United States: Communictions Law Bulletin-March 2004

The Month in Brief

This issue of our Bulletin goes to press before the month is over, but March already has brought a number of developments that affect the communications sector of our economy. Perhaps the most important of these events is the rejection, by a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit, of key provisions of the Federal Communications Commission ("FCC" or "Commission") rules governing the availability of incumbent telephone company network elements for use by competing companies. Also, on the broadcast side of the communications sector, the FCC and Congress continued to emphasize their campaigns against indecency.

These and other news items are discussed below. As always, we also provide a list of deadlines for your calendar.

Appellate Court Strikes Down Significant Portions of Triennial Review Order

On March 2, 2004, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit, in a harshly worded opinion, struck down significant portions of the FCC's Triennial Review Order ("TRO"). The swiftness of the decision, issued only five weeks after oral argument, reflected the obvious displeasure with the TRO expressed by the court at the argument. The court blasted the FCC for its "failure, after eight years, to develop lawful unbundling rules, and its apparent unwillingness to adhere to prior judicial rulings."

The FCC had made nationwide provisional findings in the TRO that competitive local exchange carriers ("CLECs") will be "impaired" in competing with incumbent local exchange carriers ("ILECs") in the mass local services market if they do not have access to ILEC local switching and dedicated transport facilities. The FCC had delegated to the state public utilities commissions, however, its authority to conduct more "granular" impairment analyses - i.e., whether the FCC's national findings should be revised in specific geographic markets. The court held that Congress had not authorized the FCC to delegate its power to make such "crucial decisions" to the states and vacated the FCC's unlawful "attempted punt" of its authority. Without the "safety valve" of delegated state impairment determinations, the court also found that the FCC's national impairment findings as to switching and transport unbundled network elements ("UNEs") must be vacated because, as the FCC conceded in the TRO, they are not sufficiently market-specific without the possibility of variations among the states. The court also struck down other aspects of the FCC's unbundling rules.

The court stayed its decision as to the portions of the TRO that it vacated until the denial of any petition for rehearing by the court or May 3, whichever is later. The stark divisions within the FCC on the disputed issues immediately reappeared, with Chairman Powell announcing on the same day as the decision that he has instructed the staff to begin working on revised unbundling rules that will pass muster, while the three Commissioners who voted for the TRO announced that they have instructed the FCC's General Counsel to seek a stay and to appeal the decision to the Supreme Court. The National Association of Regulatory Utility Commissioners ("NARUC"), as well as AT&T and MCI, also announced that they will appeal the decision.

The high stakes involved and the split within the FCC have spurred an unusually frantic lobbying effort, on both sides, to influence the decision of Solicitor General Theodore Olson as to whether the Department of Justice will support an appeal of the D.C. Circuit ruling to the Supreme Court. NARUC has asked the Bush Administration and the Congressional leadership to support an immediate appeal, although several state PUC commissioners broke ranks to urge in a letter to the Solicitor General not to appeal the ruling. Bipartisan letters urging the Justice Department to appeal the ruling were sent on March 11 by the House Judiciary Committee leadership and on March 16 by the current and next year's likely Senate Commerce Committee leadership. The March 16 letter also requests the Justice Department to seek a stay of the ruling prior to May 3. On March 17, the House Commerce Committee leadership of both parties urged Solicitor General Olson not to appeal the ruling. Nearly 130 members of the House have written to President Bush also requesting the Administration not to appeal. On March 17, a group of 12 economists urged the Administration to appeal, and the Consumer Federation of America and 29 other consumer groups wrote to FCC Chairman Powell urging an appeal by the FCC.

The state commissions also are divided as to what to do about their ongoing impairment proceedings in the wake of the court's overturning of the FCC's delegation of authority. At least 14 of the 42 state commissions conducting impairment proceedings have halted them because of the court's ruling. The New York and Michigan Public Service Commissions, among others, however, have decided to continue gathering relevant factual information because that information will be necessary no matter which body or bodies will make the ultimate impairment decisions. Similarly, a California Public Utilities Commission ("CPUC") administrative law judge denied a Verizon motion to halt the CPUC's TRO proceeding because the D.C. Circuit ruling is still stayed and may be reversed. On March 8 and 9, FCC Commissioners Martin and Copps, two of the three Commissioners supporting the TRO, urged state regulators attending a NARUC meeting to continue their impairment proceedings for the same reason.

In his comments at the NARUC meeting, Commissioner Copps stated that it is "highly unlikely" that the FCC could take comments and write interim unbundling rules that would satisfy the court's objections by May 3. He said that if the court's decision is not modified or stayed after May 3, "the state commissions will really step into the spotlight" because the interconnection agreements between the ILECs and CLECs govern until revised. He noted that the court's decision may trigger change-of-law provisions in those agreements, "and the states will have to interpret those provisions," contract by contract. Counsel for the CLECs have expressed similar views, pointing out that, in the absence of FCC rules, the states have direct authority under the statute to apply their own interpretations of the unbundling requirements.

The ILECs take the position that, in the absence of a stay after May 3, they will no longer be required to offer local switching and dedicated transport UNEs to CLECs. On March 3, SBC proposed to open negotiations with AT&T, MCI, and the 2,500 other CLECs on new wholesale rates to replace the regulated rates for "UNE-P" combinations, which are leased combinations of the local loop, local switching, and shared transport UNEs. SBC offered to continue the current UNE-P rates for 90 days to allow sufficient time for these negotiations. AT&T and MCI both immediately rejected the offer as confirmation of the ILECs' anticompetitive intent. In his comments to the NARUC meeting on March 10, Chairman Powell appeared to support the ILECs' approach by suggesting that the industry "work earnestly to arrive at commercially negotiated" UNE terms for 30 days, but, if those talks are not successful, he proposed to "work with my colleagues to craft an 18 month moratorium and transition to protect existing UNE-P customers from sudden changes in their service" as well as permanent rules that are "judicially sustainable." CLEC representatives immediately criticized Powell's statement as a call for surrender to the ILECs and questioned his role as a neutral decision-maker, while the ILECs echoed his call for negotiations.

Some of the provisions of the TRO that were upheld on appeal also remain contentious, such as the FCC's decision to eliminate the "line-sharing" requirements, under which CLECs had been able to obtain access to the high-frequency portion of an ILEC local subscriber line. The Consumer Federation of America asked the FCC, in a February 19 letter, to stay the elimination of line sharing and investigate why commercial negotiations have not provided an adequate substitute for those requirements.

In yet another settlement showing the seriousness with which the FCC regards slamming and avoidance of universal service payment obligations, Business Options, Inc. and related companies ("BOI") entered into a Consent Decree with the FCC agreeing to pay $1.28 million to resolve unpaid federal universal service fund payments and to end an investigation of the companies' slamming and other violations of the Telecommunications Act. If BOI had been found guilty, it might have lost its common carrier operating authority.

The FCC Enforcement Bureau initiated action against BOI on April 7, 2003, ordering BOI to show cause why its operating authority should not be revoked and its principals should not be ordered to cease and desist from the provision of interstate common carrier service. The Order to Show Cause initiated an evidentiary hearing to determine whether BOI had (i) changed customers' preferred carrier without prior authorization (that is, engaged in slamming) in willful and repeated violation of the Act; (ii) failed to file FCC Form 499-A in order to provide certain registration information to the FCC; (iii) failed to make required contributions to federal universal service support programs, as well as required contributions to the Telecommunications Relay Services Fund ("TRS Fund"); (iv) discontinued telecommunications services without prior FCC authorization in willful and repeated violation of the Act; and (v) engaged in a misleading and continuous marketing campaign.

The presiding officer granted the Commission's motion for partial summary decision, finding that BOI had indeed changed customers' preferred carriers on 16 occasions without following the Commission's verification procedures. The presiding officer also found that BOI failed to file its FCC Form 499-A, discontinued service to customers in Vermont without authority, repeatedly and willfully failed to make required contributions to federal universal service support programs, repeatedly and willfully failed to make required TRS Fund contributions, and willfully and repeatedly failed to file Telecommunications Reporting Worksheets in a timely manner.

According to the terms of the Consent Decree, in addition to paying the past-due federal universal service fund obligations of $772,659 24 equal monthly installments, BOI is required to make voluntary contributions totaling $510,000 48 months. The Consent Decree also requires BOI to comply with the registration requirements set forth in the Commission's rules and to verify all new customers utilizing an appropriately qualified, independent third party. BOI agreed to file its quarterly and annual Telecommunications Reporting Worksheets on or before stated due dates, to make its TRS Fund contributions on or before the due dates set forth in the invoices from the National Exchange Carrier Association ("NECA"), and to pay all past-due TRS Fund contributions.

The Maine Public Utilities Commission ("PUC") is also investigating BOI for these violations. Maine PUC Staff has requested that the PUC assess an administrative penalty of $750,000 and revoke BOI's certificate to operate in Maine. The Staff has also requested that the PUC refer the matter to the Maine Attorney General's Office for possible criminal prosecution.

In an unusual move, the Commission granted a waiver of the local television multiple ownership rules to permit one entity to own two television stations in the Miami-Ft. Lauderdale Designated Marketing Area ("DMA"). The rule provides that the same entity may own or control two television stations with overlapping Grade B contours in the same market only when at least one of the stations is not ranked among the top four stations in audience rankings in the DMA and at least eight independently owned and operating full-power television stations would remain in the market after the proposed acquisition. Despite the fact that the acquisition would not have left eight independently owned and operating television stations in the Miami DMA, the Commission granted a failing station waiver.

A failing station waiver will be granted when: (a) one of the merging stations has a low all-day audience share (i.e., 4 percent or lower); (b) the financial condition of one of the merging stations is poor; (c) the merger will produce public interest benefits; and (d) the in-market buyer is the only reasonably available candidate willing and able to acquire and operate the station, and selling the station to an out-of-market buyer would result in an artificially depressed price. The Commission found that all of the criteria were met. In particular, it found that the proposed assignee would replace infomercials with local, live, prime-time Spanish-language programming. The Commission also found support in the fact that the combination of the two stations would be the only way for either station to compete against the larger Spanish-language stations in the DMA.

Broadcast indecency continues to receive considerable attention from Congress and the Commission. In response, the industry continues to take action. Although Congress has yet to enact indecency legislation, it is moving steadily in that direction, and it is clear that broadcasters will be subject to much harsher penalties in the very near future. On March 19, the FCC announced a new standard for indecent and profane speech that overrules prior precedent on fleeting utterances of specific words. In addition, it is likely that violent content and cable and satellite programming will soon come under additional regulatory scrutiny.

On March 11, by a vote of 391-22-1, the House passed HR 3717, the Broadcast Decency Enforcement Act of 2004. The bill would increase the minimum fine for indecent programming from $275,000 to $500,000 per violation with no maximum fine set for an entire incident. Individual performers and networks would be subject to the fines. Currently performers are subject to an $11,000 fine (which has never been imposed). In addition, the FCC would be required to hold hearings on revocation of a broadcast license after three indecency violations. Violators could be required to air educational public service announcements. Local television stations not owned by a network would be exempt from fines if the indecent incident was a live show or a recorded network program that the broadcaster did not have sufficient time to review in advance. The Commission would be required to act on indecency complaints within 180 days. The White House has indicated its support for the bill.

The Senate Commerce Committee approved companion legislation, S 2056, on March 9. The Senate bill proposes fines of $275,000 for a first violation, $375,000 for a second, and $500,000 for a third, with a $3 million maximum for repeated violations in a single 24 hour period. After three strikes, the Commission would have to hold a revocation hearing. On-air talent could be fined for intentional or willful use of an obscenity. Fines will double in certain circumstances, depending upon whether the material was scripted or recorded; whether the broadcaster could have reviewed and blocked the material; whether the audience was larger than usual (such as in the case of a sporting event or awards show); and whether the violation occurred during children's programming. The Commission could take into account the broadcaster's size before issuing a fine that could force a station off the air. The Senate bill also would preserve the old ownership rules pending a study examining the connection between indecency and media consolidation. The Commission would have nine months to issue a notice of apparent liability and another nine months to resolve an indecency complaint. The bill requires the Commission to study the effectiveness of the V-Chip and, if it finds it to be ineffective, to regulate the distribution of violent programming during times when children are in the audience. Although the bill does not limit indecent programming on satellite or cable, the limitation on violent content would extend to cable and satellite.

In addition, Senator Miller of Georgia introduced S 2147 on March 1. This bill proposes to change the forfeiture penalty to 25 cents per viewer or listener of the broadcast as determined by a viewership rating service selected by the Commission. In addition, Senator Miller's bill proposes the establishment of a Council of Decency, comprising of three individuals each from the ministry, the television and broadcast industry, and teachers of primary or secondary education. The Council would advise the Commission on standards of decency.

Although none of the currently proposed legislation would extend the existing indecency law to cable or satellite, Representative Barton, the new Chairman of the House Energy and Commerce Committee, has indicated that his committee might examine indecency on cable and satellite next year. In particular, he suggested an examination of cable programming tiers and a requirement that indecent content be included only in add-on programming. Commissioner Martin indicated in a speech at the Satellite Finance 2004 conference that Direct Broadcast Satellite ("DBS") was more like an over-the-air broadcaster than a cable operator, and thus, is subject to the statutory ban on the broadcast of obscene, indecent, and profane language. Senate Commerce Committee Chairman McCain has indicated publicly that the Commission, not Congress, should enforce community standards on indecent broadcasts.

The Commission has released a number of indecency rulings in recent weeks, including a notable decision released March 19 in the Golden Globes Awards case in which the FCC announced a new standard for indecency and profanity arising out of the airing by NBC of a single utterance of the F-word by rock star Bono in a live broadcast of the awards program. Although the Commission recognized that the broadcast was permitted under its existing precedent, it nevertheless ruled that the utterance was both indecent and profane. In so holding, the Commission expressly overruled its precedent holding that isolated and fleeting uses of the F-word in situations such as this are not indecent. The decision thus appears to create a "per se" standard prohibiting the use of the F-word in broadcasts. The Commission also ruled that the statutory prohibition on profane speech was not limited to blasphemy, as in earlier decisions, but also included "vulgar and coarse language," such as the F-word. Because the Commission's own precedent permitted the broadcast at issue, however, the FCC did not impose a fine on NBC or any of the NBC affiliates that broadcast the program, and stated that the ruling would not be required to be reported on renewal applications and would not be considered in reviewing renewal applications. Also on March 19, the Commission issued Notices of Apparent Liability to Infinity Broadcasting in the amount of $27,500 for utterances made by Howard Stern on a Detroit station in 2001 and to Capstar, a Clear Channel subsidiary, in the amount of $55,000 for material broadcast on two Florida radio stations.

Prior to the March 19 rulings, the FCC had refused to reconsider a $27,500 fine assessed against Infinity for an incident on a Detroit radio station in December 2003, and the Commission had issued another fine against Clear Channel. Finding that a radio broadcast included graphic and explicit references to sexual activity to which no non-sexual meaning could be attributed, and that the language was used to pander, to titillate, and shock listeners, the Commission fined the company $247,500. As threatened in other recent orders, the Commission found that because the segment was broadcast three times each on three separate stations, there was a total of nine violations.

Chairman Powell has stated that the Commission will consider indecency violations when renewing a broadcaster's license, even prior to any new legislation being adopted. He also raised concern about a number of items contained in both the House and Senate bills that could cause litigation: the three-strikes provision and the hold on media ownership rules. He also has indicated some concern over the affect of new indecency legislation on the First Amendment.

The cable television industry recently announced a consumer education campaign to include a website, public service announcements, and media literacy workshops to help educate parents about the tools available to them to manage the programming coming into their homes.

In response to the recent indecency furor, Clear Channel Communications fired Todd Clem, otherwise known as Bubba the Love Sponge, whose broadcasts resulted in a $755,000 fine (see the February 26, 2004 edition of the Communications Law Bulletin) and suspended Howard Stern's program from all six of its stations that carried the show. Clear Channel paid the fine without protest. In addition, Clear Channel instituted a zero-tolerance policy and has plans to modify its contracts to make on-air talent financially responsible for any fines.

Viacom Inc. has also instituted a zero-tolerance policy, but Senator Brownback has asked how that policy affects its Infinity Broadcasting radio operations division's broadcasts of Howard Stern. According to a study released by the Center for Public Integrity, Howard Stern's program has accounted for half the $3.95 million in broadcast indecency fines assessed by the FCC since 1990.

On February 19, the Commission's Media Bureau issued a public notice asking for comment on whether the enactment of the 39% national cap affects its authority to modify or eliminate the UHF discount. The discount counts the audience reach of UHF stations as half of that for VHF stations in applying the Commission's national television ownership rules. Comments were due on March 19, and reply comments are due on March 29. Commissioners Copps and Adelstein criticized FCC staffers for this move, stating that "[w]ith an issue of this import, it appears to us to be a highly unusual and irregular step for the staff to take without input from members of the Commission. The timing of this move -- coming little more than a week after the oral argument in this case coupled with an immediate communication from the FCC General Counsel to the Third Circuit seeking to hold the issue in abeyance based on the staff Public Notice -- may lead to questions of whether this is an attempt to avoid a substantive court decision on an apparent weakness and inconsistency in the June 2nd media ownership order."

The Senate Commerce Committee has passed indecency legislation which includes a measure preserving the prior media ownership rules until completion of a study examining the relationship between indecency and media consolidation. The House refused to include such language in its indecency legislation. (Please see article above concerning reaction to the Golden Globe Awards case.)

The Federal-State Joint Board on Universal Service ("Joint Board") has recommended that the FCC limit high-cost universal service support that eligible telecommunications carriers, or "ETCs," may receive to one line connected to the public switched telephone network per customer. The Joint Board stated that such a limitation is needed to preserve the Universal Service Fund. Limiting universal service support to one line per customer is a dramatic shift from the current practice of allocating support to all carriers that qualify for ETC status.

In addition to the primary line restriction, the Joint Board also recommended that the FCC adopt "permissive" federal guidelines for states to follow when considering petitions for ETC status and cap high-cost support in areas served by rural carriers on a per-line basis where a competitive carrier is designated as an ETC. The Joint Board did not recommend that the FCC modify the methodology used to calculate support in areas in which multiple ETCs exist. Rather, it stated that such an evaluation should be part of an overall review of the high-cost support mechanism.

If this recommendation is adopted, competitive ETCs potentially face the loss of substantial universal service funding. Moreover, the recommendations of the Joint Board may impose a higher burden on those seeking ETC status. In the past, the FCC has more often than not accepted the recommendations of the Joint Board. Accordingly, a battle now looms between incumbent carriers, which receive the bulk of universal service support, and competitive wireline and wireless carriers to sway the FCC towards their positions.

The FCC recently released the text of the notice of proposed rulemaking ("NPRM") that it adopted at its February Open Meeting seeking comment on the regulation of Internet Protocol ("IP")-enabled services. (We reported on the Open Meeting item in last month's Bulletin.) The NPRM's questions implicate nearly all segments of the communications industry, including but not limited to, traditional wireline and wireless carriers, satellite service providers, providers of cable, pay-per-call, international, and broadband services and services to rural and underserved areas.

Although commercial IP services -- including Internet access -- were first deployed in the early to mid-1990s, there was no significant pressure to regulate those services until the advent of voice-over-IP ("VOIP") services. The FCC, however, does not limit the NPRM to VOIP technology. Rather, it seeks comment on the current and future impact of all IP-enabled services on the communications market, including all of the voice, video, and data services that rely on the Internet Protocol. The NPRM specifically recognizes that the various IP-enabled services must be differentiated for purposes of regulation and notes that such regulation, if any, would be minimal. Although the NPRM states that the FCC is not prejudging these issues, the document gives the impression that it will impose some regulation on those VOIP services that most closely resemble traditional voice telephone services.

The NPRM asks many complex questions that will require in-depth analysis of the FCC's current rules for wireline, wireless, satellite, and cable providers. The NPRM seeks comment on a wide range of issues, including:

• How to differentiate and categorize IP-enabled services;

• The jurisdictional nature of IP-enabled services (e.g., intrastate, interstate);

• Whether IP-enabled services should be classified under the statutory categories of "telecommunications services" or "information services";

• Whether IP-enabled services should be regulated under Title I, Title II and/or Title VI of the Communications Act, and whether such services provided over wireless devices should be treated differently from other IP-enabled services;

• Whether any IP-enabled services should be subject to the FCC's 911 and E911 and disability access requirements;

• Whether VOIP and other IP-enabled services should be subject to the FCC's access charge regime;

• Whether IP-enabled services should contribute to the universal service fund;

• Whether other FCC rules should apply to IP-enabled services, including rules regarding customer information, slamming, truth-in-billing, and interconnection; and

• Whether regulation of IP-enabled services will impact international settlement rates and foreign policy or trade issues.

The FCC also initiated a separate rulemaking regarding the application of the Communications Assistance for Law Enforcement Act ("CALEA") to IP-enabled services, in response to a petition for rulemaking filed by the Department of Justice and other law enforcement agencies. The CALEA rulemaking is described in further detail in a separate Bulletin article.

The FCC clearly expressed its intent to apply a light regulatory hand to IP-enabled services. The NPRM brings the number of inquiries based upon IP technology pending at the FCC to seven, joining petitions filed by AT&T, Level 3 Communications, Vonage, SBC Communications, Inflexion, and the Department of Justice. One FCC official indicated that the rulemaking is on a fast track and that the FCC may decide the questions and issues raised in the NPRM and other inquiries in a piecemeal fashion, rather than issuing a large omnibus order a couple of years from now. Another FCC official also has indicated that the FCC will soon deny AT&T's petition for a declaratory ruling that its VOIP service is not subject to access charges. The AT&T decision, however, may not address whether access charges can be retroactively assessed on VOIP providers.

The communications industry also must closely watch the Hill, where the battle over regulating VOIP also is being fought. Specifically, the Senate Committee on Commerce, Science and Transportation recently held a hearing to consider VOIP services, which was the first in a series of hearings that will consider the assumptions upon which the Telecommunications Act of 1996 was based. FCC Chairman Powell, the president of NARUC, and multiple representatives from the telecommunications industry and VOIP providers testified at the hearing.

Although Senate committee members raised a number of issues regarding VOIP technology, the overriding issues they raised concerned whether VOIP providers should be required to provide E911 services, provide access to persons with disabilities, pay access charges, and comply with the CALEA. Whether the Communications Act as currently written allows the imposition of such regulations on VOIP providers also was discussed at the hearing.

Chairman Powell testified that the Communications Act does not currently provide an adequate framework for the regulation of VOIP services because it does not allow regulation of such services to be "harmonized" with regulation of other, fundamentally similar services. He endorsed amending the Communications Act to recognize the dramatic technological changes that are occurring in the communications industry. Powell stated that certain social and security policies must be retained, "paramount among them [] universal service, 911, law enforcement and disability rights." Powell argued that a "light-touch" regulatory environment was necessary to ensure that these policies continue to be served without unnecessarily stifling innovation. Powell also stated that although imposing regulatory obligations such as E911 on VOIP providers may seem difficult, on-going technological developments will likely make these obligations easier to meet.

Inflexion Communications recently joined the myriad of IP-related petitions and proceedings pending before the FCC. Specifically, Inflexion seeks a declaratory ruling that the VOIP services it provides to underserved markets are exempt from the FCC's access charge regime. It is clear from the scope of IP-related petitions currently being considered by the FCC that the VOIP and other IP-enabled services available in the marketplace widely differ. Accordingly, it may be necessary for many, if not most, VOIP providers to similarly seek FCC guidance regarding the regulations that may apply to their unique service offerings.

Inflexion's petition claims that imposing access charges on VOIP providers would prevent them from deploying services to rural and underserved areas, where the need for such services is greatest. Inflexion also argues that such regulation would be "counterproductive with respect to achieving universal service and serving the public interest." According to the petition, imposing access charges on VOIP services presents an untenable choice for VOIP providers – they can either deploy a network entirely separate from the incumbent's network (which is extremely costly), or pay access charges for the use of the incumbent's networks (which drives the prices of such services up and removes the value that may be provided by the competitor). Inflexion also argued that imposition of access charges could threaten the very viability of the Internet.

At its March Open Meeting, the FCC adopted an order amending its International Settlements Policy ("ISP"), which should provide U.S. carriers more flexibility when negotiating commercial agreements with foreign carriers. The ISP requires: (1) equal division of the accounting rate between the U.S. and the foreign carrier; (2) nondiscriminatory treatment of U.S. carriers; and (3) proportionate return of inbound traffic. The FCC concluded that the international telecommunications market has become more competitive and that many U.S.-international routes were at or below the benchmark rates. Accordingly, the FCC exempted international routes that are benchmark-compliant from the ISP's requirements, which will significantly expand the number of routes exempt from the ISP. (In the past, 50% of traffic on a route had to be 25% below the benchmark in order to be exempt from the ISP.)

The FCC's order also maintained competitive safeguards on all U.S.-international routes so that U.S. consumers remain protected on all routes. The current international benchmark policies also are retained, subject to future evaluation by the FCC. The impact of the FCC's decision on the FCC's International Simple Resale ("ISR") and other rules will become more clear when the text of the FCC's order is released.

The FCC also announced that it will initiate a Notice of Inquiry ("NOI") to investigate whether high foreign mobile termination rates are adversely impacting competition and U.S. consumers. The FCC stated that it has not prejudged the issue, and Commissioners Abernathy and Martin remarked that they hoped the market would remedy foreign mobile termination rates so that FCC intervention would be unnecessary. The NOI additionally provides U.S. carriers with leverage to encourage foreign regulators to address the issue of mobile termination rates.

VOIP service providers operating in the United Kingdom and Canada will have an opportunity to influence VOIP regulations in those nations. Federal communications regulators in the U.K. recently requested comment on how to regulate VOIP, and it is anticipated that regulators in Canada will soon do the same.

The U.K. Office of Communications ("OFCOM") requested comment on how to accomplish numbering for voice-over-broadband ("VoB"). OFCOM has proposed changes to the National Telephone Numbering Plan ("NTNP") in which VoB services would be assigned numbers in the 056 range. The regulator also seeks comment on whether geographic numbers are appropriate for VoB. Comments regarding the proposed modifications to the NTNP are due by March 24, and May 4 is the due date for comments on the assignment of geographic numbers for VoB.

The Canadian Radio-television and Telecommunications Commission ("CRTC") also expects to determine this year how it will regulate VOIP services. The central issue will be whether VOIP calls should be regulated like conventional phone service. It is expected that the CRTC will also request comment on whether it should require VOIP providers to comply with E911 requirements. However, unlike OFCOM, the CRTC has not yet announced a formal comment cycle for these issues.

Opponents of the do-not-call ("DNC") list received a boost recently when the American Teleservices Association ("ATA") announced that it would appeal the recent Tenth Circuit DNC list ruling to the United States Supreme Court. ATA Director Tim Searcy stated that the Tenth Circuit Court decision demonstrates that commercial speech is "under attack." ATA favors regulations that would permit consumers to place their phone numbers on company-specific DNC lists. ATA has 90 days from February 17, the date of the Tenth Circuit decision, to file its appeal.

The Tenth Circuit decision reversed two earlier federal district court rulings that were favorable to opponents of the DNC list. A Colorado federal district court held that the DNC list violated the First Amendment, and an Oklahoma federal district court held that the Federal Trade Commission ("FTC") lacked the authority to institute no-call rules.

The Direct Marketing Association ("DMA"), a plaintiff in the Colorado federal district court case, has indicated that it will not appeal the Tenth Circuit ruling. Instead, it will work with the FCC and FTC to correct what it views as flaws in the implementation of the DNC list. Specifically, DMA is concerned with the lack of privacy safeguards that exist on the online registration for the DNC list.

The FCC has asked for comment on a number of questions posed by the sending of commercial electronic mail ("spam") and telemarketing calls to wireless telephone customers.

On the spam side, the CAN-SPAM Act of 2003 requires the Commission to adopt rules that protect users from delivery of unwanted commercial emails to mobile telephones. Accordingly, the Commission seeks comment on several issues, including:

• The ability of senders to determine whether a message is a mobile commercial electronic mail message and methods to enable the sender to make this determination; for instance, whether there should be a list of, or standard naming convention for domain names, or an individual registry of e-mail addresses. Another area for comment is that of automatic challenge-response mechanisms that alert senders they are sending their message to such a subscriber.

• How to provide subscribers with the ability to avoid receiving mobile service commercial messages sent without the subscribers' prior consent, and how to indicate electronically a desire not to receive future mobile service commercial messages from specific senders.

• Whether commercial cellular providers should be exempted from having to obtain express prior authorization before sending a commercial message to their customers.

• How senders can comply with the Act in general, given the unique technical limitations, particularly message-length limitations and the information required to be included in messages by the Act.

On the telemarketing side, the Telephone Consumer Protection Act ("TCPA") restricts the use of autodialers or prerecorded messages to call wireless telephones, pagers, or any service that charges the called party for calls received. It is unclear, however, how telemarketers can ensure that numbers to which they place calls do not fall within these categories. The problem is exacerbated by wireless local number portability, which permits customers to transfer their wireline telephone numbers to their wireless service accounts.

In response to this problem, the FCC is seeking comment on a "safe harbor" that will permit the use of autodialers and prerecorded voices to call numbers that have recently been transferred to wireless accounts.

On a telemarketing issue that is not confined to wireless calling, the Commission also asks for comment on a proposal to require telemarketers to consult the national do-not-call registry, and purge telephone numbers from their calling lists accordingly, every 30 days rather than each quarter as required by the current FTC" rules. The proposed FCC change will bring the Commission's regulations into conformity with a comparable, proposed change to the FTC's rules.

The DOJ, FBI, and DEA (Agencies) filed with the FCC a joint petition for expedited rulemaking to address outstanding issues regarding implementation of CALEA. The FCC has indicated that it will respond expeditiously by initiating a rulemaking proceeding, which is expected to have broad impact on providers of broadband and other telecommunications services, such as packet-mode, voice-over-IP, cable modem, and push-to-talk wireless services. The rulemaking also will address CALEA packet-mode compliance issues and thus will have more immediate impact on carriers that offer packet-mode services but have not yet complied with CALEA requirements. Comments and reply comments on the rulemaking petition are due on April 12 and April 27, respectively.

In their petition, the Agencies asked the FCC to identify more precisely the types of services and entities that are subject to CALEA. Although many service providers have taken the position that they are not subject to CALEA requirements, the Agencies are seeking to cast a wide net over the types of services and providers that must comply with CALEA requirements. The Agencies also noted that CALEA implementation for packet-mode technologies has been largely unsuccessful and urged the FCC to adopt firm deadlines to phase in CALEA packet-mode compliance. Specifically, the Agencies proposed that the FCC issue a public notice that would (1) permit limited and conditional extensions for CALEA packet-mode compliance (not to exceed 15 months after the public notice date); (2) mandate the filing of progress reports; (3) specify interim benchmarks that must be met as a condition of obtaining an extension; (4) provide for strict enforcement of the benchmark conditions and compliance deadlines; and (5) adopt steep fines and penalties for non-compliance. Additionally, the Agencies asked the FCC to adopt rules to ensure compliance with future CALEA-covered technologies and procedures for enforcement action against those providers that fail to comply with their CALEA obligations. Finally, the Agencies asked the FCC to adopt rules that (1) confirm that carriers bear sole financial responsibility for CALEA implementation costs for post-January 1, 1995 equipment and services; and (2) prohibit carriers from passing through their CALEA implementation costs to law enforcement agencies.

The FCC submitted to Congress a report recommending the elimination of third-adjacent channel minimum distance separation requirements for low-power FM stations. If enacted, this proposal would facilitate greater deployment of low-power FM stations over the objections of full-service FM stations that have raised concerns regarding harmful interference. The FCC report concluded that low-power FM stations do not create a significant risk of interference to full-service FM stations or FM translator and booster stations operating on third-adjacent channels. Legislation is expected to be introduced to enact the FCC's recommendation.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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