United States: The FCC Takes A Seat At The Cyber-Regulation Table

The FCC recently slid up its chair to the fiscal feast that is cyber security and data breach regulation and took a hefty piece of the pie. In late October the FCC announced that it charged a record $10 million fine against two telecommunication companies after the telecoms reportedly posted the private information of nearly 300,000 people in a manner making the people eligible for identity theft. Taking a cue from the Federal Trade Commission ("FTC"), the FCC action was not based on any new set of concrete regulations or laws established to give organizations a minimum bar for data protection, but rather on existing FCC powers established under the Communications Act of 1934. The action serves as good warning not only to communications providers that the FCC will be examining data breaches and, more expressly, data storage issues, but also that in the absence of clear cybersecurity regulations, federal agencies will take an expansive view of their existing authority to address cybersecurity-related incidents involving companies subject to their jurisdiction.

For those unfamiliar with similar FTC actions, over the course of the past several years the FTC has asserted its authority to regulate the handling of consumers' sensitive personal information under the "unfair or deceptive acts or practices" prong of Section 5 of the Federal Trade Commission Act, the basic consumer protection statute enforced by the Commission.. Under Section 5, an act or practice is unfair if "it causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition." With over fifty of such actions under its belt, the FTC has taken the de facto lead on addressing cybersecurity data breaches. That authority has even been confirmed by the U.S. District Court of New Jersey in an action against Wyndham Hotels, a decision that is currently on appeal to the Third Circuit.

Similar to the FTC's response, the FCC's first foray into data beach regulation was born from its interpretation of its existing authority under the Communications Act of 1934 (the "Act"). Under the Act, the FCC is responsible for regulating interstate and international communications by radio, television, wire, satellite, and cable throughout the United States and its territories. Moreover, under § 503(b)(1) of the Act, the FCC is authorized to impose a forfeiture penalty against "any person who willfully or repeatedly fails to comply with any provision of the Act." As the FCC described in its Notice of Forfeiture, that is exactly what two companies did, YourTel America and TerraCom Inc., when they collected the data of up to 300,000 customers to determine eligibility for the FCC's low-income discount phone program, "Lifeline." In order to enroll, potential participants had to demonstrate eligibility by submitting personal information to the Companies, including the applicant's name, address, date of birth, social security number, and driver's license information. Between September 2012 and April 2013, the FCC alleges that applicants' information was stored on data servers that were publicly accessible via the Internet, a fact made known to the FCC after reporters from the Scripps Howard News Service advised the FCC that they were able to access at least 128,066 confidential records by using a simple Google search.

Acting under the authority provided by the Communications Act, as amended by the Telecommunications Act of 1996 , the FCC charged the Companies with violations of Sections 222(a) and 201(b) Under § 222(a), a carrier has a duty "to protect the confidentiality of proprietary information of, and relating to . . . customers." Similarly, § 201(b) makes it unlawful for a carrier to employ "unjust or unreasonable" data security practices related to its "practices," such as, in this case, holding customers' "proprietary information." Relying on the statutorily-inferred breadth Congress included as part of the Telecommunications Act of 1996, the Commission reasoned that "proprietary information" was to be interpreted "broadly to encompass all types of information that should not be exposed widely to the public, whether because that information is sensitive for economic reasons or for reasons of personal privacy." After concluding that that the information gathered by the Companies fell within the statutory protections of § 222(a), the FCC charged that the Companies violated:

  • § 222(a) for failing to protect the confidentiality of proprietary information that consumers provided for Lifeline enrollment;
  • § 201(b) for failing to employ reasonable data security methods to protect consumers' proprietary information;
  • § 201(b) for misrepresenting in their privacy policies that they employed reasonable security measures to protect customers' proprietary information; and
  • § 201(b) for failing to notify all affected customers.

The $10 million fine levied against the two companies as a result of these alleged violations is worth noting for several reasons:

  1. The FCC has adopted a broader interpretation of "customer" that would include protection of proprietary information even before an applicant becomes a subscriber. Now applicants, like subscribers, "have a reasonable expectation that the carrier will protect the confidentiality of the PI they provide as part of that transaction."
  2. Telecommunication providers could very well be subject to regulation by both the FCC and the FTC for data security breaches that may occur. Therefore, it is extremely important that they ensure that their cybersecurity efforts in protecting a customer's proprietary information are "just and reasonable" under the Act. In the absence of clear guidelines or regulations telling companies what exactly "reasonable" means, this is a challenge that will require providers to adopt and implement a clear data and information security (DAIS) program that enables them to defend the reasonableness of their security measures should a breach occur.
  3. When a breach does occur, providers must ensure that their incident response plans provide for timely notice to all consumers affected by a data breach and be responsive not only to federal requirements but to all individual state requirements, as appropriate.
  4. Telecommunication companies must ensure that their representations about security measures to protect customer proprietary information accurately reflect the security measures the provider has in place.

The FCC's foray into the world of cybersecurity regulation, along with a host of other federal regulatory agencies (the Federal Trade Commission, Securities and Exchange Commission, and Department of Justice), further underscores the lack of established regulations or laws capable of providing organizations a minimum bar for data protection. In that vacuum, agencies are scrambling to figure out what to do about cybersecurity and how to do it – a messy proposition. So, while industry regulators belly-up and find room at the data breach table, companies should take a solid look at their cybersecurity efforts and make sure their data and information security plans leave nothing on the table whetting those appetites.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
29 Nov 2017, Webinar, Los Angeles, United States

This webinar will cover issues that California employers must face when managing a remote workforce of employees who “telecommute” for work. Due to the growing number of employees that work from home, California employers must know how to manage this new remote workforce in order to offer competitive career opportunities for a new generation of employees, while also being careful not to violate the complex California employment laws that govern these work arrangements.

30 Nov 2017, Conference, Brussels, Belgium

The European Competition and Regulatory Law Review (CoRe), the Computer and Communications Industry Association (CCIA) and the Vrije Universiteit Brussel (VUB) are delighted to invite you to our joint conference discussing some of today’s most frequently asked questions: Does competition law enforcement require an update for online markets?

4 Dec 2017, Conference, Virginia, United States

The Government Contract Management Symposium (GCMS) is held annually by the National Contract Management Association (NCMA) in the Washington, DC metro area. Formerly intended for those in federal sector, it has grown to provide training for professionals in both government and industry contracting.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.