Protection of Information: The Commission found that all information submitted in response to the standard questions would be “treated as business confidential and protected from disclosure” and that applications would “not have to specifically identify information for such treatment.” The Commission, however, declined to take any action regarding a request for “heightened protection” of PII and restrictions on sharing it within Committee agencies, stating that the Privacy Act already provides the necessary protection.
Multiple Applicants: The Commission clarified the instructions for how joint applicants can file confidentially, stating that each applicant should “(1) provide a clear statement as to how they have submitted their responses and (2) identify which applicants have filed jointly and which applicants can view each other’s business confidential information.” This approach “would alert the Committee staff of which information should not be shared and should prevent disclosure of customer lists between joint applicants.”
Cross-Referencing: The Commission rejected the request that applicants be able to cite to previously filed information in response to the standard questions, rather than resubmitting that information, stating that “permitting cross references to previously filed materials may delay Committee staff review of applicants’ submissions because Committee staff would then have to locate materials that were previously filed with respect to a different application.” The Commission, however, will allow internal cross-referencing within a single document. The Commission also rejected the request that, for applicants that have been granted a declaratory ruling approving foreign investment, the applicants be permitted to respond to a streamlined questionnaire, instead finding that such applicants must complete full responses to the standardized questions.
Relationships with Foreign Individuals or Entities: With respect to information concerning broadcast petitioners’ prior relationships, the Commission rejected requests to place a time limit on or set a defined look-back period for reporting such prior relationships, stating that “this information is necessary for staff’s national security and law enforcement review of broadcast applications.” The Commission also clarified the meaning of “planned relationships,” stating that they are “current relationships or those reasonably anticipated by negotiations or that are identified under current business plans” including “any situations in which contracts have been signed or where the parties are already in negotiations.” The Commission also clarified that a foreign relationship does not include foreign subscribers to an applicant’s retail services or foreign employees.
Background Information: The Commission clarified that the question asking whether an individual or entity had ever been “involved” or “associated” with a previous application or filing means that the individual or entity was either the applicant or listed as an owner in the prior filing/application. The Commission declined a request for a two year time limit on questions concerning previous filings with the Commission or Committee on Foreign Investment in the United States (“CFIUS”), stating that “all information regarding prior CFIUS filings would be relevant to their national security and law enforcement review.” The Commission, however, accepted a ten year limit for Commission filings. The Commission also declined any changes to the questions regarding criminal, administrative, or civil penalties.
Personally Identifiable Information (PII): The Commission clarified the set of individuals for whom broadcasters must provide PII, stating that broadcasters must provide the information “for non-U.S. Individuals with access to (1) all facilities and equipment in the United States, (2) facilities outside that United States that are used to broadcast into the United States, and (3) facilities both inside and outside the United States that store, process, or provide access to U.S. person data.” The Commission declined to change PII reporting requirements for individuals with access to submarine cable facilities, stating that such information is necessary for national security and law enforcement analysis.
Information about the Applicant’s Services: The Commission updated the list of U.S. critical infrastructure sectors in the standardized questions to track Presidential Policy Directive 21. The Commission clarified the word “serve” in questions relating to serving sectors of U.S. critical infrastructure to mean “provide services to,” which “includes situations where the applicant provides service to, has customers in, or participates in the market in certain sectors of U.S. critical infrastructure.” The Commission declined to make changes to questions concerning interconnecting carriers or peering relationships.
National Security/Law Enforcement Questions: The Commission declined to make changes to questions relating to applicant’s national security and law enforcement obligations.
Legal Authority: The Commission rejected arguments that certain questions should be eliminated because they concerned issues outside the scope of the Commission’s jurisdiction, stating that it is “not regulating format or content.”
Additional Recommendation: To the extent an applicant believes that a question is not applicable to the applicant’s situation, or is overly broad or unclear, the Commission encourages the applicant to explain this in their responses to the standardized questions.
2. Recent Robocall Decisions -- Further Notice of Proposed Rulemaking to Combat Foreign-Originated Illegal Robocalls, FCC 21-105 (released 10/1/2021), Fourth Report and Order in the Matter of Call Authentication Trust Anchor, FCC 21-122 (released 12/10/2021)
The FCC has continued to take action in its years-long battle to curb, if not eliminate altogether, the scourge of unwanted robocalls, which continue to be far and away the largest source of consumer complaints to the FCC. Two of these actions, in particular, are worth noting.
First, on October 1, 2021, the FCC released its Fifth Further Notice Of Proposed Rulemaking in CG Docket No. 17-59 (In The Matter Of Advanced Methods to Target and Eliminate Unlawful Robocalls) and Fourth Further Notice Of Proposed Rulemaking in WC Docket No. 17-97 (In The Matter Of Call Authentication Trust Anchor) to address the problem of foreign-originated robocalls placed to U.S.-based recipients (“Foreign-Originated Robocalls NPRM “). In its Foreign-Originated Robocalls NPRM, the FCC proposed rules that would place new obligations on all “gateway providers” – a newly-defined term in the NPRM – that are the point of entry for foreign-originated voice calls into the United States. These proposed rules would require such gateway providers to apply STIR/SHAKEN Caller ID authentication to all foreign-originated Session Initiation Protocol (“SIP”) calls and perform robocall mitigation (including a 24 hour traceback requirement and call blocking steps) on all such calls that display a U.S.-based phone number in the caller ID field. The FCC described these obligations as being similar to the obligations that the FCC already applies to most providers of domestic U.S. voice telecommunications services. The FCC further proposed, and sought comment on, a deadline of March 1, 2023 for gateway providers to comply with its proposed rules. In addition, the FCC proposed certain improvements to its general anti-robocalling rules by proposing revisions to the information that filers must submit to the Robocall Mitigation Database and by clarifying the obligations of voice service providers and intermediate providers with respect to calls to and from Public Safety Answer Points (PSAPs) and other emergency services providers. As of the date of this writing, the FCC had not issued its final rules from this rulemaking.
Second, on December 10, 2021, the FCC released its Fourth Report and Order in WC Docket 17-97 (In The Matter Of Call Authentication Trust Anchor) (“Fourth Report and Order”). In the Fourth Report and Order, the FCC shortened for non-facilities-based domestic small voice service providers the deadline to implement the STIR/SHAKEN caller ID authentication framework. The FCC explained that, although it had earlier granted to all domestic small voice service providers (which the FCC defines as providers with 100,000 or fewer voice service subscriber lines) a deadline extension to June 30, 2023 to implement the STIR/SHAKEN framework, new evidence demonstrated that non-facilities-based small voice service providers were generating a high and increasing share of illegal robocalls relative to their subscriber base. Accordingly, the FCC shortened the deadline for such non-facilities-based small providers to implement STIR/SHAKEN processes by a year, to June 30, 2022, while leaving in place the June 30, 2023 deadline for facilities-based small voice service providers.
3. Order and Notice of Proposed Rulemaking, In the matter of revising Spectrum Sharing Rules for Non-Geostationary Orbit, Fixed Satellite Service Systems, FCC 21-123 (released 12/15/2021)
Space Exploration Holdings, LLC (SpaceX) has been making headlines for years now – most recently with its speedy delivery to Ukraine of terminals to enable access to its Starlink satellite-based internet service amidst the ongoing military invasion of Ukraine by Russia. To provide its fixed satellite service (FSS), Starlink uses non-geostationary orbit (NGSO) satellites, which orbit the Earth far lower (about 550 km up) than geo-stationary satellites (which typically orbit around 35,000 km above Earth). These lower-orbit satellite constellations can provide broadband services “with lower latency and wider coverage than previously available via satellite.” And operators are seeking to deploy satellites by the thousands – one round of applications in mid-2020 saw proposals to deploy well over 80,000 new NGSO satellites.
The FCC, which is working to update its rules on spectrum sharing for NGSO satellite constellations, says this new generation of broadband service offerings provides “dramatically higher speeds and lower latency” and is a “game-changer” for closing the digital divide. In April 2020, SpaceX filed a Petition for Rulemaking that asked the Commission “to revise Section 25.261 of its rules to increase certainty in spectrum sharing obligations among non-geostationary (‘NGSO’) satellite systems operating in the Fixed-Satellite Service (‘FSS’) and clarify the operation of a new processing round.”
As background, the Commission over time has adopted and modified its processing round regime for handling and authorizing spectrum requests from multiple NGSO FSS systems, which was intended to foster fair outcomes among competitors while giving providers certainty for their multi-billion dollar investments. A processing round consists of a set of applications for system licenses that are grouped together for consideration based on filing dates.
Beyond deployment timing, a licensee’s processing round has some operational impacts. The Commission’s rule also prescribe a process for what are known as “in-line interference events” – situations when earth stations and space stations of different systems become aligned, causing interference of shared spectrum. Absent a coordination agreement, licensees split spectrum during such events by identifying their “home base” spectrum. The existing rule provides a first-mover advantage whereby licensees line up to identify their home-base spectrum during such events based on “the date that the first space station in each satellite system is launched and capable of operating in the frequency band under consideration.”
The thrust of SpaceX’s rulemaking request aims to encourage both competition and efficient use of limited spectrum. In particular, SpaceX requests the Commission to rule that later launchers must agree not to interfere with earlier-round licensees. Its petition also suggests that such protection should sunset after a specific term of years to avoid hampering competition. SpaceX seeks clarification that this latest space race needs to be interpreted to ensure that certain actors – particularly taking aim at non-U.S.-based entities – do not launch placeholder satellites early in order to later cut in line for declaring home-base spectrum. As an alternative, SpaceX suggests the priority be established based on spectrum efficiency metrics rather than operational timing.
On the whole, industry participants (who disagree intensely on many specific policy options) tend to agree that the Commission should update its rules to meet the twin goals of protecting active licensee investments while minimizing barriers to new market entrants. Some commenters, however, warned that SpaceX’s specific proposals risk driving down competition by foisting complicated additional requirements upon new market entrants. Commenters also suggested processing round policy changes to better stimulate investments and for spectrum selection methods that incentivize efficient spectrum use. For example, Amazon’s Kuiper Systems, LLC – a later launcher – suggests condensed processing rounds to address the reality of high numbers of failed deployments, which frees up room for other systems that could be filled with follow-on processing rounds.
In its Order and Notice of Proposed Rulemaking, released on December 15, 2021, the Commission determined that “the Petition raises fundamental issues affecting the spectrum access rights of NGSO FSS systems.” Commission Chair Rosenworcel explained that the Commission’s satellite rules are based “an era when heading to space was strictly for government superpowers” and not for the current regime dominated by private sector entrepreneurs. The Commission initially agreed that it makes sense to limit spectrum splitting procedures to those NGSO FSS systems authorized within the same processing round. And the Commission invited comments on how such a rule would affect future applicants and market entrants.
Recognizing the need for licensees to protect their billion-dollar investments, the Commission proposed to afford certainty by requiring an NGSO FSS licensee or market access recipient to certify that it has either completed a coordination agreement with any operational NGSO FSS system licensed or granted U.S. market access in an earlier processing round or to demonstrate that it will not cause harmful interference to any such system. The Commission also proposes a rule to require good faith coordination, and asks for comments on how to balance protection of existing interests against encouraging competition. The Commission described difficulties associated with the various proposed ways to measure interference by later-round licensees, but “believe[s] that quantifying a level of protection for earlier-round systems would clarify the rights and obligations of NGSP FSS licensees in different processing rounds,” and asked for comments on SpaceX’s proposal and alternative proposals.
The Commission supported the proposals for increased information sharing to coordinate spectrum sharing, which SpaceX referred to in its Petition as the “gold standard,” and the Commission invited comments for rulemaking beyond the existing good-faith coordination requirement. The Commission specifically solicited comments on the level of information sharing that should be required and proposals for protecting confidential information.
Finally, without taking a specific position on the issue, the Commission sought comments and suggestions for sun-setting mechanisms to minimize any adverse impact to competition of measures to protect earlier market entrants.
4. Report and Order and Further Notice of Proposed Rulemaking, In the matter of Affordable Connectivity Program, FCC 22-2 (released 1/21/2022)
On January 21, 2022, the FCC issued final rules for the Affordable Connectivity Program (“ACP”), as well as issued a Further Notice of Proposed Rulemaking on other aspects of the recently enacted Infrastructure Investment and Jobs Act (“Infrastructure Act”) and proposals to increase participation in the ACP.
Following the enactment of the Consolidated Appropriations Act of 2021, the FCC had adopted final rules for the Emergency Broadband Benefit Program (“EBBP”) on February 25, 2021 and had launched the EBBP on May 12, 2021 in order to provide discounted broadband service to low-income households, including those experiencing COVID-19 related economic disruptions. Pursuant to the Infrastructure Act, the ACP uses new funding to maintain the EBBP’s basic framework to offer eligible low-income households discounts off the costs of broadband service and connected devices, but with modified benefit amounts, plan and subscriber eligibility requirements, and providers’ public promotion obligations, among other changes. Where the Infrastructure Act did not make modifications to the EBBP, the FCC retained many of the existing EBBP rules and applied them to the ACP.
Participating Providers
To begin, the FCC retained the “broad, technologically neutral approach to provider participation.” The definition of an eligible “participating provider” as either an existing “Eligible Telecommunications Carrier” (“ETC”) or a provider approved by the FCC under an “expedited approval process” remained the same, and as a result, ETCs and non-ETCs—such as traditional Internet Service Providers including cable providers and non-traditional broadband providers like community-owned networks, electric cooperatives, or municipal governments—seeking to participate in the ACP must establish that they provide broadband services. The FCC will also continue to utilize the EBBP participating provider election and approval processes, such as that all new participating providers must file with the Universal Service Administrative Company (“USAC”) election notices prior to offering ACP-supported services. Existing EBBP providers are automatically transitioned to the ACP.
All participating ACP service providers continue to have a number of obligations, including providing up-to-date information to enable the use of USAC databases and the administrative process established for the ACP. To minimize waste, fraud, and abuse, among other provisions, the Order required a participating provider to: (1) register its agents with the Representative Accountability Database; (2) not provide its enrollment representatives or direct supervisors a commission that is based on the number of households applying for or enrolling in the ACP, or that is based on the revenue the provider receives in connection with the ACP; as well as (3) submit to USAC annual officer certifications stating under penalty of perjury that it has policies and procedures to comply with ACP rules.
The FCC modified certain existing EBBP rules and procedures to address changes from the Infrastructure Act regarding eligibility of providers to participate in the ACP. In particular, the Infrastructure Act removes the requirement that providers must provide EBBP-supported service “in the same manner, and on the same terms, as described in any of such provider’s offerings for broadband internet access service to such household, as on December 1, 2020.” Participating providers must only certify they offer the ACP discount on any internet service offering.
Household Eligibility
Consistent with the EBBP definition and the Infrastructure Act’s express provision that participating providers “may receive reimbursement for no more than 1 connected device per eligible household,” the Order adopted a definition of “household” that limits the ACP connected device and monthly internet service benefit to one per household—rather than separate members of a household. The Order further directed USAC to conduct quarterly “integrity reviews” and require participating providers to implement policies and procedures for ensuring household eligibility and checking for potential household and individual duplicates.
Under the Infrastructure Act, a household may qualify for the ACP if at least one member of the household: (1) meets the qualifications for participation in the Lifeline program, where the qualifying household income threshold is at or below 200 percent of the Federal Poverty Guidelines for a household of that size; (2) has been approved to receive school lunch benefits under the free and reduced price lunch program, or the school breakfast program; (3) has received a Federal Pell Grant in the current award year; (4) meets the eligibility criteria for a participating provider’s existing low-income program, subject to approval by FCC; or (5) receives assistance through the WIC Program, established by section 17 of the Child Nutrition Act of 1996. The Infrastructure Act had thus expanded the households that may qualify for the ACP by adding WIC, increasing the maximum income threshold from “135 percent” to “200 percent” of the Federal Poverty Guidelines, and eliminating as qualifying criteria substantial loss of income since February 29, 2020 and participation in a provider’s COVID-19 program. Accordingly, the Order directed USAC to make changes as necessary to implement the new eligibility criteria for the ACP that the Order set forth. For instance, the FCC determined that certain documentation of a household member’s current enrollment in a Community Eligibility Provision school or school district—but not in a school that participates in USDA Provisions 2 and 3—was sufficient for meeting the criteria that the household has been approved to receive free or reduced price school meals.
The Order also adopted final rules to continue the use of the National Lifeline Accountability Database as a program-wide tool for enrollment and reimbursement calculations, as well as adopted final rules regarding the three methods for verifying household eligibility (the National Verifier, an approved service provider alternative verification process, and school-based eligibility verifications) and for verifying identity for the ACP. One of the new rules the FCC promulgated is based on its conclusion that the record demonstrates that eligible households may experience difficulty with accessing the National Verifier on their own. As a result, the Order provided for the establishment of a one-year test pilot for granting certain trusted, neutral third party entities (e.g., schools, local or state government entities) with access to the National Verifier to assist customers with applying to the ACP.
Regarding household usage requirements, the Order adopted rules where, for ACP-supported services for which a provider does not assess a monthly fee from the subscriber, the provider must notify a consumer after 30 consecutive days of non-usage that they will be de-enrolled if they do not cure their non-usage in 15 days. Relatedly, a provider is prohibited from claiming ACP support for a subscriber that has not been using their service, and to safeguard against improper ACP claims and decrease burdens associated with recertifications and duplicate checks, a subscriber must be de-enrolled if non-usage is not cured within the allotted time. The Order adopted a definition of “usage” that was used in the EBBP and the Lifeline program, which takes into account the subscriber’s actual use of the supported free to end-user service, as well as other activities. The FCC declined to require the use of a third-party usage tracking application, but adopted certain annual recertification requirements for households.
Covered Services
The FCC clarified that the “affordable connectivity benefit” excludes broadband service products that are based primarily on the data allowance of the product and are sold separate from a monthly recurring service plan, as well as excludes service plans that are already offered with no fee to the end user. Covered internet service offerings include any broadband internet plan in which the customer is currently enrolled, regardless of whether it is a legacy grandfathered plan, and any such plan that a provider currently offers to new customers. In addition, the FCC explained that providers would be allowed to include taxes and other government fees as part of the actual amount charged to a household for reimbursement, and that providers may make internet service offerings that are available only to ACP subscribers provided that the terms are “at least as good” as plans available to non-eligible households.
In the Order, the FCC declined to apply minimum service standards to ACP-covered services, but finds that internet service offerings must include a broadband connection that permits households to rely on it for “purposes essential to telework, remote learning, and telehealth.” The FCC also clarified requirements to it easier to offer ACP support for services that are purchased in bulk or are bundled, as well as for equipment associated with the provision of services.
Covered Devices
Under the Infrastructure Act, an ACP-eligible “connected device” is defined as a laptop, desktop computer, or tablet. The FCC continued to conclude that a connected device excludes “devices that can independently make cellular calls such as large phones or phablets” and maintains requirements that, at a minimum, a connected device must be able to support video conferencing, camera functionality, and online learning software, be Wi-Fi enabled, as well as be usable by consumers with disabilities.
Reimbursement
The Order adopted the change under the Infrastructure Act for the standard monthly discount and reimbursement rate from $50 to $30 for an internet service offering. But the FCC clarified that the number of connected devices at any time that may be covered remains limited to one per household.
Furthermore, the Order adopted rules to use a reimbursement process largely similar to that administered for the EBBP. This included that participating ACP providers that apply both the Lifeline program discount and the ACP benefit to a broadband service must first apply the full Lifeline discount before calculating the ACP-claimed reimbursement. The FCC retained the market value-based approach for provider reimbursement. Similarly, the FCC retained key certification requirements from the EBBP, such as that a provider must certify that each household was not subject to a mandatory waiting period. The FCC added certain certification requirements as well, including that a provider certify that it has not charged or will not charge the household for the amount the provider is seeking for reimbursement. The FCC also adopted a rule to allow for a provider to be reimbursed for a device provided to a household that had been receiving an ACP-supported service from that provider at the time the device was provided, even if the household subsequently transferred the service benefit to a different provider.
Consumer Protection
The FCC clarified that a provider is barred from considering the results of a credit check in deciding whether to enroll a household in the ACP, in determining which ACP-supported internet service plan a household may apply their affordable connectivity benefit, and in declining to transfer a currently enrolled household’s benefit. But a provider may still run credit checks “routinely used” as part of a provider’s sign-up process for all consumers.
Regarding non-payment, the FCC clarified that the date when a provider may terminate the provision of broadband internet access service to a subscriber on the basis of non-payment is 90 consecutive days of non-payment after the bill’s due date, and advanced notice of this termination is required, but a provider cannot deny a household’s re-enrollment based on past or present arrearages. In the case of re-enrollment following termination for non-payment, however, the FCC concluded that a provider may limit service offerings to plans that would be fully subsidized by the affordable connectivity benefit or any other applicable benefit. The FCC declined to impose a uniform requirement that providers seek to mitigate a delinquent household’s non-payment, such as by moving a delinquent household to a lower-tiered service plan.
To be able to address consumers’ concerns, pursuant to Infrastructure Act requirements, the FCC adopted a proposal to use a dedicated ACP pathway within the existing FCC consumer complaint process. It also adopted various proposals to provide information to consumers about this process, “regularly” issue public reports about consumer complaints, and utilize existing enforcement powers to initiate investigations into ACP rule violations.
The Order addressed other consumer protection issues as well. The FCC first explained how, through the existing notice and comment rulemaking that it has engaged in, it has complied with the requirements of Section 904(b)(11) of the Infrastructure Act. The FCC then proceeded to address additional consumer protection requirements pursuant to Section 904(b)(11), including: (1) finding that not all “downselling” should be prohibited; (2) prohibiting providers from requiring agreement to an extended service plan as a condition of receiving the affordable connectivity benefit but requiring providers to disclose to a household that it may change its service without incurring an early termination fee; (3) prohibiting providers from imposing restrictions on seeking to switch internet service offerings (setting aside the exception for households in non-payment status as discussed above); (4) prohibiting any practice that is “reasonably likely to cause a household to believe that they are prohibited or restricted from transferring their benefit to a different provider”; and (5) prohibiting “additional unjust and unreasonable acts and practices not expressly prohibited in the Infrastructure Act.”
Disclosures and Consumer Consent
The Order adopted rules to ensure that ACP-eligible consumers are fully informed of their rights and terms and conditions for their service prior to enrollment. Disclosures must, for example, state that if a provider offers a connected device through the ACP, the household does not need to accept the device in order to enroll, and, to guard against inappropriate upselling, provide information on a provider’s ACP-supported service plans that are fully covered by the applicable affordable connectivity benefit amount. The Order directed the Wireline Competition Bureau, in coordination with the Enforcement Bureau and the Consumer and Governmental Affairs Bureau, to adopt a standard disclosure statement for all providers to use. Other rules adopted by the FCC here related to providers obtaining affirmative consent for enrollment, providers seeking such consent only after an election notice is processed and not after being removed from the ACP, providers providing certain transfer-specific disclosures, and a one-per-service limitation on ACP household benefit transfers.
Outreach and Coordination
The FCC adopted a number of measures to reach as many eligible households with ACP benefits and fully inform them about ACP terms and conditions, including by working with USAC and third parties to conduct consumer research, coordinating with community stakeholders and other government agency partners (such as the Wireline Competition Bureau, Consumer and Governmental Affairs Bureau, and the Office of Media Relations) to educate households, and requiring participating providers to provide regular notices to their subscribers and to generally publicize the availability of the ACP (such as by working with public interest and nonprofit organizations). To further facilitate the education of consumers about the ACP, the FCC directed FCC staff and USAC to develop—and/or coordinate with other agencies to develop—comprehensive provider education and training programs, as well as consumer outreach plans and other materials.
Data Reporting and Performance Goals
The FCC directed USAC, the Wireline Competition Bureau, and the Office of Economics and Analytics to work with other agencies to publish ACP enrollment data to support outreach efforts and promote transparency. Moreover, as part of measuring its success with the ACP, the FCC adopted the following goals: (1) reduce the digital divide for low-income consumers (e.g., the FCC directed the collection of data on increasing enrollments in areas with low broadband internet penetration rates); (2) promote awareness and participation in the ACP and the Lifeline program (e.g., the FCC directed the collection of data that measures public awareness); and (3) ensure efficient and effective administration of the ACP (e.g., the FCC directed the evaluation of the speed and ease of the application and reimbursement process).
Transition of Legacy EBB Program Households
The Order detailed a hybrid opt-in and opt-out approach for transitioning legacy EBB households to the ACP, utilizing an opt-out approach for most legacy EBB subscribers and an opt-in approach for certain subscribers “most likely at risk of potential bill shock as a result of the reduced subsidy amount.” The Order further addressed other requirements for this group of consumers, including regarding notices, household documentation, reverification of qualifications, and the 60-day benefit transition period.
Sunsetting Provisions
Finding it unnecessary to establish sunsetting rules at this time, the FCC directed the Wireline Competition Bureau, in coordination with other departments and organizations, to develop processes and procedures—including consumer notice requirements—to wind down the ACP in accordance with a forecast of the depletion of the funds that Congress authorized for the ACP.
Enforcement Actions and Removal of Providers
The FCC adopted a number of measures regarding conducting reviews and removals of providers as necessary to ensure the quality and integrity of the ACP. Key audit-related rules include the Office of the Managing Director’s development of a provider audit process, the Office’s subpoena authority upon receiving approval from the Office of the General Counsel, documentation retention requirements, and program integrity reviews conducted by USAC. The FCC also adopted proposals to use its existing, statutorily permitted enforcement powers, apply certain suspension and debarment rulemaking rules adopted in proceedings for certain other federal programs, and maintain a safe harbor provision for providers that act in good faith with respect to eligibility verification processes.
Administration
The Order provided that the FCC will continue to rely on USAC and its systems for administering the ACP. Other administrative issues the FCC addressed included, in particular, directing USAC to monitor the administrative budget, adopting the “red light rule” for the FCC to not take action on applications or other requests by an entity that is found to owe debts to the FCC until that debt is resolved, and specifying certain participating provider registration and reporting requirements.
The Order applied portions of other Part 54, title 47 of the Code of Federal Regulations that the FCC has promulgated pertaining to definitions, de-enrollment, program integrity, and the use of USAC to the ACP. For example, the FCC applied the following uniform definitions: (f) income; (g) duplicative support; (h) household; (i) National Lifeline Accountability Database or Database; (j) Qualifying assistance program; (k) Direct service; (l) Broadband Internet access service; (o) National Lifeline Eligibility Verifier; and (p) Enrollment representatives. As another example, the FCC granted USAC the authority to conduct program audits of contributors and providers as provided in 47 CFR § 54.707.
Furthermore, the FCC made a number of delegations of authority to the Wireline Competition Bureau and the Office of the Managing Director, including to make necessary adjustments to the program administration to conform with the intent of the Order.
Further Notice of Proposed Rulemaking
Finally, the FCC issued a further NPRM. The FCC seeks comment on structuring an outreach grant program, implementing a mechanism for determining the application of the enhanced benefit for providers serving high-cost areas, and on a potential pilot program to increase awareness and enrollment of eligible households participating in Federal Public Housing Assistance Programs in the ACP.
B. Judicial Developments
1. TCPA Decisions: Lindenbaum v. Realgy (6th Circuit No. 20-4252); Katz v. Focus Forward (2nd Circuit No. 21-1224)
The Telephone Consumer Protection Act (“TCPA”) imposes a series of restrictions substantially limiting the methods callers can use to contact consumers (including, frequently, their own customers). The TCPA allows for $500 in statutory violations per call (with the potential for trebling for knowing or willful violations), which often makes defending against TCPA claims risky in terms of damages exposure, especially when litigated as class actions. The TCPA continues to be frequently litigated, with a number of hotly contested issues percolating through the courts. Two recent circuit decisions involving two of the more frequently litigated provisions of the TCPA– namely, its restrictions on the use of automated or prerecorded calls to cellular telephone numbers and its restrictions regarding the use of a fax machine to send ads– shed some light on the scope of the law, but many questions remain and these cases will not be the last word on either section of the law.
Lindenbaum v. Realgy LLC
The TCPA makes it “unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States . . . to make any call (other than a call made for emergency purposesor made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call.” In 2015, Congress amended the TCPA to exempt calls “made solely to collect a debt owed to or guaranteed by the United States” from the scope of § 227(b)(1)(A)(iii). That amendment, however, privileged a particular type of commercial speech (i.e., debt collection work on a government account) by exempting it from the prohibitions on automated calls that applied to nearly all other callers. This, in turn, raised the issue of impermissible content-based discrimination and gave an opening to the organizations whose ability to contact interested parties had been greatly hampered by the TCPA to challenge the validity of the law.
The Supreme Court addressed whether this exemption constituted impermissible content-based discrimination two years ago in Barr v. American Association of Political Consultants. The Supreme Court’s decision was fractured, with no opinion receiving five votes in its entirety. But six justices ultimately found the government debt collection exemption unconstitutional, while a separate group of seven justices found that, assuming the provision was unconstitutional, it should be severed, allowing the TCPA’s general prohibitions on calls to cell phones to remain in place.
In severing the exemption (and thus retaining the TCPA’s prohibitions on autodialed calls to cellular telephones), Justice Kavanaugh’s controlling opinion relied on the fact that Section 227(b)(1)(A)(iii) is contained within title 47 of the U.S Code (i.e., the Communications Act), which includes a general severability clause. Moreover, even if the express severability clause of the Communications Act did not apply to the provision at issue, the Court found that it should apply a presumption of severability to uphold the broader law, which, after all, had functioned independently for years prior to the 2015 amendment that created the content-based discrimination at issue.
The opinion itself did not squarely address what the invalidation of the government debt-collection exemption meant for TCPA suits based on calls made between 2015 (when the amendment came into effect) and 2020 (when the Supreme Court struck down the unconstitutional exemption). However, the Supreme Court did state in dicta that “our decision today does not negate the liability of parties who made robocalls covered by the robocall restriction” during earlier time periods.
Defendants have nevertheless argued that the provisions of the TCPA prohibiting automated calls to cell phones were null and void between 2015 and 2020, since the law functioned as an impermissible restriction on speech during that period. The Sixth Circuit recently addressed (and rejected) this argument in Lindenbaum v. Realgy, LLC.
In Lindenbaum, plaintiff alleged he received two automated calls from the defendant advertising its electricity services even though he had not consented to receive those calls. However, after the Supreme Court’s decision in the AAPC case, Realgy moved to dismiss, arguing that since severability acted as a remedy it could only apply prospectively and could not retroactively cure a constitutionally defective statute. Since the statute was constitutionally defective during the period at issue, Realgy argued it could not serve as the basis for a lawsuit. The district court agreed and dismissed the case.
The Sixth Circuit, however, was not persuaded. It instead concluded that since “unconstitutional enactments are not law at all,” when courts conduct a severability analysis, they are not prescribing a remedy as that term is generally understood. Instead, that analysis serves as part of the court’s inherent ability to interpret statutes and to say what the law is. When a court severs a portion of a law from the rest of the statute, it is effectively saying that the provision never truly was law, and the remainder of the statute remains a binding enactment.
The court also concluded that for severability to function on a “prospective[] only” basis would require a “legislative act” beyond the powers of the judicial system. The Sixth Circuit thus determined that the Supreme Court in AAPC had “interpreted what the statute had always meant” in the absence of the unconstitutional exemption for debt collectors and that its interpretation of the provision applied even retroactively, allowing for suits based on conduct during the period in which the provision was in effect.
Realgy filed a writ of certiorari, which remains pending. Regardless of whether the Supreme Court ultimately takes up that petition, additional litigation on this issue should be expected and other circuit courts will undoubtedly weigh in. But at least for now, potential plaintiffs scored a significant victory, allowing for suits to proceed based on unauthorized automated calls to cellular telephones during the period from 2015 to 2020.
Katz v. Focus Forward LLC
The TCPA also prohibits the use of “any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement.” An “unsolicited advertisement” is defined to include “any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission.”
This law is straightforward where, for instance, a fax includes a clear offer to purchase a product. But statutory ambiguities arise when faxes instead offer a chance to participate in a survey, receive a free sample, or participate in some other activity that might induce a purchase at some later date. Notably, while the FCC found that faxes that use tools like surveys as “a pretext” to send an advertisement still violate the TCPA, that definition still leaves considerable leeway as to what exactly constitutes a pretext for an advertisement.
The Second Circuit’s recent decision in Katz v. Focus Forward LLC reflects the difficulty of determining what constitutes an unsolicited advertisement, as it creates a circuit split with an earlier Third Circuit decision on the same issue. Katz involved a fax that did not try to sell the recipient anything directly but instead offered the recipient money to participate in a market research survey.
The Katz court found that such faxes were not unsolicited advertisements, since “[f]axes that seek a recipient's participation in a survey plainly do not advertise the availability of any one of [property, goods or services], and therefore cannot be advertisements under the TCPA.” In doing so, the court analyzed whether offering money to take a survey constituted advertising the availability of any of property, goods or services.
The court first determined that the fax did not advertise the availability of any property because money did not fall within the meaning of the term “property.” It reached this conclusion through a textual analysis of the TCPA. In particular, the TCPA separately defines the term “telephone solicitation” to mean “a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services.” The court assumed that the term property was meant to have the same meaning in both definitions. It further concluded that one would not logically purchase, rent, or invest in money, since it functions as currency. Simply offering the availability of money, then, would not constitute an unsolicited advertisement. The court further concluded that the fax did not advertise the availability of services, because the faxes sought participation from the recipient rather than offering services to the recipient for purchase.
The court further bolstered its holding by relying on the legislative history. Specifically, the committee report on the provision stated that “the Committee does not intend the term ‘telephone solicitation’ to include public opinion polling, consumer or market surveys, or other survey research conducted by telephone,” since “such research has generated relatively few complaints” from consumers.”
The Second Circuit also criticized the Third Circuit’s earlier decision that found that similar faxes fell within the scope of the TCPA on the grounds that rather than focusing on the statutory definition of an unsolicited advertisement, it instead determined what constituted a “commercial transaction.” As the Katz court noted, that term appears nowhere in the TCPA. To the contrary, the TCPA does not prohibit all faxes that advertise transactions that are “commercial in nature.” Instead, it forbids only those faxes that advertise the availability of property, goods or services.
2. Preemption Challenge to California Net Neutrality Law – ACA Connects et al. v. Bonda (9th Circuit, No. 21-15430)
On January 28, 2022, a panel of the Ninth Circuit Court of Appeals issued its opinion in ACA Connects, et al. v. Bonta, No. 21-15430 (“Bonta”), rejecting an interlocutory appeal by four major telecommunications trade associations (ACA Connects – America’s Communications Association, f/k/a the American Cable Association; CTIA – The Wireless Association; NCTA – The Internet & Television Association; and USTelecom – The Broadband Association) whose members include most, if not all, of the country’s Internet Service Providers (“ISPs”). The four trade associations (“plaintiffs”) originally had filed their lawsuit with the federal district court for the Eastern District of California, seeking to preliminarily and permanently enjoin, on Supremacy Clause/preemption grounds, the state of California’s enforcement of the California Internet Consumer Protection and Net Neutrality Act of 2018 (“SB-822”). SB-822, in essence, codified the federal “net neutrality” rules that the FCC had enacted in 2015 and then rescinded in 2018, but SB-822 limited its application to broadband internet access services provided to customers in California. The federal district court, relying largely on the D.C. Circuit’s analysis in Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019) (“Mozilla”), denied plaintiffs’ motion for preliminary injunction. The federal district court did so after concluding that plaintiffs were unlikely to succeed on the merits of their preemption claim because the FCC, by reclassifying broadband internet access services as “information services” subject to Title I of the federal Communications Act rather than “telecommunications services” subject to Title II of the federal Communications Act, not only removed those services from the FCC’s preemptive authority but also removed those services from the preemptive scope of the Communications Act itself, whether viewed through the lens of conflict preemption principles or viewed through the lens of field preemption principles. Plaintiffs obtained a stay from the district court and filed their interlocutory appeal with the Ninth Circuit, seeking reversal of the district court’s denial of their preliminary injunction motion.
In rejecting the plaintiffs’ interlocutory appeal, the Ninth Circuit panel largely hewed to the analysis of the D.C. Circuit in Mozilla, in which the D.C. Circuit upheld the FCC’s 2018 decision to classify broadband internet access services as information services rather than telecommunications services, but then reversed the FCC’s attempt to expressly preempt states from enacting legislation conflicting with the FCC’s decision not to regulate broadband internet access services as telecommunications services.
The Ninth Circuit panel began its analysis by framing its inquiry as one to “consider the broadband industry’s contention that, when the FCC reclassified broadband services under Title I, thereby abandoning its regulatory authority with respect to net neutrality, California was preempted from stepping into the breach to enact its own net neutrality protections.” Bonda, slip op. at 8. Against this frame, the panel described Mozilla’s salient holding – which the panel adopted as its own – as being that, under Title I of the Communications Act, the FCC lacked the authority to regulate broadband services through the imposition of net neutrality rules and therefore, “because federal regulatory authority is a prerequisite to preemption, the FCC could not expressly preempt the states.” Id., slip op. at 8-9.
As the district court below it had done, the Ninth Circuit panel had little trouble expanding its conclusion that the FCC lacked express preemptive authority over state regulation of information services to embrace a conclusion that (i) no implied preemption of such state regulation arose from the policies underlying the FCC’s decision not to regulate broadband internet access services as telecommunications services and (ii) no express or implied preemption of such state regulation arose from the structure or language or policies underlying the Communications Act itself. The panel summarized its reasoning as follows:
As the D.C. Circuit held in Mozilla, by classifying broadband internet services as information services, the FCC no longer has the authority to regulate in the same manner that it had when those services were classified as telecommunications services. The [FCC], therefore, cannot preempt state action, like SB-822, that protects net neutrality. Without the authority to preempt, it does not much matter whether SB-822 conflicts with the federal policy objectives underlying the [FCC’s] reclassification decision. And SB-822 does not conflict with the Communications Act itself, which only limits the FCC’s authority. As to the service providers’ field preemption argument, Supreme Court authority, the case law of this circuit, and various provisions of the Communications Act itself all foreclose that argument. [internal citations omitted].
Id., slip op. at 9-10.
Although the panel’s decision claims to follow the preemption analysis found in both Mozilla and the Supreme Court’s decision in Louisiana v. FCC, 476 U.S. 355 (1986), it is not without its curiosities and potential vulnerabilities. For example, because the plaintiffs’ principal conflict preemption argument was that SB-822 conflicted with the FCC’s “policy decision” to classify broadband internet access service as an information service subject to Title I of the Communications Act in order to reduce or eliminate the regulatory burdens and costs that would apply to that service if the FCC chose to classify it as a telecommunications service subject to Title II, the panel accepted the plaintiffs’ assertion (and concluded that Mozilla had held) that the Communications Act afforded the FCC with broad discretionary authority to classify broadband internet access service as either an information service or a telecommunications service. Indeed, the existence of such presumed discretionary FCC authority appears to be the linch-pin of the panel’s preemption analysis. But it is far from clear that, when Congress added the definitions of “information service” and “telecommunications service” to the Communications Act as part of its enactment of the Telecommunications Act of 1996, Congress intended those statutory definitions to be potentially interchangeable or intended to give the FCC the option to classify a service as one or the other, depending on the FCC’s regulatory preferences. Not only does such a presumed intent not flow naturally from the language of the Communications Act itself, it appears at odds with the legislative history behind Congress’ addition of those statutory definitions to the Communications Act in 1996, which Congress added to codify the FCC’s prior regulatory establishment of an “enhanced service” as a type of service distinct from a telecommunications service.
Similarly, the panel’s decision to reject plaintiffs’ additional conflict preemption claim that SB-822 conflicts with Section 153(51) of the Communications Act (which provides the definition of a “telecommunications carrier” for purposes of the Act) and Section 332(c)(2) of the Communications Act (which defines and distinguishes between commercial mobile service and private mobile service) arguably ignores the overall structure and purpose of the Communications Act and of Congress’ 1996 amendments to that Act. According to the panel, those definitions only limit the scope of the FCC’s authority, and say nothing about state authority to regulate such services – a conclusion that Mozilla also had drawn, which conclusion the panel characterized as “well-reasoned”. Id., slip op. at 28. As further support for its rejection of plaintiffs’ statutory conflict preemption claim, the panel also pointed to the Savings Provision of the Telecommunications Act of 1996, (Section 601(c)(1) of the 1996 Act), which the panel read to establish that none of Congress’ 1996 amendments to the Communications Act have a preemptive effect unless those amendments expressly so provide. Id., slip op. at 29. But the panel’s reading of the Savings Provision is arguably too expansive, insofar as that provision appears to address existing state law at the time the 1996 Act was passed, not new state statutory enactments. And the panel’s analysis of Sections 153(51) and 332(c)(2) is difficult to square with existing implied preemption jurisprudence, because it arguably reads out of existence the accepted legal principle of implied preemption based on a statute’s overall structure and purpose – a concept that other courts interpreting Congress’ 1996 amendments to the Communications Act have acknowledged.
The panel’s analysis and rejection of plaintiffs’ field preemption arguments also is not watertight. The panel concluded that SB-822’s limitation of its scope to broadband internet access services “provided to customers in California” and to internet service providers that “provide broadband Internet access service to an individual……or other customer in California” establishes that SB-822 “does not have the practical effect of regulating wholly interstate conduct.” Id., slip op. at 30. In reaching this conclusion, the panel relied not on any factual record, but on a 2014 Ninth Circuit decision (GLAAD v. Cable News Network, Inc., 742 F.3d 414 (9th Cir. 2014)) that did not involve broadband internet access services or SB-822 (but according to the panel, involved an analogous California statute). Id. The panel then concluded that, even if SB-822 “touches on” interstate communications, Congress left ample space for state laws to supplement the federal scheme in the field of interstate broadband services, citing the existence of state laws in such areas as consumer privacy, policing fraud, taxation, general commercial dealings, and enforcing fair business practices. Id., slip op. at 30-33. But this analysis ignores at least four important points that render it factually and legally vulnerable: (i) factually, the interstate or intrastate nature of a communications service cannot be determined solely from the location of the customer initiating or receiving the communication; (ii) federal law already classifies broadband internet access services as being jurisdictionally interstate, not intrastate, services; (iii) the test for field preemption is not whether state regulation has “the practical effect of regulating wholly interstate conduct”; and (iv) the regulation of certain business practices by providers of interstate services is not the same thing as the regulation of the interstate services themselves.
An altogether separate curiosity in the case is that one of the panelists, Judge Wallace, filed a concurring opinion in which he emphasized that the panel was “solely reviewing a denial of a preliminary injunction” and therefore “can express no view on issues arising after a trial dealing with a permanent injunction.” Id., slip op. at 34. Judge Wallace’s apparent motivation for his concurrence was to chastise the parties (and the district court below) for not proceeding to a trial or adjudication on the merits of the plaintiffs’ claims and request for a permanent injunction, because “appealing from a grant or denial of a preliminary injunction to obtain an appellate court’s view of the merits often leads to ‘unnecessary delay to the parties and inefficient use of judicial resources’” and “generally provides ‘little guidance’ because ‘of the limited scope of our review of the law’ and ‘because the fully developed factual record may be materially different from that initially before the district court.’” Id. (internal citations omitted). But because plaintiffs’ claims turn entirely on preemption principles, it is unclear whether foregoing an interlocutory appeal and instead proceeding directly to trial would have been a better choice for the parties or for the judiciary.
Plaintiffs have filed with the Ninth Circuit a petition for rehearing en banc. As of the date of this writing, that petition remains pending.
3. Challenge to FCC Order on Unlicensed Use in the 6 Mhz Spectrum Band – AT&T Services, Inc. v. FCC (D.C. Circuit No. 20-1190, 12/28/2021)
Historically, the FCC has reserved the 6 GHz spectrum band for licensed users that “support a variety of critical services provided by utilities, commercial and private entities, and public safety agencies.” However, in 2017, responding to the growing demand for wireless broadband, the Commission announced that it was considering opening a portion of the spectrum between 3.7 and 24 GHz to unlicensed use and sought public comment. On April 23, 2020, the FCC adopted an Order allowing unlicensed devices to operate in the 6GHz band.
The Commission’s Order distinguished between internet access points that use standard power (like the devices that provide internet to stadiums, concert halls, and other large areas) and access points that use low power (like typical residential or office routers). The Order required all standard-power access points to use an automated frequency coordination (“AFC”) system, a technology designed to ensure that unlicensed devices do not cause harmful interference with licensed devices. The Order also prohibited unlicensed standard-power access points from using 6 GHz sub-bands in which mobile licensees operate.
By contrast, the Order allowed unlicensed low-power access points to operate across the 6 GHz band. But to protect licensed users from harmful interference, the Order required that routers (1) operate below specified maximum power levels—as relevant here, 5 decibel milliwatts per megahertz (5 dBm/MHz); (2) use a “contention-based protocol,” through which a device “listens” to a channel to ensure it is free before transmitting a signal over it; and (3) remain indoors, thus decreasing the likelihood of interference with licensed outdoor users.
A group of petitioners, consisting of licensees in the 6 GHz band, challenged the FCC’s Order in the U.S. Court of Appeals for the D.C. Circuit. The petitioners contended that the Order failed to protect licensees from harmful interference and therefore ran afoul of both the Communications Act and the Administrative Procedures Act (“APA”). On December 28, 2021, the D.C. Circuit issued a decision that largely upheld the FCC’s Order.
The court first addressed the petitioners’ argument that the Commission had understated the risk of harmful interference to licensees by unlicensed devices. The court rejected this argument on the ground that it mischaracterized the FCC’s goal. According to the court, the Commission did not intend to eliminate all risk of harmful interference but instead sought to “balance unlicensed device access and incumbent protection.” Further, the court noted that the FCC’s Enforcement Bureau has the ability to investigate reports of harmful interference and take appropriate enforcement action.
The court next addressed the petitioners’ argument that low-power devices should be required to use an AFC system as required for standard-power access points. The court rejected this challenge and found that the Commission had adequately explained its conclusion that the restrictions and requirements established for indoor use of low-power access points would eliminate any significant risk of harmful interference.
Additionally, the court rejected a number of technical objections to the principal study on which the Commission relied, which was submitted by Cable Television Laboratories (“CableLabs”). Among other criticisms, the petitioners argued that the FCC should have obtained and released the raw data used in the study. However, the court found that “requiring agencies to obtain and publicize the data underlying all studies on which they rely would be impractical and unnecessary.”
The court then addressed the petitioners’ challenge to the 5 dBm/MHz power limit for low-power access points. The petitioners argued that this limit was “plucked . . . out of thin air,” but the court found that the Commission relied on its “engineering judgment” in picking the limit. The court also found that the requirements imposed on low-power access points would render outdoor use “impractical and unsuitable,” which would further decrease the risk of harmful interference.
The court also rejected a number of individual challenges raised by specific petitioners. Among other criticisms, the court rejected an argument that unlicensed use would interfere with 911 dispatch and other public safety services. The court found that the commission had expressly considered the effects on public safety services and adopted safeguards to protect such services.
Finally, the court considered a challenge brought by the National Association of Broadcasters, which argued that the Commission should reserve a sliver of the 6 GHz band for licensed mobile operation. The court found that the FCC had failed to respond to this argument, and therefore granted the petition for review on this point. However, the court declined to vacate the order and instead remanded the matter to give the Commission a further opportunity to respond. Other than this issue, the court upheld the Commission’s Order and denied the petitions for review.
4. Preemption in the Context of Maine’s Regulation of Cable Service Rate Refunds – Spectrum Northeast et al. v. Frey (1st Circuit No. 20-2142, 1/4/2022)
On March 18, 2020, Maine adopted “An Act to Require a Cable System Operator to Provide a Pro Rata Credit When Service is Cancelled by a Subscriber” (“Pro Rata Act”). The Pro Rata Act amended Me. Stat. tit. 30-A, § 3010, which involves consumer rights relating to television service. The Pro Rata Act added provisions into the statute that provides a subscriber with a pro rata credit or rebate for the days of a billing period that remain after a subscriber cancels the service. The act also required cable providers to notify subscribers of the available pro rata credit in “nontechnical terms”. The intent of enacting the legislation is to “protect cable customers from paying for service they do not receive.”
At issue in this litigation is whether the Cable Communications Act of 1984 (“Cable Act”) expressly preempts state laws, specifically those that regulate rates for the provision of cable service, if the FCC has determined that cable operators in the state are subject to “effective competition.” Maine is a state subject to effective competition under 47 C.F.R § 76.906 (2020). In May 2020, Spectrum Northeast, LLC and Charter Communications, Inc. (“Spectrum”) filed suit in the United States District Court for the District of Maine seeking a declaratory judgement that Maine’s Pro Rata Act is preempted by the Cable Act. The District Court found, in consideration of the Attorney General’s motion to dismiss, that the Pro Rata Act was a prohibited regulation of the “rates for the provision of cable service.” The Attorney General appealed and the First Circuit held that Maine’s Pro Rata Act was not preempted by the Cable Act.
The Cable Act includes both general and specific preemption provisions. At issue was the specific preemption provision, which provides: “the rates for the provision of cable service shall not be subject to regulation by the [Federal Communications] Commission or by a State or franchising authority under this section.” The parties disputed whether Maine’s Pro Rata Act is a regulation of “rates for the provision of cable services.” The parties agreed that the Cable Act does not define “rates” or what constitutes “rates for the provision of cable services.”
Spectrum argued that the Pro Rata Act regulated rates in that it requires cable providers to measure their service in daily increments rather than monthly.
The Attorney General argued that the Pro Rata Act did not regulate rates because it was designed to protect citizens from being charged for cable services that were never provided.
The First Circuit held that “provision of cable service” referred to the amount a cable subscriber is charged for accessing/receiving cable service, i.e., the price per month of equipment rented from the service provider. According to the First Circuit, the Pro Rata Act provides a rebate for time after service has ended, which the language of the Cable Act indicates is not the “provision of cable service” as it does not relate to the receiving of cable service.
The court then turned to the historical background leading to the enactment of the Cable Act. In the 1970’s and 1980’s, FCC regulation, and federal preemption, of rates was limited to non-basic cable services. When the Cable Act was passed in 1984, preemption was no longer limited to non-basic cable service. In 1992, carve out exceptions to the preemption were added to the Cable Act and provided for “the establishment or enforcement of . . . any state law, concerning customer service that imposes customer service requirements that exceed . . . or addresses matters not addressed by” the minimum standards set forth by the FCC. In light of this history, the court found support in four areas for its conclusion that the Pro Rata Act was not preempted.
First, the legislative history of the Cable Act focused on preempting monthly rates charged for the provision cable services. The court found that Spectrum had not identified, nor could the court find, any reference to preemption of termination rates in the history of federal cable regulation.
Second, the Court found significant the congressional silence regarding termination fees or rebates. Congress did not address prices or rates for service termination even though Congress well knew service termination occurred and addressed the disposition of cable wiring “upon termination of service.”
Third, Spectrum failed to demonstrate how small pro rata termination credits would be controlled by effective competition or contrary to the Cable Act’s pro-competitive goal. The Cable Act promoted competition through market forces because such competition would “keep the rates for basic cable services reasonable without the need for regulation.” The court concluded that pro rata termination credits would actually promote competition by removing barriers between switching providers and, thus, the Pro Rata Act aligned with the goal of the Cable Act.
Fourth, the Cable Act and subsequent amendments actually contemplated states adopting and enforcing consumer protection laws. Section 552(d)(1) of the Cable Act provides, “[n]othing in this subchapter shall be construed to prohibit any State or any franchising authority from enacting or enforcing any consumer protection law, to the extent not specifically preempted by this subchapter.” The court noted that the Pro Rata Act was also aimed at protecting consumers from deceptive business practices and fit into section 552(d)(1) of the Cable Act.
In conclusion, the First Circuit relied on the text and history of the Cable Act to interpret whether Maine’s Pro Rata Act regulated rates for the provision of cable service such that it would be preempted. The court ultimately concluded that the Pro Rata Act regulated a period after the provision of cable service rather than a regulating a rate for provision of cable service and constituted a consumer protection law that was not preempted by the Cable Act.
5. Ninth Circuit Decisions Applying the “Public Injunction” Exception to Arbitration Clauses – Hodges v. Comcast (9th Circuit No. 19-16483) and Cottrell v. AT&T Inc, (9th Circuit No. 20-16162)
Many communications service providers include provisions in their customer agreements requiring customers to arbitrate disputes on an individual basis. In Hodges v. Comcast Cable Comm’cns, LLC, 12 F.4th 1108 (9th Cir. 2021), and Cottrell v. AT&T Inc., 2021 WL 4963246 (9th Cir. Oct. 26, 2021), the U.S. Court of Appeals for the Ninth Circuit dialed back the scope of an exception to the general enforceability of arbitration provisions that applies to California customers.
Under the “McGill rule,” California’s Supreme Court holds that a contractual provision that waives the right to seek “public injunctive relief” in all forums is unenforceable. See McGill v. Citibank, N.A., 2 Cal.5th 945, 393 P.3d 85 (Cal. 2007). As a result, where a California plaintiff—including a class representative in a putative class action of California customers—seeks public injunctive relief, an arbitration provision preventing the arbitrator from awarding such relief cannot be enforced. And, if the arbitration agreement contains a non-severability provision, then the entire arbitration agreement is rendered unenforceable.
Hodges was a Comcast subscriber who alleged that Comcast violated the statutory privacy rights of a class of California residential subscribers with respect to its collection of viewing information. Hodges, 12 F.4th at 1110-11. Comcast sought to compel Hodges to arbitrate his claim, but the district court concluded that the arbitration provision (which contained a non-severability provision) was unenforceable because Hodges sought public injunctive relief. The Ninth Circuit reversed.
The key question addressed by the Ninth Circuit is what constitutes “public injunctive relief” under California law. In McGill, the California Supreme Court distinguished between “private injunctive relief,” which “primarily resolves a private dispute between the parties and rectifies individual wrongs,” and “public injunctive relief,” which “by and large benefits the general public and that benefits the plaintiff, if at all, only incidentally and/or as a member of the general public.” 393 P.3d at 89. The “primary purpose and effect” of the latter is “prohibiting unlawful acts that threaten future injury to the general public.” Id. at 90.
Since McGill, a number of case have struggled with the scope of what constitutes “public injunctive relief,” particularly in the class action context. After parsing these cases, and taking into account the conception of “public injunctive relief” that earlier led the Ninth Circuit to conclude the Federal Arbitration Act did not preempt the McGill rule, the Court held that Hodges did not seek public injunctive relief—even though he had used that label in his complaint. Rather, the Court concluded that the relief Hodges sought was for “cable subscribers” of Comcast. Thus, “by definition they [the requests for relief] will only benefit a ‘group of individuals similarly situated to the plaintiff,’” and “[t]here is simply no sense in which this relief could be said to primarily benefit the general public as a more diffuse whole.” 12 F.4th at 1121.
Judge Berzon dissented, arguing that “a forward-looking injunction protecting the privacy rights of millions of cable consumers” and that “affect[s] the contract terms a business could offer to members of the public” qualifies as public injunctive relief. Id. at 1122.
Shortly after Hodges, the Ninth Circuit applied that decision in Cottrell, 2021 WL 4963246. Cottrell, an AT&T customer, alleged that AT&T improperly charged customers for DIRECTV Now accounts without their authorization. Id. at *1. The Court concluded that “[t]he benefit of Cottrell’s requested relief . . . would not primarily accrue to the general public,” but rather “the beneficiaries of the injunction would be current and future AT&T customers”—i.e., a group similarly situated to Cottrell rather than primarily the general public. Id. at *2.
This report was edited by Christian F. Binnig, from the Chicago, Illinois office of Mayer Brown LLP (who also contributed to its preparation). In addition, Hans J. Germann, Christopher S. Comstock, Kara K. Gibney, Kyle J. Steinmetz, and Elaine Liu, also from the Chicago, Illinois office of Mayer Brown, and Andrew C. Emerson and Aaron Shank, from the Columbus, Ohio office of Porter Wright Morris & Arthur LLP, and Cara Brack, from the Pittsburgh, Pennsylvania office of Porter Wright Morris & Arthur LLP, contributed to the preparation of this report.
