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

All four companies provided a “dial-around” long distance telephone service in which customers paid a monthly fee for a certain number of long distance minutes. The customers could access the service by dialing a toll-free access number and then entering a PIN to make long distance calls – although, in fact, the vast majority never did. The monthly fees were nonetheless included in bills received by the consumers from their local telephone carriers. Some of the dial-around service companies cited by the FCC had common ownership and all, coincidentally, were based in Pennsylvania. 

The companies claimed they had multi-step procedures for verifying each customer’s order for the dial-around service. Aggrieved customers responded that they had never heard of the companies before noticing suspicious charges on their phone bills. Records provided to the FCC by the companies showed that fewer than one-tenth of one percent of the customers who were billed actually used the service.

The FCC concluded that the companies had deliberately engaged in illegal cramming activities. Even if the actions were not deliberate, said the FCC, the companies should have known they were improperly charging people who hadn’t ordered their service, based on the large number of complaints (and possibly also based on the large number of customers who never used the service they were paying for).

Cramming is a violation of Section 201(b) of the Communications Act of 1934, which requires all charges for communications services to be “just and reasonable.” The Act authorizes the FCC to charge up to $150,000 for each violation. The FCC proposed fines calculated to exceed the allegedly fraudulent charges, to serve as a deterrent. In addition, the FCC will be monitoring these companies for future compliance, and threatens to revoke their operating authority if they continue cramming. Unfortunately for the affected consumers, these fines are remitted to the U.S. Treasury, and not to them individually. The customers who took the time to go through the complaint process at least have the satisfaction of knowing the four companies have been punished for their cramming ways.

Minimum label size: 1.5” x 5.23”. And all the minutiae detailed above apply just to the front. For the back, adhesive labels must have “an adhesion capacity sufficient to prevent . . . dislodgment during normal handling”. A “minimum peel adhesion capacity for the adhesive of 12 ounces per square inch is suggested.” Alternative means of affixing the label (e.g., “cling labels” using the screen’s static charge) are also permitted.

Variations on the horizontal example shown above include a vertical design and a triangular design.

Surprisingly, the rule as initially proposed applied to any device with a built-in viewing screen, regardless of screen size.  Didn’t they realize that pasting a big label on a Dick Tracy wristwatch TV screen wouldn't be easy? The FTC appears to have gotten the word, though. The final version of the rule exempts TVs that “are designed to operate on built-in rechargeable batteries or inserted batteries.”

The FTC is also looking at requiring similar labeling for devices without screens, such as cable boxes and DVRs – but that’s for another day.

No word yet on when the new rules will appear in the Federal Register but, as noted above, they are currently set to apply to all non-exempt TVs manufacturer on or after May 10, 2011. Energy Guide labels will also have to be included in catalogs and website listings as of July 11, 2011.

And finally, the careful and law-abiding observer will note that the labels must include the warning that “Federal law prohibits removal of this label” –  just like a mattress or pillow label! Oh sure, the TV version limits that prohibition to “before consumer purchase”, suggesting that it’s OK to remove the label once you’ve got the TV all set up at home. But do you really want to take that chance?

You could take up Rockefeller’s suggestion and ask Congress to give the FCC express statutory authority. But there are downsides of going to Congress for a remedy: chairs could shift during the November elections, and besides – would you really want to risk opening the Communications Act to amendments (shot clock, anyone?) And let’s not forget about timing – you want the NBP to move ahead now, not at some indefinite future point, after the full range of Congressional process has managed to inch its way to some (unpredictable) conclusion at some point in the indefinite future.

Or you could take Hutchison up on her challenge and reclassify internet access as a Title II telecommunications service. But as many have observed, that would almost certainly lead back to court. 

Or maybe, as Fletcher, Heald’s own Mitchell Lazarus has suggested, the FCC could find a more tailored way out.

Both of the last two options, however, involve the FCC re-jiggering its own legal authority from within – which risks potential punishment from the minority party (not a purely hypothetical risk, as Hutchison’s comments, noted above, demonstrate).

So what’s the answer? 

If I were Mr. Genachowski, stuck between a legal rock and a political hard place, I might look for some other way out of the bind – a way that would permit regulation of net neutrality while keeping my agency both out of court and out of any politically costly cross-fire in Congress. If only I had a protector. Or in this case, a consumer protector. You see where I am going with this: I would consider handing off the net neutrality hot potato to my regulatory siblings at the Federal Trade Commission (FTC). 

The FTC can’t regulate common carriers. But so far ISPs aren’t common carriers, thanks to the FCC’s consistent reluctance thus far to so categorize them. And if ISPs aren’t common carriers, the FTC can step in. (See tech attorney Glenn Manishin’s analysis of Comcast on this point.) 

Section 5(a) of the FTC Act gives the agency jurisdiction over “unfair or deceptive acts or practices”, and FTC Chairman Leibowitz has been willing in the past to assert jurisdiction in order to protect consumers. 

Remember, dear Readers, Chairman Leibowitz has sunk significant political capital into asserting his agency’s power over online commerce issues and other consumer protection initiatives that are threatened if someone in the government can’t enforce net neutrality. So the FTC could be expected to welcome the authority to regulate ISPs and implement net neutrality.

And – just as politically important here – if the FTC were to be deemed the principal locus of control over the issue, Chairman Rockefeller and his Senate Commerce Committee – and their colleagues on the House side – would lose no power. The Commerce Committees have oversight authority over both the FCC and the FTC, so allowing one of the two agencies to take up regulation in an area – say, net neutrality – previously controlled by the other agency would not realign Congressional power in any way. All Chairman Rockefeller has to do is ask his Consumer Protection Subcommittee Counsels to join his meetings with his Communications Counsels. 

But even if the FTC is standing by, ready, willing and able to take over, and even if that approach would likely be acceptable to the powers-that-be on the Hill, there’s still one big question: would Mr. Genachowski voluntarily give up the power he believes his agency has? Jurisdiction does not switch hands easily or often in this town, but Mr. Genachowski’s boss, President Obama, might not care which of his agencies holds authority, as long as his National Broadband Plan’s infrastructure is protected.

One thing, I believe, is certain: net neutrality enforcement authority will be assigned eventually. Like a handful of chips thrown into the air on a casino floor, no part of government’s power will be left un-gathered and unused. The only question left is who will pick them up.

• Robocallers would be required to get “express written consent” before delivering prerecorded telemarketing messages to any residential customer, whether or not he/she has registered on the FTC’s “do not call” list. (Current FCC rules require such written consent only for those on the “do not call” list.) The proposed requirement would apply even if an established business relationship exists between the caller and the customer which otherwise permits live telemarketing calls. Under the FCC’s proposal, “written” consent for robocalls would not actually need to be “written”, but could also be obtained in other ways, including pressing a particular number on the phone keypad. That flexibility would, of course, cushion the blow for telemarketers. BUT the written “consent” would have to: (a) reflect that the telemarketer had provided “clear and conspicuous notice” to the consumer that he/she was authorizing delivery of robocalls and that the consumer is willing to receive such calls; and (b) make clear that the consent was not obtained as a condition to the purchase of any good or service; and (c) include the consumer’s phone number.
• Robocaller messages would be required to include an automated, interactive mechanism to allow consumers to opt out of receiving future robocalls from that particular company.
• During any one campaign, telemarketers using automated dialing equipment to connect consumers to live pitchmen (or pitchwomen) would be permitted to abandon no more than three percent of the calls that people answer. (A call is abandoned, according to the FCC, if the consumer is not connected with a sales representative within two seconds after the end of the greeting.) The FCC’s current rule allows the same abandonment rate over a 30-day period, thereby permitting the telemarketer to average its rate over multiple campaigns.
• Healthcare-related prerecorded messages from certain federally regulated entities would be exempt. This includes messages such as flu shot and prescription refill reminders, requests for documents needed for insurance billing, and calls to encourage enrollment in treatment programs.

The proposed amendments would not change other robocall exemptions, such as fundraising calls from non-profit organizations, calls from politicians or political campaigns, and calls from commercial entities that are purely informational, such as airline flight cancellation notices. Emergency alerts are also exempt.

Comments regarding the proposed rules are due 60 days after the Notice of Proposed Rulemaking is published in the Federal Register, which has not yet occurred. Reply comments are due 30 days after the comment deadline.   We will publish the dates when they become available.