CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

The Universal Service Fund (USF) – it’s not just for telephone service anymore.

For more than a decade, the Universal Service Fund (USF) has subsidized (1) telephone lines in places where there isn’t enough of a business case for phone companies to build and operate them, and (2) monthly telephone service for people who couldn’t afford it. 

That’s not good enough anymore, according to the FCC. 

As the Commission sees it, high-speed Internet – broadband – is a necessity, not a luxury. Accordingly, the FCC is looking to re-direct some USF funds to support broadband. Most likely, this will take the form of a monthly discount on broadband for low-income households.

In moving broadband way up on the list of life’s essentials, the Commission may be getting ahead of many consumers. Affordability is undoubtedly one factor in broadband adoption, but there may also be a number of people who just don’t think it’s that important, or not worth the hassle, or too much of a privacy risk, or any number of other concerns. To change their minds, the FCC has decided to use a ploy familiar to the criminal element: it’s going to test how much free or discounted Internet Joe Consumer needs to get hooked on broadband.  As with any pusher, the FCC’s apparent hope is that eventually the consumer will become addicted and willing to cough up the full price.

Accordingly, in February, the Commission announced (in its overhaul of the USF Lifeline program) that it would be setting up a Pilot Program “to test how the Lifeline program could be structured to promote the adoption and retention of broadband services by low-income households”. And now, with a public notice released April 30, 2012, the Wireline Competition Bureau has followed up on that plan. The Bureau is making $25 million available to eligible telecommunications carriers (ETCs) to carry out “field experiments” on customers.

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Commission adopts skeletal preliminary rules for sharing, but leaves plenty of important details to be worked out in future proceedings

And so it begins.

The Commission has adopted the first minimal rules paving the way for the repacking of the TV broadcast spectrum. The new rules are, at most, preliminary guide markers. In that respect they’re much like the seemingly inconsequential surveyor’s stakes that quietly appear as an early harbinger of the heavy-duty construction teams that will eventually re-shape the idyllic pastureland into a ten-lane highway. Like those surveyor’s stakes, they mark the beginning of a process that will likely lead to dramatic changes in the landscape.

As everyone by now knows, the Commission (with Congress’s clear support) is intent upon repurposing a substantial chunk of the spectrum currently used for over-the-air television broadcasting. The goal is to free up UHF spectrum for broadband use. The full technical details of how the FCC might hope to accomplish that have not been revealed (and may not even have been fully formulated as yet). But you’ve got to start somewhere, so the Commission has now taken its first step.

In its recent Report and Order (Channel Sharing Order), the Commission has opened the door – at least for the purposes of the incentive auctions that Congress has authorized – to permit channel-sharing by full-power and Class A TV licensees. (The Commission will consider channel sharing in non-auction contexts in a later rulemaking.) The channel-sharing concept, under which multiple TV licensees would share a single six MHz channel, arose a couple of years ago. It was also an integral component of the spectrum portion of the “Middle Class Tax Relief and Job Creation Act” (which the FCC refers to as the “Spectrum Act”) the Congress enacted last February. 

According to the new rules, when channel-sharing eventually becomes a reality, it will be subject to the following general considerations:

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It’s that time of year again – all telecoms and VoIP providers must file their annual Form 499-A by April 2.

That “other” April deadline is right around the corner: all telecommunications carriers are required to file FCC Form 499-A by April 2, 2012. If you’re an intrastate, interstate or international provider of telecommunications in the U.S., this probably means YOU (but check below for the short list of exemptions).

 Form 499-A is used to true up the carrier’s Universal Service Fund contributions reported during the previous year. The revenues reported on the form will also be used to calculate upcoming 2012 contributions to the Telecommunications Relay Service, the North American Numbering Plan, and the Local Number Portability Fund.  (For 2012, the proposed “contribution factor” – i.e., percentage of revenues that must be paid – will be a whopping 17.9 percent, up from 15.3 percent in the last quarter of 2011. Ultimately, these contributions come from consumers, who are assessed a surcharge as a percentage of their phone bill.)

The new 2012 form was released on March 5, giving carriers less than a month to get on file. It’s mostly the same as last year, except that now non-interconnecting VoIP providers must file to fulfill their new obligation to contribute to the Telecommunications Relay Service Fund. (That new obligation comes courtesy of the Twenty-First Century Communications and Video Accessibility Act of 2010.)

A reporting company’s initial 499-A filing must be paper and ink; after that, carriers can file online through USAC’s website.

Before starting to fill out the form, a reporting company will need to pull together some financial information – i.e.,billed revenues for 2011, broken down into various categories. There is a safe harbor percentage available for entities that have difficulty separating their telecommunications versus bundled non-telecoms revenues. There is also a safe harbor for cell and VoIP providers to use in breaking out their interstate versus intrastate revenues.

Additionally, carriers with a lot of international revenue should take note of the “limited interstate revenues exemption” (LIRE). That allows companies whose interstate revenues are 12% or less than their international revenues to exclude international revenues in their “contribution base” (the amount upon which their contribution is assessed). Don’t look for this exemption in the Form 499-A instructions; it’s buried in a worksheet in an appendix.

If you’re not sure whether you’re a telecommunications carrier or not, you probably are. The category of mandatory 499-A filers is broad, including resellers, non-common carriers and VoIP providers. However, there are limited exemptions for:

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Looking to rein in fraud, waste, and abuse in the federal Lifeline program, the FCC has pulled out almost every bureaucratic tool in the box.

As we all know, the federal Lifeline program, overseen by the FCC, provides subsidized phone service to low-income households. In 2010, the Government Accountability Office released a report revealing a significant lack of direction and control within the Lifeline program. In response, the FCC has now adopted comprehensive measures to combat fraud, waste, and abuse in the program. By doing so, it hopes to trim “up to” $200 million from the Lifeline program this year and $2 billion over the next three years.

The FCC’s Report and Order and Further Notice of Proposed Rulemaking (R&O/FNPRM) spans 231 pages (and another 100 pages or so of appendices). Eligible telecommunications carriers (ETCs) will want to familiarize themselves with the many specific requirements detailed in the R&O/FNPRM in order to assure compliance. The following provides an introductory overview of the highlights of the FCC’s action. (Important note: this post does not address (a) Lifeline issues specific to Tribal lands or (b) state-conducted eligibility review.)

The R&O/FNPRM focuses on two main problem areas: (1) support for more than one person per household; and (2) support for ineligible consumers.

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Previously granted “permanent” exemptions may be gone, but requests for new exemptions can still be filed by January 18; failure to file means programming must be closed captioned by January 19

If you happen to be one of the 298 television programmers who lost closed captioning exemptions last October, heads up – your programming must be fully compliant with the closed captioning rules beginning January 19, 2012. But take heart, you can re-apply for your exemptions. The deadline for re-filing is January 18, 2012.

As we reported back in October, the Commission pulled the exemption rug out from under nearly 300 programmers who thought, not unreasonably, that the exemptions that the FCC’s Consumer and Governmental Affairs Bureau (CGB) had granted them five years ago were permanent. Turns out that the full Commission disagreed.

But the Commission did leave the door open for any of those programmers to try to get their exemptions back, as long as they can satisfy the new standards announced in October. The deadline for making such a request is January 18, 2012.

Programmers who are interested in petitioning for a new exemption must submit current, detailed documentation showing that it would be “economically burdensome” to provide closed captioning on the specific programming for which an exemption is sought. (“Economically burdensome” is the standard established by the Twenty-First Century Communications and Video Accessibility Act of 2010, but the Commission has provisionally interpreted the new test to mean the same thing as the old “undue burden.”)

Whether closed captioning is considered economically burdensome for a particular provider or program owner will depend on: (1) the nature and cost of the closed captioning; (2) the impact on the operation of the entity; (3) the financial resources of the entity; and (4) the type of operations. Although these factors appear similar to those used in the past, the categorical presumption that CGB used to use – a presumption that allowed it to green light lots of exemptions without carefully inspecting each request – is now gone. Instead, each new petition will now be considered strictly on a case-by-case basis.

Petitions for exemption must include:

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The FCC proposes to require closed captioning for TV programming transmitted via the Internet; comment deadlines already set

The FCC has launched a rulemaking to implement the closed captioning sections of the 21st Century Communications and Video Accessibility Act (CVAA). The new rules will impose closed captioning requirements on certain online television programming; they will also require captioning capability for a wide variety of devices that are designed to receive or play back video, potentially including smartphones, computers, tablets, game consoles, video recorders, and set-top boxes.

Closed captioning is the text on a television screen that transcribes the audio portion of the program. (“Closed” means that viewers can turn the captioning on and off at will.) Today most television programming, whether delivered via broadcast, cable, or satellite, must carry closed captioning, and television sets 13 inches or larger must be capable of displaying the captions. But online television – think Hulu – has not been subject to these rules. And the rapidly-proliferating variety of non-television video display devices, like tablets, have not been required to have the technical capability to display captioning.

That’s about to change. Congress gave the Commission until January 12, 2012, to bring the closed captioning rules into the era of mobile and Internet television.

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All you TV broadcasters and MVPDs – mark your calendars! July 1, 2012 is the current deadline for full compliance.

Let’s have a big “welcome back” for the video description rules – they’ve been gone for years, but as we reported last March, Congress figured it was time to bring them back and now, voilà!

As required by the behemoth “21^st Century Communications and Video Accessibility Act of 2010,” the FCC has adopted rules requiring the provision of video description.  (“Video description” involves voice-overs describing a program’s key visual elements. Check out our earlier post for a quick refresher course on video description.) The FCC tried almost ten years ago to impose such rules on broadcasters and certain multichannel video programming distributors (MVPDs), but the rules were struck down by the U.S. Court of Appeals for the D.C. Circuit. The court concluded that Congress hadn’t given the Commission the necessary authority.  That was then, this is now: the FCC now has authority in spades, with explicit instructions from Congress to reinstate the original rules – with a few tweaks.

The new rules are nominally “reinstated” as of October 8, 2011 – that’s what Congress required, and the Commission timed Federal Register publication of the rules accordingly. (One exception: Section 79.3(d) and (e) have to be run through the Paperwork Reduction Act drill before they can become effective.) But take heart – broadcasters and MVPDs have until July 1, 2012, to come into full compliance.

Broadcaster and MVPD obligations under the new rules include the following:

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Newly adopted and proposed fixed service rules add flexibility, especially in rural areas.

We wrote last summer about how the proliferation of wireless devices has created a corresponding need for wireless backhaul capacity – “backhaul” being a term that refers generally to the “middle mile” links that move end-user traffic between cell towers and the core network. Traditionally, backhaul was carried on copper wires or fiber, but that 20th Century approach isn’t necessarily the most practical, particularly in rural and remote locations. In those situations, a wireless approach, using point-to-point links on microwave frequencies allocated by the FCC for “fixed service”, does the trick better.  The FCC has now adopted the proposals it put forth a year ago to facilitate the use of fixed service spectrum for wireless backhaul. In a concurrent notice of proposed rulemaking (NPRM), the Commission seeks comment on additional wireless backhaul matters.

During the meeting at which the Commission adopted the new rules, Chairman Genachowski admitted that when he first heard about the proposals to change the fixed service rules, his eyes “glazed over.”  Now, however, the subject is generating a lot of enthusiasm at the FCC. At the meeting, Genachowski and the other Commissioners rhapsodized that more flexible fixed service rules will increase rural buildout, spur 4G deployment, create jobs, and stimulate technical innovation.

Specifically, the new rules will:

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The FCC giveth and the FCC taketh away as it proposes elimination of International Settlements Policy while continuing to monitor competitiveness, possibly through new or expanded reporting requirements

The FCC has proposed to eliminate its 80-year-old International Settlements Policy (ISP) (except as it applies to Cuba – that would require the State Department’s blessing). The ISP is intended to prevent monopolistic foreign carriers from charging U.S. carriers non-competitive rates for the termination of foreign traffic, leading to high international rates for U.S. consumers.

In its very simplest terms, the policy dictates a uniform bargaining position for U.S. carriers: they must accept the same rates as other carriers on that route, are entitled to terminate their proportionate share of incoming traffic from a foreign carrier, and have to split termination rates (a/k/a/ “accounting rates”) 50/50 with the foreign carrier.

The ISP does not apply where carriers pay below a certain set benchmark rates for that route. There are only a few dozen routes to which the ISP still applies, so it’s no longer an active key component of international regulation. The Commission is concerned that the policy itself may be preventing carriers from negotiating benchmark or lower rates on ISP routes because foreign carriers have little incentive to negotiate symmetric rates when they can re-originate traffic at lower rates.

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It’s not nice to try to fool caller ID services – in fact, it’s now illegal, with violators looking at possible $10K penalties.

“Spoofing” a phone call – that is, hiding your true identity from caller ID services – may sound like a harmless prank, but it’s a serious enough problem to have attracted the attention of Congress. Last year Congress passed (and, in December, President Obama signed) the “Truth in Caller ID Act”, making it unlawful to transmit misleading or inaccurate caller ID information “with the intent to defraud, cause harm, or wrongfully obtain anything of value.” The law charged the FCC with responsibility for enforcing the new prohibition. In late June, the Commission dutifully revised its own rules to reflect the new law;  it also issued a report (ordered up by Congress) on caller ID in new telephone technologies.

The upshot of all this: a new anti-spoofing regulation with a potentially stiff penalty (max $10K for each violation) and a request that Congress broaden the FCC’s authority to reach more spoofers.

Spoofing provides many opportunities well beyond the merely mirthful; in fact, it affords the motivated criminal plenty of ways to wreak serious damage. A malicious caller might, for example, elicit a social security number from an individual by appearing to be from a bank or government office. Or circumvent a bank’s security screening by appearing to be the account holder, calling from the number of record. Or, in a really creepy use, make threatening calls from the recipient’s own number, thus appearing to be actually in the house. Nothing mirthful there.

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