Consumer Privacy Issues and VoIP Access Charges Major Issues in 2008
As we enter 2008, the regulatory machinery continues to turn slowly. Many of the issues that were important in 2007 (and 2006 and 2005) remain pending. Among these are reform of the intercarrier compensation system, including access charges, and a revision of the universal service system. Enforcement on consumer issues, especially privacy, also promises to be a significant area of activity this year. In particular, any form of carrier or interconnected VoIP provider should be alert to compliance with FCC privacy rules regarding customer information. The FCC has been initiating inquiries and assessing $100,000 penalties on companies that are non-compliant, and more of the same is expected in 2008. Currently, all carriers are faced with a March 1 deadline for filing compliance reports or risk the $100,000 penalty.
The FCC’s Customer Proprietary Network Information (“CPNI”) rules were revised in April 2007 and further changes were proposed at the same time. The expansion of the rules came mainly in the form of applying it to interconnected VoIP providers. The primary area of revision was aimed at curbing “pretexting” by requiring a customer password before release of any “call detail information” over the telephone and by requiring that a notice be sent to the FCC within five business days if a breach of the rules occurs. The agency also required carriers to provide it with an annual certification, signed by an officer of the company, stating personal knowledge that the company has adequate procedures in place to comply with FCC CPNI rules. The 2008 certification is due on March 1, 2008.
The FCC was active in 2007 in enforcing its CPNI rules. The agency issued several “notices of apparent liability” (“NALs”) against carriers who had either failed to file the required certification or had submitted inadequate compliance plans. Each of these came with the standard $100,000 penalty. AT&T was among the many companies to receive NALs or enter into Consent Decrees in connection with CPNI in 2007, as were many smaller companies.
Carriers filing CPNI certifications for the first time should be aware that the FCC may also check them against prior filings, or other filings such as the universal service Form 499A. For example, Liberty Phones, Inc., filed a CPNI certification in 2007 and, from that filing, the FCC determined that the company had not previously complied with the obligation to file Form 499A, nor had it made the various payments associated with the form (USF, LNP, TRS). The company further compounded the problem by failing to respond promptly to the FCC’s questions about its past practices. As a result, the agency issued an NAL against Liberty in the amount of $20,000, which will not include any penalties or interest for failure to pay other fees.
In response to the FCC’s stricter rules, Verizon has imposed new requirements of its own on carriers purchasing certain services from it. Specifically, Verizon is now seeking an “Agreement to Protect CPNI” and a “Designation of CPNI Authorizers” form. These documents apply to all CPNI, even though the FCC’s new rules focused on “call detail information” rather than all customer information. Further, Verizon requests this information even for customers who are served by a dedicated account team, despite the fact that customers with dedicated account teams are not subject to the same FCC requirements. In effect, Verizon is using a “belt and suspenders” approach to ensuring CPNI compliance.
The Battle of the Forbearance Petitions on Access Charges
Another area which has been active in prior years and will continue to be so in 2008 is the filing of “Forbearance Petitions” with the FCC. The Telecom Act created these petitions as a way to permit filers to request deregulation from the FCC. The attraction of these Petitions, however, is that the law requires the FCC to act on them within 12 months (with one possible 90 day extension) or the Petition is automatically “deemed granted.” Since many other types of requests often languish at the FCC for years, a Petition for Forbearance is a way to get a request addressed within a set timeframe.
The most recent such Petition was filed by Embarq, the company created from the former Sprint ILECs. The Embarq Petition represents yet another volley in the battle over the application of access charges to interconnected VoIP calling. Embarq asks that the FCC forbear from applying to VoIP calls the enhanced service provider exemption from paying access charges. The exemption was created many years ago to nurture and encourage the development of enhanced (aka information) services by excluding them from per minute access charges which would drive up their cost and discourage usage. Those services thus are terminated as local calls and pay only the local interconnection fee rather than interstate or intrastate access charges. VoIP providers classify themselves as enhanced service providers who qualify for this exemption. The ILECs disagree, claiming that interconnected VoIP is just another form of telephone service.
By filing its Petition, Embarq hopes to start the 12 month clock running on the FCC’s inaction on this topic. The issue of VoIP and access charges has been around for several years, with a number of federal court cases being held in abeyance awaiting FCC clarification on the issue. A similar – but opposite – Petition for Forbearance was filed by Feature Group IP in October. That Petition asks the FCC to forbear from applying certain sections of its rules and the Telecom Act to IP traffic, specifically those sections that require the payment of access charges on some VoIP calls. Feature Group IP tried to fashion its request narrowly, so as to make it more acceptable, but it is widely viewed as a potential precedent for all sorts of interconnected VoIP calls. Embarq has now submitted a Petition that is a direct opposite of that filed by Feature Group IP.
Presumably, these Petitions will force the FCC to take some action during 2008 on the issue of the application of access charges to interconnected VoIP traffic. One central issue in that regard – if the FCC finds that access charges should apply – is whether that ruling is made retroactive. Because the issue has gone on for so long, the liability from retroactive application of access charges would be crushing to some, maybe many
companies.
A U.S. Court of Appeals ruling in December of 2007 has questioned the FCC’s reasoning on retroactivity and vacated the FCC’s decision on the subject. The case involved the application of access charges to two types of prepaid cards that both were argued to be “information services” exempt from access. The FCC disagreed and found both types, “menu driven” and IP-transport, to be “telecommunications” subject to access fees. However, the agency went on to determine that its decision on IP-transport cards should be retroactive, while the ruling on menu driven cards should be prospective only. The Court of Appeals upheld the FCC’s retroactivity decision on IP-transport cards, but questioned its reasoning in not making the menu driven cards subject to retroactive application as well. As a result, the Court vacated the FCC decision which limited the application of access charges to menu driven cards to prospective usage only. This ruling may make it more difficult for the FCC to avoid retroactive application when it does get around to ruling on the application of access charges to interconnected VoIP, in the event the FCC concludes that access fees should apply to VoIP calls. IP
