and placing unauthorized charges for service on consumers’ telephone bills, a practice known as “cramming.” Both companies also fabricated audio recordings and submitted the recordings to the FCC, consumers, and state regulatory officials as “proof” that consumers had authorized the companies to switch their long distance carrier and charge them for service when in fact the consumers had never spoken to the companies or agreed to the service.

Section 258 of the Communications Act and Section 64.1120 of the FCC’s Rules make it unlawful for any telecommunications service carrier to submit or execute a change in a subscriber’s selection of telephone exchange service or telecommunications service provider except with prior authorization from the consumer and in accordance with the FCC’s verification procedures. Additionally, Section 201(b) of the Communications Act requires that “all charges, practices, classifications, and regulations for and in connection with [interstate or foreign] communications service [by wire or radio], shall be just and reasonable.” The FCC has found that any assessment of unauthorized charges on a telephone bill for a telecommunications service is an “unjust and unreasonable” practice under Section 201(b), regardless of whether the “crammed” charge is placed on consumers’ local telephone bills by a third party or by the customer’s carrier.

Further, the submission of false and misleading evidence to the FCC violates Section 1.17 of the FCC’s Rules, which states that no person shall “provide material factual information that is incorrect or omit material information . . . without a reasonable basis for believing that any such material factual statement is correct and not misleading.” The FCC has also held that a company’s fabrication of audio recordings associated with its “customers” to make it appear as if the consumers had authorized the company to be their preferred carrier, and thus charge it for service, is a deceptive and fraudulent practice that violates Section 201(b)’s “just and reasonable” mandate.

In the cases at issue, the companies failed to obtain authorization from consumers to switch their carriers and subsequently placed unauthorized charges on consumers’ bills. The FCC found that instead of obtaining the appropriate authorization or even attempting to follow the required verification procedures, the companies created false audio recordings to mislead consumers and regulatory officials into believing that they had received the appropriate authorizations. One consumer who called to investigate suspect charges on her bill was told that her husband authorized them–but her husband had been dead for seven years. Another person was told that her father–who lives on another continent–requested the change in service provider. Other consumers’ “verifications” were given in Spanish even though they did not speak Spanish on the phone and therefore would not have completed any such verification in Spanish. With respect to one of the companies, the FCC remarked that “there was no evidence in the record to show that [the company] had completed a single authentic verification recording for any of the complainants.”

The FCC’s forfeiture guidelines permit the FCC to impose a base fine of $40,000 for “slamming” violations and FCC case law has established a base fine of $40,000 for “cramming” violations as well. Finding that each unlawful request to change service providers and each unauthorized charge constituted a separate and distinct violation, the FCC calculated a base fine of $3.24 million for one company and $4 million for the other. Taking into account the repeated and egregious nature of the violations, the FCC found that significant upward adjustments were warranted–resulting in a $7.62 million fine for the first company and a proposed $9 million fine for the second.

Investigation Into Commercials Aired on LPFM Station Ends With $16,000 Civil Penalty

Late last month, the FCC entered into a consent decree with the licensee of a West Virginia low power FM radio station to terminate an investigation into whether the licensee violated the FCC’s underwriting laws by broadcasting announcements promoting the products, services, or businesses of its financial contributors.

LPFM stations, as noncommercial broadcasters, are allowed to broadcast announcements that identify and thank their sponsors, but Section 399b(b)(2) of the Communications Act and Sections 73.801 and 73.503(d) of the FCC’s Rules prohibit such stations from broadcasting advertisements. The FCC has explained that the rules are intended to protect the public’s use and enjoyment of commercial-free broadcasts in spectrum that is reserved for noncommercial broadcasters that benefit from reduced regulatory fees.

The FCC had received multiple complaints alleging that from August 2010 to October 2010, the licensee’s station broadcast advertisements in violation of the FCC’s noncommercial underwriting rules. Accordingly, the FCC sent a letter of inquiry to the licensee. In its response, the licensee admitted that the broadcasts violated the FCC’s underwriting rules. The licensee subsequently agreed to pay a civil penalty of $16,000, an amount the FCC indicated reflected the licensee’s successful showing of financial hardship. In addition, the licensee agreed to implement a three-year compliance plan, including annual reporting requirements, to ensure no future violations of the FCC’s underwriting rules by the station will occur.

Failure to “Think of the Children” Leads to $6,000 Fines

Three TV licensees are facing $6,000 fines for failing to timely file with the FCC their Form 398 Children’s Television Programming Reports. Section 73.3526 of the FCC’s Rules requires each commercial broadcast licensee to maintain a public inspection file containing specific information related to station operations. Subsection 73.3526(e)(11)(iii) requires a commercial licensee to prepare and place in its public inspection file a Children’s Television Programming Report on FCC Form 398 for each calendar quarter. The report sets forth the efforts the station made during that quarter and has planned for the next quarter to serve the educational and informational needs of children. Licensees are required to file the reports with the FCC and place them in their public files by the tenth day of the month following the quarter, and to publicize the existence and location of those reports.

This month, the FCC took enforcement action against two TV licensees in California and one TV licensee in Ohio for Form 398 filing violations. The first California licensee failed to timely file its reports for two quarters, the second California licensee failed to file its reports for five quarters, and the Ohio licensee failed to file its reports for eight quarters. Each licensee also failed to report these violations in its license renewal application, as required under Section 73.3514(a) of the Rules. Additionally, the Ohio licensee failed to timely file its license renewal application (in violation of Section 73.3539(a) of the Rules), engaged in unauthorized operation of its station after its authorization expired (in violation of Section 301 of the Communications Act), and failed to timely file its biennial ownership reports (in violation of Section 73.3615(a) of the Rules).

Despite the variation in the scope of the violations, each licensee now faces an identical $6,000 fine. The FCC originally contemplated a $16,000 fine against the Ohio licensee, as its guidelines specify a base forfeiture of $10,000 for unauthorized operation alone. However, after assessing the licensee’s gross revenue over the past three years, the FCC determined that a reduction of $10,000 was appropriate, resulting in the third $6,000 fine.

A PDF version of this article can be found at FCC Enforcement Monitor.

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As we posted earlier, the FCC voted at its February meeting to preempt state laws in Tennessee and North Carolina restricting municipalities from providing broadband service. The FCC has now released the text of its Order, and it reveals the expanse of the FCC’s concerns, filling in the details as to the types of state law provisions the FCC considers to be barriers to broadband competition and therefore subject to preemption. The Order furnishes critical guidance to other municipalities considering a challenge of laws in their own states. It also informs state legislators as to how they can modify existing state laws to avoid a future confrontation with the FCC.

In the Order, the FCC preempted a Tennessee law prohibiting municipal electric utilities from providing broadband service outside their service areas, and certain restrictions and requirements of a North Carolina law. The FCC did so under its asserted authority pursuant to Section 706 of the Telecommunications Act of 1996 to remove barriers to broadband investment and promote broadband competition. The specific restrictions the FCC found to constitute or contribute to such barriers are summarized below, and the breadth of the FCC’s preemption of these restrictions is substantial. As a result, no one should be surprised to see more preemption requests arriving at the FCC.

Tennessee Law

The Tennessee law was fairly straightforward. It prohibited a municipally-owned electric power system from offering internet or video services anywhere outside the geographic footprint in which it provides electric service. The FCC found that this territorial restriction was an explicit barrier to broadband investment and competition, and used its authority under Section 706 to preempt the restriction. This portion of the FCC’s decision offers no real surprises, and relies on a fairly basic view of what constitutes a barrier to growth in municipal broadband.

North Carolina Law

Far more interesting is the portion of the Order relating to North Carolina. The North Carolina law was more complex, containing a variety of restrictions and requirements for municipalities wishing to deploy broadband service. The FCC found that, taken in the aggregate, these portions of the law created a barrier to broadband investment and competition, leading the FCC to preempt them. While acknowledging that some of the preempted provisions in the North Carolina law might have been allowed to stand individually, the FCC concluded that the aggregate effect required their preemption. In taking this approach, the FCC left some uncertainly as to which provisions it would have preempted on even a stand-alone basis, but provided very helpful guidance as to both the nature and scope of the FCC’s concerns. As the list of provisions preempted by the FCC set forth below indicates, the FCC’s view of barriers to municipal broadband growth is quite expansive.
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The FCC today released its much anticipated Open Internet Order. While it will take some time to digest the 313-page decision (though the new rules only total eight pages), here is a brief summary of the highlights:

  • No Blocking. The Order prohibits providers of broadband Internet access services (“broadband services”) from blocking lawful content, applications, services, or non-harmful devices, subject to reasonable network management.
  • No Throttling. The Order prohibits providers of broadband services from impairing or degrading lawful Internet traffic on the basis of content, application or service, or use of a non-harmful device, subject to reasonable network management. This includes no degradation of traffic based on source, destination, or content and prohibits singling out content that competes with the broadband provider’s business model.
  • No Paid Prioritization. The Order prohibits paid prioritization, which the FCC views as the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity.
  • No Unreasonable Interference. The Order also prohibits broadband providers from unreasonably interfering with or unreasonably disadvantaging (i) end users’ ability to select, access, and use broadband Internet access service or lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers’ ability to make lawful content, applications, services, or devices available to end users. The FCC indicates that reasonable network management will not violate this rule.
  • Reasonable Network Management. The Order defines reasonable network management as follows:
    A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service.

  • Enhanced Transparency. The rule adopted in 2010, and upheld on appeal, remains in effect. Specifically, broadband providers must accurately disclose information regarding network management practices, as well as performance and commercial terms sufficient for consumers to make informed choices regarding use of the service. The rule has been enhanced by: adopting a requirement that broadband providers always disclose promotional rates, all fees and/or surcharges, and all data caps or data allowances; adding packet loss as a measure of network performance that must be disclosed; and requiring specific notification to consumers that a “network practice” is likely to significantly affect their use of the service. The FCC granted a temporary exemption from these enhancements for small providers (defined for the purposes of this temporary exception as providers with 100,000 or fewer subscribers), and asked the Consumer & Governmental Affairs Bureau to adopt an Order by December 15, 2015 deciding whether to make the exception permanent and, if so, the appropriate definition of “small”.
  • Scope of Rules. The FCC clarified that the rules apply to both fixed and mobile broadband Internet access service. The focus is on the consumer-facing service which that FCC defines as:
    A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part.

    The definition does not include enterprise services, virtual private network services, hosting, or data storage services. The definition also does include the provision of service to edge providers.

  • Interconnection. Because broadband service is classified as telecommunications, the FCC indicates that commercial arrangements for the exchange of traffic with a broadband provider are within the scope of Title II, and the FCC will be available to hear disputes raised on a case-by-case basis. The Order does not apply the Open Internet rules to interconnection.
  • Enforcement. The FCC may enforce the Open Internet rules through investigation and the processing of complaints (both formal and informal). In addition, the FCC may provide guidance through the use of enforcement advisories and advisory opinions, and it will appoint an ombudsperson on the subject. The Order delegates to the Enforcement Bureau the authority to request a written opinion from an outside technical organization or otherwise to obtain objective advice from industry standard-setting bodies or similar organizations.
  • “Light touch” Title II. While reclassifying broadband services under Title II of the Communications Act, the FCC forbears from applying more than 700 codified rules, including no unbundling of last-mile facilities, no tariffing, no rate regulation, and no cost accounting rules. The FCC also states that reclassification will not result in the imposition of any new federal taxes or fees; the ability of states to impose fees on broadband is already limited by the congressional Internet tax moratorium. The FCC, however, does not forbear from Sections 201 (prohibiting unreasonable practices), 202 (prohibiting unreasonable discrimination), 208 (for filing complaints), Section 222 (protecting consumer privacy), Sections 225/255/251(a)(2) (ensuring access to services by people with disabilities), Section 224 (ensuring access to poles, conduits and attachments), and Section 254 (promoting the deployment and availability of communications networks (including broadband) to all Americans; except that broadband providers are not immediately required to make universal service contributions for broadband services.

The new rules will not go into effect until they have been published in the Federal Register. That publication also starts the clock for parties that want to file petitions for reconsideration or appeals of this decision. With more than 4 million comments filed in the proceeding, you would have to think someone will not be happy with this Order.

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While the FCC’s net neutrality order got most of the attention yesterday, the FCC took another major broadband-related action at its February 26 meeting. Over the strenuous objections of incumbent internet service providers (“ISPs”), trade associations for ISPs, states, the National Governor’s Association and others, the FCC on a 3-2 vote with Commissioners Pai and O’Rielly dissenting, preempted state laws in Tennessee and North Carolina which placed limitations on municipally-owned broadband networks. The FCC’s action, if upheld in the judicial review certain to follow, would allow municipalities currently prohibited by state law from expanding service to do so via federal preemption of those restrictions. Advocates of the FCC’s action argue that it will open the door to a more robust expansion of high-speed broadband service, especially in rural areas and other locations that would otherwise be underserved.

The matter began last year when the City of Wilson, North Carolina and the Electric Power Board of Chattanooga, an agency of the City of Chattanooga, Tennessee (the “EPB”) challenged state restrictions on their operations. Wilson and the EPB own and operate high-speed fiber broadband networks in their respective communities, and each claimed that it wants to expand the geographic scope of its network but is effectively blocked from doing so by state laws. Wilson and EPB asked the FCC to use its power under Section 706 of the Telecommunications Act of 1996 to preempt those laws, arguing that they are inconsistent with the federal policy of making broadband available to all Americans.

Section 706 of the Telecommunications Act provides that the FCC “shall take immediate action to accelerate deployment of [broadband to all Americans] by removing barriers to infrastructure investment and by promoting competition in the telecommunications market.” Wilson and EPB argued that Section 706 gives the FCC the power to preempt the Tennessee and North Carolina statutes because those statutes constitute barriers to network investment and competition. Wilson and EPB were supported by a number of municipalities and municipal utilities, and organizations representing them, as well as by technology companies such as Netflix and scores of individual commenters. Those parties generally argued that encouraging municipalities such as Wilson and EPB to expand internet service to consumers is precisely the sort of competition that the FCC should be promoting, and would encourage the spread of high speed broadband to rural areas that are unserved or underserved by incumbent ISPs. Wilson, EPB and their supporters also asserted that the state laws limiting municipal broadband service were enacted at the behest of incumbent ISPs to insulate them from competition.

Incumbent ISPs and others opposing Wilson and EPB argued that municipal broadband services often fail to succeed financially, leaving taxpayers stuck with the bill, while not necessarily promoting effective competition or the rollout of broadband to unserved areas. They also argued that the FCC lacks authority to preempt state laws under Section 706 because that provision does not explicitly provide such authority. In addition, they argued that preemption would be inconsistent with the Supreme Court’s 2004 decision in Nixon vs. Missouri Municipal League, where municipalities petitioned the FCC for preemption of a Missouri law prohibiting municipalities from providing telecommunications services. At issue in Nixon was the language of Section 253 of the Communications Act of 1934 which provided that no state law could prohibit “the ability of any entity to provide … telecommunications service.” The Court held that “any entity” did not include municipalities, which are political subdivisions of the states themselves. As a result, opponents of Wilson and EPB claimed that Nixon bars the FCC from interfering with a state’s sovereignty over its municipalities by preempting the limitations the state has placed on those municipalities.

Although the text of the Order adopted at the February 26 meeting has not yet been released, from the statements made by the Chairman and commissioners at the meeting, it appears the FCC is asserting that its preemption authority empowers it only to strike down the state restrictions, or “red tape” as Chairman Wheeler referred to them, that the states of Tennessee and North Carolina had imposed on municipalities which they had otherwise authorized to provide broadband service. Proceeding from this perspective, a state could ban a municipality from providing broadband service altogether, but once it has given the municipality authority to provide broadband service, it may not impose restrictions that create barriers to network investment and competition.

It is important to note that the FCC’s Order is limited to the specific statutes in Tennessee and North Carolina, and that other state laws would have to be considered on a case-by-case basis following the filing of petitions with the FCC by municipalities in those states. However, yesterday’s action provides a strong indication of how the current FCC would likely rule in cases involving the other 17 states that have similar restrictions on municipally-provided broadband service.

One can expect at least two things to result from the FCC’s action. First, other municipalities wishing to build or expand their own broadband networks may file petitions with the FCC for preemption of laws in their states claiming that those laws restrict municipally-deployed broadband networks.

Second, the FCC’s action will almost certainly be subject to judicial challenges and stay requests by the States of Tennessee and North Carolina, as well as other parties in interest. By limiting its claimed authority under Section 706 to review restrictions imposed by states on municipal broadband service to “red tape” restrictions, without disturbing a state’s right to make the fundamental decision as to whether a municipality should be permitted to offer broadband service in the first place, the FCC is seeking to navigate a course that will make the preemption more limited and therefore easier to defend in the inevitable court challenges. Whether that will be enough for yesterday’s action to survive a trip through the courts remains to be seen.

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February 2015

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • FCC Issues $3.36 Million Fine to Company and Its CEO for Selling Toll Free Numbers
  • Antenna Fencing and Public Inspection File Violations Result in $17,000 Fine
  • FCC Reiterates That “Willful Violation” Does Not Require “Intent to Violate the Law”

Hold the Phone: FCC Finds Company and CEO Jointly and Severally Liable for Brokering Toll Free Numbers

The FCC handed down a $3,360,000 fine to a custom connectivity solutions company (the “Company”) and its CEO for violations of the FCC’s rules regarding toll free number administration. Section 251(e)(1) of the Communications Act mandates that telephone numbers, including toll free numbers, be made “available on an equitable basis.” As a general rule, toll free numbers, including “vanity” numbers (e.g., 1-800-BUY-THIS), cannot be transferred, and must be returned to the numbering pool so that they can be made available to others interested in applying for them when the current holder no longer needs them. Section 52.107 of the FCC’s Rules specifically prohibits brokering, which is “the selling of a toll free number by a private entity for a fee.”

In 2007, the Enforcement Bureau issued a citation to the Company and CEO for warehousing, hoarding, and brokering toll free numbers. The Bureau warned that if the Company or CEO subsequently violated the Act or Rules in any manner described in the 2007 citation, the FCC would impose monetary forfeitures. A few years later, the Bureau received a complaint alleging that in June and July of 2011, the Company and CEO brokered 15 toll free numbers to a pharmaceutical company for fees ranging from $10,000 to $17,000 per number. In 2013, the FCC found the Company and CEO jointly and severally liable for those violations and issued a $240,000 fine.

Despite the 2007 citation and 2013 fine, the Bureau found evidence that the CEO continued to broker toll free numbers. In early 2013, the Bureau received tips that the CEO sold several toll free numbers to a law firm for substantial fees. An investigation revealed that the CEO, who was the law firm’s main point of contact with the Company, had sold 32 toll free numbers to the firm for fees ranging from $375 to $10,000 per number. On other occasions, the CEO solicited the firm to buy 178 toll free numbers for fees ranging from $575 to $60,000 per number. This, along with his correspondence with the firm–including requests that payments be made to his or his wife’s personal bank accounts–were cited in support of a 2014 Notice of Apparent Liability (“NAL”) finding that the CEO, in his personal capacity and on behalf of the Company, had “yet again, apparently violated the prohibition against brokering.”

As neither the Company nor the CEO timely filed a response to the 2014 NAL, the FCC affirmed the proposed fines: $16,000 for each of the 32 toll free numbers that were sold, combined with a penalty of $16,000 for each of the 178 toll free numbers that the Company and CEO offered to sell, resulting in a total fine of $3.36 million.

FCC Rejects AM Licensee’s “Not My Tower, Not My Problem” Defense

The FCC imposed a penalty of $17,000 against a Michigan radio licensee for failing to make available its issues/program lists in the station’s public file and for failing to enclose the station’s antenna structure within an effective locked fence.
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Everyone with a cell phone has probably received an unsolicited telemarketing robocall or text made by a company using an automated dialing system at some point. As we have previously written, a federal statute, the Telephone Consumer Protection Act (“TCPA”), prohibits making any autodialed call or sending a text to mobile phones, except in the case of an emergency or where the called party has provided their consent. And, where the autodialed call is a telemarketing call, that consent must be in writing. Significant fines have been levied against companies that violate the TCPA and related regulations.

Recently, however, there has been considerable debate as to whether a consumer’s consent to receive such calls, once given, can be withdrawn, and if so, whether consumers can waive that right so that marketers can continue to contact them despite a request to opt out. Although the TCPA and its implementing regulations give consumers the right to opt in to receiving telemarketing robocalls and texts, they are actually silent as to consumers’ ability to later change their minds and revoke that consent or opt out.

The further issue of whether consumers can waive their right to revoke their consent after having given it is discussed in a recent Pillsbury Client Alert by Pillsbury attorneys Catherine D. Meyer, Andrew D. Bluth, Amy L. Pierce and Elaine Lee entitled Stop Calling Me: Can Consumers Waive the Right to Revoke Consent under the TCPA? As the Client Alert points out, while most authorities and courts imply a right under the TCPA to revoke previously given consent, some recent decisions have revolved around whether the consumer can contractually give up that right to revoke.

Because the TCPA’s restrictions apply not just to businesses that use autodialers, but to businesses that use telephones capable of autodialing (which, some are arguing at the FCC, include pretty much any smartphone), the answer to this question could affect a large number of businesses and not just telemarketers.

In short, while the permanence of a consumer’s consent to be called is now somewhat up in the air, businesses calling consumer cell phones using equipment capable of autodialing need to be knowledgeable about all of the requirements of the TCPA, including whether they have received, and continue to have, a consumer’s consent to make that call.

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In the U.S., jamming communications signals is illegal. Over the years, I’ve written a number of posts about the FCC’s persistent efforts to prevent jamming. Among these were fines and other actions taken against an Internet marketer of cell phone jamming devices; a variety of individuals and companies selling cell phone jamming devices through Craigslist; an employer attempting to block cell phone calls by its employees at work; a truck driver jamming GPS frequencies to prevent his employer from tracking his whereabouts; and an individual jamming the frequencies used by a shopping mall for its “mall cop” communications systems.

In each of these cases, the FCC went after either the party selling the jamming device, or the user of that device. Normally, jammers work by overloading the frequency with a more powerful interfering signal, confusing the signal receiver or obliterating the lower-powered “authorized” signal entirely. Historically, jammers have often been individuals with a grudge or an employer/employee trying to get the electronic upper hand on the other.

It was therefore a new twist when the FCC announced today that it had entered into a Consent Decree with one of the largest hotel operators in the U.S. “for $600,000 to settle the [FCC’s] investigation of allegations that [the operator] interfered with and disabled Wi-Fi networks established by consumers in the conference facilities at the Gaylord Opryland Hotel and Convention Center in Nashville, Tennessee … in violation of Section 333 of the Communications Act of 1934, as amended….”

The FCC’s Order describes the basis for its investigation and the Consent Decree as follows:

Wi-Fi is an essential on-ramp to the Internet. Wi-Fi networks have proliferated in places accessible to the public, such as restaurants, coffee shops, malls, train stations, hotels, airports, convention centers, and parks. Consumers also can establish their own Wi-Fi networks by using FCC-authorized mobile hotspots to connect Wi-Fi enabled devices to the Internet using their cellular data plans. The growing use of technologies that unlawfully block consumers from creating their own Wi-Fi networks via their personal hotspot devices unjustifiably prevents consumers from enjoying services they have paid for and stymies the convenience and innovation associated with Wi-Fi Internet access.

In March 2013, the Commission received a complaint from an individual who had attended a function at the Gaylord Opryland. The complainant alleged that the Gaylord Opryland was “jamming mobile hotspots so that you can’t use them in the convention space.” Marriott has admitted that one or more of its employees used containment features of a Wi-Fi monitoring system at the Gaylord Opryland to prevent consumers from connecting to the Internet via their own personal Wi-Fi networks. The Bureau investigated this matter to assess Marriott’s compliance with Section 333 of the Act and has entered into the attached Consent Decree. To resolve the Bureau’s investigation, [the operator] is required, among other things, (i) to pay a $600,000 civil penalty to the United States Treasury, (ii) to develop and implement a compliance plan, and (iii) to submit periodic compliance and usage reports, including information documenting to the Bureau any use of containment functionalities of Wi-Fi monitoring systems, at any U.S. property that [it] manages or owns.

Today’s Order makes clear that the FCC’s concerns about “signal jamming” are not limited to traditional brute force radio signal interference. In this case, the jamming was done by “the sending of de-authentication packets to Wi-Fi Internet access points.” Also of interest is that the FCC did not assert, as it often has in past jamming cases, that it was concerned about the impact of jamming communications on those in nearby public spaces. It appears that the “de-authentication” was limited to areas inside the hotel/convention center, and the FCC made clear that even this limited jamming was “unacceptable”.

This is not the first time the FCC has exercised its authority in ways affecting the hospitality industry (for example, fining hotels because their in-house cable systems don’t comply with FCC signal leakage limits designed to protect aviation communications). However, the FCC’s willingness to step in and regulate access to Wi-Fi on hotel property indicates that the FCC might be a growing influence on hotels’ business operations, particularly as hotels seek to make an increasing portion of their revenues from “guest fees” of various types, including for communications services. The Order indicates that the hotel here was charging anywhere from $250 to $1,000 per wireless access point for convention exhibitors and customers, providing a powerful incentive for the hotel to prevent parties from being able to sidestep those charges by setting up personal Wi-Fi hotspots.

Figuring out ways to drive up demand for these hotel services is Business 101. Doing it in a way that doesn’t draw the FCC’s ire is an upper level class.

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August 2014

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Nonexistent Studio Staff and Missing Public Inspection File Lead to $20,000 Fine
  • Failure to Route 911 Calls Properly Results in $100,000 Fine
  • Admonishment for Display of Commercial Web Address During Children’s Programming

Missing Public Inspection File and Staff Result in Increased Fine

A Regional Director of the FCC’s Enforcement Bureau (the “Bureau”) issued a Forfeiture Order against a Kansas licensee for failing to operate a fully staffed main studio as well as for failing to maintain and make available a complete public inspection file.

Section 73.1125(a) of the FCC’s Rules requires that a broadcast station have a main studio with a “meaningful management and staff presence,” and Section 73.3526(a)(2) requires that a broadcast station maintain a public inspection file. In July of 2012, a Bureau agent from the Kansas City Office tried to inspect the main studio of the licensee’s station but could not find a main studio. Although the agent was able to find the station’s public inspection file at an insurance agency in the community of license, the file did not contain any documents dated after 2009. After the inspection, the licensee requested a waiver of the main studio requirement, which the FCC’s Media Bureau ultimately denied.

In May of last year, the Bureau issued a Notice of Apparent Liability for Forfeiture (“NAL”) against the licensee. In the NAL, the Bureau noted that the base fine for violating the main studio rule is $7,000 and the base fine for violating the public file rule is $10,000. However, due to the over two-year duration of the public inspection file violation and the 14 month duration of the main studio violation, the Bureau increased the base fines by $2,000 and $1,000, respectively, resulting in a total proposed fine of $20,000.

In its response to the NAL, the licensee did not deny the facts asserted in the NAL. Therefore, the Forfeiture Order affirmed the factual determinations that the licensee had violated Sections 73.1125(a) and 73.3526(a)(2) of the FCC’s Rules. However, in its NAL Response, the licensee requested that the proposed fine be reduced because the licensee’s station serves a small market and it would face competitive disadvantages if it were required to fully staff the main studio.

The Bureau rejected the licensee’s request to reduce the fine based on an inability to find qualified staff because there is no exception to Section 73.1125(a)’s requirement of a main studio due to staffing shortages. The Bureau also pointed out that the licensee had no staff presence at the main studio for more than a year. The Bureau briefly entertained the idea that the licensee had intended to argue that it was financially unable to maintain a fully staffed studio; however, since the licensee did not submit any financial information with its response to the NAL, the Bureau dismissed the possibility of reducing the fine amount based on the licensee’s inability to pay.

The Bureau also rejected the licensee’s argument that maintaining a main studio would place the station at a competitive disadvantage because the licensee’s main studio waiver request was based only on financial considerations, which is not a valid basis for a waiver of the main studio rule. Moreover, the Bureau pointed out that even if the waiver had been granted and the licensee had then staffed the studio, corrective action after an investigation has commenced is expected by the FCC, and does not warrant reduction of cancellation of a fine. Therefore, the Bureau affirmed the fine of $20,000.

Automated Response to 911 Calls Leads to Substantial Fine

The Enforcement Bureau issued an NAL against an Oklahoma telephone company for routing 911 calls to an automated operator message in violation of the 911 Act and the FCC’s Rules.

Under Section 64.3001 of the FCC’s Rules, telecommunications carriers are required to transmit all 911 calls to a Public Safety Answering Point (“PSAP”), to a designated statewide default answering point, or to an appropriate local emergency authority. Section 64.3002(d) of the FCC’s Rules further requires that if “no PSAP or statewide default answering point has been designated, and no appropriate local emergency authority has been selected by an authorized state or local entity, telecommunications carriers shall identify an appropriate local emergency authority, based on the exercise of reasonable judgment, and complete all translation and routing necessary to deliver 911 calls to such appropriate local emergency authority.”
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July 2014

Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

  • Multi-Year Cramming Scheme Results in $1.6 Million Fine
  • Violation of Retransmission Consent Rules Leads to $2.25 Million Fine
  • $25,000 Fine for Failure to Respond to FCC

Continued Cramming Practices Lead to Double the Base Fine

The FCC recently issued a Notice of Apparent Liability for Forfeiture (“NAL”) against a Florida telephone company for “cramming” customers by billing them for unauthorized charges and fees related to long distance telephone service.

The FCC had received more than 100 customer complaints against the company. The complaints alleged that the company had continued to bill the customers and charge them late fees after they had paid their final bills and canceled their service with the company. The FCC opened an investigation in response to the complaints and issued a Letter of Inquiry (“LOI”) to the company in July 2011, but the company did not submit a timely response. The FCC issued an NAL in 2011 proposing a $25,000 fine against the company for its failure to reply to the LOI, and ultimately issued a Forfeiture Order fining the company $25,000.

Section 201(b) of the Communications Act of 1934 (the “Act”) requires that that “[a]ll charges . . . in connection with . . . communication service shall be just and reasonable.” Prior decisions of the FCC have determined that placing unauthorized charges and fees on consumers’ phone bills is an “unjust and unreasonable” practice and is therefore unlawful.

The NAL provides information from 11 customer complaints detailing instances where customers attempted to cancel their service and continued to be charged late fees and other fees by the company. The FCC determined that the phone company did not have authorization to continue billing these customers after they canceled their service.

Although the FCC’s Forfeiture Guidelines do not provide a base fine for cramming, the FCC has settled on $40,000 as the base fine for a cramming violation. The NAL addressed 20 cramming violations, which would create a base fine of $800,000. However, the FCC determined that an upward adjustment of the fine was appropriate in this case because the unlawful cramming practices had been occurring since 2011, the company did not respond to the 2011 LOI, and there was a high volume of customers who received cramming charges. Therefore, the FCC increased the proposed fine by $800,000, resulting in a total proposed fine of twice the base amount, or $1.6 million.

Cable Operator’s Retransmission of Six Texas TV Stations Results in Multi-Million Dollar Fine

Earlier this month, the FCC issued an order against a cable operator for rebroadcasting the signals of six full-power televisions stations in Texas in violation of the FCC’s retransmission consent rules.

The cable operator serves more than 10,000 subscribers in the Houston Designated Market Area (“DMA”) in 245 multiple-dwelling-unit buildings and previously had retransmission consent agreements with the stations. However, those agreements expired in December 2011 and March 2012. The cable operator continued retransmitting the signals of those stations without extending or renewing the retransmission consent agreements, and the licensees notified the cable operator that its continued retransmissions were illegal. Subsequently, each licensee filed a complaint with the FCC.

In its May 2012 response to the complaints, the cable operator did not deny that it had retransmitted the stations without the licensee’s express written consent, but said that it had relied on the master antenna television (“MATV”) exception to the retransmission consent requirement. The cable operator noted that it had begun converting its buildings to MATV systems in November 2011 and had hoped to complete the installations before the retransmission agreements expired in December 2011, but did not complete the MATV installation until July 26, 2012.
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Beginning tomorrow, October 16, 2013, new FCC “robocalling” rules go into effect that require all businesses to obtain specific written consent from a consumer before sending that consumer marketing messages by telephone or text. While we did an earlier Pillsbury Advisory on these rules, they still appear to be catching businesses off-guard, as many business owners incorrectly assumed that the rules were targeted only at robocallers and text spammers, and are just now beginning to realize that the breadth of business activities reached by these rules is far more extensive.

When calling or texting a cell phone for any non-emergency reason, the FCC’s rules have always required that businesses using autodialer technology, like that used in text campaigns, or pre-recorded voices, must first get express consent from the recipient. Prior express consent has also been required before making marketing calls to residential landlines, but the rules contained an exception to that requirement if the business had an established business relationship with the called party (e.g., you ordered something from their catalog in the past eighteen months).

The big change under the new rules is that the prior express consent required to send marketing messages to cell phones (the FCC treats calls and texts the same) or to residential landlines must now be in writing, and there is no longer an exception to that requirement for those with an established business relationship with the called party.

While the impact of this rule change on robocallers is obvious, it applies to most other businesses as well. For example, many broadcast stations have a variety of texting programs, ranging from news, weather and traffic alerts to promotional texts about upcoming programming events or contests. Those stations should now review how the numbers they are texting were originally added to their contact lists, and either be certain that they meet the FCC’s new requirements, or suspend texting to those numbers.

For purely informational texts, such as news, weather and traffic alerts, the station need only have previously received express consent to send the type of text message involved. Written consent was not required and is still not required if there is no marketing component to the call. As a result, if the station previously stated it would only use the consumer’s cell phone number to send weather alert texts, then weather alerts are the only type of texts the station can send to those who signed up for that type of text message. The weather alert contact database therefore could not be combined with the station’s marketing contact database.

The rub is that such stations must also make sure that those weather texts do not include any marketing messages in addition to the weather-related messages. If a marketing component is included (and the definition of marketing for this purpose is very broad), starting tomorrow, they will need to get written consent before sending any more of those messages.

To send promotional or other forms of marketing texts, a business needs to have made a clear and conspicuous disclosure and received clear consent in writing. Importantly, the business cannot require that the written consent be given as a condition of purchasing any product or service. As to the consent being in writing, the FCC permits electronic signatures collected via webforms, email, text messages, telephone keypresses, or voice recordings.

Businesses that previously signed consumers up for their texting programs via a webform, for example, may have given sufficiently clear notice and generated an electronic signature sufficient to fulfill these requirements. Affected businesses should therefore review the language used in their disclosures to be sure that it clearly communicated to the consumer what the texting program involves, and that it did not condition the consumer’s ability to make a purchase on their giving this consent. If a business is able to meet these tests, then it should verify that it has retained sufficient records to demonstrate that it obtained the necessary written consent before continuing to text the affected consumers.

While we have covered the high points of the new rules in this post, those affected should definitely read the more detailed description found in our Pillsbury Advisory. In particular, businesses need to be aware that these new rules were adopted pursuant to the Telephone Consumer Protection Act. That law is the source of many class action lawsuits brought on behalf of consumers who have received texts or calls alleged to be in violation of the law, and provides statutory damages where violations are found to have occurred.

Unfortunately, the prospect of class action damages is likely to attract lawsuits for even benign potential violations of the new rules, and just being named a defendant in such a lawsuit can have devastating consequences for that business. While the effort involved in ensuring that your business is in compliance with these rules could be substantial, the risks of proceeding to contact consumers via marketing texts or calls, even where they are your existing customers, is far too great to be ignored.