Commission compels carriers to conclusively tie down customer’s consent

The U.S. Court of Appeals for the D.C. Circuit has issued a decision upholding the Commission’s 2007 Order relating to the necessary mechanism for obtaining customer approval for release of customer proprietary network information (“CPNI”). That mechanism imposes greater burdens on carriers than had been the case prior to 2007.

Under the Communications Act, certain customer information – including the customer’s specific calling plans, special features, pricing and terms, and details about whom they call and when – is deemed “proprietary” and is supposed to be kept confidential.  Still, that information is useful for carriers’ marketing purposes: some carriers directly market new or different services to their customers based on CPNI, while others contract with joint venturers or outside third parties to use this information to market for them.

Before using CPNI for marketing, carriers must have the customer’s approval. The big question in this case is how that approval is supposed to be obtained.

The Commission has zigzagged back and forth on this issue over the years. In the late 1990s it imposed an “opt-in” requirement under which the carrier had to obtain an express OK from the customer before the customer’s CPNI could be used. This was obviously a pain for the carrier. More to the carrier’s liking was the “opt-out” approach, which provided that the carrier could use CPNI for marketing unless the customer affirmatively told it not to.

In its 2007 Order the FCC required carriers to obtain “opt-in consent” from a customer before disclosing the CPNI to a carrier’s joint venture partner or independent contractor. The Commission adopted these more strict requirements in the context of the pretexting problems which came to national attention several years ago.

National Cable &Telecommunications Association and intervenors, Qwest Communications International Inc. and Verizon, challenged this “opt-in” requirement . Their challenge was based on a claim that the 2007 Order either violated the First Amendment, or was arbitrary in violation of the Administrative Procedure Act, or both – the D.C. Circuit found that the NCTA didn’t make itself particularly clear on that point. But it didn’t really matter, since the court swatted away the challenge quite easily on all counts.

After a review of the constitutionality of the 2007 Order and its “opt-in” requirements, the court determined that CPNI is commercial speech (a category of speech that is subject to less rigorous constitutional protection) and that the Commission’s requirements were adequately supported by the evidence in the record. In so doing, the court found that protection of a customer’s interest in the privacy of his own communications data is a substantial governmental interest – one which justifies the relatively minimal burden of an “opt-in” requirement. The Court’s ruling means that carriers must continue to obtain “opt-in” consent from a customer before disclosing that customer’s CPNI to a joint venture partner or independent contractor for the purpose of marketing communications-related services to that customer.