U.S. Wireless Carrier Issues

Transcription

1 U.S. Wireless Carrier Issues October 27, 2008 Boston Brussels Chicago Düsseldorf Houston London Los Angeles Miami Munich New York Orange County Rome San Diego Silicon Valley Washington, D.C. Strategic alliance with MWE China Law Offices (Shanghai)

2 E911 Location Accuracy: Proposed New Rules Could Impose Significant Burdens on U.S. Regional and Rural Wireless Carriers Six months after being blocked by a federal appeals court, the Federal Communications Commission (FCC) is once again poised to adopt rules imposing new E911 Phase II location accuracy requirements on wireless carriers. On September 22, 2008, the FCC issued a Public Notice requesting comments on joint proposals for new E911 location accuracy rules submitted by the Association of Public-Safety Communications Officials (APCO), the National Emergency Number Association (NENA), Verizon Wireless and AT&T. These proposals, which have also been backed by Sprint Nextel, consist of separate requirements for carriers utilizing handset-based location solutions (i.e., CDMA and iden carriers) and those utilizing network-based location solutions (i.e., GSM carriers). Having apparently decided to put these proposals on a fast track, the FCC gave the public only until October 6, 2008, to file comments, and until 12:00 pm on October 14, 2008, to file replies. Although these proposals are less stringent than the rules that were blocked by the court, they would still place new demands on wireless carriers that will likely require substantial investments in technology and infrastructure. As a result, these proposals could impose a substantial burden on regional and rural carriers that could significantly affect their operations and, in some cases, even their viability. CARRIERS WITH HANDSET-BASED SOLUTIONS For carriers utilizing handset-based location solutions, the rules proposed by APCO, NENA, Verizon Wireless and Sprint Nextel would require that, within two years, 67 percent of Phase II calls must be accurate to within 50 meters in all counties served by a carrier, and 80 percent of Phase II calls must be accurate to within 150 meters in all counties. Within eight years, carriers would be required to improve these levels to 67 percent accuracy within 50 meters and 90 percent accuracy within 150 meters. These rules would also allow a carrier to exclude up to 15 percent of the counties it covers from the 150-meter accuracy requirement (but not the 50-meter accuracy requirement) based upon heavy forestation in those counties that limits the accuracy of handset-based technologies. NON-NATIONWIDE CARRIERS LEFT OUT? The proposed rules make no mention of the potential impact on regional and rural carriers, which lack the nationwide carriers resources and access to new technologies. Non-nationwide carriers must be prepared to press these issues with the FCC and beyond, if necessary. CARRIERS WITH NETWORK-BASED SOLUTIONS For carriers utilizing network-based location solutions, the new rules proposed by APCO, NENA and AT&T would measure compliance only for those counties in which the carrier has deployed E911 Phase II in at least one cell site located within the county s boundary. Specifically, when measured at the county level, 67 percent of all calls must be accurate within 100 meters, and 90 percent of all calls must be accurate within 300 meters. The proposed rules also establish a series of interim benchmarks that ultimately require carriers to meet the 67 percent/100-meter standard in 100 percent of their covered counties within five years and to meet the 90 percent/300-meter standard in 85 percent of their covered counties within eight years. The proposed rules also encourage (but do not require) carriers with network-based solutions to begin incorporating handsetbased solutions or hybrid platforms on their systems by allowing carriers to blend their handset-based accuracy data with their network-based accuracy data in order to meet the overall network-based standards. ISSUES FOR REGIONAL AND RURAL CARRIERS The proposals now being considered by the FCC do not take into account the potential impact these proposals could have on regional and rural carriers that lack the resources and access to new technologies enjoyed by the nationwide carriers. These - 2 -

3 proposals also ignore or gloss over the challenges that many smaller carriers face, particularly those serving expansive rural areas with challenging terrain. THE NEW E911 RULES WOULD APPLY TO ALL CARRIERS REGARDLESS OF SIZE Unlike before, the new rules make no distinction between Tier I, Tier II and Tier III carriers. In addition, these proposals fail to address other issues of special importance to regional and rural carriers, such as the amount of capital needed to implement the necessary technologies and/or infrastructure (a particular concern in today s tight capital and credit environment), the availability of and access to new technologies and equipment needed to meet the proposed accuracy requirements, and the impact of zoning and other restrictions on the deployment of towers, antennas and other necessary infrastructure. Regional and rural carriers must therefore be prepared to take every step they can as soon as possible to ensure that, as the FCC moves forward on these proposed new E911 location accuracy rules, their unique needs and concerns are given full and fair consideration. Regional and rural carriers must also be prepared to press their concerns beyond the FCC if necessary, including to the courts and/or Congress. Otherwise, they could find themselves subject to a regulatory burden that could have them quite literally fighting for their lives. Other Issues in the Spotlight VERIZON/ALLTEL MERGER RE-IGNITES DEBATE ON ROAMING The pending merger of Verizon Wireless and Alltel has reignited debate on the in-market (or home roaming ) exception to the FCC s automatic roaming rule, as well as the availability of automatic roaming for data services not covered by the current rule (such as internet access, BlackBerry-type services, etc.) The merger has also raised questions regarding the future of Alltel s existing roaming agreements, as well as its GSM roaming network in the western United States. In August 2008, numerous regional and rural carriers and carrier groups filed petitions urging the FCC to resolve outstanding issues involving the in-market exception and data roaming before acting on the Verizon/Alltel merger. In the alternative, these petitioners urged the FCC to impose specific conditions requiring Verizon to provide automatic home and data roaming as a common carrier service following the merger, regardless of the requesting carrier s spectrum usage rights. The FCC was prepared to revise its automatic roaming rule in August 2008, but pulled a draft order from circulation in response to concerns that the revised rule did not adequately address the needs of regional and rural carriers. The FCC is now expected to act on revised roaming rules at about the same time as it votes on the Verizon/Alltel merger, which reports indicate could occur as soon as November 4, Although roaming advocates would prefer that the FCC address all of the outstanding roaming issues at once, including data roaming, it appears that the FCC will limit its upcoming order to revising the in-market exception. THE MERGER OF VERIZON AND ALLTEL HAS FORCED THE FCC TO TAKE A LOOK AT THE FOLLOWING ROAMING ISSUES: The in-market exception to the automatic roaming rule Automatic roaming for data services The removal of Alltel from the market as a competitive roaming option and the fate of Alltel s existing roaming agreements The fate of Alltel s GSM roaming network With respect to Alltel s GSM roaming-only network which it acquired through its earlier merger with Western Wireless several petitioners have requested that Verizon/Alltel either be required to sell this network to another operator (preferably not one of the nationwide carriers) or be required to continue operating this network as a GSM roaming network for a specified period of time. Verizon recently told the FCC that it views the GSM roaming network as a successful business and that it plans to maintain this business and operate this network indefinitely. Verizon further stated that it will maintain the GSM network to at least its - 3 -

4 current level of quality, including any necessary upgrades and investments, although it does not plan to expand the network s geographic coverage. EARLY TERMINATION FEES: WILL THE FCC PREEMPT THE STATES AND CLASS ACTION LITIGANTS? The FCC is currently considering whether to formally preempt state regulation and state law actions on wireless carriers use of early termination fees (ETFs). In place of state law, the FCC would adopt federal consumer protection standards on ETFs. The wireless industry has generally supported federal preemption of ETF regulation, since this would (1) establish a uniform, nationwide policy in place of a patchwork of varying state laws and requirements; and (2) effectively bring a halt to the filing of class action lawsuits alleging that wireless carrier ETFs violate state contract and/or consumer protection laws. Class action lawsuits over ETFs are not limited to the large nationwide carriers; similar suits have been filed against smaller regional carriers as well. In recent years, many wireless carriers have been targeted by class action lawsuits regarding their ETF practices. For example, a state court in California recently held that Sprint Nextel s ETF was an unlawful penalty under California state law and entered a judgment against the carrier totaling $73 million. Just one month prior, Verizon Wireless settled a California class action suit for $21 million, and similar cases remain pending against AT&T and T-Mobile. However, class action lawsuits involving ETFs are not limited to the national carriers; similar suits have been filed against smaller regional carriers as well. The FCC first looked into ETF issues in 2005, when it received petitions asking for a formal ruling that ETFs are rates charged under Section 332(c)(3)(A) of the Communications Act, and thus not subject to state regulation. Although nothing happened for some time, the FCC s interest in ETFs was reawakened in 2008, most likely in reaction to the latest round of class action lawsuits against wireless carriers, as well as the introduction of a bill in the Senate that would establish a federal bill of rights for wireless consumers while preserving state authority over the use of ETFs. At a public FCC hearing on ETFs in summer 2008, Chairman Martin appeared to express a preference for federal regulation of ETFs, stating that he does not believe that a patchwork of 50 different sets of regulations with widely varying protections benefits consumers or the industry. Chairman Martin also expressed his skepticism that class action lawsuits are the best way to guarantee consumer protections. FCC Chairman Martin has expressed a preference for federal regulation of ETFs, including federal consumer protection standards. However, Chairman Martin also stated that if the FCC were to take responsibility for regulating carrier ETFs, it should protect consumers from abusive practices, including rules guaranteeing that: (1) ETFs are reasonably related to the cost of the equipment the consumer receives; (2) ETFs are prorated over the life of the contract; (3) any contract for service is for a reasonable length of time; (4) when a consumer renews a contract without receiving equipment, the ETF is not extended; and (5) consumers are given time to review their first bill before becoming subject to an ETF. Although Chairman Martin was reportedly planning to take action on ETFs in August 2008, a draft order has still not been circulated to the other commissioners for review. It is therefore uncertain when (or even if) the FCC will act on this issue. FCC SEEKS FURTHER CHANGES TO UNIVERSAL SERVICE FUNDING AS ITS INTERIM CAP IS CHALLENGED In 2008, the FCC adopted an interim cap on high-cost universal service support provided to eligible telecommunications carriers (ETCs). This interim cap is especially problematic for wireless providers that rely on ETC funding for the provision of service in high-cost rural areas. Under the cap, ETCs now receive funding based on the high-cost support levels established in March 2008 and must share this funding with any newly-designated competitive ETCs. In August 2008, the Rural Cellular Association (RCA) and a group of small wireless carriers filed a Joint Petition for Reconsideration asking the FCC to rescind this interim cap. RCA subsequently withdrew its joint petition and filed suit in the U.S. Court of Appeals for the D.C. Circuit seeking judicial review of the FCC s interim cap. RCA s appeal was consolidated for review with other appeals filed by various wireless carriers, and this case is still in the early procedural stages

5 Meanwhile, the FCC is poised to vote on comprehensive universal service reform at its meeting scheduled for November 4, Specifically, the FCC is seeking changes that would restructure the method by which universal service support is calculated and distributed. The FCC should meaningfully fund broadband services and ensure that investment in mobile wireless infrastructure in rural areas is accelerated, not impeded. The potential impact of the FCC s proposal on wireless carriers in particular prompted a recent letter to the FCC from Senators Snowe and Collins of Maine. The senators expressed concern that a reduction in funds to wireless carriers could reduce cellular coverage in rural areas and that inadequately served rural areas will fall farther behind non-rural areas in the basic capacity to meet public safety requirements. The senators also urged the FCC to meaningfully fund broadband services and ensure that investment in mobile wireless infrastructure in rural areas is accelerated, not impeded. FEDERAL COURT RULES A WARRANT IS REQUIRED FOR MOBILE PHONE LOCATION INFORMATION For the first time ever, a federal district court judge has ruled that the government must present a warrant based on probable cause in order to obtain historical cell phone tower location information from a wireless carrier. The government is still considering whether to appeal the decision, but this case nevertheless provides an example of some of the legal challenges posed by location-capable mobile phones. All communications service providers are required to provide assistance and information to law enforcement pursuant to various federal statutes. However, these same statutes also require law enforcement to meet certain legal standards in order to obtain a carrier s assistance if this standard is not met, law enforcement s request may not be lawfully authorized and the carrier s assistance may be improper under the law. Recently, law enforcement authorities have been increasingly turning to wireless carriers with requests for real-time location information for a subject s mobile phone, as well as historical mobile phone location information, which refers to information that a carrier has stored in its billing, operations or traffic management systems and records, such as information about which towers and/or sectors a customer s phone touched over the course of a call, etc. in other words, information that would allow someone to reconstruct a customer s location and movements during a call. LAW ENFORCEMENT MAY REQUEST TWO TYPES OF MOBILE PHONE LOCATION INFORMATION: Real-time information (where the customer is right now) Historical information (billing or other records showing a customer s earlier movements) In various jurisdictions around the United States, the government has argued that a combination of the Stored Communications Act (SCA) and the Pen Register Statute taken together allows law enforcement to obtain real-time mobile phone location information under a lower legal standard based on specific articulable facts, rather than on the more stringent standard known as probable cause. The majority of federal courts that have addressed this issue have rejected the government s theory and ruled instead that real-time location information requires a warrant based on probable cause. Nevertheless, some courts have accepted the government s theory, and conflicting opinions can be found even within the same federal district. The issue of mobile phone location information that is stored in a carrier s records ( historical information) is somewhat different, and until recently had not been looked at closely by the courts. That changed earlier in 2008, when the government applied for a court order in the Western District of Pennsylvania that would have required a wireless carrier (Sprint Nextel) to disclose transactional records for a customer s mobile phone, including all historical cellular tower data, cellular tower site information and sectors. The government based its request on the lower specific articulable facts standard of the combined SCA/Pen Register Statute

6 A five-judge panel of U.S. magistrate judges rejected the government s request, ruling that, under the Fourth Amendment and all relevant statutes, the government could only obtain this information through a warrant based on probable cause. The government appealed, but U.S. District Judge Terrence McVerry issued an order affirming the magistrates decision. Although this ruling is only binding in one federal district, this issue is likely to continue to come before other courts throughout the country, and these courts may follow or be influenced by this decision. DOJ WANTS NEW CALEA RULE ON MOBILE PHONE LOCATION INFORMATION In 2007, the U.S. Department of Justice (DOJ) petitioned the FCC to adopt new rules for wireless carriers under the Communications Assistance for Law Enforcement Act (CALEA). One of these new rules would require wireless carriers to install the technology necessary to provide law enforcement with more detailed location information for mobile handsets specifically, the latitude and longitude information that carriers now obtain through their E911 Phase II location systems. The wireless industry and privacy advocates have strongly opposed this proposed new rule. As of October 2008, the FCC had not taken any action on DOJ s request. NEW ELECTRONIC FILING SYSTEM STREAMLINES TOWER SITING REVIEW PROCESS Although expanding and improving coverage is a priority for any wireless carrier, speeding up the tower siting process is especially important for carriers that will need to construct more towers to meet E911 location accuracy requirements. Carriers should therefore consider the benefits of using the FCC s newly launched voluntary internet-based electronic filing system, which will enable licensees and tower proponents to complete the historic review process for the proposed construction of communications facilities under the Nationwide Programmatic Agreement on Tower Siting and Historic Preservation (NPA). The new system is designed to eliminate administrative burdens and streamline the process of clearing communications towers under the NPA. The NPA applies to any applicant (including some users of unlicensed transmitting devices) proposing to construct a new communications tower, modify an existing tower, or collocate an antenna on an existing tower, regardless of whether it is associated with a site-based or geographic license. Licensees and other companies involved in tower construction should implement full compliance procedures for this complex process, which should be initiated several months in advance of construction. Instead of merely assuming that no historic properties will be affected, applicants must take affirmative steps to confirm that construction will not have an adverse effect on historic properties. Failure to adhere to these procedures exposes an FCC licensee to sanctions, including monetary forfeitures or even, in extreme circumstances, an order to dismantle the tower and/or license revocation. For more information, please contact your regular McDermott Lawyer or: Shirley S. Fujimoto: sfujimoto@mwe.com David D. Rines: drines@mwe.com For more information about McDermott Will & Emery visit The material in this publication may not be reproduced, in whole or part without acknowledgement of its source and copyright. U.S. Wireless Carrier Issues is intended to provide information of general interest in a summary manner and should not be construed as individual legal advice. Readers should consult with their McDermott Will & Emery lawyer or other professional counsel before acting on the information contained in this publication McDermott Will & Emery. The following legal entities are collectively referred to as McDermott Will & Emery, McDermott or the Firm : McDermott Will & Emery LLP, McDermott Will & Emery/Stanbrook LLP, McDermott Will & Emery Rechtsanwälte Steuerberater LLP, MWE Steuerberatungsgesellschaft mbh, McDermott Will & Emery Studio Legale Associato and McDermott Will & Emery UK LLP. McDermott Will & Emery has a strategic alliance with MWE China Law Offices, a separate law firm. These entities coordinate their activities through service agreements. This communication may be considered attorney advertising. Previous results are not a guarantee of future outcome