You will find more information about the most significant items on the June meeting agenda after the break:

Securing the Communications Supply Chain – The NPRM and NOI would seek comment on a proposal to prohibit all future authorizations for equipment on the FCC’s Covered List under the Secure and Trusted Communications Act. The NPRM would seek comment on whether, and how, the FCC should revoke any current authorizations for equipment included on the Covered List, and if it should revise the rules to no longer permit exceptions for equipment authorizations on the Covered List. It would also propose to require participants in any upcoming FCC auctions to certify that their auction bids do not and will not rely on financial support from any entity that the agency has designated as a national security threat to the communications supply chain. The NOI would seek comment on how the FCC can leverage its equipment authorization program to encourage manufacturers to consider cybersecurity standards and guidelines when building devices that will connect to U.S. networks.

Modernizing Equipment Marketing and Importation – The Report and Order would adopt changes to the equipment authorization rules to allow expanded marketing and importation of radiofrequency (“RF”) devices prior to certification, with conditions. The Order would add a new condition to allow importation of up to 12,000 RF devices for certain pre-sale activities prior to authorization. It would additionally amend the FCC’s rules to allow conditional sales of RF devices prior to authorization, so long as those devices will not be delivered to consumers until they are authorized. The Order includes labeling, recordkeeping, and other conditions to ensure that RF devices are not sold or operated prior to equipment authorization.

Improving Emergency Alert Systems – The Report and Order and FNPRM would adopt the rule changes proposed in the FCC’s March 2021 NPRM to update the EAS and WEA systems rules, pursuant with the 2021 National Defense Authorization Act (“NDAA”) requirements. The Order would create a new category of non-optional “National Alerts,” combining WEA Presidential Alerts with FEMA Administrator Alerts, which may be nationally or regionally distributed. States would be encouraged to establish a state EAS plan checklist for State Emergency Communications Committees (“SECCs”), or otherwise establish an SECC if not already formed. This Report and Order would also enable FEMA to report false EAS and WEA alerts and to repeat certain EAS messages if necessary. The FNPRM would seek comment on whether to remove or refine certain EAS emergency event codes that are irrelevant or confusing, and on whether to update the EAS to include a more persistent display and notification of emergency messages for more severe events.

Implementing the TRACED Act – The Report and Order would establish rules pursuant to the TRACED Act to create a process that streamlines the ways in which a private entity may report robocalls or spoofed caller ID to the FCC. The Commission would create on online portal where private entities, meaning any entity other than an individual person or public entity, could submit suspected violations directly to the Enforcement Bureau. The Order clarifies that the new portal would not affect the existing consumer complaint process, and the agency will still use the consumer complaint portal for individual consumer complaints.

Connected Care Pilot Program – The Second Report and Order offers further guidance on the Commission’s Connected Care Pilot Program, including on the Pilot Program budget and administration, eligible services, competitive bidding instructions, invoicing, and data reporting for selected participants. Notably, the Order clarifies that the Pilot Program will reimburse network equipment purchases necessary to make both broadband and connected care information services functional, even if the Pilot Program is not directly supporting the costs of those services. The FCC announced earlier this year that an initial 23 applicants had been selected, with more selected applications to be announced at a later date, and selected applicants could begin the funding request process once this Report and Order becomes effective.

Click here to listen to this episode.

To start, here is the first resolution we suggested for the industry:

Resolution for Voice Service Providers: Resolve to reduce illegal robocalls. Voice service providers long have supported the FCC’s ongoing efforts to target bad actors sending illegal and fraudulent robocalls, but in 2021, each carrier should resolve to do its part individually in the battle to stop illegal calls. All voice service providers must implement the STIR/SHAKEN call authentication framework by June 30, 2021 and should develop an effective robocall mitigation program to prevent their customers from originating illegal robocalls. These changes are necessary to stay on the right side of the anti-robocall battle. Each voice service provider should resolve to make reducing illegal robocalls a top priority.

Background: 2020 marked a turning point in the number of requirements that voice service providers have in the battle against illegal robocalls. These include:

• STIR/SHAKEN Implementation Mandate

STIR/SHAKEN is an industry-developed framework designed to allow communications service providers to distinguish legitimate calls from illegally spoofed calls so that they can take steps to mitigate the illegal calls. STIR/SHAKEN utilizes an encrypted authentication and verification process that establishes a chain of trust between the calling party and the called party. In March 2020, the FCC required “voice service providers” (including intermediate providers) to implement STIR/SHAKEN in the IP portions of their network by June 30, 2021, while in October creating with some exceptions, most notably for small carriers (fewer than 100,000 voice lines), who receive a two-year extension of the deadline.

• Call Blocking Order

On December 30, the FCC released an Order requiring voice service providers to meet certain affirmative obligations and to better police their networks against illegal calls. These requirements include an obligation to notify callers when calls are blocked, to provide customers upon request with a list of calls that were blocked, and to implement processes for addressing claims that calls were improperly blocked. Further, regardless of whether a provider blocks calls, every provider has certain obligations to “prevent and avoid” originating illegal robocalls, including an obligation to conduct due diligence on new and renewing customers.

• Reassigned number database deadline

On February 8, the FCC announced via Public Notice the compliance date for the remaining rule requiring service providers to report information to the Reassigned Numbers Database Administrator. Beginning April 15, 2021 and recurring on the 15th day of each month thereafter, service providers must report permanent disconnections of their subscribers.

• Development and submission of Robocall Mitigation Plans

The FCC will soon require voice service providers that have not fully implemented STIR/SHAKEN in their networks to submit a Robocall Mitigation Plan detailing their efforts to prevent and avoid originating illegal robocalls. A provider must include three things in its robocall mitigation program:

• • the provider must take reasonable steps to avoid originating illegal robocall traffic (the FCC recommends the use of reasonable analytics);
  • the provider must commit to respond to requests from the Industry Traceback Group to trace suspect calls for mitigation efforts; and
  • the provider must cooperate in investigating and stopping any illegal robocallers (meaning that the provider must block calls or callers that are believed to be illegal).

Keeping the Resolution

So how can a voice service provider keep this resolution? We have several suggestions.

First, if it has not already begun the work, a provider should begin ASAP to implement STIR/SHAKEN in the IP portions of its network. For the time being, implementation requires a provider to have direct access to telephone numbers or else it cannot obtain an SPC token from the STIR/SHAKEN Governance Authority. (Sometime later in the year, merely filing a Robocall Mitigation Plan will be sufficient.) Those that have direct access to numbers should obtain their token authority and obtain a technological solution for implementing STIR/SHAKEN. Those that do not, including resellers, should work with their underlying carriers to determine how STIR/SHAKEN will be implemented and, most importantly, what attestation level will be assigned to the provider’s outbound calls.

Second, every provider should begin to develop its Robocall Mitigation Plan. These plans will be highly individualized, depending on the service provider’s customer base, technologies, and position in the call flow. Nevertheless, we expect the FCC to hold providers to their stated plans, so both an insufficient plan and an overly ambitious plan pose risks to the service provider. KDW is working with several providers already to develop their plans.

Third, service providers must develop compliance mechanisms to address the new anti-robocall obligations that have been implemented. These include processes for receiving and promptly responding to Industry Traceback Group requests, processes for responding to Enforcement Bureau notices of customers that are violating the robocall rules, and “know your customer” due diligence when provisioning or renewing service to a customer. Finally, compliance will also include reporting service reassignments to fuel the FCC’s new Reassigned Number Database. These are not the only requirements that will be adopted, so we recommend that a service provider implement a process for receiving compliance updates regularly as well.

2021 will be a big year for anti-robocall efforts. Voice service providers will want to keep this resolution in order to stay on the right side of the illegal robocall battle.

Follow the Communications group for ongoing coverage of TCPA/Robocall news, including:

• Kelley Drye at the 2021 INCOMPAS Policy Summit On February 9, Partner Steve Augustino moderated a two-part Robocall Compliance panel at the 2021 INCOMPAS Summit. Watch both panels here.
• Effectively Mitigating Illegal Robocalls: What Service Providers Need to Do On March 3, join Partner Steve Augustino for a Telestrategies webinar that will help service providers understand the STIR/SHAKEN framework, informing service providers of their new obligations, how to respond to investigation requests, and how to develop an effective robocall mitigation program.
• TCPA Tracker The TCPA Tracker Newsletter is produced as a collaborative effort between Kelley Drye’s Litigation, Advertising/Privacy, and Communications practices to help you stay current on TCPA (and related) matters, including case developments, and provide an updated comprehensive summary of TCPA petitions pending before the FCC. Subscribe here.
• Kelley Drye’s Full Spectrum Kelley Drye’s Full Spectrum podcast features smart, informative conversations about the latest issues in the technology, telecommunications, and media industries. Bringing together thought leaders in business, government, and enterprise, Full Spectrum offers an in-depth exploration of current legal, regulatory, and business issues. Our “Inside the TCPA” series offers a deeper focus on TCPA issues and petitions pending before the FCC.

See below for recordings of both sessions:

FCC Panel

Industry Panel

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FCC regulatory activity likely will slow in the immediate lead-up to and aftermath of the 2020 general election. As a result, the September agenda may represent the FCC’s last big push on major reforms for the year. You will find more details on the significant September meeting items after the break:

Repurposing 3 GHz Band Spectrum: The draft Report and Order and Further Notice of Proposed Rulemaking would eliminate the non-federal radiolocation and amateur allocations from the 3.30-3.55 GHz band as a first step toward future sharing of the spectrum between federal incumbents and commercial wireless providers. However, the FCC would allow incumbent non-federal licensees to continue in-band operations until it finalizes its plans to reallocate the spectrum operations to below 3.0 GHz. The FCC would propose making 100 megahertz of spectrum in the 3.45-3.55 GHz band available for flexible use wireless service throughout the contiguous United States. To facilitate such wireless operations, the FCC would propose adding a co-primary, non-federal fixed and mobile (except aeronautical mobile) allocation to the band. It would also seek input on the appropriate licensing, auction, spectrum sharing, and technical rules for the band, and on relocation procedures for the non-federal relocation operators.

Commercial Access to the 4.9 GHz Band: The draft Sixth Report and Order and Seventh Further Notice of Proposed Rulemaking would allow one statewide 4.9 GHz band licensee per state to lease some or all of its spectrum rights to third parties, including commercial users. Lessees would be required to comply with the same spectrum coordination procedures as public safety licensees in the band. In addition, the FCC would seek comment on establishing a Band Manager in each state to coordinate and authorize new operations in the 4.9 GHz band. The agency also would request input on how to ensure robust use of the 4.9 GHz band, including through dynamic spectrum sharing technologies and cross-state collaborations.

Implementing STIR/SHAKEN Framework: The draft Second Report and Order would require voice service providers to either upgrade their non-IP networks to IP and implement the STIR/SHAKEN framework or develop a non-IP caller ID authentication solution by June 30, 2021. The FCC would adopt extensions of the June 30, 2021 deadline for: (1) small providers (two-year extension); (2) providers that currently cannot get a digital certificate necessary to implement STIR/SHAKEN because they do not obtain direct access to telephone numbers or other technical issues (indefinite extension); (3) services scheduled for discontinuance (one-year extension); and (4) non-IP network services (indefinite extension). The Commission would require all providers subject to an extension to implement a robocall mitigation plan for the parts of their networks where STIR/SHAKEN is not implemented and certify that they implemented such mitigation measures with the FCC. Moreover, the FCC would require intermediate providers to either pass along caller ID authentication information for authenticated calls or authenticate the caller ID information for unauthenticated calls they receive by June 30, 2021. Intermediate providers would be relieved of the independent authentication requirement if they register with the industry traceback consortium or respond to all traceback consortium information requests. Finally, the FCC would prohibit providers from adding line item charges to subscribers for providing caller ID authentication.

Streamlining Foreign Ownership Reviews: The draft Report and Order would establish rules and timeframes for the Committee for the Assessment of Foreign Participation in the United States Telecommunications Service Sector (Committee) to complete its review of certain applications posing potential foreign ownership concerns (i.e., the applicant has a 10% or greater direct or indirect foreign investor). Specifically, the Committee would be required to complete its initial application review within 120 days and, if necessary, its supplemental application review within 90 days. Affected applicants would be required to provide responses to a standardized set of national security and law enforcement questions regarding: (1) corporate structure and shareholder information; (2) relationships with foreign entities; (3) financial condition; (4) compliance with applicable laws and regulations; and (5) business and operational information. The standardized questions would be developed in a subsequent proceeding following public notice and comment. The new rules would apply to applications: (1) for international Section 214 authorizations or to assign/transfer control of such authorizations; (2) for submarine cable landing licenses or to assign/transfer control of such licenses; and (3) to exceed the foreign ownership limits under Section 310(b) of the Communications Act.

Reforming IP CTS Rates and Standards: The draft Report and Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking would establish a compensation rate of $1.30/minute for IP CTS providers through a two-step transition process. The first step would transition from the current $1.58/minute rate to a $1.42/minute rate for the remainder of fund year 2020-21 (effective December 1, 2020), while the second step would transition the rate to $1.30/minute for fund year 2021-22. The FCC would also propose to adopt service standards for IP CTS captioning delay and accuracy, and seek comment on appropriate metrics. The Commission would request input on appropriate IP CTS service standard testing procedures, including sample size and call methodology. In addition, the FCC would ask whether it or a third-party organization should be responsible for such testing.

Reviewing 911 Fee Diversion: The draft Notice of Inquiry would request input on the effects of 911 fee diversion, specifically from states, on the provision of 911 services and the transition to next-generation 911 services. The FCC also would seek comment on how it can use its regulatory authority to discourage 911 fee diversion, including by conditioning state eligibility for FCC licenses, programs, or other benefits on the absence of fee diversion. The FCC would further ask about measures it can take to discourage fee diversion under the Commission’s authority, and how it can encourage states to pass legislation or adopt rules that would prohibit 911 fee diversion.

In the first ruling, P2P Alliance, the Bureau ruled that an automatic telephone dialing system (“ATDS”) is not determined by whether the equipment has the capability to send a large volume of calls or texts in a short period of time. Instead, the Bureau, while recognizing that the Commission’s interpretation of the ATDS definition remains pending, ruled that “whether the calling platform or equipment is an autodialer turns on whether such equipment is capable of dialing random or sequential telephone numbers without human intervention.” The Bureau also provides an illuminating discussion of the so-called “human intervention” element of prior FCC statements regarding autodialers.

In the second ruling, Anthem, Inc., the Bureau denied a petition to exempt certain healthcare-related calls from the TCPA’s consent requirements. In this order, the Bureau breaks less new ground and instead reiterates that prior express consent must be obtained before a call (or text) is made and that the supposed value or “urgency” of the communication does not necessarily make it permissible.

Besides these two petitions, the Commission has nearly three dozen petitions pending before it on a variety of matters relating to exemptions from the TCPA’s consent requirements, the collection and revocation of consent, the “junk fax” provisions, and other questions raised by the flood of TCPA class action litigation in the last five years. If the FCC begins addressing these other pending petitions, the course of TCPA class action litigation could change significantly.

In March 2018, the United States Court of Appeals for the D.C. Circuit issued a landmark rebuke of the FCC’s interpretation of the TCPA. The case, ACA International v. FCC, reviewed a 2015 Omnibus Declaratory Ruling on a variety of matters, the most notable of which was the FCC’s expansive interpretation of an “automatic telephone dialing system” (“ATDS”), the use of which triggers therobo TCPA’s prior express consent requirements and private right of action provisions. In ACA International, the court found the FCC’s interpretation “impermissibly broad” and remanded the case to the FCC for further consideration.

Since that time, the FCC has taken comment twice on the ACA International remand, but FCC Chairman Pai has focused the agency’s efforts on identifying and reducing illegal robocalls rather than addressing the remand. Chairman Pai has repeatedly said that unwanted automated calls is a top consumer complaint and he has pursued a multi-faceted approach to preventing or blocking those calls before they reach consumers.

The Commission has

• authorized voice service providers to block incoming calls that “reasonable call analytics” identify as likely illegal calls,
• mandated that service providers implement a call authentication framework to prevent unlawfully spoofed calls,
• directed specific service providers to block certain calls or have their own calls blocked by other providers,
• proposed multiple fines exceeding $100 million each for illegally spoofed calls, and
• authorized a comprehensive database to identify when telephone numbers have been reassigned from a subscriber who may have given consent to a new subscriber.

The Anthem and P2P Alliance Rulings

Against this backdrop, the flood of TCPA class action cases has powered a rising tide of petitions for declaratory rulings addressing specific aspects of the TCPA’s requirements, from when consent is needed, how it may be obtained, and how it may be revoked. At Kelley Drye, we have chronicled these developments in our monthly TCPA Tracker and its accompanying FCC Petitions Tracker of the nearly three dozen pending petitions. The total number of petitions has risen slightly over time, as new petitions have modestly outnumbered decisions issued by the Commission.

P2P Alliance Petition (Two-Way Texting With Manual Intervention). In May 2018, the P2P Alliance, a group that represents providers and users of “peer to peer” text messaging services, sought a declaratory ruling that peer to peer messaging services did not involve an ATDS and thus were not subject to the restrictions on ATDS calls/texts contained in the TCPA. The petition sought a ruling with respect to text messaging services that enable two-way text communication, requiring a person to manually send each message. Although the Bureau declined to rule with respect to any specific platform – citing a lack of sufficient evidence regarding the how the platforms operate – the Bureau issued a ruling with several important clarifications.

First, the Bureau ruled that the ability of a platform or equipment to send “large volumes of messages” is not probative of whether that platform or equipment constitutes an ATDS under the TCPA. The Bureau declared that “whether the calling platform or equipment is an autodialer turns on whether such equipment is capable of dialing random or sequential telephone numbers without human intervention.”

This conclusion effectively puts to rest ambiguous statements in some prior orders that TCPA plaintiffs had argued brought any high-volume calling platform within the scope of the TCPA. Furthermore, the Bureau’s conclusion appears most consistent with decisions by several U.S. Courts of Appeal that have ruled an autodialer must employ a random or sequential number generator to meet the TCPA’s definition of an ATDS. The Bureau noted, however, that the “details” of the interpretation of an ATDS were before the Commission in ACA International so, until the Commission addressed that issue, the Bureau was relying solely on “the statutory definition of autodialer.”

The Bureau’s ruling contains an illuminating discussion of the so-called “human intervention” element of prior FCC statements regarding autodialers. Per the Bureau’s ruling, “If a calling platform is not capable of dialing such numbers without a person actively and affirmatively manually dialing each one, that platform is not an autodialer.” The Bureau explained the “actively and affirmatively” dialing standard as requiring a person to manually dial each number and send each message one at a time. Use of such technologies is not an “evasion” of the TCPA, the Bureau commented, because the TCPA “does not and was not intended to stop every type of call.”

Thus, while the full contours of the ATDS definition are still to be defined by the Commission, the Bureau’s P2P Alliance ruling helps to clarify that an “active and affirmative” manual process for sending calls or messages removes a platform or piece of equipment from the ambit of the TCPA. This ruling could buttress many district court rulings that have found sufficient human intervention in the operation of many calling or texting platforms.

Anthem Petition (Prior Express Consent for Healthcare-Related Calls). The Anthem petition addressed by the Bureau was filed in June 2015, one month before the FCC released the Omnibus Declaratory Ruling addressed in ACA International. (Anthem has a more recent petition addressing post-Omnibus order issues that remains pending.) In the June 2015 petition, Anthem asked the Commission to create an exemption for informational healthcare-related calls/texts initiated by healthcare providers and sent to existing patients, arguing that such communications were beneficial to patients and could be protected by an opt-out process it believed the Commission was then considering for ATDS calls. The Commission received limited comment in September 2015 (while the ACA International appeal was being litigated) and has received virtually no filings discussing the petition since that time.

In the ruling, the Bureau denied virtually all of Anthem’s requests, emphasizing instead the TCPA’s requirements for prior express consent for ATDS calls. Specifically, the Bureau ruled that “makers of robocalls generally must obtain a consumer’s prior express consent before making calls to the consumer’s wireless telephone number.” (emphasis in original). It rejected Anthem’s request for an exemption permitting such calls, subject to opt-out, and repeated that the “mere existence of a caller-consumer relationship” does not constitute consent. Importantly, however, the Bureau affirmed prior statements that a consumer who has knowingly released their phone number for a particular purpose has given consent to receive calls at that number.

To the extent that the Anthem petition sought an exemption based on the “urgency” of healthcare-related communications, the Bureau declined to create such an exception, emphasizing, however, that the “emergency purposes” exception could apply to the extent the calls/texts satisfied the Commission’s rules and its recent COVID-19 Declaratory Ruling.

In the end, the ruling likely will not change the status quo for calls and texts being made today. The Bureau emphasized previous rulings requiring prior express consent and endorsed previous statements about how such consent may be obtained. Further, the Bureau affirmed the “emergency purposes” exception, although declining to expand its scope. Thus, entities making calls or texts following prior FCC guidance should not need to make any changes as a result of the Anthem ruling.

Looking Ahead

These decisions are not the broad rulings that many hoped for when ACA International was remanded to the FCC in March 2018. Chairman Pai was highly critical of the 2015 Omnibus order from the FCC (from which he dissented) and welcomed the ACA International decision. He has focused the agency on reducing unwanted calls prior to addressing the legal interpretations called for by the remand. Now, however, with those actions at an advanced stage and with his expected time as Chairman of the FCC about to end, many are wondering if the Pai Commission will revisit the ATDS definition, revocation of consent, and safe harbor questions remanded to it. Even if it does not, however, the Commission has nearly three dozen other petitions still pending, which could provide needed guidance on discrete issues that have arisen in TCPA litigation.

We don’t know at this time which way the FCC is likely to go, or even if it will address more TCPA issues during Chairman Pai’s tenure, but enterprises and service providers should watch the FCC closely over the next few months.

TCPA litigation has largely focused on the autodialer restriction over the past decade. In 2015, the Federal Communications Commission (“FCC”) adopted an expansive interpretation of the restriction, which the U.S. Court of Appeals vacated and remanded in 2018. While the industry has waited for the FCC to offer further guidance, entities making calls and sending texts have navigated an environment plagued by uncertainty. Several courts of appeals have adopted conflicting interpretations of the autodialer provision. Meanwhile, the FCC could offer its interpretation at any time, throwing the issue into further litigation in all probability. In this environment, the Supreme Court agreed to hear the constitutionality of one TCPA exemption in the Barr case. Many are hoping for a decision that goes beyond the 2015 amendment and offers definitive guidance on the autodialer provision’s scope. This post discusses what to expect – and what to watch for – in the Supreme Court’s oral argument this week.

Background

In Am. Ass'n of Political Consultants v. Sessions, 323 F. Supp. 3d 737 (E.D.N.C. 2018), a group of political and polling organizations who wished to use autodialer technology to contact potential voters, sued the Government challenging the constitutionality of the TCPA’s autodialer ban. The group argued that the autodialer ban is a content-based restriction on speech, which does not survive strict scrutiny under First Amendment jurisprudence. According to the plaintiffs, the autodialer restriction fails strict scrutiny’s narrow tailoring requirement because it allows the FCC to promulgate various exemptions based on the content of the call and the 2015 amendment exempts calls related to the collection of government debt. Therefore, the law is not narrowly tailored to advance the privacy interests of the TCPA. Additionally, Plaintiffs asserted that less restrictive means could advance the TCPA’s interests.

The district court disagreed with the Plaintiffs and found that the government debt collection exemption survived strict scrutiny because it is a narrow exception, which furthers the compelling interest of government debt collection. Additionally, the court declined to consider the constitutionality of the FCC’s exemptions because it reasoned that it was not the correct court to hear such challenges. Regarding Congressional delegation of authority to the FCC to create exemptions, the court reasoned that the delegation “does not substantively except any communications” and therefore “is not facially or inherently content-based.” Lastly, the court concluded that the supposed less restrictive means would not be as effective in achieving the purposes of the TCPA.

Plaintiffs appealed the decision to the Fourth Circuit. In Am. Ass'n of Political Consultants, Inc. v. Fed. Commc'ns Comm'n, 923 F.3d 159 (4th Cir. 2019), the Fourth Circuit held that the government debt exemption failed strict scrutiny due to under-inclusiveness. The Fourth Circuit concluded that the exemption is underinclusive because: (1) the exemption “subverts the privacy protections underlying the ban” by authorizing many intrusive calls, and (2) debt collection calls are “among the most intrusive, disruptive, and complained of phone calls.” However, instead of invalidating the entire TCPA, the court relied on a severance clause in the Communications Act of 1934 (which contains the TCPA) and severed the government debt collection exemption. The court reasoned that severance was appropriate because Congress explicitly intended the severance of constitutionally infirm portions of the Communications Act and the autodialer restriction had worked effectively for twenty-four years before Congress amended it to exempt government debt collection calls.

Consequently, on November 14, 2019, the Solicitor General petitioned the Supreme Court to review the Fourth Circuit’s decision to settle the question of the TCPA’s constitutionality and to provide clarity on the severance of unconstitutional portions of the statute. On January 10, 2020, the Supreme Court accepted the petition for review.

Previewing the Supreme Court Review

The Supreme Court accepted two questions regarding the TCPA:

1. Is the 2015 government debt collection exemption constitutional, and
2. Is the appropriate remedy to sever the provision from the TCPA?

On the first question, the Government argued that the government debt collection exemption is not content-based but relationship-based as it is dependent on the relationship between debtors (called parties) and their creditor (the Government). Therefore, it argued, the government debt collection exemption is actually subject to intermediate scrutiny, which it passes since it is a narrow exception, which applies to a few calls only and furthers the significant interest of protecting the public fisc. This comports with the autodialer restriction, which is a content-neutral time, place, and manner restriction. The American Association of Political Consultants (Respondents in the Supreme Court) asserted that the Fourth Circuit correctly found that the autodialer restriction as currently written is a content-based restriction, which fails strict scrutiny and renders the TCPA unconstitutional.

Remedy

As to the second question, Respondents argued that First Amendment jurisprudence mandates that courts should issue decisions that protect speech and not abridge it. Thus, Respondents argued, finding the TCPA to contain a content-based restriction on speech, the proper remedy should have been to strike down the restriction on speech, not to sever the “speech-promoting exception.” Respondents also argued that the autodialer restriction must be invalidated because the TCPA, even after the Fourth Circuit’s remedy, continues to be an unconstitutional restriction on speech. .

Amicus Curiae Positions

In addition to the arguments presented by the litigants, interested parties filed 17 amicus curiae briefs. On the one hand, supporting the government and the constitutionality of the exemption were many states, members of Congress, student loan servicing centers and several consumer interest groups. In the amicus brief submitted by the states, the states argued, among other things, that the robocall ban should be upheld because it prohibits highly intrusive robocalls regardless of content and therefore passes First Amendment scrutiny. In the amicus brief submitted by the members of Congress, they argued that the TCPA is a critical law that stops intrusions on Americans’ privacy, deters scams, and protects the integrity of the telephone as a means of communication. Consumer groups similarly argued that the TCPA protects government interests “of the highest order” (according to Public Citizen) and argued that invalidation would harm consumer privacy. The consumer interests generally argued that, even if the government debt collection provision fails to satisfy scrutiny, the remainder of the TCPA should survive.

Notably, while not supporting either party, consumer groups the National Consumer Law Center and Consumer Federation of America, joined by telecommunications carrier Verizon, argued that the government’s interest is compelling and argued in support of the TCPA’s restrictions on calling, particularly restrictions on unconsented calls to cellular phones.

On the other hand, supporting the position that the provision is unconstitutional were the U.S. Chamber of Commerce, debt collection companies, several business groups and several free speech groups. In its amicus brief, the Chamber of Commerce argued that the TCPA should be invalidated because the autodialer restriction has become a tremendous source of meritless litigation that FCC guidance has not addressed. Similarly, trade groups such as the Retail Energy Supply Association argued that the government debt collection exemption is not severable because Congress would not have adopted such broad restrictions on automated calls without the exemptions adopted in the statute. Debt collectors such as Portfolio Recovery Associates sounded a similar point, arguing that the TCPA’s “open ended delegation of authority” to the FCC to create exemptions renders the statutory scheme unconstitutional. The Retail Litigation Center, while ostensibly not taking a position on either issue, offered an extensive critique of the TCPA’s “real world effects” on communications with customers and urged the Court to “address this dysfunction” in its disposition of the case.

What to Watch For in Oral Argument

With this lineup of arguments, the Supreme Court will hear oral argument in a highly unusual setting. Due to the COVID-19 pandemic, the Supreme Court scheduled its first-ever arguments to be held via teleconference for this week, giving court-watchers an unprecedented opportunity to hear arguments live, rather than via audio files released after the argument. Due to the teleconferencing format, the Justices will ask questions in order of seniority, rather than the customary rapid-fire open questioning format. In earlier arguments this week, the approach permitted a more straightforward examination of the issues, with fewer interruptions in the litigant’s arguments.

The resolution of Barr could affect many stakeholders. A key question to watch will be the extent to which the Court entertains questions relating to severability of the government debt collection exemption and the broader TCPA critiques offered by various amicus parties. While the Supreme Court has ruled in several TCPA cases recently, thus far, it has addressed the issues narrowly or on grounds not exclusive to the TCPA. We will be watching to see if the Court may deviate from this approach in Barr and bring some clarity to the more contentious provisions of the TCPA.

The Warning Letters

The agencies identified the three VoIP gateway providers as the sources of the illegal calls through the efforts of the USTelecom Industry Traceback Group, a consortium of phone companies that help officials identify potentially unlawful calls. The phone companies used a process known as “traceback,” in which they share information to trace unlawful spoofed robocalls to their origination.

In the letters, the agencies reminded the companies that the COVID-19 scam robocalls are in fact illegal and directed them to cease transmitting the traffic immediately, as the calls have “the potential to inflict severe harm on consumers.” The letters warned the companies that if they did not stop transmitting the identified traffic within 48 hours, the FCC would authorize other U.S. voice providers to block all calls from the companies and take any other steps necessary to prevent transmission of the calls. The agencies also sent a separate letter to USTelecom advising the trade association that, if the VoIP providers do not block the traffic, the FCC will authorize other U.S. service providers to block all calls coming from that gateway and will take other actions as necessary to authorize U.S. service providers to block traffic from the originating entities. In addition, the FCC encouraged other service providers to take immediate action to block unlawful calls pursuant to existing legal authority.

This action is a significant – and significantly aggressive – new approach by the agencies. While both agencies have taken actions to prevent and deter unlawful robocalls, the threat to block traffic from the originating carrier is a new tactic in the fight against unlawful calls. Notably, it is not clear under what authority the FCC can or would order the blocking of all traffic from the subject VoIP gateway providers if they failed to block the allegedly unlawful robocalls. The letter does not cite any provision of the Communications Act that would authorize such blocking. Moreover, existing FCC orders relating to call blocking have authorized only limited call blocking practices that were optional for the carriers. Were the FCC to order such blocking (and to make it mandatory), it appears that such action would be the first of its kind by the agency.

Briefly, we will review the agencies’ recent history with anti-robocall activities.

The Educare Services Enforcement Action and Prior FTC Warning Letters

In the three letters to the VoIP gateway providers, the FCC and FTC reference the FTC’s recent enforcement action against VoIP provider Globex Telecom. This action relied upon provisions of the FTC’s Telemarketing Sales Rule ("TSR"), which addresses calls made for a telemarketing purpose. In December 2019, the FTC obtained a preliminary injunction against Educare Services and Globex Telecom Inc. for robocalling consumers to promote allegedly fraudulent credit card interest rate reduction services. The FTC complaint alleges that Globex played a key role in “assisting and facilitating” the illegal credit card interest rate reduction services Educare promoted by providing Educare with the means to call consumers via interconnected VoIP communication services and facilities. For a VoIP company to be liable under a TSR “assisting and facilitating” theory, the FTC must prove that the company “knew or consciously avoided knowing” the robocall campaigns violated the TSR.

A week before the joint letters, the FTC sent letters to nine VoIP service providers and other companies warning them that “assisting and facilitating” in the transmission of illegal COVID-19-related telemarketing or robocalls is unlawful. The agency also sent letters to nineteen VoIP service providers in January with a similar warning about all illegal robocalls.

FCC TRACED Act Implementation and the STIR/SHAKEN Mandate

Like the FTC, the FCC recently shifted its focus in robocall enforcement towards the originating carriers. On February 4, 2020, the FCC’s Enforcement Bureau sent letters to seven VoIP gateway service providers, notifying them that unlawful robocalls had been traced to their networks and asking for their assistance in tracking down the originators of the calls. Although no enforcement action was threatened at the time, the FCC also asked each provider to detail their anti-robocall efforts to the Commission.

More recently, the FCC took several steps in implementing the TRACED Act, which requires the FCC to initiate several near-term rulemakings and other actions aimed at addressing unlawful spoofing and robocalling operations. On March 27, the agency adopted a Report and Order and Further Notice of Proposed Rulemaking establishing rules for the registration of a single consortium to conduct private-led “traceback” efforts, which is expected to formalize the relationship with the USTelecom Industry Traceback Group. Additionally, on March 31, the FCC adopted a separate Report and Order and Further Notice of Proposed Rulemaking mandating that originating and terminating voice service providers implement the STIR/SHAKEN framework in the IP portions of their networks by June 30, 2021. STIR/SHAKEN—the technology framework behind the “traceback” process—allows providers to verify that the caller ID information transmitted with a particular call matches the caller’s number as the calls are passed from carrier to carrier. FCC Chairman Pai previously urged major providers to adopt STIR/SHAKEN technology voluntarily and warned that the voluntary approach would become a mandate if the providers did not move fast enough. Still to come are comments on a “know your customer” obligation for service providers and rules to deny access to numbering resources to originators of unlawful calls.

As we have previously noted, the TRACED Act also requires the implementation of an alternative call authentication framework in non-IP networks, extends the FCC’s statute of limitations for bringing some illegal robocall enforcement actions, and eliminates the requirement to give warnings before issuing certain filings.

Takeaways

These letters, coupled with the recent activity by the FTC and FCC to combat illegal robocalls, signal the agencies’ desire to cause a meaningful reduction in unlawful calling, and in particular, demonstrate a desire to prevent scammers from taking advantage of the COVID-19 crisis to carry out their deceptions. Both agencies can seek civil penalties and take other actions necessary to prevent the proliferation of these calls.

Importantly, the targets of agency action are not necessarily limited to the entities that place the unlawful calls. These federal actions are a good reminder for VoIP and other service providers to assess whether their customers’ practices may indicate unlawful use of VoIP or other services. With the warning letters, and now these blocking letters, the FCC and FTC increasingly are showing an openness to pursuing penalties under vicarious liability theories. If there are facts that support knowledge of the unlawful activity or “red flag” type practices (such as a customer being the target of multiple third party government subpoenas, among other facts), that’s a good indication that further steps by the VoIP provider may be warranted to mitigate the risk of facing an enforcement action by the FTC or FCC. If you have questions about how these enforcement trends and related risk factors are relevant to your business, please contact your Kelley Drye counsel.

Kelley Drye continues to closely monitor this, and other TCPA developments. Click here to read our advisory and summary of the Pallone-Thune TRACED Act. You can find additional coverage at Kelley Drye’s Legal Download, where Partner Steve Augustino discusses what an illegal call really is, highlights of the TRACED Act, and what’s next for the FCC.

Be sure to subscribe to Kelley Drye’s Full Spectrum podcast, which features our “Inside the TCPA” series, and check out our monthly TCPA Tracker newsletter, which helps you stay current on TCPA (and related) matters, case developments and provides an updated comprehensive summary of TCPA petitions pending before the FCC.

The August agenda items impact all corners of the telecommunications industry. You will find more details on some of the most significant August meeting items after the break:

RDOF Funding and Procedures: The draft Notice of Proposed Rulemaking (“NPRM”) seeks comment on the budget, auction procedures, application processes, and deployment obligations for the RDOF. The FCC plans to target $20.4 billion in support to areas that lack access to 25/3 Mbps broadband service, which represents the agency’s current benchmark for fixed advanced communications services and an increase over the 10/1 Mbps minimum performance tier under the CAF. The FCC would award RDOF support through an auction in two phases, with the first phase targeting wholly-unserved census blocks and the second phase focusing on partially-unserved census blocks. Like the CAF auction, the FCC anticipates weighing RDOF auction bids based on performance, with higher-speed, lower-latency services preferred. RDOF bidders would be subject to similar application procedures, deployment milestones, and reporting obligations as CAF auction participants.

RDOF Data Collection: The draft Report and Order and Further NPRM would require all fixed broadband providers to submit coverage polygons depicting the areas where they provide service as well as information on the speed and technology used in providing such service. Service provider coverage claims would be subject to challenge by government entities and the public, with the FCC seeking comment in the further NPRM on how it should gather and apply this “crowdsourced” information. For now, the RDOF data collection would be in addition to the deployment data already collected by the FCC from service providers through the Form 477. The new data collection would only apply to fixed broadband providers at first, but the FCC would seek comment on the parameters for incorporating mobile broadband coverage data into the RDOF in the future. In addition, the FCC would seek input on whether to require even more precise deployment data based on user location and who should bear the burden of such data collection.

Rural Health Care Program (“RHCP”) Reform: The draft Report and Order would adopt reforms to the FCC’s RHCP, which provides financial support to rural health care providers to obtain broadband and other communications offerings at discounted rates to facilitate telehealth services. The FCC plans to revamp the RHCP’s Telecom Program that subsidizes the difference between urban and rural service rates by, among other things, requiring the RHCP Administrator to create a database of rates that health care providers would use to determine the amount of support they can receive. The FCC would prioritize RHCP funding in the event support requests exceed the cap (which was $581 million in 2018) based on the rurality of the area and whether the area faces a shortage of medical personnel. The FCC would caution that it intends to enforce limits on RHCP spending consistent with its current review of overall universal service budgets. In addition, the FCC anticipates tightening up its RHCP competitive bidding and consultant rules following a number of high-profile enforcement actions.

Streamlining Smallsat Licensing: The draft Report and Order would revise the FCC’s current one-size-fits-all satellite licensing regime and create a tailor-made path for licensing smallsats. Smallsat applicants would be subject to lower application fees, easier application processes, and quicker agency reviews, including an exemption from the agency’s processing round procedure that often delays approvals as competing satellite systems file challenges. To qualify for streamlined processing, smallsat applications must meet certain requirements, including: (1) a maximum mass of 180 kg for any single satellite; (2) no more than 10 satellites under a single authorization; (3) total on-orbit satellite lifetime of five years or less; (4) propulsion capabilities or deployment below 400 km altitude; (5) ability to share frequencies with current operations without precluding future entrants; and (6) relatively low risk from orbital debris.

Toll-Free Number Auction: The draft Public Notice would establish procedures for the auction of over 17,000 toll-free numbers in the “833” code, with applications due by October 18, 2019 and bidding set to begin on December 17, 2019. The auction would be the first time the FCC has used competitive bidding to distribute numbering resources. The auction would be run by Somos, which currently is the designated administrator of the toll free database. Parties may apply to participate in the auction individually or through a Responsible Organization, which can bid on behalf of multiple parties as long as the parties do not want the same numbers. Parties would be subject to application, anti-collusion, and default provisions similar to those used in the FCC’s recent spectrum auctions. Winning bidders would be allowed to sell the toll-free numbers obtained through the auction on the secondary market and would report such secondary market transactions to Somos.

MLTS 911 Requirements: The draft Report and Order would implement recent legislation by prohibiting the manufacture, import, sale, or lease of an MLTS unless it is pre-configured so that a user may initiate an emergency call by dialing 911 without first having to dial “9” or take other action to access an outside line. Similarly, anyone installing, managing, or operating an MLTS would not be allowed to do so unless the MLTS is pre-configured to allow 911 direct dialing. If possible, MLTS managers also must configure the MLTS to provide a notification when a 911 call is made to a central location (e.g., front desk, security office) in order to facilitate emergency response efforts. The FCC plans to adopt an assumption that an MLTS manager is responsible for any failure to comply with the 911 direct dialing or notification rules. The new rules would apply to any MLTS manufactured, imported, sold, leased, or installed after February 16, 2020. In addition, the FCC would impose “dispatchable location” requirements on MLTS and other 911-capable services, which would require the transmission of a caller’s street address and additional information such as room number, floor number, or other data to help identify the caller’s location.

Anti-Spoofing Expansion: The draft Report and Order would expand the reach of FCC enforcement against the manipulation of caller ID information for malicious purposes (otherwise known as “spoofing”) under new authority granted by legislation adopted last year. Specifically, the FCC would extend its authority to punish spoofing violations for communications originating from foreign points to recipients within the United States. The FCC also would expand the scope of communications covered by its anti-spoofing rules to include some of the most widely-used forms of text messaging as well as alternative voice services, such as one-way VoIP services. The draft item follows in the wake of numerous enforcement actions imposing large fines for malicious spoofing in 2018.

Cable Franchise Fee Restrictions: The draft Report and Order would address concerns raised by a federal appeals court regarding the fees imposed by local franchising authorities (“LFAs”) on cable operators. The Communications Act places a five percent cap on such fees, but cable operators allege that LFAs frequently seek additional benefits as part of the franchise process. The draft item would treat most in-kind contributions required by LFAs from cable operators as fees subject to the five percent cap. Moreover, the FCC would prohibit LFAs from using their franchising authority to regulate most non-cable services, including broadband services offered over cable systems. LFAs also would be prohibited from requiring cable operators to secure additional franchises or other authorizations to provide non-cable services through their cable systems.

The current and future definition of what qualifies as an automatic telephone dialing system ("ATDS" or "autodialer") remains a hotly debated and evaluated issue for every company placing calls and texts, or designing dialer technology, as well as the litigants and jurists already mired in litigation under the Telephone Consumer Protection Act ("TCPA"). Last year, the D.C. Circuit struck down the FCC’s ATDS definition in ACA International v. FCC, Case No. 15-1211 (D.C. Cir. 2018). Courts since have diverged in approaches on interpreting the ATDS term. See, e.g., prior discussions of Marks and Dominguez. All eyes thus remain fixed on the FCC for clarification.

In this post, we revisit the relevant details of the Court’s decision in ACA International, and prior statements of FCC Chairman Ajit Pai concerning the ATDS definition to assess how history may be a guide to how the FCC approaches this issue.

DC Circuit Found FCC’s 2015 Definition of ATDS Was Too Broad

Under the statute, an ATDS is defined as a device with the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator” and “to dial such numbers.” 47 U.S.C. § 227(a)(1)(A)-(B). The D.C. Circuit unambiguously concluded that in 2015 the FCC adopted an overly expansive and unreasonable view of this definition. In its 2015 Declaratory Ruling and Order, the FCC defined equipment as an autodialer if it contained the potential “capacity” to dial random or sequential numbers, even if that capacity could be added only through specific modifications or software updates (so long as the modifications were not too theoretical or too attenuated). Under this revised interpretation, any equipment that could be modified to dial numbers randomly or sequentially would be an ATDS – and therefore subjected the caller to potential liability under the statute. The FCC also made contradictory statements about the capabilities that an autodialer must possess – reaffirming and then appearing to disclaim its prior rulings on predictive dialers, and offering contradictory statements regarding the level of human intervention that would preclude a call from being auto-dialed. These statements further compounded the uncertainty surrounding autodialers.

The D.C. Circuit Court was troubled by the “eye-popping” reach of the 2015 Order’s interpretation, which could be applied to any smartphone, and found that such a reach could not be squared with Congress’ findings in enacting the TCPA. The Court observed that the FCC’s interpretation was “utterly unreasonable in the breadth of its regulatory [in]clusion.” It rejected the FCC’s justification that a broad reach was necessary to encompass “modern dialing equipment,” concluding that Congress need not be presumed to have intended the term ATDS to apply “in perpetuity” and citing paging services as an example of TCPA provisions that have ceased to have practical significance.

Although the Court did not clarify the requisite “capacity” needed—present or future—to be an ATDS, it declared that “the TCPA cannot reasonably be read to render every smartphone an ATDS subject to the Act’s restrictions.” The Court also found that the confusion over the term “capacity” as it relates to the ATDS definition was multiplied by the FCC’s insufficient explanation of the requisite features that the covered ATDS equipment must possess. Specifically, the 2015 Declaratory Ruling and Order fell short of reasoned decision making in “offer[ing] no meaningful guidance” as to the seminal questions of whether a device (1) must itself have the ability to generate random or sequential numbers to be dialed, (2) must dial numbers without human intervention or (3) must “dial thousands of numbers in a short period of time.”

By setting aside the prior interpretation, the D.C. Circuit handed the issue back to the FCC for further analysis and explanation. The FCC sought comment on how to respond to the D.C. Circuit’s ruling and appears to be close to issuing a decision on the remanded issues.

Is Commissioner Pai’s 2015 Dissent a Harbinger of the Decision on Remand?

When the FCC’s 2015 omnibus TCPA Declaratory Ruling and Order was issued, then-Commissioner Pai (now Chairman of the FCC) authored a highly critical dissent, including a direct challenge to the interpretation of an autodialer. In his view, the ruling improperly expanded the definition of an ATDS beyond the legislative mandate, and needed to be reigned back in.

Chairman Pai’s dissent took issue with the ATDS definition as overbroad and over-inclusive. He posited that only equipment that has the capability to dial sequential numbers or random numbers should qualify as an ATDS. “If a piece of equipment cannot do those two things—if it cannot store or produce telephone numbers to be called using a random or sequential number generator and if it cannot dial such numbers—” Chairman Pai asked, “then how can it possibly meet the statutory definition? It cannot.” The principal issue addressed in the 2015 order was whether the statute’s reference to the “capacity” of ATDS equipment referred to the potential capabilities of the equipment. On this front, Chairman Pai’s view was clear: he believed that the statutory definition of an ATDS was limited to the equipment’s “present capacity,” not to its potential or theoretical capacity, and his dissent focused largely on why the concept of potential capacity was a bridge too far.

Chairman Pai’s interpretation of the statute closely hues to the specific capabilities listed in the text of the TCPA—the ability to store or produce numbers using a random or sequential number generator, and to dial such numbers. The FCC’s interpretation, Chairman Pai charged, “transforms the TCPA from a statutory rifle‐shot targeting specific companies that market their services through automated random or sequential dialing into an unpredictable shotgun blast covering virtually all communications devices.” Chairman Pai was willing to claim victory for the “rifle‐shot” set, stating that if today’s callers have abandoned random or sequential dialers due to the TCPA’s prohibition, then the TCPA has “accomplished the precise goal Congress set out for it” and, if parties want to address more modern types of abusive dialing equipment, they should go to Congress for action.

Given Chairman Pai’s previous statements and the D.C. Circuit’s criticism of the prior order’s scope, it appears likely that the FCC will look only to the present capabilities of particular equipment, rather than its potential or future capacity. However, this alone does not answer the question before the agency. In 2015, Chairman Pai seemed ready to declare the autodialer definition to have achieved its goal, but now that he leads the agency, will he hold to that position?

Notably, since assuming the leadership of the Commission, Chairman Pai has made multiple statements about the need to address the “scourge” of robocalling. The FCC has taken several actions aimed at reducing abusive calls, better detecting spoofing and unlawful activity, and empowering carriers to block illegal calls and consumers to block illegal and unwanted calls. Much of these actions were detailed in an FCC Bureau report on illegal robocalls released on February 14. While it eschews any recommendations for future actions, the report details ongoing FCC and industry efforts to combat illegal robocalls, and identifies some of the challenges to FCC enforcement activities. The Commission also recently adopted a database for number assignment changes that aims to reduce misdirected calls to the wrong telephone number. Will these robocall reduction efforts give the Pai-led FCC the “cover” to narrow the definition of an ATDS, and, if so, by how much will it be narrowed?

Some narrowing of the prior definition is inevitable. Few argue that ordinary smartphones should be subject to the TCPA restrictions. But even advocates of a broad interpretation disagree on how to get there: some have argued that the FCC should maintain the prior definition but exempt smartphones, while others argued for standards that would exclude “ordinary” or unmodified smartphones. Some in the industry, on the other hand, are asking the FCC to focus more narrowly on equipment prominent in the early 1990s, when the TCPA was passed, and be less likely to include equipment that solely calls from pre-loaded lists of numbers. This would be consistent with Chairman Pai’s dissent – provided he has the other votes to achieve it. An interpretation along this line would appear to be good news for predictive dialing equipment and various dialers that involve differing levels of human intervention to complete calls.

Given the divergent interpretations in Marks and Dominguez, the FCC’s interpretation of the ATDS definition is almost certainly headed back to the courts for confirmation that the FCC’s revised definition (whatever it is) lies within the agency’s delegated powers and is sufficiently clear to pass judicial muster. Moreover, a restrictive interpretation of the legislative mandate for what can be regulated would leave to Congress the question of whether a broader definition must be considered, including how to address modern dialing equipment and other modern technologies. Several anti-robocall bills aimed at expanding the reach of the ATDS definition are already under consideration in both houses of Congress. Thus, even if the FCC adopts a narrower interpretation, we’re likely to see the ATDS issue shift to other forums in the second half of 2019.

With that in mind, and given the continual cycle of TCPA lawsuits, companies placing calls or texts and those designing calling or texting platforms should consider how participating in the FCC and subsequent proceedings can further their interests. They also would benefit from determining how the clarified ATDS definition is likely to affect their business, and whether any proactive adjustments would be helpful to prevent disruption to the business or to manage TCPA risk exposure, including evaluating whether the consent they obtain is sufficient. Kelley Drye will continue to follow these issues and provide updates through its monthly TCPA Tracker. Please contact us to join our list or if you have any questions concerning these issues.

Part one of this episode focuses on the big picture in 2018 and the FCC's use of non-monetary tools to encourage adoption of industry best practices. Part two features a deeper dive into FCC enforcement trends on revocation of authority and inability to pay claims, and takes a close look at the FCC’s expanded robocalling enforcement.

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The R&O will establish a database noting the date of the most recent “permanent disconnection” of a number. Permanent disconnection refers to when a subscriber permanently relinquishes a number, or the provider permanently reverses the assignment of the number to a particular subscriber and disassociates that subscriber with active service to that number. A number must have a permanent disconnection age of at least 45 days before it can be reassigned to another person. Thus, the information in the database is not supposed to contain temporary disconnections (such as for non-payment) or when a number is ported to another provider.

Parties would query the database with two pieces of information: the number to be checked and a date the party knows the subscriber last had the number. This latter date could be the date consent was obtained, the date the subscriber last accepted a call at the number, or some other date that the party contends is associated with the subscriber. Upon a query, the database will respond with a “yes,” “no,” or “no data” response indicating whether the number has been reassigned after that date. Parties will be able to query the database on an individual number basis or though bulk queries. Both a caller and “agents acting on behalf of a caller” may query the database.

Notably, in a late change, the FCC added a safe harbor for callers using the new database. This safe harbor provides protection from TCPA liability where “database errors” lead to an incorrect call to a consumer.

All voice providers that receive numbers from either the North American Numbering Plan or the Toll Free Numbering Administrator will be required to report information to the database on the 15th of each month. Covered providers will be required to start keeping permanent disconnection records as soon as the information collection is approved by OMB even if the database has not yet launched. The R&O directs for the FCC to use a competitive bidding process to identify a third party administrator to operate the database which will be responsible for collecting fees to fund the database’s operation. The Administrator’s costs to operate the database following its establishment will be recovered through usage charges that the Administrator will collect from callers that choose to use the database. The R&O also directs the North American Numbering Council to make recommendations on some technical and operational matters related to establishment of the database. The FCC has not specified exactly when the database will be operational.

Commissioner Rosenworcel voted in support of the item but also announced a desire for carriers make robocall blocking tools available to every consumer where technically feasible. In conjunction with her vote, she announced that her office had sent letters to major phone companies asking for information about any tools that the company offers today and associated costs.

The Truth in Caller ID Act prohibits certain forms of “spoofing,” which involves the alteration of caller ID information. While Congress recognized certain benign uses of spoofing, federal law prohibits the deliberate falsification of caller ID information with the intent to harm or defraud consumers or unlawfully obtain something of value. Back in June 2017, the FCC accused Mr. Abramovich and his companies of placing millions of illegal robocalls that used spoofing to make the calls appear to be from local numbers to increase the likelihood that the called party would pick up, a practice known as “neighbor spoofing.” The robocalls indicated that they came from well-known travel companies like TripAdvisor, but in reality the robocalls directed consumers to foreign call centers that had no relationship with the companies. Mr. Abramovich did not deny that his companies placed the spoofed robocalls, but argued that he lacked the requisite intent to defraud or cause harm, and noted that only a fraction of the consumers targeted actually answered the robocalls. Mr. Abramovich also argued that the third-party companies that hired to him to run the robocall campaign and the carriers that transmitted the robocalls should share in the liability for the violations.

The FCC disagreed. First, the FCC found that the use of neighbor spoofing and the references to well-known travel companies demonstrated an intent to defraud consumers. The FCC also found that Mr. Abramovich intended to harm the travel companies by trading on their goodwill and harmed consumers by spoofing their phone numbers, resulting in angry return calls by robocall recipients. Second, the FCC rejected the argument that liability should be based on the number of consumers who actually answered, explaining that the Truth in Caller ID Act only requires that a spoofed call be placed with fraudulent intent, not that the call actually reach a consumer. Finally, the FCC emphasized that Mr. Abramovich and his companies, not the third-party travel companies or the carriers, actually placed the spoofed robocalls and therefore bore sole responsibility for the violations. In fact, the FCC stated that the spoofed robocalls harmed the carriers by burdening their networks and engendering consumer complaints.

The fine is important for reasons beyond its size. For one, the fine came less than a year after the FCC issued the associated notice of apparent liability – an unusually quick turnaround for such a complex case that represents a shift to accelerated enforcement in line with Chairman Pai’s prior calls for a one-year deadline for forfeiture orders. Moreover, the FCC imposed the record-setting fine despite Mr. Abramovich’s claims that he cannot pay it. The FCC is required by the Communications Act to consider a party’s ability to pay when assessing forfeitures. As a result, the FCC historically will reduce a fine to approximately 2-8% of a party’s gross revenues in response to an inability to pay claim and significantly lowered fines under this framework just over a year ago. However, inability to pay is just one factor in the FCC’s forfeiture analysis and the agency determined that the repeated, intentional, and egregious nature of Mr. Abramovich’s violations warranted the unprecedented fine. While the FCC’s rejection of the inability to pay claim is not unprecedented, it leaves open the question of whether and how the FCC expects Mr. Abramovich to pay the fine. In many cases, parties receiving large fines can negotiate lower settlements with the Department of Justice when it brings a collection action on behalf of the FCC, but such settlements are not guaranteed. As a result, it appears the FCC’s primary goal was to establish a strong precedent to deter future violators rather than to actually receive payment.

Two Commissioner statements on the item also deserve attention. Although voting to approve the fine, Commissioner O’Rielly dissented in part, questioning the FCC’s assertion that spoofed robocalls cause harm regardless of whether consumers actually hear the message. Commissioner O’Rielly agreed that Mr. Abramovich and his companies intended to defraud call recipients, but he did not find sufficient evidence to indicate that Mr. Abramovich and his companies specifically considered the potential harm to consumers with spoofed numbers or the referenced travel companies. The dissent appears concerned that the FCC automatically will infer an intent to harm any time neighbor spoofing is used, even when such spoofing does not involve fraud, creating a strict liability regime. Meanwhile, Commissioner Rosenworcel highlighted the need for comprehensive regulatory reform to combat illegal robocalls. Specifically, Commissioner Rosenworcel noted the recent federal court decision setting aside key aspects of the FCC’s robocalling rules and requiring the FCC to revisit its definition of an autodialer. The Commissioner also pointed to the glut of outstanding petitions at the agency seeking exemptions and technical limitations to the robocalling rules. The Commissioner signaled that the FCC’s focus on robocalling issues will involve as much rulemaking as enforcement.

We will continue to follow the actions of the FCC and lawmakers and post any new developments regarding robocalling and spoofing here.

The flurry of activity related to robocalls began with a hearing before the Senate Committee on Commerce, Science, and Transportation on April 18, 2018, entitled “Abusive Robocalls and How We Can Stop Them.” During the hearing, the Committee members first posed questions to Adrian Abramovich, who the FCC alleged in a June 2017 Notice of Apparent Liability (NAL) violated the Truth in Caller ID Act by placing more than 95 million robocalls to consumers while “knowingly causing the display of inaccurate caller ID information.” Mr. Abramovich appeared before the Committee pursuant to a subpoena and provided answers to general questions about robocalling practices. However, he refused to answer questions related to his specific activities or the allegations in the FCC’s NAL, citing his Fifth Amendment right against self-incrimination, which prompted Committee Chairman John Thune (R-SD) to suggest that the Committee may seek to hold him in contempt of Congress.

The Committee then heard testimony from the following witnesses, representing the federal government, industry and businesses, and consumer advocates: Lois Greisman, Associate Director of the Marketing Practices Division for the FTC’s Bureau of Consumer Protection, Rosemary Harold, Chief of the FCC’s Enforcement Bureau, Kevin Rupy, Vice President of Law and Policy for the United States Telecom Association, Scott Delacourt, on behalf of the U.S. Chamber of Commerce, and Margot Saunders, Senior Counsel at the National Consumer Law Center. During this part of the hearing, Committee members posed numerous questions to the witnesses about what resources are currently available and what more could be done to reduce the number of robocalls consumers receive, and the commenters generally agreed that a holistic approach, including enforcement activity and technological improvements in the industry, would be the best way to address the issue.

During the hearing, Senator Richard Blumenthal (D-CT) also announced new proposed legislation entitled the Repeated Objectionable Bothering of Consumers on Phones (ROBOCOP) Act, which would, among other obligations: (1) require telecommunications companies to verify that caller ID is accurate, with some exceptions, and offer consumers optional free robocall-blocking technology; (2) establish a private right of action against telecommunications companies that violate Section 227 of the Communications Act; and (3) authorize the FCC to create a nationwide unblocking system that will ensure consumers are in control of the calls and text messages they receive. The bill is co-sponsored by Senators Ed Markey (D-MA), Ron Wyden (D-OR), Chuck Schumer (D-NY), Tammy Baldwin (D-WI), and Jeff Merkley (D-OR). Representative Jackie Speier (D-CA) introduced a companion bill in the House on the same day.

In addition, Senator Brian Schatz (D-HI), along with eleven co-sponsors, introduced separate legislation called the Robocall Enforcement Enhancement Act of 2018. This bill would extend the statute of limitations to three years for both the TCPA and the Truth in Caller ID Act. (Coincidentally, Ms. Harold specifically referenced harmonization of the statutes of limitations for these laws during the Commerce Committee hearing as one way that Congress could help the FCC in its enforcement efforts.)

Finally, fifteen Senators sent a letter to FCC Chairman Ajit Pai requesting that the Commission take a number of specific steps in response to the D.C. Circuit decision. In particular, the letter asks the FCC to (1) “establish a comprehensive definition of the term auto dialer”; (2) “maintain aggressive protections restricting unwanted calls and texts to reassigned numbers, and ensure that callers face liabilities for these illegal calls and texts in any future TCPA order or rulemaking”; and (3) “reiterate that consumers always have the right to revoke consent, regardless of any contractual clauses that may be included in user agreements.” The Senators requested that Chairman Pai respond in writing to their letter by May 9, 2018.

Meanwhile, the FCC has not yet received the remand from the D.C. Circuit in the ACA International case. (That is not scheduled until May 5.) The Commission is proceeding with examination of issues surrounding a possible database of reassigned numbers, having adopted a further notice of proposed rulemaking at its March Open Meeting. Comments on the proposal will be filed in June and July of this year.

We will continue to monitor Congressional activities related to robocalls, as well as the FCC’s pending rulemaking and will post any new developments here.

The actions today are limited in scope – principally targeting “spoofing” practices that use obviously invalid numbers as the purported originating number. Although the FCC recognizes that spoofing itself is permissible and valid in many instances (for example, doctors making calls from their mobile phones but sharing their office number instead), the Order targets three areas where the purported caller ID is clearly invalid. This marks the first time that the Commission has authorized call blocking in any manner, and the Order is understandably cautious, despite the broader claims made in non-telecom venues. The Order permits blocking, but does not require it. Moreover, the Order repeatedly reminds carriers that they are responsible for instances where their blocking practices are too broad or impermissibly block lawful calls. Given the generally conservative nature of common carriers, this warning is likely to limit the instances that actual blocking that is used, at least initially.

What Calls Can be Blocked?

In the Order, the Commission defines a specific set of circumstances within which a provider may preemptively block a call that the FCC has determined are “likely to be unlawful.” The specific circumstances for allowable call blocking outlined in the Order are as follows:

• Blocking at the Request of the Originating Number Subscriber. The FCC codifies a clarification made via public notice in 2016 which states providers may block calls when requested by the subscriber to which the originating number is assigned (i.e., a Do-Not-Originate (“DNO”) request). The FCC previously decided that providers are allowed to block a call from a number where the subscriber is asking that it be blocked to prevent a robocaller from making calls pretending to originate from that number. For the blocking to be valid, the number must be used for inbound calls only and the subscriber must consent to the blocking. The FCC also encourages providers to work together to share information about DNO requests to enable the system to work more effectively.
• Calls that Purport to Originate from Unassigned Numbers. Providers are now allowed to initiate blocking of a call that appears to originate from a number that the carrier knows is unassigned. The Commission explains that the origination of a call from a number that is unassigned is a strong signal that the calling party is spoofing the caller ID, likely with the intent to defraud and harm a customer. Specifically, the following three categories of unassigned numbers can reasonably be blocked by providers:
  • numbers that are invalid under the North American Numbering Plan (“NANP”) such as those that use an unassigned area code, an abbreviated dialing code, do not have the required amount of digits, or that contain a single repeated digit (other than 888-888-8888, which is a valid number);
  • numbers that have been verified as not allocated to an provider by the NANP Administrator (“NANPA”) or polling administrator (“PA”); and
  • numbers that the NANPA or PA allocated to a provider but are not currently in use (the blocking provider must be the entity to which the number has been allocated for blocking to be allowable). Thus, in effect, the “allocated but unassigned” category is likely to be rarely used to block calls.

Critically, although the FCC authorizes carriers to block certain calls, it doesn’t require them to do so, and it leaves open some risks that may discourage carriers from blocking calls. Notably, the Commission does not create a safe harbor protection for carriers, meaning that errors made in blocking calls are potentially actionable. Moreover, the Commission repeatedly reminded carriers that blocking could subject the carrier to liability if the blocked call falls outside the categories defined above. Further, the FCC warned against blocking of any calls to 911 or other emergency numbers.

In addition, internationally originated calls are subject to potential blocking. The Order notes that in many instances an internationally originated call may display a NANP number – such as in VoIP situations or in cases where a call center is involved. These calls are potentially subject to the blocking practices. Callers originating such calls should take care to ensure that proper caller ID is transmitted in practice by its originating carrier(s).

Finally, the Order “encourages” providers to adopt an easy, quick process by which a caller whose number is blocked erroneously may contact the provider and resolve the problem. This concern, however, feeds the Further Notice in the proceeding.

FNPRM

The Commission – and in particular, Commissioner O’Rielly – expressed concern that blocking not impact lawful calls. Thus, as noted above, the Order contains several warnings to carriers that they potentially are responsible if calls outside the specific categories are blocked, and it encourages (but doesn’t require) a challenge process for incorrect blocking. In the FNPRM component, the FCC seeks comment on whether to make a challenge process mandatory and, if so, how it should work. Thus the next phase of this issue will shift to instances of erroneous blocking, and how callers may address those concerns.

Additionally, the FNPRM explores the ways that the FCC can measure the effectiveness of its robocalling efforts as well as those adopted by industry. The FCC asks whether it should adopt a requirement for carriers to report the number of blocked calls, and/or to rely on data received through consumer complaints as the benchmark for effectiveness. Commissioner Clyburn noted this provision in her comments during the meeting, and suggested that these changes were adopted at her request. One can expect that Commissioner Clyburn will monitor comments on this issue closely.

With these issues, and the unknown prevalence of erroneous blocking, it’s sure that we will hear more on this in the coming months.

Intent to Cause Harm

The FCC’s investigation stemmed from consumer complaints regarding a robocalling campaign advertising insurance products sold by Mr. Roesel’s companies. A medical paging service complained to the FCC when the campaign disrupted its subscriber communications, including service at South Carolina hospitals. Based on the information provided by the complainants, the FCC traced the robocalls to an account registered to Mr. Roesel at his personal address. After subpoenaing his phone records, the FCC determined that Mr. Roesel and his companies allegedly made over 21 million unauthorized robocalls in a three-month span, averaging 200,000 calls a day. Critically, the FCC analyzed a sample of about 82,000 robocalls and found that the caller ID information transmitted belonged to unassigned numbers unconnected to Mr. Roesel or his companies. Further investigation revealed that Mr. Roesel allegedly selected these numbers to mask the source of the calls for consumers and avoid detection by authorities.

The FCC found that the deceptive spoofing, when done in conjunction with an unauthorized robocalling campaign, automatically demonstrated the “intent to cause harm” necessary to violate the Truth in Caller ID Act. Moreover, statements obtained by the FCC from a whistleblower formerly employed by Mr. Roesel indicated he knew the spoofed robocalls violated the law and targeted “economically disadvantaged and unsophisticated consumers” as well as the elderly in his campaign. The FCC determined that the campaign not only harmed the consumers called and disrupted the medical paging service, but also that his actions reduced the supply of quality phone numbers available for assignment. Specifically, because the (unassigned) numbers used by Mr. Roesel and his companies were now linked to allegedly illegal telemarketing, these unassigned numbers have no value to future subscribers.

Personal Liability

Consistent with past enforcement actions involving spoofed robocalls, the FCC found Mr. Roesel personally liable for the alleged violations. First, the FCC noted that Mr. Roesel allegedly authorized and oversaw his companies’ spoofed robocalls. Second, Mr. Roesel allegedly failed to follow normal corporate formalities, mixing personal and corporate accounts, such as by setting up the campaign under his own name and paying for the campaign from his personal funds. The FCC found such personal involvement in the alleged violations sufficient to “pierce the corporate veil” and propose fines directly against Mr. Roesel.

The proposed forfeiture represents a fine of approximately $1,000 for each of the more than 82,000 robocalls allegedly spoofed with an unassigned number. Notably, the Truth in Caller ID Act authorizes the FCC to propose an NAL against entities not holding FCC licenses, without first issuing a “warning” in the form of a Citation. By contrast, the Telephone Consumer Protection Act contains no such exemption and required the FCC to issue the Citation for the alleged unauthorized robocalls by Mr. Roesel and his companies before it can propose forfeitures. The Citation warns that the FCC may impose penalties of nearly $20,000 per unauthorized robocall if Mr. Roesel or his companies commit any further violations. Judging by the FCC’s recent emphasis on stamping out unauthorized robocalls under Chairman Pai, there is every reason to heed such warnings and expect further robocalling-related enforcement actions.