March 2009
Cable and Telecommunications Policy Newsletter
In This Issue
BROADBAND STIMULUS UPDATE
FCC BEGINS WORK ON BROADBAND PLAN; RENEWS USF HIGH COST DOCKET
COURT UPHOLDS FCC "OPT-IN" RULE FOR SHARING CUSTOMER DATA WITH CONTRACTORS
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Greetings!

My office is pleased to present the April 2009 issue of my Cable and Telecommunications Policy Newsletter.  This free newsletter provides analysis and opinion on issues facing the cable and telecommunications industry, focusing both on national and Minnesota-specific issues.  Feel free to pass it on to your colleagues or anyone you think may have an interest in the contents.  You can do so easily be clicking on the "Forward e-mail link" at the bottom of this e-mail.

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Tony Mendoza
 
FEDERAL BROADBAND STIMULUS UPDATE
 
The NTIA, RUS, and FCC held a series of public meetings regarding the broadband initiatives under the American Recovery and Reinvestment Act of 2009.  Video of all of the meetings is available on the new Broadband Technology Opportunities Program (BTOP) web site at http://www.ntia.doc.gov/broadbandgrants/meetings.html  In testimony to the U.S. House of Representatives Subcommittee on Communications, Technology, and the Internet Committee on Energy and Commerce on April 2, 2009, Mark Seifert, an official with the NTIA, stated that the agency would be issuing a Notice of Funds Availability (NOFA) within the next two months.  This document will "describe in detail how the application process will work, how [NTIA] will evaluate the applications, as well as how grantees will be held accountable, including requirements concerning progress reports and job creation measurements."  The first round of grants is expected to be released in Fall 2009.
  
 In his testimony, Mr. Seifert provided some additional insight on the kinds of projects NTIA hopes to fund through the BTOP program.  Mr. Seifert testified:
  
We anticipate receiving applications that will allow people who live in unserved and underserved areas to work online at speeds that permit videoconferencing. We hope to see applications that propose to make broadband available for smart grid technology and health information technology applications. We want applications that will provide researchers and scientists at universities and other institutions the broadband connectivity they need to compete with the rest of the world. Schools, universities, libraries, community centers, job training centers and hospitals are all community anchor institutions that need broadband connectivity. We view these grants as a test-bed or proof of concept for sustainable, viable, and scalable projects. For example, we encourage partnerships between small businesses, municipalities, and others that may demonstrate nontraditional but effective ways of getting broadband into communities. These grants will not be just for large companies. When the economy recovers, these projects should show future investors the way forward. By spending $4.7 billion on projects that are tested and scalable, we will be taking one step closer to realizing President's Obama's vision of a 21st Century communications infrastructure for everyone in America.
 
 The phrase "proof of concept" was also used at a panel discussion at the NCTA Cable Show in Washington, D.C. last week.  Blair Levin, a telecommunications analyst with Stifel Nicolaus, and an advisor to the Obama Administration on communications policy issues, also surmised that BTOP dollars would be used to fund "demonstration projects."  This could signal a willingness on the part of the Obama Administration to put BTOP dollars at risk for the purpose of funding demonstration projects.  However, Levin also stated at the Cable Show that he believed BTOP money would not go to areas where the private sector was already investing.  He opined that rural cable and telco interests should be more worried about BTOP funded programs than companies serving urban areas, such as Comcast.  Levin said he did not think the NTIA would necessarily limit BTOP funding only to "unserved" areas.


 
FCC BEGINS WORK ON NATIONAL BROADBAND PLAN; RENEWS UNIVERSAL SERVICE HIGH COST FUND PROCEEDING
 
The FCC announced yesterday that it has commenced work on a national broadband plan required under the American Recovery and Reinvestment Act of 2009.  A final plan is due to Congress by February 17, 2009.  The Recovery Act requires the FCC to explore several key elements of broadband deployment and use, and the in a Notice of Inquiry issued yesterday, it now seeks comment on the following issues:
  • The most effective and efficient ways to ensure broadband access for all Americans;
  • Strategies for achieving affordability and maximum utilization of broadband infrastructure and services;
  • Evaluation of the status of broadband deployment, including the progress of related grant programs; and
  • How to use broadband to advance consumer welfare, civic participation, public safety and homeland security, community development, health care delivery, energy independence and efficiency, education, worker training, private sector investment, entrepreneurial activity, job creation, and economic growth, and other national purposes.
On the same day, the FCC issued another Notice of Inquiry regarding the FCC's rules for determining the amount of support to be provided to states for non-rural carriers, such as Qwest.  Qwest has twice successfully appealed the FCC's rules for distributing fund to non-rural carriers to the 10th Circuit Court of Appeals.  The FCC has struggled to develop a non-rural high cost fund that it can support with record evidence on appeal.  The Telecommunications Act of 1996 requires the FCC's to develop "specific, predictable, and sufficient universal service support mechanisms.  The 1996 Act also requires that consumers on rural, insular, and high-cost areas have access to telecommunications services at rates "reasonably comparable to rates charged for similar services in urban areas."  The FCC has struggled to define the terms "reasonably comparable" and "sufficient."  The 10th Circuit has twice rejected the FCC's funding benchmark, holding in the second remand order that the FCC failed to empirically demonstrate a relationship between costs of service and rates.
 
Qwest argues that the FCC has relied to heavily in previous rulemaking efforts on the continued existence of implicit subsidies within its rate structure to achieve the goal of "reasonably comparable" rates.  Qwest argues these implicit subsidies have eroded due to competition.  Qwest has proposed that the FCC modify its non-rural support mechanism to target support at the highest-cost wire centers by reducing the FCC's current support benchmark to 125% of the national average urban rate, providing support to non-rural carriers whose costs exceed that rate benchmark.  Other parties have proposed alternative funding formulae.  The FCC seeks to refresh the record and also seeks comment on whether it should integrate this proceeding with broader federal universal service reform and its national broadband plan.
D.C. CIRCUIT COURT OF APPEALS UPHOLDS FCC'S "OPT-IN" RULE FOR SHARING CUSTOMER DATA WITH JOINT VENTURE PARTNERS AND CONTRACTORS
 
The United States Court of Appeals for the District of Columbia last month upheld an FCC rule requiring telecommunications carriers to obtain "opt-in" consent before sharing customer data with a carrier's joint venture partner or independent contractor.  The FCC modified its previous "opt-out" rule with respect to customer data shared with joint venture partners and contractors in response to the Telephone Records and Privacy Protection Act of 2006.  In passing this law, Congress documented problems with the practice known as "pretexting," as well as problems with unauthorized selling or transferring of consumer data by "data brokers" or "dishonest company insiders," and the knowing purchase or receipt of fraudulently obtained consumer data.
 
The FCC uses an "opt-out" rule for data sharing among affiliate companies.  The FCC distinguished the treatment of affiliates from joint venture partners and contractors for two reasons.  First, the FCC found that information shared with third party non-affiliated companies is at greater risk of loss once it is out of the control of the carrier.  Second, the FCC found that third party joint venture partners and contractors would likely not be subject to the same laws that protect the confidentiality of customer data in the possession of telecommunications carriers, because the joint venture partners and contractors are often not telecommunications carriers.
 
The D.C. Circuit rejected the argument that the FCC should have supported its opt-in rule with actual evidence that joint venture partners or contractors have ever disclosed confidential customer data to others.  The Court held that this argument attempted to divert attention from the fact that the carrier's sharing of customer information with a joint venture or contractor was itself an invasion of privacy, as distinguished from what the third party contractor did with the information after receipt.  The Court also held that the risk of unauthorized disclosure increases with the number of entities possessing it.