As described by Wheeler, the FCC’s cybersecurity initiative will be led by the private sector, with the Commission serving as a monitor and backstop in the event that the market-led approach fails. In particular, the FCC will “identify public goals, work with the affected stakeholders in the communications industry to achieve those goals, and let that experience inform whether there is any need for next steps.” Chairman Wheeler stressed that the new paradigm must be dynamic, more than simply new rules, and the Commission will rely on innovation by the private sector.

The Commission's efforts will be guided by four principles, including commitments to:

1. preserving the qualities that have made the Internet an unprecedented platform for innovation and free expression, so that Internet freedom and openness is not sacrificed in the name of enhanced security;
2. privacy, i.e., enabling personal control of one’s own data and networks;
3. cross-sector coordination, e.g., among regulatory agencies; and
4. the multi-stakeholder approach to global Internet governance and an opposition to any efforts by international groups to impose Internet regulations that could restrict the free flow of information in the name of security.

(1) Information Sharing and Situational Awareness. The Commission is looking into legal and practical barriers to effective sharing of information about cyber threats and vulnerabilities in the communications space. Specifically, the Chairman noted that “companies large and small within the Communications communications sector must implement privacy-protective mechanisms to report cyber threats to each other, and, where necessary, to government authorities.” Moreover, where a cyberattack causes degradations of service or outages, the Chairman stated that “the FCC and communications providers must develop efficient methods to communicate and address th[e] risks.” To that end, the Chairman noted that the FCC is actively engaged with private sector Information Sharing and Analysis Organizations, and with other federal agencies, to improve threat information sharing and situational awareness.

(2) Cybersecurity Risk Management and Best Practices. Noting the work of the Communications Security, Reliability and Interoperability Council (CSRIC) in developing voluntary cybersecurity standards, Chairman Wheeler called upon communications providers to work with the Commission to set the course for years to come regarding how companies in that sector communicate and manage risk internally, with their customers and business partners, and with the government. In addition, the Commission will be seeking information to measure the implementation and impact of the CSRIC standards.

(3) Investment in Innovation and Professional Development. Chairman Wheeler has asked the FCC Technological Advisory Council (“TAC”) to explore specific opportunities where “R&D activity beyond a single company might result in positive cybersecurity benefit for the entire industry.” Specifically, the FCC will “identify incentives, impediments, and opportunities for security innovations in the market for communications hardware, firmware and software.” Further, the FCC will work with NIST and academia to “understand the current state of professional standard and accountability,” as well as “where the FCC might positively contribute toward further professionalization of the workforce.”

This initiative could have significant impact on telecommunications and technology companies. Cybersecurity already is a top priority for CSRIC. A new working group was established within CSRIC and work is underway to update the industry's cybersecurity best practices. The primary goal is to align the industry's cybersecurity activities with the National Institute of Standards and Technology's (NIST) Cybersecurity Framework Version 1.0 released in February 2014. Industry members are encouraged to participate in the process. Based on the current timeline, CSRIC will vote to approve the new best practices in March 2015.

Kelley Drye & Warren's attorneys recently presented a webinar discussing cybersecurity updates and considerations for the telecommunications and technology industries. To listen to a recording of The Cybersecurity Review webinar, please click here.

Several aspects of the District Court’s Memorandum Opinion and Order (“Order”) merit mention. In the absence of direct authority in the Eighth Circuit, in which the District Court sits, the Order found that breach of interconnection agreement disputes may directly be filed in federal courts, i.e., without the need to first go to the state commission that arbitrated and/or approved it. The Order noted a split among federal appellate courts on whether disputes regarding interpretation and enforcement of interconnection agreements should first be filed before a state public service commission, and the Level 3 Court adopted the rationale of the Fourth. In contrast, the Third and Eleventh Circuits (and potentially the Seventh Circuit) continue to require such disputes first be filed with a state public service commission.

In addition, the District Court concluded the plaintiffs had successfully stated a claim that the AT&T ILECs violated Sections 251 and 252 as a result of an ILEC’s breach of an interconnection agreement. Relying in part on the Federal Communications Commission’s decision in Core Communications Inc. v. Verizon MD., Inc., 18 FCC Rcd. 7962, 7971-7973 (2003), the Order explained that “Section 251(c)(2) expressly requires defendants to provide interconnection ‘on rates… in accordance with the terms and conditions of any agreement.’” However, the District Court dismissed the CLECs’ claim that the AT&T ILECs violated Sections 201 and 202 of the Telecom Act by engaging in unjust, unreasonable charges, practices, classifications, regulations, facilities, or services, and unjust and unreasonable discrimination. The District Court agreed with the AT&T ILECs' argument that the incumbent carriers were not acting as “common carriers” under the Telecom Act when providing Section 251 interconnection because fulfillment of the duty to interconnect under Section 251 was equate to the provision of “telecommunications service.” The District Court relied on the analysis in Global Naps, Inc. v. Bell Atlantic-New Jersey, Inc., 287 F. Supp. 2d 532 (D. NJ. 2003) to reach the result.

While the immediate impact of the Order may be limited to within the other federal trial courts of the Eighth Circuit, the Order does highlight the split in authority among the federal appellate courts. Of course, the case may be appealed to the Eighth Circuit which has yet to pass on this issue. Moreover, the Order highlights possibly evolving views on the distinctions between obligations imposed on ILECs under Section 201 and 202, and Sections 251 and 252 in terms of claims for breach of interconnection agreements.

This action, released August 2, 2013, represents the first of which we are aware where the Commission imposed a fine on an individual user of a GPS jammer. As we reported in late 2012, in recent years, the FCC’s investigations and enforcement matters against unauthorized marketing and use of GPS blockers, cellphone jammers, and similar equipment led principally to citations without monetary penalties, as well as to enforcement advisories for the general public. We anticipated then that the Commission might soon find reason to issue substantial forfeitures for illegal operation of such devices, especially where facts are present demonstrating either, one, that large corporations are utilizing such unauthorized devices or, two, that 9-1-1 or other emergency communications are being subjected to interference.

In April 2013, the Commission found the first set of circumstances in the case of two sizeable corporations, The Supply Room, Inc. and Taylor Oilfield Manufacturing, Inc., operating cell phone jammers. The Commission issued NALs against each corporation in excess of $125,000.

The present NAL is an instance of the second set of circumstances. In proposing the almost-$32,000 forfeiture against Mr. Bojczak (which Mr. Bojczak can seek to have the agency reduce or cancel), the Commission expressed clear concern about interference to navigational equipment designed to promote public safety. The device in question was found by Enforcement Bureau staff to be operating in the vicinity of, and presumably causing interference to, a ground-based augmentation system (“GBAS”) operated by the Port Authority of New York and New Jersey at Newark Liberty International Airport and used to support precision approaches by aircraft, departure procedures, and terminal area operations.

Several aspects of the Commission’s calculation of the proposed forfeitures bear mention. First, the Commission once again used the maximum per violation per day forfeiture amounts of $16,000 for using unauthorized equipment and, separately, for operating without a license or other authorization. (Jammers, the FCC underscored, are per se unlawful.) Second, the Commission increased the base forfeiture amount for interference of $7,000 by 50% because of the safety-oriented nature of the GBAS operations to which Mr. Bojczak’s device is alleged to have caused interference. Third, the Commission reduced the overall proposed forfeiture amount by 25% because the violator cooperated with, and voluntarily relinquished his equipment to, Bureau personnel. The FCC, as a final comment and signaling what appears to be an ongoing evolution and toughening of its enforcement approach to jammers, noted that in future cases, it may pursue “alternative or more aggressive sanctions” – including referral to the Department of Justice for possible criminal action – if remedies like the one proposed in the Bojczak NAL do not deter future similar violations.

The Second Circuit’s decision represents the second federal appellate decision in little over a month shooting down arguments of AT&T seeking to limit the scope of their interconnection obligations under Section 251. In April, we reported that the United States Court of Appeals for the Sixth Circuit ruled that a State commission may fashion interconnection obligations under Section 251(a) that differ from those applicable under Section 251(c)(2).

The Second Circuit’s opinion addresses the rates and sections of the Act applicable to “transit traffic.” The Second Circuit described the “principal question [as] whether AT&T, an interconnecting carrier, is obligated under § 251(c)(2) to provide this routing of traffic, or transit service, at lower TELRIC rates or whether AT&T is permitted to charge higher negotiated rates” under Section 251(a). The Second Circuit recognized that the provision of transit traffic service by ILECs is essential to most CLECs entering the market. The Court further acknowledged that, if ILECs are allowed to impose higher, negotiated rates rather than TELRIC rates, then the additional costs imposed on the CLECs would put the CLECs at a competitive disadvantage. The Court concluded that allowing an ILEC to impose unregulated rates on indirectly interconnecting CLECs would undermine the very purpose of the Act, namely, to provide CLECs with the tools necessary to compete with the ILECs and to offset the inherent advantages that ILECs have through their infrastructure. The Second Circuit also found that nothing in Section 251(c)(2) limits that provision to the transmission and routing of traffic between a CLEC and the ILEC’s end users. Accordingly, the Court held that ILECs are obligated under Section 251(c)(2) to provide transit traffic service at TELRIC rates and not higher negotiated rates under Section 251(a).

While the Court limited its order to rates charged by the parties to contract in dispute, the application of this decision and its rationale is not limited to those parties. The Act provides the option of negotiated resolutions under § 252(a) and expresses a preference for those negotiated resolutions. The Court agreed with the District Court that the DPUC erred in imposing regulated rates on all of AT&T’s transit service contracts. The Court joined other federal appellate courts facing similar questions by concluding that the DPUC’s order would undermine Section 252(a) and the preference for negotiated outcomes. Thus, while the Court did not issue an order requiring the use of TELRIC rates for transit traffic, it found that TELRIC-based rates are available to CLECs when other rates are not agreed upon – at least they will be in Connecticut, New York and Vermont, the States bound by the Second Circuit.

In reaching its conclusions, the Court addressed two other topics of note. Before reaching the substance of the primary issues – the application of Section 251(c)(2) to, and the rates for, transit traffic – the Court held that the FCC’s consideration but current inaction on the topic of whether Section 251(c)(2) applied to transit service did not pre-empt State commission action on the question of transit traffic rates. Rather, the Court found, in the absence of guidance from the FCC, that Congress gave State commissions the “latitude to exercise their expertise in telecommunications and the needs of the local market” and that the State commission was free to rule on the issue.

The Court also rejected AT&T’s argument that, because the agreement in dispute was fashioned as a commercial agreement and not expressly a Section 252 interconnection agreement, the DPUC did not have the authority to review it. The Second Circuit held that the DPUC had the authority to review the agreement and determine whether the subject matter fell under Section 251, and therefore, was subject to the regulatory framework of Sections 251 and 252 – in other words that it was, in fact, an interconnection agreement. The DPUC made just such a determination by concluding that negotiations for transit service should have been conducted by the carriers pursuant to Section 252.

This week, the Fourth Circuit issued an important decision concerning the jurisdiction and role of federal courts in the interpretation and enforcement of state-approved Interconnection Agreements (“ICAs”). In Central Telephone Co. v. Sprint Communications Co., the Fourth Circuit held that plaintiffs are not required to bring claims relating to the interpretation and enforcement of state-approved ICAs to a state commission before they can be heard in federal court. Instead, the court ruled that a party may bring a claim for breach of contract in federal court directly. This decision opens a new option for parties seeking to interpret and enforce ICAs, at least in the states within the Fourth Circuit (which encompasses Maryland, Virginia, North Carolina, South Carolina and West Virginia).

At the outset, the court noted two propositions that are roundly accepted and not in dispute in the case. First, it noted that a federal court has jurisdiction to interpret the terms of an ICA under 28 U.S.C. section 1331. Second, it also noted that “every circuit to have considered the question” has concluded that a state commission also has such authority to interpret the terms of an ICA. The question presented by Sprint, however, was the “more particularized” question of whether a state commission must interpret an ICA before a federal district court can do so.

In finding that the federal courts have jurisdiction in the first instance, the court held that neither the text of the 1996 Act nor the FCC decisions applying it provide state commissions with exclusive jurisdiction to interpret and enforce state-approved ICAs. Notably, relying in part on an FCC amicus brief disavowing the interpretation, the court disagreed with a Third Circuit decision, that held state commissions had exclusive authority to resolve disputes over ICAs in the first instance. Instead, the Fourth Circuit ruled that the FCC’s Starpower decision only stands for the proposition that state commissions have authority to interpret and enforce ICAs when asked to do so and not that state commissions have exclusive authority to do so.

The case arose out of a request by Intrado Communications, Inc. (“Intrado”) for interconnection with AT&T in order to provide competitive emergency communications services to Public Safety Answering Points (“PSAPs”), specifically services allowing the PSAPs to receive 911 emergency telephone calls. When the two carriers failed to reach a negotiated agreement on all points, Intrado sought arbitration before PUCO. One of the issues Intrado raised in its Petition was on whose network POIs should be established in geographic areas where Intrado was the designated 911 service provider. PUCO held that, when AT&T brought end user 911 calls to Intrado for completion to a PSAP served by Intrado, AT&T must establish a POI on Intrado’s network. Ultimately, PUCO based its decision on Section 251(a), not on Section 251(c), which Intrado had referenced in its Petition.

AT&T argued that only Section 251(c)(2) articulates the interconnection obligations that apply to an ILEC and that, as a result, the only POI that can be ordered in an arbitration involving an ILEC and a CLEC is on the ILEC’s network. Specifically, AT&T pointed to Section 251(c)(2)(B), which obligates an ILEC to provide, upon request, “interconnection with the [incumbent] local exchange carrier’s network . . . at any technically feasible point within the carrier’s network” (emphasis added). In other words, AT&T argued that any Section 251(a) obligations it might have could not extend beyond the more specific ILEC obligations contained in Section 251(c)(2).

The Court plainly disagreed with AT&T that the POI must be located on AT&T’s network for two principal reasons. One, it concurred with the FCC’s straightforward statement in its 1996 decision implementing the local competition provisions of the Telecommunications Act of 1996 that Section 251(a) “applies to all telecommunications carriers.” Two, observing that a State Commission can require one CLEC to establish a POI located on another interconnecting CLEC’s network, the Court reasoned that “it makes little sense to read the Act in a way that imposes fewer obligations on the incumbent carriers than on less-established non-dominant carriers.” The Court found that “there is no limiting language in the statute” requiring CLECs to always establish interconnection on the incumbent carrier’s network. In so doing, the Court recognized the ability of State Commissions to fashion particular interconnection terms and conditions under Section 251(a) in the absence of a prohibition against doing so when faced with making an arbitration determination.

The Court’s decision also speaks to the authority a State Commission has to resolve issues in a Section 252 arbitration when the petition is silent as to the statutory section on which the State Commission bases its decision. In brief, the Court ruled that in order for an issue to be considered by a State Commission in a Section 252 arbitration, the statutory section under which it is decided need not be the one under which the issue is decided by the State Commission provided that the parties understood and contested what was at stake substantively, as it found Intrado and AT&T did here.

This decision represents a setback for ILECs that have sought to limit their interconnection obligations to those explicitly set forth in Section 251(c) or to use Section 251(b)(4)(A) as a sword to preclude State Commissions from considering alternate legal or regulatory bases for action in arbitration proceedings that were not expressly raised in a petition or a response. It will be of interest to observe whether AT&T seeks further review of this matter, having now lost at the PUCO, the federal District Court, and before the U.S. Court of Appeals.

At the same time, it bears monitoring whether CLECs will be able to make offensive use of this decision. Notably, the Court did not cite as a limitation of its decision the nature of the competitive services that Intrado sought to provide, i.e., emergency communications. As such, the decision could be of relevance in a wide variety of interconnections scenarios.