California Requires Carrier Notice of Public Hearings on Universal Service

No. 09-05 May 31, 2009

Regulatory Review

The Miller Isar, Inc. Regulatory Review is a monthly report designed to provide clients with information regarding regulatory and policy matters that may impact their business operations. The Regulatory Review is provided for informational purposes only and does not constitute legal opinion or legal counsel. Comments and suggestions are always welcome.

This report is prepared for informational purposes only and does not constitute legal opinion or counsel. The data contained herein is believed to be correct, however, Miller Isar does not guarantee its accuracy or completeness or make any warranties, express or implied, regarding its usage. Redistribution or reproduction is prohibited without written permission.

Federal Regulatory News

FCC Establishes Fiscal Year 2009 Regulatory Fee Assessment and Collection requirements

On May 14, 2009, the Commission issued a Notice of Proposed Rulemaking and Order regarding Assessment and Collection of Regulatory Fees for Fiscal Year 2009. The Commission notes that it is obligated to collect $341,875,000 in regulatory fees during Fiscal Year 2009 to fund Commission operations. The Commission’s Order adopts proposals set forth in its August 2008 Further Notice of Proposed Rulemaking, while requesting comment on substantive and procedural aspects the current regulatory fee program, including assessment of fees on digital broadcasting television licensees after the June 12, 2009 nation-wide digital transition date. The Commission notes that it proposes to “use essentially the same section 9 regulatory fee assessment methodology adopted for fiscal year 2008, except with regard to submarine cable systems.”

NPRM & Order: Word | Acrobat

Copps Statement: Word | Acrobat

Commission Seeks Additional FY2010 Funding

The Commission has submitted it’s a $335.8M funding request to the U.S. Congress for fiscal year 2010. Included in the request is an additional $15M that would be used to modernize technological infrastructure, including upgrades its website and telephone system. At a hearing before the House Appropriations Committee’s financial services and general government subcommittee, acting FCC Chairman Michael J. Copps noted that the Commission’s current technology infrastructure is lacking. He noted that the Commission seeks to website upgrades that will allow key word searches by the public, while enhancing the ability of interested parties to participate in Commission proceedings, and phone system improvements intended to facilitate intra-agency communications throughout the U.S. Of the $335.8M requested, $318M is targeted to maintain current service levels – a $6M increase over FY2009 earmarked to offset “inflationary increases for salaries, benefits, leasing costs, utilities, and other contractual services.” Approximately $1M would be allocated to meet staffing requirements, and an additional $1M would go to DTV transition, after the June 12 transition date.

Wireline Intermodal Porting Interval Reduced to One Business Day

On May 13, 2009, the Commission ordered a reduction in the time required to port telephone numbers for wireline- to-wireline and wireline to other services from four business days to one business day. The action updates the 12 year-old local number porting standard. All providers must implement the new number porting interval within nine months from the time the Commission receives technical rules from the North American Numbering Council (NANC), due 90 days after the effective date of the Commission’s order. Small incumbent local exchange carriers have 15 months after the NANC recommendation to implement the new interval, this following incumbent carrier protests over the cost of implementation. The order was combined with a further notice of proposed rulemaking requesting a refreshing of the record on how the porting process can be improved, and how complex ports should be processed. Local number portability has been contentious, particularly between wireless carriers who have lobbied for shorter porting periods, and incumbents who have sought the status quo arguing that compliance costs for expedited porting would be significant.

VoIP Providers Subject to Disconnection Rules/Speeds Number Portability

On May 13, 2009, the Commission expanded consumer protections for customers of interconnected VoIP providers, by requiring providers to notify customers before they discontinue, reduce or impair service, as other regulated telecommunications providers currently must do. According to the Commission, “Interconnected VoIP providers can no longer close shop without notice, leaving customers unexpectedly without phone service or recourse.” Specifically, the Commission extended to interconnected VoIP providers the discontinuance obligations that apply to domestic non-dominant telecommunications carriers under section 214 of the Communications Act of 1934, as amended (the Act). According to the Act, ““No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby.” Before an interconnected VoIP provider may discontinue service, it must comply with the streamlined discontinuance requirements under Part 63 of the Commission’s rules, including the requirements to provide written notice to all affected customers, notify relevant state authorities, and file an application for authorization of the planned discontinuance with the Commission.

In a related matter, the Commission, in the same action, also reduced the period of time in which number porting between intermodal carriers occurs to from four days to one business day, further including interconnected VoIP providers in the requirement. (See related story, above).

Commission Releases Consumer Complaint Reports

The Federal Communications Commission, on May 6, 2009, released three reports governing informal consumer inquiries and complaints. Two reports include statistics for third and fourth quarter 2008, and the second applies to complaints and inquiries regarding telecommunications access to those with disabilities. According to the fourth quarter News Release, “complaints in the reported categories decreased over 28%, from 98,816 in the 3rd quarter to 70,836 in the 4th quarter of 2008. Most of the decrease occurred between the Radio and Television Broadcasting category where complaints decreased over 27% from 40,057 in the third quarter to 29,106 this quarter and in Wireline Telecommunications where complaints decreased from 39,546 in the third quarter to 27,160 [in the 4th] quarter. Cable & Satellite Services-related complaints decreased over 7% from 2,263 in the 3rd quarter of 2008 to 2,097 in the 4th quarter. Wireless complaints decreased 26% from 16,950 in the 3rd quarter of 2008 to 12,464 in the 4th quarter.” “The sub-categories in which notable increases were experienced in 2008, as compared to 2007, were: (1) DTV (Radio and Television Broadcasting), a 1,787% increase from 14,895 in 2007 to 281,168 in 2008; (2) TCPA (Wireline Telecommunications), a 157% increase from 25,971 in 2007 to 66,767 in 2008.”

Fourth Quarter Report on Informal Consumer Inquiries and Complaints Released.
News Release: Acrobat

Third Quarter Report on Informal Consumer Inquiries and Complaints Released.
News Release: Acrobat

Report on Informal Consumer Complaints Regarding Access to Telecommunications for People With Disabilities.
News Release: Word | Acrobat

Baker May be Republican FCC Commissioner Candidate

There is growing speculation that Meredith A. Baker, former acting administrator of the National Telecommunications and Information Administration, may be nominated to take the vacant Republican seat on the FCC Commission. Speculation arises from discussions held among members of the Senate Commerce, Science, and Transportation Committee, though no formal comments have been forthcoming. Republicans have been reportedly deadlocked on potential candidates, though the scheduling of hearings on Julius Genachowski’s nomination as Commission Chair may be prompting action on a Republican candidate. Republican Commissioner Robert M. McDowell’s term ends in June, although he may remain at the Commission until the current Congress adjourns possibly at the end of 2010.

U.S. Broadband Penetration Nears 27% OECD Reports

A report by the global Organization for Economic Cooperation and Development concludes that broadband penetration in the U.S. is approaching 27%, just above the global average of 23% at the end of 2008. This places the U.S. at 15th in the world for broadband deployment. The average monthly broadband subscription price in the U.S. is about $45.52, according to the OECD, which is slightly above the worldwide average of about $43.92.

- The OECD report is available here
- The New York Times has this blog post
- Broadband Census has the FCC update

Barton, Stearns Introduce FCC Reform Legislation

Representatives Joe Barton ((R) Texas) and Cliff Stearns ((R) Fla.), ranking members of the House Energy and Commerce Committee and Communications, Technology, and the Internet Subcommittee, respectively, have introduced new legislation designed to reform what they described as the FCC’s “byzantine regulatory processes.” Under the bill, the Commission would be required to publish the text of proposed rules for comment before adopting them. Further the Commission would be subject to a 30-day deadline for releasing the texts of decisions once adopted. A 30-day or longer comment period and like reply comment period would also be required on proposed rule changes, followed by at least 30 days for Commission consideration of the comments. The Commission would be required to establish deadlines for acting on petitions, applications, complaints, and other filings. Missed deadlines would require Commission notice to the House and Senate Commerce committees and explain the reason for the delay, with updates every 14 days until the text of the decision is published. The Commission would also be required to provide annual summaries to legislators in any year in which it misses such a deadline. And, the bill would require the Commission to establish an annual schedule for release of statistical reports. If release dates are missed by 60 days, the Commission would be required to provide notice to the House and Senate Commerce leadership, with an explanation for the delay, and updates every 30 days until the report is released. The bill reflects the ongoing Congressional scrutiny under which the Commission has remained for some time during while Kevin Martin served as Commission chair.

In The Courts

Appeals Court Upholds Lower Court Injunction on State VoIP USF Surcharges - Nebraska Commission Seeks Rehearing

The U.S. Court of Appeals for the Eighth Circuit (St. Paul) has upheld a lower court’s preliminary injunction that precludes the Nebraska Public Service Commission from requiring nomadic interconnected voice-over-Internet-protocol (VoIP) service providers to collect a universal service surcharges from end users. The issue stems from Nebraska Commission efforts to require that Vonage Holdings collect and remit state universal service fund surcharges from end users on revenues that are not subject to federal universal service fund collection Vonage appealed and won a preliminary injunction from the U.S. District Court for the District of Nebraska in 2008. The appeals court rejected Nebraska Commission arguments on appeal of that decision, that the state universal service surcharge requirement is consistent with the FCC’s “safe-harbor,” allowing VoIP providers to make federal Universal Service Fund contributions on an assumed interstate and international revenue base of 64.9% of total revenues. The court cited the possibility of conflicts between the methods used by different states for deciding the address on which a VoIP customer’s intrastate universal service surcharges are based. (Vonage Holdings Corp. v. Nebraska Public Service, --- F.3d ----, 2009, WL 1161584 (C.A.8 Neb. May 1, 2009)

On May 14, 2009, the Nebraska Public Service Commission asked the Court of Appeals for a rehearing or a rehearing en banc of the Court’s decision, contending that the Court’s ruling contradicts the a 2004 decision in “Qwest Corp. v. Scott,” in which the Court found that absent “persuasive evidence of preemptive intent by the FCC, … the exercise of judicial restraint is the better course.” The Nebraska Commission’s request is based in part on an FCC’s Office of General Counsel brief in the appeal, stating that the FCC’s federal regulatory preemption of state VoIP regulation had not intended to preempt state universal service surcharge collection, based on intrastate VoIP revenues. The FCC brief was not addressed in the Court’s recent ruling. See Communications Law Bulletin article.

Commission Ban on Exclusive Cable Agreements Upheld

The U.S. Court of Appeals for the District of Columbia Circuit has upheld the Commission’s prohibition on exclusive cable agreements. The Commission had ruled that exclusive agreements between cable providers and multi-dwelling unit owners were anti-competitive, and prohibited new agreements and enforcement of existing agreements. In siding with the Commission, the Court rejected the appellants’ claims, arguments that the statutory provision at issue – Section 628 of the Communications Act – was intended to address programming discrimination exclusively, and not anti-competitive barriers to competition generally. Instead, the court found that the FCC’s broader interpretation was reasonable and permissible under the Chevron doctrine, which generally requires the courts to defer to agency judgment in questions of statutory interpretation that are within the agencies’ expertise. Real estate appellants had also argued that the Commission was effectively regulating the real estate industry. In response, the court noted that the Commission’s actions applied exclusively to cable providers.

State Regulatory News

ALABAMA/TENNESSEE – Deregulation Laws Enacted

Alabama Governor Bob Riley (R) has signed the “Communications Modernization and Lifeline Improvement Act,” which effectively precludes Public Service Commission regulation of basic local exchange services on January 1, 2011. Under the bill, increases in optional service rates are not to increase by more than 5% per optional feature per year through the end of 2010. Optional services also then become deregulated. Other services were deregulated in 2005. This leaves the Commission with exceptionally limited authority to regulate basic residential service and business services with four lines or less. The Commission will not have jurisdiction to regulate any form of broadband service, broadband-enabled services, voice-over-Internet-protocol (VoIP) services, or information services. AT&T reportedly spent significant efforts in painting a picture of significant competition and the need for incumbent carrier flexibility to compete, a viewed not unanimously shared by some members of the Commission.

In Tennessee, Governor Phil Bredesen (D) signed HB 1698/SB 1954, which deregulates all AT&T basic local exchange service rates in the State, into law. As in Alabama and other states, supporters claimed that deregulation was needed to face growing competition. The final version of the law reflected an AT&T compromise with rural interests, the cable industry, and the Competitive Carriers of the South, Inc. Tennessee Regulatory Authority Director Sara Kyle had proposed a deregulatory proceeding before the Authority, but ultimately lobbied the legislature on the terms of the Bills. Under the new law, the Authority retains limited authority to address consumer complaints and competitor allegations of anti-competitive behavior.