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AT&T’s Argument It Was Untouchable by Federal Trade Commission Fails in Court

Phillip Dampier February 27, 2018 AT&T, Net Neutrality, Public Policy & Gov't 1 Comment

AT&T’s attempt to avoid oversight and enforcement of consumer protection laws by the Federal Trade Commission (FTC) failed in a federal appeals court Monday, overturning a 2016 decision that agreed with AT&T the FTC could not oversee or punish AT&T for its business practices.

In a unanimous 11-0 decision by the Ninth Circuit Court of Appeals, the court found AT&T’s interpretation of a law it said gave the Federal Communications Commission exclusive authority to regulate and oversee “common carrier” telecom companies was overly broad and based on a misinterpretation of the law. The decision means the FTC will continue to pursue AT&T in court to secure relief for AT&T’s wireless customers that the FTC claims were misled by AT&T’s unlimited data plan that was not truly unlimited.

“The phrase ‘common carriers subject to the acts to regulate commerce’ thus provides immunity from FTC regulation only to the extent that a common carrier is engaging in common-carrier services,” the court ruled Monday. In laymen’s terms, the judges found that the FCC does have the regulatory authority to oversee common carrier services like basic telephone service, but the law does not prevent other government agencies like the FTC to oversee AT&T’s conduct in non common-carrier services.

The FTC and the FCC both argued that allowing AT&T and the 2016 lower court opinion to stand would create a regulatory loophole through which virtually any corporation with even the slightest ownership stake in a common carrier telecommunications company could escape all oversight and enforcement of consumer protection laws.

The dispute began in 2014, when the FTC sued AT&T in court for intentionally throttling wireless internet speeds of millions of AT&T customers hanging on to their legacy unlimited data plans.

The FTC’s complaint alleged that the company failed to adequately disclose to its customers on unlimited data plans that, if they reached a certain amount of data use in a given billing cycle, AT&T reduced – or “throttled” – their data speeds to the point that many common mobile phone applications – like web browsing, GPS navigation and watching streaming video –  become difficult or nearly impossible to use.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said former FTC Chairwoman Edith Ramirez in 2014. “The issue here is simple: ‘unlimited’ means unlimited.”

According to the FTC’s complaint, AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans. The complaint alleged that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars.

The complaint accused AT&T of violating the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans.

AT&T responded in court asking the case be dismissed, arguing that the FTC could not bring a case against AT&T because, as a common carrier, only the FCC has jurisdiction over the company.

The case was largely decided on whether Congress intended to exempt common carrier companies from FTC oversight based on their “status” or their “activities.” AT&T argued the law clearly gave companies deemed to be common carriers a blanket exemption from FTC oversight. The FTC argued Congress only intended to exempt the specific common carrier “activities” or services sold by a company from FTC oversight, not the entire company. The three-judge panel of the Court of Appeals agreed with AT&T’s view, affirming AT&T’s claim it was untouchable by the FTC and dismissed the FTC’s lawsuit.

Judge Kozinski, questioning AT&T: “I’m regulated by the FTC and I don’t like it. I go out and I buy a small, money-losing common carrier. Do I say, ‘bye bye FTC,’ under your reading of the statute?”

The decision was a stunner in D.C. regulatory circles and opened a chasm-sized loophole for almost any company to completely escape the FTC’s oversight and enforcement of consumer protection laws just by providing a single common carrier service (or acquiring a small phone company that does) to secure blanket immunity. The FTC appealed the decision before the Ninth Circuit Court of Appeals.

Both the FTC and at least one judge hearing the federal agency’s appeal saw the potential impact of the earlier 2016 decision immediately.

“I’m regulated by the FTC and I don’t like it,” Judge Alex Kozinski said to AT&T’s attorney. “I go out and I buy a small, money-losing common carrier. Do I say, ‘bye bye FTC,’ under your reading of the statute?”

The FTC warned if AT&T’s view was upheld, any company could buy a common carrier and violate federal consumer protection laws with no recourse for consumers and no available FTC enforcement action.

This week’s decision, called “common sense” by the judge who wrote the summary of the court’s finding, restores the FTC’s authority over non-common carrier services at companies large and small, including AT&T. It is also a relief to FCC Chairman Ajit Pai, who earlier argued the FTC had jurisdiction over abusive ISPs and would effectively oversee broadband providers without any need to continue the net neutrality policies of his predecessor. Had the court ruled in favor of AT&T, Pai’s policy would have transferred oversight of internet services to an agency legally prohibited from overseeing most broadband providers.

The FTC was pleased with the decision.

“It ensures that the FTC can and will continue to play its vital role in safeguarding consumer interests including privacy protection, as well as stopping anti-competitive market behavior,” Maureen Ohlhausen, acting Chairwoman, said in an emailed statement.

AT&T was not, and claimed the court ignored the merits of the case.

“We are reviewing the opinion and continue to believe we ultimately will prevail,” the representative said in an emailed statement, which did not definitively state whether AT&T intended to appeal the decision.

Charter Seeks Favorable Licensing Terms for New Mobile/Rural Wireless Broadband Service

There are three tiers of Citizens Broadband Radio Service users – incumbent users (usually military) that get top priority access and protection from interference, a mid-class Priority Access License group of users that win limits on potential interference from other users, and unlicensed users that have to share the spectrum, and interference, if any.

Charter Communications wants to license a portion of the 3.5 GHz Citizens Broadband Radio Service (CBRS) band to launch a new wireless broadband service for its future mobile customers and potentially also offer its own rural broadband solution.

The CBRS band has sat largely unused except by the U.S. military since it was created, but now the Federal Communications Commission is exploring opening up the very high frequencies to attract wireless broadband services with Priority Access Licenses that will assure minimal interference.

One of the most enthusiastic supporters of CBRS is Charter/Spectrum, which has been testing a 3.5 GHz wireless broadband service using CBRS spectrum in Centennial and Englewood, Col., Bakersfield, Calif., Coldwater, Mich., and Charlotte, N.C. Those tests, according to Charter, reveal the cable company “can provide speeds of at least 25/3 Mbps at significant distances,” which it believes could become a rural broadband solution for customers outside of the reach of its wired cable network.

But Charter’s interest in CBRS extends well beyond its potential use to reach rural areas. Charter’s primary goal is to offer wireless connectivity in neighborhoods for its forthcoming mobile phone service. Charter plans to enter the wireless business this year, selling smartphones and other wireless devices that will depend on in-home Wi-Fi, CBRS, and a contract with Verizon Wireless to provide coverage everywhere else.

Charter wants to keep as much data usage on its own networks as possible to reduce costs. It has no interest in building a costly, competing LTE 4G or 5G wireless network to compete with AT&T, Verizon, Sprint, and T-Mobile. But it is interested in the prospect of using LTE technology on CBRS frequencies, which are likely to be licensed at much lower costs than traditional mobile spectrum.

Primary Economic Areas

There are several proposals on the table on how to license this spectrum. Large wireless companies want Priority Access Licenses (PALs) based on Partial Economic Areas (PEAs) — 416 wireless service areas the FCC established as part of its spectrum auctions. PEAs are roughly equivalent to metropolitan areas and typically cover multiple counties surrounding a major city. Major wireless carriers are already familiar with PEAs and their networks cover large portions of them.

Charter is proposing to license PALs based on county lines, not PEAs, which will likely reduce the costs of licensing and, in Charter’s view, will “attract interest and investment from new entrants to small and large providers.” If Charter’s proposal is adopted, its costs deploying small cell technology used with CBRS will be much lower, because it will not have to serve larger geographic areas.

The FCC envisioned licensing PALs based on census tract boundaries, which would result in licenses for areas as small as portions of neighborhoods. That proposal has not won favor with like wireless companies or cable operators. The wireless giants would prefer licenses based on PEAs, but companies like AT&T seem also amenable to the cable industry proposal.

Charter’s proposed CBRS network would likely allow the cable company to offload a lot of its mobile data traffic away from Verizon Wireless, reducing the company’s data costs. Charter’s deployment costs are relatively low as well, because the backhaul fiber network used to power small cells is already present throughout Charter’s service areas.

Just how far into rural unserved areas Charter’s CBRS network can reach isn’t publicly known, but it would likely not extend into the most difficult-to-serve areas far away from Charter’s current infrastructure. But if the FCC establishes county boundaries and a requirement that those companies obtaining priority licenses actually serve those areas, it could help resolve some rural broadband problems.

Trump Administration Official Proposes Nationalizing 5G Over Security Concerns

National security officials inside the Trump Administration dropped a controversial proposal on the desks of multiple federal agencies that advocates a federal government takeover of the nation’s forthcoming 5G wireless network.

Axios obtained a copy of an accompanying memo and PowerPoint presentation outlining the proposal that would nationalize 5G service and have taxpayers fund the construction of a single,  nationwide network that would allow federal officials to secure traffic from foreign economic and cybersecurity threats.

Some national security officials worry the Chinese have achieved dominant market positions in network infrastructure and artificial intelligence, and this could have security implications for emerging technologies like self-driving cars and machine to machine communications, which will likely use 5G networks.

“China is the dominant malicious actor in the Information Domain,” the presentation notes, adding that two Chinese manufacturers – ZTE and Huawei are dominant players in 5G infrastructure at a time when American manufacturers of wireless technology are disappearing.

That 5G technology and who makes it is becoming a national security issue, claims the author, advocating reduced risk by authorizing the United States government to build a single, nationwide 5G wireless network, on which America’s wireless carriers could lease secure access. The network concept could even eventually be shared with America’s allies to protect them from “Chinese neo-colonial behavior,” the author writes.

The author of the presentation, perhaps unintentionally, waded into the heart of a fierce debate between municipalities, broadband advocates and private cable and phone companies and their funded special interest groups, over the benefits of public vs. private broadband service.

Calling the taxpayer-funded effort “the 21st century equivalent of the Eisenhower National Highway System,” the author advocated first spending up to $200 billion to construct a national fiber optic backbone that would reach neighborhood 5G small cells. Additional funding would cover small cell placement and equipment.

The author implied the Department of Defense budget could be tapped for some of the money, quoting the Secretary’s interest in expanding secure communications. The author noted little of the military’s current $700 billion budget does any good for the American people in the information domain. Constructing a secured 5G broadband network would presumably change that.

The proposal suggests a national 5G network could be up and running within three years, if it became a government priority. ISPs and other users would then be able to obtain access on the network to service their respective customers.

If adopted, the Trump Administration would oversee the country’s largest public broadband project in American history, paid for by U.S. taxpayers, a concept that has traditionally been anathema to most Republicans and the broadband industry. Both have traditionally opposed public broadband projects if or when they compete with the private sector.

“This is coming from a Trump’s National Security Council,” tweeted Hal Singer, a principal at Economists, Inc. “If the same thoughts came from Bernie Sander’s NSC (or Elizabeth Warren’s), Republicans would be up in arms and Fox News would sound the socialism alarm.”

Commissioners at the Federal Communications Commission also roundly criticized the proposal.

“I oppose any proposal for the federal government to build and operate a nationwide 5G network,” wrote FCC Chairman Ajit Pai. “The market, not the government, is best positioned to drive innovation and investment.”

Pai wants the government to accelerate the allocation of additional wireless spectrum that could be auctioned off to wireless carriers to expand 5G.

The large wireless carriers remained silent about the implications of the proposal, claiming they had not yet seen it.

But by late morning, the Trump Administration was attempting to downplay the presentation, telling Recode the document was dated and had merely been floated by a staff member and was not a reflection of an imminent major policy announcement.

That did not stop four of the five commissioners at the FCC from hurrying out statements criticizing the proposal, and the fifth tweeting negatively about it. They apparently took it very seriously:

Comcast Adds 4G Backup to Cover Internet Outages for Businesses

Phillip Dampier January 11, 2018 Comcast/Xfinity, Consumer News, Wireless Broadband 2 Comments

Comcast’s Business division has introduced the first automatic 4G backup internet connection service for commercial customers who experience an internet outage or network problem.

Comcast’s Connection Pro ($29.95/mo) offers automatic switching to a backup 4G LTE wireless internet service that will keep business customers connected to the internet until Comcast’s wired broadband connection is repaired and goes back online.

“Internet connectivity is critical for any business. Losing their connection – even shortly – can be disruptive,” said Jeff Lewis, vice president, data product management, Comcast Business. “Comcast Business understands that businesses need a redundant back-up solution to help stay connected and provide greater peace of mind in the event of a power or internet outage.”

The service targets small businesses and retailers and is marketed as a backup for cash registers/credit card point of sale terminals, email, and cloud services, and includes battery backup to maintain connectivity for up to eight hours in the event of a power outage.

Business customers can also access an online control panel to remotely monitor outages at individual business locations.

Verizon Accuses AT&T of “Rigging the Game to Stifle True Competition”

It is rare for AT&T and Verizon to feud in public, even rarer for one company to accuse the other of being anti-competitive, but that is precisely what happened last week in California as the two companies sparred over building a next generation wireless network for first responders.

The First Responder Network Authority (FirstNet) is a government program to provide emergency responders with priority access to the first nationwide, high-speed wireless broadband network dedicated to public safety. AT&T won an extremely lucrative contract to build, operate and maintain the network in states that “opt in” to AT&T/FirstNet’s proposal. But AT&T is not building a separate wireless network apart from its existing wireless infrastructure. It is using $6.5 billion in public taxpayer dollars and free access to an extremely valuable segment of nationwide 700MHz spectrum, known as Band 14, to improve its existing wireless network for individual customers and the first responders that will get priority access in the event of an emergency.

For AT&T to benefit the most financially, it has to convince each of 56 states and territories to “opt in” to its FirstNet deployment plan or do nothing at all, which will result in that state or territory automatically being enrolled in AT&T’s plan. If a state elects to opt out of AT&T’s plan, the wireless company cannot get free access to Band 14 or collect the taxpayer dollars designated for that area.

FirstNet is one of AT&T’s most lucrative contracts in years, and the phone company is doing everything possible to win over state officials in hopes they will embrace the FirstNet plan. It has been a successful effort with more than 30 states, Puerto Rico and the U.S. Virgin Islands purposely opting in, and more than a dozen still studying AT&T’s offer. To date, no state has opted out.

Verizon, which did not bid on the original FirstNet contract, has not walked away from providing public safety communications and has spent a considerable amount of its advertising budget to promote Verizon’s own services to first responders, designed to assure they get first priority to clogged cellular networks in the event of an emergency. In August, Verizon announced it will privately finance its own “private network core” to directly serve police, fire, ambulance, and related agencies. Verizon’s first responder network will be separate from Verizon’s public network, but the company has also promised full priority access to its public LTE 4G network across the country.

Verizon’s counteroffer comes without taxpayer financing, yet will offer many of the same services as AT&T FirstNet, without costing the country more than $6 billion. Among the services Verizon will give away for free: priority/preemption access, which means in an emergency, first priority will go to emergency officials even if it means dropping your cell phone call or data session. Verizon is also bolstering its Push-to-Talk Plus service, which works with existing land mobile radio networks. This will allow first responders to use the “walkie talkie”-type features already a familiar part of their radio equipment.

Verizon’s offer would seem to be a good deal for consumers and governments in states like New York and California that have yet to opt in to AT&T FirstNet, and in California, Verizon was invited to bid to create an alternative network in a potential “opt out” scenario. Verizon’s director of public-safety solutions group – David Wiederecht, promised the state Verizon would submit its bid by the state deadline, which was last Wednesday. By Friday, California officials leaked word Verizon had reneged on that commitment and did not participate, a fact Verizon later confirmed.

Verizon accused AT&T and FirstNet of colluding to rig the “Request for Proposals” process in California with requirements that were impossible for anyone except AT&T to meet.

“Vigorous competition that allows the industry and the marketplace to continue to grow and innovate is in the best interest of public safety and should be everyone’s shared goal,” Verizon said in a written statement. “Instead, we believe FirstNet and its corporate partner are rigging the game in order to stifle true competition.”

Urgent Communications reported that the among the most onerous requirements imposed by AT&T and FirstNet is that all emergency communications in an “opt out” state must be sent to the FirstNet LTE core network operated by AT&T. That would mean that regardless of who builds and operates the network, AT&T still remains at the core of FirstNet.

“We’re not prepared to have our public safety customers run on a network where we can’t control their ability to connect or their customer experience,” according to the Verizon spokesperson.

Verizon suggests the reason for 36 states to have opted-in to AT&T’s proposal may not be the result of love for AT&T, but rather the punishments the states and territories risk if they don’t sign on with AT&T.

Don Brittingham, Verizon’s vice president of public safety, testified at a Pennsylvania hearing regarding FirstNet and warned states could be effectively stuck with AT&T indefinitely.

“States should not be required to use the network core deployed by (AT&T) FirstNet, as such a requirement would put the state in the untenable position of being driven by the interests and decisions of FirstNet’s commercial partner—a condition that would be unattractive to any prospective state commercial partner,” Brittingham said.

AT&T has also borrowed from its customer preservation policies on the retail side with terms and conditions that could be financially devastating to states that decide to look elsewhere.

Because any competing provider is required to use AT&T’s network core to be a part of FirstNet, AT&T can set whatever price it chooses for third party access. But most onerous of all is the penalty imposed if a state opts out of AT&T FirstNet and chooses a vendor that does not meet every FirstNet guideline. In that case, a state would be required to come hat in hand back to AT&T/FirstNet for service that does meet the guidelines AT&T/FirstNet wrote. In California, that penalty fee would amount to as much as $15 billion, more than twice the amount taxpayers are paying AT&T to build out FirstNet in at least 36 states and territories.

Taken from a FirstNet fact sheet.

AT&T defended the amount of the penalty fee, claiming it has to build or enhance its network to provide public safety communications for at least 25 years, but critics contend the penalty is so risky, most states will opt for the path of least resistance and legal exposure and sign on with AT&T/FirstNet.

Verizon’s complaints about the bidding process received a strong rebuke from AT&T.

“Building a state-of-the art network that meets the needs of first responders is hard. Clearly, AT&T is up for the task,” Chris Sambar, AT&T’s senior vice president for FirstNet, said in a statement provided to Urgent Communications. “We’re noticing a pattern: Verizon says they have public safety’s back, but when it comes to the heavy lifting, they are nowhere to be found.”

But then, neither are any competing providers.

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