United States: Communications Law Bulletin – January 2006

January, 2006, brought the Federal Communications Commission ("FCC" or "Commission") closer to a full complement of commissioners and saw new developments on a number of fronts, including Net neutrality and the vexing problem of misappropriation of customer information by so-called "data brokers." This and other news is covered in this issue of our Bulletin, which also includes our usual list of deadlines for your calendar.

Chairman Martin Swears in Commissioners Tate and Copps, and White House Sends Nomination for Last Remaining Seat on FCC

On January 3, 2006, FCC Chairman Martin swore in newly appointed FCC Commissioner Deborah Tate to complete the remaining 18 months of the term of former Chairman Michael Powell. Chairman Martin also administered the oath for Commissioner Copps, who was confirmed for a second term on the Commission.

Commissioner Tate, a former director of the Tennessee Regulatory Authority and a former aide to two Tennessee governors, was confirmed by the Senate in December 2005. Ms. Tate will occupy the suite of offices that Chairman Martin occupied while he was a Commissioner. Ms. Tate has made three staff announcements so far. She appointed Aaron Goldberger as her legal advisor on wireless and international issues, named Ian Dillner of the Wireline Competition Bureau as her acting advisor on wireline issues, and appointed Andrew Long, an Associate Chief of the Media Bureau, as acting advisor on media issues. Ms. Tate has not named a senior legal advisor yet. Commissioner Tate’s term expires on June 30, 2007.

Commissioner Copps’ new term will expire on June 30, 2010. Mr. Copps has not announced any changes in staffing for his second term.

Regarding the remaining Republican seat, President Bush in early February nominated Robert McDowell, the senior vice president and assistant general counsel of Comptel (an industry group representing competitive carriers), to fill this last (long-open) Commission seat. Senate Commerce Committee Chairman Ted Stevens has voiced his support for this nomination and noted that a confirmation hearing would be scheduled "fairly soon."

Recent publicity concerning the activities of online data brokers, which offer to obtain and sell individuals’ mobile telephone billing and call detail records, has resulted in efforts on several fronts to end these abusive practices.

The data brokers ply their trade primarily by "pretexting" – that is, by calling the mobile carriers’ customer service centers and pretending to be legitimate subscribers. By providing the required subscriber authentication information, or using deceptive means to bypass authentication requirements, pretexters sometimes are able to obtain confidential information concerning calls placed by legitimate customers.

Among other efforts to curb these illicit activities, bills have been introduced – or shortly will be introduced – in Congress to criminalize data broker pretexting. The legislation with the broadest bipartisan support is S. 2178, introduced by Senators Schumer (D-N.Y.), Nelson (D-Fla.), and Specter (R-Pa.), which would impose fines of up to $250,000 and prison terms of up to five years for fraudulent and deceptive practices that result in unauthorized access to telephone subscriber account information. Other bills likely will be introduced, including promised legislation from Representative Barton (R-Tex.), Chairman of the House Energy and Commerce Committee.

The FCC and the Federal Trade Commission ("FTC") also are investigating the data broker problem, and the FCC has issued notices of apparent liability against two mobile carriers concerning their compliance with the requirement that all carriers certify their compliance with the customer proprietary network information ("CPNI") obligations of the Communications Act and the Commission’s rules.

The wireless carriers generally have reaffirmed their commitment to customer privacy and have expressed their support for legislation that will criminalize the fraudulent activities of data brokers. Wireless carriers also have brought lawsuits and obtained restraining orders and injunctions against pretexters. Notably, T-Mobile USA Inc. ("T-Mobile") obtained temporary restraining orders against two data brokers and obtained permanent injunctions against three other data brokers. Sprint Nextel Corp., Verizon Communications Inc.’s Verizon Wireless, and Cingular Wireless LLC also have brought lawsuits and obtained relief against data brokers.

The initiatives of carriers, Congress, and the FCC appear to be having an effect on the data brokerage industry. According to Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection, "more than half" of the 40 data broker websites monitored by the FTC have ceased operation since the recent controversy began.

On January 31, the FCC released a Public Notice announcing that the advanced wireless services ("AWS") auction (for spectrum in the 1.7 and 2.1 GHz bands) would begin on June 29, 2006. The Public Notice sets forth certain auction procedures and proposed reserve prices for the licenses, and seeks comment on other auction procedures. Recent and ongoing developments, however, indicate that the auction likely will be governed by new rules with respect to designated entities ("DEs").

Specifically, the Democratic Commissioners have been urging a rulemaking to reform the DE rules. These rules provide for bidding credits for qualified small business bidders, and some auctions have set aside spectrum only for DE bidders. The Democratic commissioners want to limit the ability of national wireless carriers to partner with small businesses, and would like such revised rules in place prior to the AWS auction. Although Chairman Martin previously had resisted tying completion of a DE proceeding to the start of the AWS auction, the Commission released a notice of proposed rulemaking on the DE issues at the beginning of February and indicated that it intends to complete the DE proceeding in time for the new rules to be effective for the AWS auction.

The FCC also recently adopted an order implementing the Commercial Spectrum Enhancement Act ("CSEA"). This order, which contained few surprises, revised several auction procedures. Among other items, the order: (1) modified the FCC’s reserve price rule, (2) modified the FCC’s tribal land bidding credit rule, (3) clarified the FCC’s default and interim withdrawal rules, and (4) facilitated combinatorial or "package" bidding. These new rules, accordingly, will not delay the AWS auction.

Prior to the auction, the FCC also expects to issue an order regarding the relocation of broadband radio service operations in the AWS spectrum. Because there is broad support for the FCC’s proposal to base this relocation on the earlier relocation rules used in the Personal Communications Service ("PCS") context, this relocation order is not expected to delay the AWS auction.

How these developments play out over the new few months will determine the precise contours of the long-awaited AWS auction.

When the FCC adopted its Digital Subscriber Line ("DSL") classification order back in August 2005, it also adopted a policy statement outlining four principles to preserve and promote the open and interconnected nature of the public Internet. These so-called "Net neutrality" principles state that consumers are entitled: (1) to access the lawful Internet content of their choice; (2) to run applications and services of their choice, subject to law enforcement needs; (3) to connect their choice of legal devices that do not harm the network; and (4) to competition among network providers, application and service providers, and content providers. Although this policy statement did not constitute an enforceable rule, the FCC commissioners stated that they would incorporate these principles into ongoing policy activities.

Then, as part of the conditions for approval of the SBC/AT&T and MCI/Verizon mergers in October 2005, the FCC announced that the applicants had agreed to be bound by – and subject to enforcement of – the earlier net neutrality principles for a period of two years.

Since the issuance of the FCC’s policy statement, Congress has also weighed in on the Net neutrality question. Notably, neutrality provisions in the draft Barton legislation would (as currently drafted) prohibit blocking or degrading of content of competitors over high-speed connections, but would create an exception for premium tiers that would give preference to content providers who pay an additional fee.

Now, the marketplace is stepping in behind – or ahead of – the regulators. With the deregulation of DSL (and the resulting elimination of prohibitions against discriminatory pricing), several large telephone companies have announced support for the idea of charging content providers additional fees to guarantee faster content delivery over the Internet. Specifically, BellSouth has announced that it has already begun talks with certain content providers on this issue. AT&T has expressed support for such additional fees for priority content delivery, and Verizon has stated that it might favor such an approach. These companies argue that they are required to maintain the network that content providers use for free to deliver their services for a profit. Some observers also speculate that cable companies may adopt the same practices for cable modem services.

In response, many parties have denounced the proposals for tiered pricing or premium pricing. Content providers object that these proposals amount to double-charging for bandwidth because consumers have already paid for the high-speed Internet access. Smaller content providers are concerned that they would be competitively disadvantaged, particularly as the large telephone companies begin to offer their own content services. Consumer groups have similarly cautioned that these proposals would allow the big companies to discriminate against rivals and indirectly raise the costs of broadband access for consumers. Commissioner Copps has warned that these pricing proposals could bring the Internet under the domination of large telephone companies by creating "gatekeeper controls." Chairman Martin, however, was recently quoted as differentiating blocking of content from the offering of tiered services, and as urging that no new rules be adopted without actual complaints of blocking. In short, Chairman Martin seems inclined to let the pricing proposals "play out" in the marketplace before even considering regulation.

All of these viewpoints were evident in a Senate Commerce Committee hearing on Net neutrality held on February 7. There appears to be no consensus at the moment on how to address this issue, with some senators stating that the marketplace should sort out the problem, while others believe that some Congressional action is required. Even among those pressing for action, there does not seem to be agreement on what action would be appropriate, or even on how "Net neutrality" should be defined.

A significant battle over these issues is brewing, making this an issue to watch in 2006 for wireline and wireless providers as well as content providers.

Congress finally set a hard deadline for transitioning to digital television ("DTV") legislation when the House on February 1 passed budget reconciliation legislation that includes provisions requiring TV broadcasters to relinquish their analog spectrum by February 17, 2009. Signed by the President on February 8, the legislation requires the FCC to commence an auction of the returned analog spectrum by January 28, 2008, and extends the FCC’s auction authority to September 30, 2011. The legislation also provides up to $1.5 billion to assist consumers in purchasing DTV converter boxes that will allow their analog TV sets to receive digital signals after the transition is completed.Much work, however, remains on a number of communications-related bills introduced in Congress last year. For example, last July, Sen. Ensign (R-Nev.) introduced a telecommunications update bill, and several months later, House Commerce Committee Chairman Barton (R-Tex.) introduced a bill addressing broadband Internet, video franchising, and advanced communications services. Although House and Senate Commerce Committee leaders predict that comprehensive telecommunications legislation will be passed this year, the legislation faces significant obstacles. Notably, "Net neutrality," a principle of open access to networks, has become a major sticking point for telecommunications reform.

Additionally, Congress failed to pass broadcast decency legislation last year. Although early last year the House overwhelmingly approved a broadcast decency bill that would increase penalties for broadcasting "obscene, profane, or indecent" material to $500,000, the Senate has yet to pass a similar measure. Reportedly, the Senate Commerce Committee is working on a bipartisan decency bill, but the bill is not expected to be ready until the committee completes hearings concerning the Internet.

Three universal service fund ("USF") bills also were introduced in Congress last year. An additional bill to overhaul USF is expected to be introduced in the House of Representatives in late February. A draft of the bill would expand the pool of USF contributors to include providers of voice-over-IP ("VoIP") and intrastate telephone services. The draft bill also would expand USF subsidies to broadband services and allow the FCC to base USF contributions on the quantity of telephone numbers assigned to a service provider, rather than on revenues. Additional USF legislation also is expected to be introduced in the Senate shortly. Senate Commerce Committee Chairman Stevens (R-Alaska) has stated that USF is a major priority for this year, but it is unclear whether USF reform will be included in a stand-alone bill or as part of the larger telecommunications reform legislation.

Furthermore, although the Senate Commerce Committee unanimously approved an E911 bill last year, the bill has been placed on hold until new waiver language can be worked out. The bill would allow the FCC to grant waivers to VoIP providers demonstrating that they cannot meet E911 requirements for technical reasons. With or without further Congressional guidance, the FCC is expected to act on a number of requests for waiver of the November 28, 2005 deadline requiring VoIP providers to comply with E911 requirements.

On January 31, the D.C. Circuit Court dismissed a petition for review of an FCC denial of a license application after finding that the court lacked jurisdiction to review the petition because the petition was untimely filed. The petition for review was filed after the 30-day deadline provided for notices of appeal under Section 402(b) of the Communications Act, but within the 60-day deadline provided for petitions for review under Section 402(a) of the Act. Section 402(b) permits appeals of FCC orders under specified circumstances, including licensing matters, while Section 402(a) permits review of all other FCC orders. The court rejected the petitioner’s argument that the FCC licensing order at issue can be bifurcated into a "waiver" decision and a "licensing" decision, and that the petition only seeks to challenge the waiver decision, which may be reviewed under Section 402(a). The court concluded that the waiver decision was not a "final order" under Section 402(a) and was "ancillary" to the ultimate licensing decision. Consequently, the court held that the FCC order was an "inseparable whole" and challengeable only under Section 402(b).

On December 22, 2005, California Public Utilities Commission ("PUC" or "Commission") Commissioner Susan Kennedy and PUC President Peevey issued a proposed decision in the long running Consumer Protection Rulemaking. Release of the proposed decision before the end of the year (and before Commissioner Kennedy’s departure from the PUC to be Governor Schwarzenegger’s Chief of Staff) fulfilled a commitment Commissioner Kennedy made to the legislature in early 2005, when she spearheaded the Commission’s decision to rescind the rules previously adopted in 2004. The Peevey/Kennedy proposal essentially eliminates the comprehensive rules adopted by the Commission in 2004 and replaces them with programs for increased enforcement of a "bill of rights" and consumer education programs. Unlike the previously rescinded rules, the Peevey/Kennedy proposal would apply to all telecommunications providers, both wireless and wireline. It also includes policies in favor of "Net neutrality" and stand-alone DSL. Public comments on the Peevey/Kennedy draft have been received. In general, consumer groups advocate reinstating the rules adopted in 2004 rather than creating what they call an "unfunded" Consumer Fraud Unit within the Commission. The carriers, on the other hand, support elimination of the "prescriptive" rules in favor of more focused enforcement by the Fraud Unit. There is disagreement among the wireline carriers as to the need for the stand-alone DSL and Net neutrality policies.

On January 25, the day before the Commission was scheduled to vote on the Peevey/Kennedy proposal, Commissioner Dian Grueneich released an alternative decision, thus delaying the Commission’s final decision until at least early March to allow for an additional public comment period. The Grueneich alternative would reinstate portions of the rescinded rules that require carriers to disclose key service terms and conditions in the documents and contracts provided to customers at the point of sale, require that customers receive a document containing the key terms and conditions at the point of sale, mandate that all service contracts must use the same language as that used in the marketing materials and by the sales person, and allow customers a 30-day period to cancel a sale without penalty. The Grueneich alternative also would eliminate the policy statements regarding Net neutrality and naked-DSL, stating that the Commission has no jurisdiction to enforce such policies, and expand the consumer education program so that it would be conducted by both the carriers and the Commission staff. The Peevey/Kennedy proposal would have the Commission staff solely responsible for the education program. Comments on the Grueneich alternative are due on February 14, and reply comments are due on February 21. The Commission may vote on both proposals as early as its March 2 regularly scheduled agenda meeting.

The Commission’s recently released 2006 Work Plan includes completion of the Consumer Protection proceeding in its list of important priorities for the upcoming year. In addition, the Commission intends to foster the introduction of new communications technologies such as Broadband over Power Lines; study the impact of VoIP on competition, public safety, and universal support programs; reevaluate the current regulatory treatment of telecommunications carriers; and settle access and pricing issues for competitive use of incumbent networks. The Work Plan is an annual report issued by the Commission pursuant to a statutory mandate.

On January 11, Governor Schwarzenegger appointed Rachelle Chong to fill the vacancy left by the departure of Commissioner Susan Kennedy, who became the Governor’s Chief of Staff on January 1, 2006. Commissioner Chong was an FCC commissioner from 1994 to 1997. Since leaving the FCC, Chong, an attorney, has been in private practice and an expert witness and arbitrator in San Francisco. Commissioner Chong was sworn in at the Commission’s January 12, 2006 agenda meeting and can assume the duties of a commissioner pending confirmation by the state Senate.

State policy-makers returning after end-of-year recesses face a flurry of proposals to deregulate telecommunications services. The Mississippi legislature is considering a bill that would deregulate all telecommunications services other than single-line basic exchange service. If enacted, the bill would limit the Mississippi commission’s jurisdiction to hearing complaints regarding basic service and access. It also would provide the commission with very limited powers to hear complaints regarding service agreements.

A pending Kentucky bill would allow incumbent carriers to opt in to an alternative regulatory framework that would cap basic exchange rates but deregulate the rates for other retail services, similar to the regulatory scheme that currently applies to BellSouth. In Georgia, the state Senate has passed and the House is considering a bill to limit the Public Service Commission’s jurisdiction over broadband, wireless, and VoIP services. SB 120, passed by the Senate on January 26, 2006, would eliminate the PSC’s power to set rates, terms, and conditions for these services. The PSC would retain jurisdiction over consumer complaints and matters where it has jurisdiction according to federal law.

Both houses of the Indiana legislature have passed comprehensive bills that could dramatically alter the telecommunications landscape in the state. On January 25, the full Senate approved a bill that would phase in retail pricing deregulation through 2009 in those areas with sufficient broadband deployment, would impose some limits on municipal provision of broadband services, and would create a state "lifeline" program for low-income customers. The Senate bill also provides for statewide video-franchising, and prohibits per-minute charges for local service. The House, which must approve some form of reform legislation before March 2 when the state’s legislative session ends, passed its own version in early February. The House version differs from the Senate’s in that it eliminates the state-wide video franchising provision and immediately deregulates wireless, VoIP, non-basic, and broadband services rather than adopting the three-year phased process tied to broadband availability in the Senate bill.

State regulatory commissions also continue to actively consider proposals for relaxing telecommunications regulations. In early February, the Texas PUC will hold a workshop to consider the rules for implementing a 2005 law allowing rate deregulation in small markets where sufficient competition exists. In early January, the Texas PUC requested comments on a provision in the same 2005 law that requires VoIP providers who use landline facilities to have access to rights-of-way. The Illinois Commerce Commission has asked for comments on whether it needs to affirmatively determine that rates for competitive telecommunications services are "just and reasonable" or whether competitive forces are sufficient. The Commission also has asked whether the "just and reasonable" standard depends on the market, size of the carrier involved, and other related issues.

The FCC issued fines totaling $63,000 against eight TV stations for violations of the Children’s TV rules. WRDQ, Orlando, Florida, received the largest fine ($20,000) for, among other things, violating commercial limits and failing to provide to program guide publishers an indication of the age group for which its core children’s programming is intended. The other stations (three Agape Church stations in Little Rock, Arkansas ($10,000 each), three S&E Network stations in Puerto Rico ($3,000 each), and WAPA-TV, San Juan, P.R. ($4,000)) were fined for failing to publicize the existence and location of their Children’s Television Programming Reports.

Final approval of the budget reconciliation package, including DTV provisions, was scheduled for a vote in the House on February 1. The DTV provisions set February 17, 2009, as the deadline for the end of the DTV transition, provide up to $1.5 billion to subsidize consumers’ purchases of converter boxes that will allow analog TV sets to continue operating after the digital transition is completed, and earmark $1 billion for a state and local public safety interoperability grant program.

The proposed merger of the WB and UPN networks reportedly will not involve the transfer of TV station licenses and thus is not expected to require prior FCC review and approval. The merger also is expected to be consistent with the FCC’s media ownership rules. The combined CW network will be equally owned by Time Warner and Viacom and will begin broadcasting in the fall.

On January 26, the FCC established a window, from May 1 through May 12, 2006, for filing applications for digital companion channels for low-power television ("LPTV"), TV translator, and Class A TV permittees and licensees. The FCC also established a freeze on the filing of LPTV, TV translator, and Class A analog and digital minor change, analog and digital displacement, and digital on-channel conversion applications from April 3 through May 12, 2006. This action is part of the FCC’s larger effort to facilitate the DTV transition for LPTV, TV translator, and Class A TV stations.

On December 9, 2005, the United States Court of Appeals for the Eighth Circuit enjoined implementation and enforcement of a Minnesota statute forbidding wireless providers from making changes to the terms or conditions of subscriber contracts that "could result" in increased rates or an extended contract term without first obtaining the consent of the subscriber. The court found that Section 332 of the Communications Act preempts the Minnesota statute because the statute is an impermissible rate regulation. The court based its finding in part on FCC precedent stating that 30-day delays of rate changes caused by state review of rates were "rate regulation" within the meaning of Section 332. The Minnesota statute’s customer notification requirement required giving the customer 60 days' notice before implementing any contract change. The court also found that the other subsections of the statute were not severable from the customer consent provision. For these reasons, the Eighth Circuit reversed the district court's partial denial of the wireless carrier’s request for a preliminary injunction and remanded the case for entry of a permanent injunction against enforcement of the entire section of the statute. The case is styled Cellco v. Hatch, 431 F.3d 1077 (8^th Cir. 2005).

Google, Inc. ("Google") agreed to buy radio-advertising company dMarc Broadcasting Inc. ("dMarc") in a deal that gives Google a foothold in traditional media’s ad markets. Initially, Google will pay $102 million in cash, but dMarc could earn up to $1.1 billion more over the next three years if it meets certain performance and revenue targets.

dMarc operates an online system for advertisers to purchase radio airtime. The technology automatically schedules and places commercials into radio stations’ computers for broadcast, allowing advertisers to efficiently and cheaply find, buy, and track spots, and enabling broadcasters to decrease the costs associated with processing advertisements.

Google plans to integrate dMarc’s system into Google's AdWords platform, allowing Google to offer radio ads to its substantial base of Web advertising customers. Google hopes the combined automated system will link smaller, local advertisers with ad opportunities in traditional media, allowing Google to exploit a market underserved by national ad firms. While some analysts speculate that Google is trying to become a one-stop shop for large advertisers and, therefore, may try to broker TV advertising in the future, others believe that Google’s moves to this point fill a specific niche and will not have a significant impact on the media-buying business.

Congressional interest in video franchising legislation has increased in advance of a February 15, 2006 hearing on the subject before the Senate Commerce, Science, and Transportation Committee. Last summer, Senator Ensign introduced a bill currently before the committee that would eliminate state or local video franchise requirements, including build-out requirements. Early in February, Senators Burns and Inouye proposed video franchise reforms that garnered support from the National League of the Cities. The principles outlined by the Senators state, among other things, that Title VI of the Communications Act is designed to ensure that "state and local authorities have primary responsibility for administration of the franchising process within certain federal limits." Press reports indicate that Verizon has asked Congress to consider video franchise legislation separately from any overhaul of the Communications Act, but there are indications that House Commerce Committee members are resistant to splitting up reform legislation. Representative Barton, the Commerce Committee Chair, has predicted introduction of comprehensive reform legislation by early March or sooner.

Meanwhile, following Texas’s lead as the first state to approve statewide video franchises last fall, Indiana, Missouri, Virginia, and South Carolina have introduced statewide video franchise bills. Similar legislation introduced in the New Jersey legislature apparently has stalled, and New York is moving in the opposite direction by seeking to strengthen enforcement of municipal franchise conditions.

A video franchising bill introduced in the Indiana House, HB-1331, would maintain municipal authority over cable franchises but would prohibit municipalities from imposing franchise requirements on a telephone company or other new video service entrant that differ substantially from those imposed on the incumbent cable provider. Advocates of the bill argue that it would preserve localities’ ability to obtain revenue from franchise fees, while shielding new entrants from obligations not imposed on incumbents.

Under a bill recently introduced in the Missouri legislature, SB-816, new video entrants could apply to the state Economic Development Department ("EDD") for a statewide video franchise. The bill would require the EDD to develop regulations and would prohibit municipalities from imposing fees, taxes, build-out requirements, or other franchise requirements other than those imposed by the state. The bill would require state video franchisees to take reasonable and technically feasible steps to provide localities with distribution capacity and community access channels. The bill also would prohibit state video franchisees from discriminating against prospective residential subscribers based on income levels (so-called "redlining"). The bill would impose a franchise fee equal to five percent of gross revenue.

Virginia is likely to enact video franchise reform legislation, according to analysts. Upon unanimous vote, the Virginia House Commerce and Labor Committee sent HB-1404 to the House floor. The bill, which has a Senate counterpart in SB-706, would give municipalities only 120 days to negotiate and approve video franchise applications. The legislation also would preempt cities’ power to impose build-out requirements by requiring build-out to 65 percent of a franchise area within 7 years and to 80 percent of the franchise area within 10 years. The bill would authorize video franchise applicants to appeal negative decisions to the state. The legislation also would permit applicants like telephone companies that already hold local rights‑of-way franchises to extend the terms and conditions of the franchise to new video services. The bill also would allow incumbent video service providers the right to choose less-onerous franchise terms than those imposed on new entrants. Press reports indicate that this bill is the result of a compromise among Verizon, the National Cable Television Association, and the Virginia Cable Telecommunications Association.

Parallel bills introduced in the South Carolina legislature, SB-1053 and HB-4428, would authorize the Secretary of State to award statewide video franchises. Municipal franchises already in effect would remain effective until expiration, but otherwise would be preempted. Current municipal franchisees would be permitted to apply for a statewide franchise covering new markets. Statewide video franchisees would be entitled to access public rights-of-way, subject to either the municipal franchise fee charged to incumbents or five percent of revenue in markets where no incumbent exists. The bill would allow recovery of franchise fees from customers as a separate line item on bills and would prohibit build-out requirements. The bill also would require statewide video franchisees to match the number of public access channels provided by incumbents or, where no incumbent exists, to provide two public access channels in rural markets and three in urban markets.

The New York bill, SB-1433, would authorize the Public Service Commission ("PSC") to enforce municipal video franchise requirements. The bill would permit the PSC to intervene when a video service provider refuses to comply with municipal efforts to enforce its franchise conditions. Supporters argue that many communities frequently do not possess the legal and administrative resources necessary to force compliance with franchise terms. The bill does not eliminate municipal franchising, but provides municipalities with a mechanism to obtain state enforcement of local franchise requirements.

In early December, a bill allowing New Jersey to permit statewide video franchises was introduced into the New Jersey legislature, but unconfirmed reports indicate that the bill failed to pass before the end of the legislative session. If so, this would be the second video franchise bill to stall in the New Jersey legislature, at least temporarily. A full discussion of these bills is available in the December 2005 edition of the Communications Law Bulletin.

On the local level, Anaheim Mayor Curt Pringle is the first mayor of a major metropolitan area to break ranks with mayors nationwide. In early February, Mayor Pringle proposed abolishing local franchise fees and exempting telephone companies from certain rules currently imposed on cable companies. Mayor Pringle said that the current regime is blocking a more competitive pay television market. Without a written agreement, he seeks to allow AT&T to upgrade its network to carry video signals. In doing so, Mayor Pringle is at odds with groups demanding that telephone carriers be subject to the same local franchise requirements as cable carriers, including the U.S. Conference of Mayors, the National League of Cities, and the National Association of Telecommunications Officers and Advisors.

On the judicial front, the Texas Cable & Telecom Association ("TCTA") has asked a Texas state court to overturn provisions in a 2005 Texas telecom deregulation statute that allowed statewide video franchises. The complaint alleges that the statute’s video franchising provision violates Texas statutory prohibitions against unfair discrimination in commerce and violates state constitutional equal protection rights. This state-court suit is similar to a TCTA complaint filed before Federal District Court in Austin in September 2005. The federal complaint was described in the September 2005 issue of the Communications Law Bulletin.

A three-judge panel of the United States Court of Appeals for the Eighth Circuit heard arguments regarding the legality of the FCC’s 2004 decision preempting state regulation of voice over Internet Protocol services. The court’s decision in this case could provide some measure of certainty to states that seek to regulate certain aspects of VoIP services. The judges are considering several challenges to the FCC’s decision that were brought by a variety of state regulatory commissions and state consumer advocates. In that decision, the FCC concluded that it would preempt state regulation of VoIP services "that have basic characteristics similar to" those of Vonage’s DigitalVoice services.

The judges peppered the FCC’s attorney with questions regarding the scope of the FCC’s decision and whether it applies to cable VoIP services. The FCC’s attorney responded that states "are reading this order as preempting more than it does," and pointed out that a proceeding is still pending before the FCC regarding the regulation of IP-enabled services. The FCC’s attorney noted that the FCC’s order only preempted state certification, tariffing, and related tasks, all of which "conflicted with federal open entry and detariffing policies."

The judges also questioned whether the appeal is ripe, given that the FCC’s order is written in the future tense regarding services other than Vonage’s DigitalVoice service. In addition, the judges questioned whether consumer-related regulations (e.g., slamming and cramming rules) are preempted by the decision, to which the FCC’s attorney replied that the order did not address those issues. Debated heavily was whether the FCC had to demonstrate both that separating intrastate and interstate VoIP calls is impossible and that state regulation would conflict with, negate, or thwart federal policies, in order to support a preemption finding.

Several VoIP providers submitted arguments before the U.S. Court of Appeals for the D.C. Circuit, contending that the FCC acted arbitrarily and capriciously last year when it provided VoIP service providers only 120 days to comply with enhanced 911 ("E911") requirements. Petitioners Nuvio Corporation, Lightyear Network Solutions LLC, Primus Telecommunications, Inc., Lingo, Inc., and i2 Telecom International, Inc. contend that the FCC’s decision did not take into consideration economic, technical, and other obstacles to providing E911 services and that it conflicted with long-standing FCC precedent. The Petitioners contrasted the FCC’s haphazard application of E911 requirements to VoIP providers to its measured and careful application of similar requirements to other communications companies. In addition, the Petitioners claimed that the FCC violated the Administrative Procedure Act by not providing adequate notice of the E911 rules.

Note: Although we try to ensure that the dates listed in the PDF document are accurate as of the day this edition goes to press, please be aware that these deadlines are subject to frequent change. If there is a proceeding in which you are particularly interested, we suggest that you confirm the applicable deadline. In addition, although we try to list deadlines and proceedings of general interest, the list below does not contain all proceedings in which you may be interested.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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