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

They already control former TV Channels 54 and 59 (bought  directly from Aloha Partners). With its latest acquisition, AT&T now has access to Blocks C, D and E of the “Lower 700 MHz” band. (That band consists of former TV Channels 52-69. The commercial segment has been broken up into five blocks for non-broadcast purposes, known as A, B, C, D, and E.)

In the FCC’s view, the AT&T/Qualcomm deal was different from the AT&T/T-Mobile deal.  According to the Commission, the Qualcomm deal did not put a competitor out of business, because AT&T was buying only Qualcomm’s spectrum, not Qualcomm as a company. Some sticklers might see this as a distinction without a difference: after all, if you buy all of a company’s spectrum resources, don’t you remove that company from the competitive marketplace just the same as if you bought the company itself? The FCC apparently isn’t much of a stickler this time around.

The FCC did admit that the concentration of spectrum resources might be reaching harmful levels, but it felt that the public interest could be protected through remedial conditions.  Among the conditions:

• The new spectrum must not be “bonded” with other spectrum so as to make roaming by other carriers’ subscribers impossible;
• Power levels must be limited to avoid interference to Lower 700 MHz frequency blocks AT&T does not control;
• AT&T must allow other Lower 700 MHz operators to collocate on towers AT&T owns. (The precise reach of this condition isn’t clear, since we don’t know what percentage of the towers used by AT&T are owned by it and are thus subject to the condition); 
• The newly acquired frequencies may also not be used for uplink traffic – a condition that may be difficult to retain as technology evolves.

The FCC’s propensity to place conditions on large acquisitions to accomplish policy goals that would be difficult to achieve by rulemaking was subdued in this case. We know this because the Commission rejected petitions seeking additional conditions.   The FCC concluded the proposed-but-rejected conditions were not specific to this proceeding and could/should be dealt with elsewhere. (Conditions that didn’t make the cut included: requiring handset interoperability; accelerating build-out timetables; reducing early termination fees; forbidding exclusive deals with handset manufacturers (like the early iPhone); priority access for public safety users; and net neutrality.) 

The FCC also brushed aside questions about changing its screening threshold. That threshold is a processing device by which the level of regulatory scrutiny given a deal depends on how much spectrum is proposed to be controlled by the buyer and which frequency bands are included. Since the Commission was approving the AT&T/Qualcomm transaction without any spectrum divestiture condition, the screen didn’t matter here.  

And so the spectrum consolidation march continues. As has been the case so often in the past, marketplace forces are finding ways to rearrange resources faster than the government can keep up. Whether the incentive auction concept to knock TV off of much of its spectrum perch will be relevant by the time Congress and the FCC can figure out how to adopt and implement it, and whether the impact on competition will be acceptable policy-wise, remain to be seen.

The Court thoroughly disagreed with AT&T's position that the undefined term “personal” in FOIA Exemption 7(c)’s protection of “personal privacy” should derive its meaning from a separate statutory definition of “person” which can include a corporation. “Person” is a noun; “personal” is an adjective. They are different. Building on his favorite give-and-take during oral argument, the Chief Justice writes:

Adjectives typically reflect the meaning of corresponding nouns, but not always. Sometimes they acquire distinct meanings of their own. The noun “crab” refers variously to a crustacean and a type of apple, while the related adjective “crabbed” can refer to handwriting that is “difficult to read,” Webster’s Third New International Dictionary 527 (2002); “corny” can mean “using familiar and stereotyped formulas believed to appeal to the unsophisticated,” id., at 509, which has little to do with “corn,” id., at 507 (“the seeds of any of the cereal grasses used for food”); and while “crank” is “a part of an axis bent at right angles,” “cranky” can mean “given to fretful fussiness,” id., at 530.

That’s really all you need to know, as everything flowed from this initial tutorial. The Chief Justice showed he has “street smarts” as well as “book smarts”:

Certainly, if the chief executive officer of a corporation approached the chief financial officer and said, “I have something personal to tell you,” we would not assume the CEO was about to discuss company business. Responding to a request for information, an individual might say, “that’s personal.” A company spokesman, when asked for information about the company, would not. In fact, we often use the word “personal” to mean precisely the opposite of business-related: We speak of personal expenses and business expenses, personal life and work life, personal opinion and a company’s view.

Though the Chief Justice probably didn’t need to go beyond the plain language rationale for the holding – either for the sake of sound legal reasoning or in order to get the buy-in of the more liberal members of the Court – he did note that neither of two FOIA exemptions dealing with personal privacy (i.e., Exemptions 6 and 7(c)) has ever been read to apply to anything but an actual person. By contrast, other exemptions (primarily Exemption 4) relating to trade secrets appear to protect similar interests held by corporations.   That’s largely because, as the FCC pointed out during oral argument, legislative history and DOJ Guidance contemporaneous with the creation of Exemption 7(c) clearly define “personal” accordingly. 

So that’s it . . . well, almost. We’re compelled to point out two other aspects of the decision. First, for all the FOIA-geeks out there, the opinion makes no mention – and, more importantly, does not appear to buy into – the government’s strange and controversial position that FOIA exemptions should not be construed narrowly. Second, the Chief deserves a serious hat tip for the way in which he closed out his opinion:

We reject the argument that because “person” is defined for purposes of FOIA to include a corporation, the phrase “personal privacy” in Exemption 7(C) reaches corporations as well. The protection in FOIA against disclosure of law enforcement information on the ground that it would constitute an unwarranted invasion of personal privacy does not extend to corporations. We trust that AT&T will not take it personally.

Well worded, Your Honor!

CompTel filed a Freedom of Information Act (FOIA) request for copies of all pleadings and correspondence in the investigation file. AT&T parried with a gambit sometimes known as a “reverse FOIA”: it asked the FCC to reject CompTel’s request because at least some of the documents at issue were exempt from disclosure under FOIA Section 7(c). That section exempts from routine FOIA treatment information the disclosure of which “could reasonably be expected to constitute an unwarranted invasion of personal privacy”.  

The Commission denied AT&T’s request, paving the way for disclosure of AT&T’s documents to CompTel. AT&T appealed that denial to the U.S. Court of Appeals for the Third Circuit which, to the surprise of many, ruled for AT&T. (You can read more about the case on the website of the Reporters Committee for Freedom of the Press, in whose amicus brief ASNE joined.) The gist of the Third Circuit’s decision: a corporation may claim a personal privacy interest for purposes of FOIA Section 7(c).

So, there we were: up was down, black was white, corporations were people, and press organizations (like ASNE) which routinely find themselves opposed to the government in FOIA matters were suddenly siding with it.  It was like some bizarre joke. 

Thankfully, the Justices of the Supreme Court don’t have much of a sense of humor.  

As I gaze into my post-argument crystal ball, it seems clear that the Court will rule for the FCC with a 7-1 vote (8-0 being a less likely possibility and 6-2 an even less likely shot).  Why eight votes, when there are nine Justices? Justice Kagan recused herself from the case. 

In fact, I’ve rarely witnessed so one-sided an argument. This thing was over before it started. The government’s counsel received only a few questions, mainly from Justice Alito, and sat down with a full six minutes of his allotted time remaining; when he used his reserved time for rebuttal, he was asked no questions at all. That almost never happens.

The Court’s treatment of AT&T’s counsel seemed to confirm the Court’s preference for the FCC’s arguments. The questions started early (within 30 seconds), hit hard, then tapered off quickly, as if the Justices got their shots in, satisfied themselves that the FCC should win, and quickly got bored. 

So the Court appeared to like the government’s position – which may strike some as odd in view of the fact that it was just last year that the same Court issued a seemingly contrary decision. That would be Citizens United v. Federal Elections Commission, one of the most controversial decisions in recent years, in which the Court concluded that corporations are people for purposes of political advocacy and the First Amendment.

Here’s how I figure it:

First, I see a very solid six votes for the FCC.

Start with Justice Scalia, who loves two things above all else: plain language and original intent. The transcript of the oral argument in the AT&T case is riddled with illustrations of his mindset (like when he says that the phrase “personal privacy of a corporation” is a “very strange phrase to me”). That’s not a good sign for AT&T.

Since Chief Justice Roberts and Justice Thomas generally share this preference for plain statutory language, I think it’s safe to put them on the FCC’s side along with Scalia.

Justice Breyer was clearly skeptical as well, at one point asking AT&T’s attorney whether he could think of any examples where the government has asserted a personal privacy right under this exemption. The inevitable “No” response sealed his vote, and probably Justice Sotomayor’s as well. That would be two more votes for the government.

Justice Ginsburg seemed especially unconvinced by any of AT&T’s arguments about the supposed original “understanding” of this exemption.  One more pro-FCC vote there, giving us six solid in that category.

Justice Kennedy was a little tougher to read, mainly because he didn’t ask many questions. However, those he did ask were very similar: all were intended to clarify the distinction between a corporation acting in its own interest, on the one hand, and acting in the interest of, say, its employees, on the other. He seemed to be trying to confirm that: (a) employees can protect themselves when necessary; and (b) the corporation can raise other objections (such as whether the agency followed its own procedures). If he’s convinced that both of those are “yes”, he should be voting with the FCC (although, of these seven, he’s the most likely to go the other way).

I’m predicting that only Justice Alito will vote for AT&T. He seemed the most sympathetic to AT&T’s arguments, engaged in the most antagonistic questioning of the government’s attorney and, generally, is the most willing of the conservative judges to throw aside the “originalism” principle in favor of a particular result, especially where corporations are involved. Toss in the fact that he was previously a judge on the Third Circuit and, therefore, might be inclined to side with his former colleagues, and he’s the most solid vote for AT&T. 

So you heard it here first: the Swami’s calling this one a romp for the FCC and the government. Shoot, I'm so confident about the prospects of an FCC victory here that I’ll toss in a bonus prediction: look for Justice Scalia to write the majority opinion.

[A closing observation on jumping into bed with the enemy:  In FOIA litigation, folks on the side of the press normally find themselves at odds with the government. No surprise there: the press usually wants FOIA access to materials that the government doesn’t want to cough up. But in FCC v. AT&T, the FCC was happy to make the contested materials publicly available, so it made sense for press interests to support the Commission. However, the government’s counsel demonstrated why, even in such situations, the government isn’t the most reliable of allies. The government’s lawyer was asked by Justice Scalia whether FOIA exemptions should be construed narrowly. The simple answer could and should have been “Yes, of course” – since that would have been consistent both with the FCC’s position in this case and with earlier Supreme Court decisions regarding application of FOIA exemptions. But instead, the government’s counsel hedged, responding that FOIA exemptions “are to be given meaningful reach”. While that approach won’t help the government in this particular case, it’s likely to come in handy for the government in about 99% of the FOIA cases coming down the pike – including the Supreme Court’s soon-to-be-issued decision in another FOIA case, Milner v. Department of the Navy).]

A number of radars have experienced interference even from compliant, DFS-equipped transmitters. The FCC could have come down hard on the U-NII operators: an unlicensed transmitter, even in full compliance, is not permitted to interfere with an authorized or government service, like airport radars. Instead, though, and to its credit, the FCC took a collaborative approach with the providers causing the problem. It did mention, though, that transmitters not in compliance with the rules would be subject to enforcement action.

The airport in San Juan, Puerto Rico, is one of those that reported interference to its radar. The FCC traced the signal to a roof-mounted transmitter a few miles away, made by Motorola and operated by AT&T. The unit was FCC-certified for U-NII operation at 5735-5840 MHz. But it was operating outside that band, at 5605 MHz, and had no working DFS.

The FCC cited AT&T for two offenses. One was operating a transmitter outside the frequency range in the certification, and without the required DFS. The other charge is a little more complicated. Because the transmitter operated outside the band where it was certified for unlicensed operation, it did not qualify for unlicensed operation. Therefore, reasoned the FCC, by definition AT&T needed a license. But AT&T did not have one for 5605 MHz. So the FCC added on the more serious charge of operation without a license.

The base fine for the outside-the-certification problem is $5,000, and for operation without a license, $10,000. The FCC doubled the latter, explaining that it did so because AT&T is a large and profitable company, to reach a total of $25,000.

We have two questions.

In cases where a transmitter fails to match its certification, as here, the FCC usually cites the manufacturer. Going after AT&T makes sense only if the FCC thinks the transmitter was compliant when shipped, and that AT&T took it out of the box, re-tuned it to an unauthorized frequency, and turned off the DFS. That would indeed be a blatant offense. But the FCC does not accuse AT&T of doing this. The farthest it goes is to say AT&T “consciously” operated at the unauthorized frequency. Contrast the delicate touch with another recent case, in which the FCC flatly accused the provider both of disabling the DFS and of fitting the unit with an unauthorized antenna that pushed the effective power to hundreds of times above the maximum permitted. (Despite the more egregious offense, and the improper use of two systems on two frequencies, the fine there was the same $25,000).

Usually, before the FCC proposes a fine, it sends a Letter of Inquiry to the suspected offender to get the other side of the story. There is no indication that it sent one to AT&T. We don’t know all the facts; but if AT&T has an explanation, we think it should have the chance to say so before its alleged offense is splashed over the public record.

Our other question concerns the charge of operating without a license at 5605 MHz. That frequency is part of the U-NII band, and AT&T’s operation appears to have been within the power limit for that frequency. So far as we can tell, Motorola (or AT&T) could have had the same transmitter re-certified to include 5605 MHz. AT&T was at fault for not making sure this happened. But calling that omission “operation without a license” is a stretch.

The only licensable services at 5605 MHz are maritime radionavigation, meteorological aids, and radar. AT&T’s use of the transmitter is none of these. The communications function it provided is lawful only as an unlicensed service. Had AT&T sought a license for this application at that frequency, it would have been turned down.

Think about this. AT&T was fined for failing to do something it could not have done. And the fine was doubled, to boot.

Plainly some kind of enforcement action is needed. There was interference to an important radar system from a transmitter that failed to meet the requirements of its certification. Given the actual circumstances, though, AT&T’s only real offense was the use of unauthorized equipment (base fine, $5,000). Yes, the rules can be read to permit an allegation of operation without a license, and that might be justified in some cases. Here, though, the main effect of the added charge was to greatly boost the allowable fine.

The FCC may simply have wanted to make an impression on AT&T. That’s reasonable. But we would also like to see the Commission stay within a common-sense interpretation of the rules. We think that’s only fair.

Not only would the licensee/renewal applicant have to produce its own documents, it would have to track down and turn over a similar universe of documents for each of its “affiliates” – “affiliates” not just in the usual sense of “under common control or management”, but in the very broad sense of sharing facilities, participating in joint venture arrangements, or even just having contractual relationships. (For all the unpleasant details, check out the definition of “affiliate” in Section 1.2110 (c)(5) of the FCC’s rules.) This broad definition normally applies in auctions, to avoid competitive bidding credits going to undeserving entities. It does not fit well in the renewal context, where the point is to assess the qualifications of the licensee, not entities that it can’t control. 

Worse, the proposed document production exercise would repeat each time any license held by the applicant and any of its affiliated entities comes up for renewal. Especially for larger entities, the procedure would result in a cascade of repeated document productions, in some cases involving hundreds of affiliates and thousands of licenses. No wonder AT&T and Sprint are worried. This type of due diligence is no cakewalk for smaller entities either, who will have fewer resources to put towards compiling the required information. 

Expensive, time-consuming – and probably unlawful.   The federal Paperwork Reduction Act (yes, it’s hard to tell, but there really is one) bars governmental agencies from requiring the filing of “unnecessarily duplicative” information otherwise reasonably accessible to the FCC. All of the requested paper is already in the FCC’s own files. If that isn’t unnecessarily duplicative, then nothing is.

After all that, if the Commission finds an applicant’s submission to be “insufficient”, the Commission will deny the application. Don’t ask us what “insufficient” means – the FCC isn’t saying. Apparently, like Justice Stewart in Jacobellis v. Ohio, it will know it when it sees it. Given that people’s livelihoods can be at stake, we expect a better articulation of what the Commission is looking for. We think the Administrative Procedures Act expects the same.

Reply comments about the proposed rule changes are due by August 23. The Commission will accept ex parte communications after that.

Wasn’t it the Obama administration in general – and FCC Chairman Genachowski’s administration in particular – that arrived on the scene with a much ballyhooed promise of “transparency” in government decision-making?   Gone would be the bad old days of a few corporate giants sitting around with policy-makers in smoke-filled rooms deciding the fate of the rest of the industry and, for that matter, of the general public, whose representatives were offered no seat at the table.   Some tentative steps in that direction were taken, including announcing the expected agenda items at upcoming meetings far enough in advance to permit everyone to have a last word with the Commission before the cone of silence imposed by the Sunshine Act descends. A new spirit of openness seemed to be stirring over the waters of FCC policy-making.

Perhaps that is why the recent backdoor maneuvering seems like such a betrayal.   To be sure, the GSA’s “no smoking” policy ensured that industry titans would have to leave their Macanudos and Cohibas smoldering outside in their idling limos while they met with “senior FCC officials”. And these days mineral water and acai juice are more likely to be on the beverage bar than rye and sour mash. So a lot of the fun, not to mention the smoke, has been drained from smoke-filled rooms. 

But the essence of a smoke-filled room – the private, closed door, invitation-only, giant corporation-only session with high ranking policy-makers – certainly remains. The conception that something as important as Net Neutrality (with huge implications for the privacy of the American people), the development and growth of the Internet, and the expansion of broadband access could be hashed out by a few corporations over corned beef sandwiches with no involvement whatsoever from the rest of the world is appalling. It is everything that the Obama administration claimed to reject about politics-as-usual. 

The FCC needs to do some damage control – and fast – to reassure people that in its quest to deliver universal broadband to strengthen our economy and democracy, it is not trampling on the very principles that it seeks to further.   An open decision-making process cannot take short cuts and can thrive only in the full light of day.

It will allow VoIP on the iPhone 3G channel after all. If you hear loud cheers from the general direction of Mountain View, CA, that’s the Google folks breaking out the Red Bull. Apple still has not formally approved the Google Voice app, but a big obstacle is now out of the way.

The coincidence? Exactly one day before AT&T’s about face, the FCC announced the date, two weeks from now, on which it will formally propose its network neutrality rules. One of the key factors that precipitated the current surge of interest in network neutrality was a 2007 request from Skype, a VoIP company, asking the FCC to prohibit wireless companies (like AT&T) from blocking VoIP service. So the rules that might eventually be adopted, a year or two from now, may require action along the lines that AT&T took today.

Down here in the bunker we are a little surprised at the news. The wireless carriers have been erecting a protective wall of press releases that say network neutrality rules will bring about the end of technical innovation, social progress, and cheap cell phones. And AT&T’s decision may fundamentally change the economics of wireless phone service. We can expect vigorous marketing of VoIP services to iPhone users. That will probably cause a significant drop in paid-for voice minutes. Will AT&T start charging more for its data plan? Will Apple abandon the subsidy on the iPhone and start charging customers what the phone actually costs? AT&T may have brought us a little closer to a system in which customers have free choice and pay only for what they choose.

Sometimes the FCC can get the results it wants without actually regulating. Sometimes just announcing the date on which it plans to begin to consider regulating is enough.

While it makes up its mind, Apple generously invites Google to put the application on other, non-iPhone platforms “and let consumers make their choices.” Apple apparently misses the irony. If it truly favored consumer freedom, it would let customers include Google Voice in their choice of user experiences on the iPhone.

AT&T, for its part, claims no involvement in Apple’s decision (or failure to make one) regarding Google Voice. But AT&T is equally irony-challenged. Much of its response (a) touts the benefits of wireless competition, while (b) defending AT&T’s arguably anticompetitive policy of blocking VoIP services on its broadband network. The response is surprisingly frank about the rationale. VoIP users run up fewer minutes of voice service. AT&T needs the revenues from voice minutes to pay back the subsidy that lets consumers buy the iPhone at an artificially low price, which in turn has attracted many new customers to AT&T’s network (and billings for voice minutes).

Here’s an idea: a wireless network that offers its users maximum choice, and charges only for services actually selected and delivered. No limitations on handset applications; no handset “subsidies” recovered through excessive monthly charges. The wired phone system once had carrier-imposed equipment subsidies and service restrictions. Their removal by the FCC triggered the current telecommunications revolution and helped to produce the Internet. Maybe it’s time to try the same approach for wireless services as well.

Google’s response to the FCC on Google Voice might be interesting and helpful, but we will never know. Except for a glowing account of the advantages of Google Voice and Android, a Google-supported operating system for wireless phones, public copies of the response are heavily redacted, especially as to communications between Google and Apple about getting Google Voice approved. Again, the irony is hard to miss. Google has the legal right to redact information that it thinks might unfairly help its competitors. But as a company that has long championed openness on the Internet, it might have been more open with information that affects not only Google and Apple, but all of us interested in making the best use of communications resources.

One started with a petition from Skype, which provides free or inexpensive phone service over the Internet.  Most wireless carriers do not allow access to Skype over their handsets, because the customer could call via Skype instead of running up expensive minutes. The other proceeding began with a group of small rural cell companies asking the FCC to ban exclusive arrangements for handsets. Because such deals limit the most desirable handsets to the majors, the small carriers lose business to customers who want the latest in hardware. So far, though, the FCC has only invited public comment on these requests, with no hint as to whether it might act.

The newest wrinkle comes out of Apple’s decision against Google Voice.

Broadly speaking, Google Voice brings phone service into the Internet Age. A subscriber receives a new phone number, local in any region of the subscriber’s choosing. Calling that number rings all the customer’s phones, wherever they are: office, home, cell, etc. Different callers can be automatically routed to different phones, or forwarded selectively to still other phones, or fed different voice mail greetings, or given different rings, or blocked altogether. All the voice mails from all the phones end up in one place, where they can be read in printed form, like emails, or listened to online from anywhere. There are provisions for setting up conference calls, and for recording phone conversations for online storage. Parallel features cover SMS messaging.

And calling anywhere in the United States is free.

Apple rejected Google’s application to sell Google Voice through the App Store, the only legal source of iPhone software. And Apple revoked previous App Store approvals for third-party software intended to work with Google Voice. Early speculation supposed that Apple had acted at the request of AT&T, whose network uses the iPhone, but press reports say that AT&T has denied any involvement. Apple’s motivation for stirring up its customers remains unknown.

Now the FCC has sent letters to all three companies: Google, Apple, and AT&T, asking Apple and AT&T which one of them made the decision to bar Google Voice, and why, and whether Apple and AT&T offer competing applications. The letter to Google asks for details on how Google Voice works, and for a summary of the discussions with Apple and AT&T.

What the FCC will do with this information is not clear. Also not clear is whether it will even get the information. Or whether it has the authority to ask. Back in the 1976 Computer II proceeding, the FCC relinquished jurisdiction over information flowing through communications systems. It would regulate the lines, it then decided, but not the bits and bytes moving over them. (In the broadband environment, it has since deregulated even the lines.) With only limited exceptions for certain forms of VoIP , the FCC has indeed kept its hands off Internet applications. Apple and AT&T have to concede the FCC’s authority over wireless voice service, and may even acknowledge some control over handsets, but may well argue that Computer II put optional software applications beyond Commission reach.

For those of us who enjoy corporate conflict as a spectator sport – over-muscled, over-equipped gladiators struggling in the arena – the Google-Apple-AT&T spat is a welcome addition to the long-running Google-Microsoft and Apple-Microsoft events. “The enemy of my enemy is my friend,” the saying goes. But now the two biggest enemies of Microsoft have become enemies themselves.

Pass the popcorn, and keep your scorecard ready.