The Year Ahead for Communications Providers

Thursday, January 22, 2015 - 14:59

MCC interviews Michael R. Dover and Robyn P. Mohr, associates in the Communications practice of Kelley Drye & Warren LLP.

MCC: Please start our discussion by explaining the various types of communications providers.

Dover: “Communications provider” is a very broad term that refers to a number of companies in the technology and new media industries. More traditional communications providers, like telecommunications carriers, often refer to telephone or Internet service providers. The term is also often used to refer to VoIP or Internet application providers and wireless companies.  Communications provider can also refer to media entities such as cable and satellite companies. Or, it can be used to refer to less traditional media entities, like over-the-top content providers or video-on-demand services.

MCC: Let’s start with the more traditional telecommunications companies. What big issues did they face in 2014, and what do you see as the biggest issue of 2015?

Dover: One of the more interesting developments this year has less to do with actual telephone carriers and more to do with a company’s use – or misuse – of phone calls and faxes. 

Over the last year, the Federal Communications Commission has been very active in enforcing the Telephone Consumer Protection Act (47 U.S.C. 227), known as the “TCPA.” The TCPA prevents telephone solicitations or telemarketing and the use of automated telephone equipment in certain circumstances. TCPA litigation is particularly worrisome because the statute provides for damages between $500 and $1,500 per violation. So, any company that calls, texts or faxes its customers should be mindful of the TCPA. In 2014, there were more than 50 TCPA petitions pending before the Federal Communications Commission (FCC), and we are seeing the Commission take a more active role in these actions.

One of the most notable TCPA actions this year was Capital One’s settlement for nearly $73 million, the largest TCPA class action settlement to date. In that case, Capital One and three other collections agencies were sued for using automatic telephone dialers to call peoples’ cellphones in an attempt to collect outstanding credit card debts. 

AT&T Mobility also chose to settle its TCPA-based litigation for $45 million, in October. Although telephone service providers aren’t often the subject of TCPA litigation, the AT&T settlement serves as a reminder to wireless carriers that they are not immune from the law. 

In this case, AT&T allegedly made auto-dialed calls to wireless phone numbers without receiving the prior express consent of the recipients, as required by the TCPA. 

Now, it looks like 2015 is already off to an active start. During the first week of 2015, the FCC released an $18,000 Forfeiture Order against an advertising company for delivering unsolicited, pre-recorded sales calls, informing consumers that they had won a vacation package. Here, the FCC proposed a penalty of $4,500 per message, which unfortunately isn’t unheard of.

MCC: What about newer communications services like over-the-top content providers or video-on-demand services?

Mohr: It’s been a big year for over-the-top content providers and video-on-demand services. While the term “over-the-top” is rather broad, it typically refers to the delivery of audio, video or other media over the Internet. “Video-on-demand” services are commonly thought of as a type of “over-the-top” provider. 

With video-on-demand, a viewer can watch content by streaming it through a set-top box, computer or even mobile device. Traditional cable and telecommunications companies can also offer video-on-demand services that allow subscribers to watch content at the click of a button. One of the major draws of a video-on-demand service, of course, is that a subscriber isn’t tied to a broadcast schedule.

Currently, the FCC regulates over-the-top providers and video-on-demand services differently than it regulates traditional multichannel video programming distributors (MVPDs) like cable television or direct-broadcast (DBS) satellite providers.

MCC: Why does it matter that these services are treated differently?

Mohr: Traditional MVPDs have a number of legal rights and obligations. For instance, MVPDs are bound by program access, program carriage and retransmission consent rules. In exchange for these benefits, MVPDs also take on additional obligations.  MVPDs are required to employ closed captioning and video description on certain programming and must also make emergency information accessible to people with disabilities. 

As it stands now, many over-the-top services do not have these benefits and burdens. But, the FCC has recently proposed changing the traditional definition of an MVPD and issued a Notice of Proposed Rulemaking, seeking public comment on the issue.

MCC: How has the FCC proposed to change the definition of an MVPD in its Notice of Proposed Rulemaking?

Mohr: The FCC’s NPRM takes a holistic look at the evolving Internet-based video marketplace. Specifically, the NPRM breaks up the video market into four separate types of services: subscription linear, subscription on-demand, transactional on-demand, and ad-based linear and on-demand. Under the FCC’s proposed definition, subscription linear services would be included in the new MVPD definition.   

MCC: What is a “subscription linear” service?

Mohr: The FCC defines a “subscription linear” service as one that would make a continuous stream of video programming available to viewers on a subscription basis. These are the “Aereos” of the world that allow subscribers to view a prescheduled lineup of programming. 

It’s also important to note that most Internet-based video services require a significant amount of broadband capacity. As demand for Internet-based video services continues to rise, so will the need for broadband access, capacity and speed. 

MCC: What are some major issues involving broadband capacity, access and speed that we should be aware of?

Dover: A major concern with the delivery of content has to do with whether broadband providers can charge for faster access to content, known as paid prioritization. This is one of the central issues in the net neutrality debate. Under a “paid prioritization” model, Internet service providers would be able to charge content providers, like video-on-demand services, to deliver content to viewers. Other issues in the net neutrality debate include no-blocking and anti-discrimination rules. 

Currently, the FCC defines “broadband” as a connection of at least 4 Mbps downstream and at least 1 Mbps upstream. At those speeds, it would take about 2 hours and 46 minutes to download a 2-hour movie and around 26 minutes and 40 seconds to upload a 5-minute video. So, if you want to download or upload video content at a faster speed, you’re going to need a quicker, higher-capacity Internet connection.

Recently, the FCC and the president have also said that they will make municipal broadband a priority in the coming year.

MCC: What is municipal broadband, and what are your predictions for 2015?

Mohr: “Municipal broadband” refers to broadband infrastructure and Internet access services that are provided by local governments. Municipal broadband networks are somewhat controversial because several states currently have laws that prohibit local governments from building these types of networks. However, municipal networks appear to be gaining some momentum. Recently, President Obama unveiled a number of broadband expansion plans. He also spoke about the need for faster, more affordable Internet access in his State of the Union address. These announcements are timely as the FCC is set to consider petitions from Chattanooga’s Electric Power Board and the City of Wilson, North Carolina, seeking FCC pre-emption of state law prohibiting municipal broadband.

MCC: Do you expect any additional activity from the FCC this year?

Dover: Yes. The FCC is said to be considering whether it should raise the definition of “broadband” to 25 Mbps downstream and 3 Mbps upstream from its current definition. Under the Telecommunications Act of 1996, the FCC has the power to define what speeds qualify as “broadband” Internet service. The last time the FCC updated its definition of broadband was in 2010 when it raised the speed from 200 Kbps to the current standard. The new definition could impact what broadband projects get funding from various FCC programs like the Connect America Fund or the E-rate program.

We also expect the FCC to clarify the Commission’s USF/ICC Transformation Order relating to transitional intercarrier compensation for Voice over IP (VoIP) traffic originating or terminating through a competitive LEC and its VoIP partner. In recent years, certain interexchange carriers have refused to pay end office switched access compensation or even tandem switched access compensation on this traffic despite clear indications from the FCC that these carriers should pay compensation for each of the individual functions that are equivalent to the individual services provided in the traditional time-division multiplexing format. The FCC’s clarification on this matter will further the Commission’s IP-transition goals and provide clarity on the numerous compensation disputes relating to VoIP-originated traffic.

Finally, net neutrality will be a big FCC focus in the coming months. In February, the chairman is expected to circulate a draft order outlining proposed net neutrality rules. Among these rules will likely be variations on a no-blocking or anti-discrimination rule with regard to how Internet service providers can treat traffic from various websites. At the heart of the issue is whether the chairman’s proposal will change the regulatory classification of broadband providers to what is known as a “common carrier.” This “Title II” approach is the regulatory scheme applied to traditional telephone service and would subject broadband providers to a number of statutory restrictions. It’s also possible that the Commission will decide to regulate broadband as a Title II service but will forbear from applying many of the law’s more onerous obligations. It looks like 2015 is going to be a busy year for the Commission.

MCC: Do you have any final thoughts to share with our readers?

Dover: As telecommunications, technology and new media companies continue to grow, legal and regulatory issues are sure to arise. 2015 is on pace to be an exciting year for these industries, and we look forward to helping our clients keep pace with the changing legal landscape.

Please email the interviewee at with questions about this interview.