US Telecom Highly Critical of FCC in Calling for Universal Service Contribution System Overhaul

On March 29, 2012, US Telecom, the trade association representing AT&T, Verizon and other incumbent carriers, filed a sharply-worded ex parte letter with the Federal Communications Commission (“FCC”).  In it, US Telecom implored the FCC to fix the broken system for determining Universal Service Fund (“USF”) contributions. US Telecom criticized the current revenue-based contribution methodology as outdated, inequitable, wasteful, and inefficient and pressed the Commission to move ahead with the consideration of a “Connections-Based” contribution model that more accurately reflects the migration away from traditional telecommunications services towards an all broadband network.

Recognizing that any major overhaul of the USF contribution system would take many months, if not years, US Telecom urged the Commission to enact more immediate reforms to the current revenue-based USF contribution system to ensure fairness and alleviate the marketplace uncertainties caused by years of unresolved appeals of USAC audit decisions.

The letter restates many points made in past years by the Ad Hoc Coalition of International Telecommunications Companies (“Coalition”), a grassroots movement organized for the purpose of advancing common sense reforms to the USF program.  The Coalition has been pushing hard for USF reform with three pending petitions before the FCC.  The Coalition urges the FCC to provide contracting wholesalers and resellers of telecommunications with timely and available information regarding their contribution duties in a real-time database so that USF assessments can be made without uncertainty or discrimination and in a manner that promotes compliance with federal rules and the goals of universal service.



Federal Trade Commission Releases Final Report on Online Consumer Privacy; Calls on Congress to Act

In a final report released March 26, 2012, the Federal Trade Commission (“FTC”) called upon businesses to step up their efforts to protect consumer privacy.  The FTC wants companies to make privacy the ‘default setting’ for commercial data privacy practices and give consumers more control over the collection and use of their personal data through simplified choices and increased transparency.  In its report, entitled, “Protecting Consumer Privacy in an Era of Rapid Change: A Proposed Framework for Businesses and Policymakers,” the FTC implores Congress to consider general privacy legislation, data security and breach notification legislation, and data broker legislation.

 

Among the FTC’s specific recommendations:

• Privacy by design: Companies should build in consumers’ privacy protections at every stage in developing their products. These include reasonable security for consumer data, limited collection and retention of such data, and reasonable procedures to promote data accuracy.

• Simplified choice for businesses and consumers: Companies should give consumers the option to decide what information is shared about them, and with whom. This should include a Do Not Track mechanism that would provide a simple, easy way for consumers to control the tracking of their online activities.

• Greater Transparency: Companies should disclose details about their collection and use of consumers’ information, and provide consumers access to the data collected about them.

 

The FTC said it will focus on these five areas during the year ahead:

•Do-not-track policies: The FTC “commends the progress made in this area: browser vendors have developed tools to allow consumers to limit data collection about them, the Digital Advertising Alliance has developed its own icon-based system and also committed to honor the browser tools, and the World Wide Web Consortium standards-setting body is developing standards.” The FTC says it will “work with these groups to complete implementation of an easy-to-use, persistent, and effective Do Not Track system.”

•Mobile privacy: The FTC urges companies offering mobile services to work toward improved privacy protections, including disclosures. The agency plans a May 30 workshop “to address how mobile privacy disclosures can be short, effective, and accessible to consumers on small screens.”

•Data brokers:  Data brokers should “make their operations more transparent by creating a centralized website to identify themselves, and to disclose how they collect and use consumer data.  In addition, the website should detail the choices that data brokers provide consumers about their own information.”

•”Large platform providers”: The FTC cites privacy concerns about the “extent to which platforms, such as Internet Service Providers, operating systems, browsers and social media companies, seek to comprehensively track consumers’ online activities. The FTC will host a public workshop in the second half of 2012 to explore issues related to comprehensive tracking.”

•Code of conduct: The agency says it will work with the Department of Commerce and “industry stakeholders to develop industry-specific codes of conduct. To the extent that strong privacy codes are developed, when companies adhere to these codes, the FTC will take that into account in its law enforcement efforts. If companies do not honor the codes they sign up for, they could be subject to FTC enforcement actions.”



AmEx Pulls Gift Cards from NJ in Response to Zip Code Requirements

In response to the recently implemented New Jersey law requiring gift card sellers to obtain ZIP codes from customers, American Express Co. (“AmEx”) has pulled its gift cards from stores in the state.  AmEx stated that it was not possible to guarantee compliance with the law for cards not bought directly from AmEx.  The law is reportedly the only one of its kind in the country and gives the state the power to claim the value of those cards not redeemed after two years.  The manner in which ZIP codes are to be collected by merchants is still being discussed by state officials, and the outcome of such discussions will likely determine if retailers will have to spend more on upgrading their point-of-purchase sales system so that a ZIP code could be identified with a transaction for later tracking.  The law is currently under appeal.



Federal Court Imposes Access Charge Obligations on Prepaid Calling Providers who Make Use of LANs

Recently, the US District Court for the Northern District of Texas (“the Court”) ruled that IDT Telecom (“IDT”) was subject to access charge obligations after IDT had offered its customers Local Access Numbers (“LANs”) to access its calling card platform.  AT&T had filed suit against IDT, alleging that IDT, through a “scheme” designed to “disguise long-distance calls as local calls,” purposefully and unlawfully evaded its obligation to pay “legally required” interstate access charges for calls originating on AT&T’s network. 

In its ruling on the parties’ motions for summary judgment, the Court found that the access charge obligations in the FCC’s 2006 Prepaid Calling Card Order (“2006 Order”) applied to all prepaid calling card providers including those providers who utilize LANs.  The Court rejected IDT’s argument that the 2006 Order had only required access charges to be paid for 8YY dialed calls and IP-enabled calling cards.  The Court also determined that the rating of locally dialed calls was possible and further ruled that even though IDT did not physically connect with AT&T’s network, IDT was liable for access charges since IDT had “constructively ordered” AT&T’s services through its existing agreements with CLECs.  AT&T’s lawsuit against IDT remains open and is on course for trial to determine the damages owed by IDT. •



Allison D. Rule is a senior associate at Marashlian & Donahue, LLC, The CommLaw Group, a Washington, D.C.-area law firm specializing in federal and state telecom and technology matters, with a concentration in stored value/prepaid. The firm’s Law Clerk, Patrick O’Brien, assisted in the preparation of this article. Allison can be reached at

adr@commlawgroup.com.



Disclaimer: This article is intended for informational purposes only and is not for the purpose of providing legal advice. You should not act upon the information in this article without seeking professional counsel.