Business Phone Systems: VOIP PBX, Hosted PBX, Virtual PBX.

In a proceeding that generated an unusual amount of press coverage and widespread industry interest, the Federal Communications Commission (FCC) on July 31 adopted revised band plan and services rules for its upcoming auction of 700 MHz band spectrum. The FCC will auction a total of 62 MHz of spectrum during the 700 MHz auction, which according to federal law must begin by Jan. 28, 2008. This spectrum is coveted by companies both within and outside of the wireless industry because it is ideal for carrying wireless signals.

The text of the FCC’s Order has not yet been released, so the specific details of the new auction rules are not yet known. We have summarized the key elements of the FCC’s News Release below, and will issue further advice when the FCC’s final 700 MHz Auction order is released.

Revised 700 MHz Band Plan

The FCC adopted a revised band plan for the “Lower” and “Upper” 700 MHz bands. In general, the 700 MHz band encompasses spectrum from 698 MHz to 806 MHz. Some of the spectrum within this band previously was auctioned and licensed by the FCC. In the upcoming 700 MHz auction, the FCC will auction a total of 62 MHz of spectrum, divided among five spectrum blocks. Some of the specifics for each of these spectrum blocks are:

Block

Bandwidth/Pairing

Frequencies

Market Type/Size

Lower A Block

12 MHz/2 x 6 MHz

698-704 MHz/

728-734 MHz

EA -Economic Area (larger than CMAs)

Lower B Block

12 MHz/2 x 6 MHz

704-710 MHz/

734-740 MHz

CMA - Cellular Market Areas (smallest market size)

Lower E Block

6 MHz/Unpaired

722-728 MHz

Economic Area

Upper C Block

(Open Access)

22 MHz/2 x 11 MHz

746-757 MHz/

776-787 MHz

REAG – Large multi-state regions of US

Upper D Block

(Public/Private)

10 MHz/2 x 5 MHz

758-763 MHz/

788-793 MHz

Nationwide License

The FCC also adopted several significant revisions to the public safety spectrum allocations within the 700 MHz band.

Performance Requirements

The FCC adopted new, more stringent build-out and performance requirements for the new 700 MHz licensees. The performance requirements described below were strongly opposed by the wireless industry.

• For smaller geographic market-area licenses (such as Economic Area licenses and Cellular Market Area licenses), licensees will be required to provide service to cover at least 35 percent of the geographic area of the licensed market within four years of license issuance; and 70 percent of the geographic area by the end of the license term.

• For the larger, REAG market licenses, licensees will be required to provide service to cover at least 40 percent of the population of the licensed market within four years of license issuance; and 75 percent of the population by the end of the license term.

• The FCC did not identify specific build-out requirements for the nationwide Upper D block license. This licensee will be required to partner with an adjacent Public Safety Broadband Licensee, and to negotiate a Network Sharing Agreement to be approved by the FCC, which will govern construction deadlines, among other issues.

• If a licensee does not meet the four-year performance benchmarks, the FCC will reduce its license term from ten to eight years, thereby imposing an accelerated construction schedule.

• If a licensee fails to meet the end-of-term construction requirements, the FCC will automatically reclaim any unserved areas of its license area and re-license those areas.

Open Access

One of the more controversial aspects of the FCC’s new rules is its decision to impose “open platform” requirements on the winning bidder of the 22 MHz Upper C Block license. Specifically, the Upper C Block licensee will be required to provide a platform that will allow customers, device manufacturers, third-party application developers and others to use the device and applications of their choice on this spectrum block, subject to the condition that these devices and applications do not harm the network.

Public Safety/Private Partnership

As mentioned above, the FCC will require that the winner of the 10 MHz Upper D Block nationwide license form a Public Safety/Private Partnership with an adjacent nationwide public safety licensee, to develop a shared, interoperable broadband network for both public safety and commercial use. Under the new rules, public safety will have priority access to the Upper D Block commercial spectrum in times of emergency, and the commercial licensee will have preemptible, secondary access to the adjacent public safety broadband spectrum.

Auction Procedures

The FCC adopted three noteworthy changes to its auction procedures for the 700 MHz auction. First, the FCC will use anonymous bidding for the auction, regardless of any pre-auction assessment of how competitive the auction will be. Second, the FCC will use “package bidding” procedures to auction the 12 Upper C Block REAG licenses, to assist bidders that are seeking to create a nationwide footprint. Finally, the FCC directed its staff to establish “reserve prices” for this auction. These prices will allow the FCC to decline to auction the 22 MHz Upper C Block license if the newly imposed open access requirements on this spectrum depress bidding to an unacceptably low level.

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For more information, please contact:

Theresa Cavanaugh, Washington, D.C., (202) 973-4257, terrycavanaugh@dwt.com

Chris Fedeli, Washington, D.C., (202) 973-4274, chrisfedeli@dwt.com

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As previously noted in our June 1 posting, the Federal Communications Commission (FCC) has extended its Telecommunications Relay Service (TRS) requirements, which oblige telecommunications service providers and manufacturers to afford persons with hearing and speech-impaired disabilities reasonable access to telephone services and equipment.

The FCC’s new Order and rules, which have now been released, impose these obligations on “interconnected” [to the public switched network] Voice over Internet Protocol (VoIP) providers and manufacturers of VoIP handsets and other equipment. Some of these requirements will become effective for VoIP providers and manufacturers 60 days after they are published in the Federal Register, while others (involving collection of information) must await OMB approval. All told, we estimate the requirements will be phased in over a four- to seven-month time frame.

As described in our previous advisory, the new regulations require VoIP providers to offer (and manufacturers to enable) various types of TRS—which typically involves an interplay of voice, text and/or video components and an operator’s intervention—and to the extent “readily achievable,”¹ to designate an agent for receipt and handling of accessibility complaints and inquiries, and to send this information to the FCC for posting on the agency’s website. In addition, all interconnected VoIP providers and equipment manufacturers are required to: (1) consider accessibility of covered equipment and services throughout their design, development, and fabrication, as early and consistently as possible; (2) where employee training is provided, consider accessibility issues in the development of such training; and (3) maintain records of the entity’s accessibility efforts that can be presented to the FCC in the event that consumers with disabilities file complaints. Interconnected VoIP providers must also offer abbreviated “711” dialing to access these relay services.

Finally, and importantly, VoIP providers will now be required to contribute a percentage of their interstate revenues into the federal TRS Fund, and to file FCC Form 499-A (used to calculate such contributions, as well as Universal Service Fund and other contributions) on an annual basis. In turn, VoIP providers will be eligible for compensation from the fund for the TRS services they provide.

The FCC once again declined to classify VoIP as a “telecommunications” service subject to the panoply of regulations applied to providers of such services, but instead found that “[b]ecause consumers have a reasonable expectation that interconnected VoIP services are replacements for traditional phone service, the same disability access protections that currently apply to telephony must apply to interconnected VoIP.” This pronouncement fits the FCC’s pattern over the past two years of applying a growing variety of public-safety, consumer-protection and law-enforcement-related obligations on interconnected VoIP services. The FCC has already imposed 911/E911, universal service, CALEA (wiretapping) and, most recently, CPNI (subscriber privacy) obligations on interconnected VoIP services.

FCC Chairman Kevin Martin has stated that the agency will “continue to evaluate” the applicability of other telephone-type obligations to VoIP, including numbering and other consumer protection measures, in order to “protect the interests of consumers and establish a competitively neutral playing field for competing services.” Interconnected VoIP providers and equipment manufacturers thus may expect additional FCC regulation in the future.

The details of these new regulatory requirements and contribution obligations are complex in their applicability and implementation. For further information, please contact one of the below-listed DWT attorneys.

Footnote

¹ If the requirement is not “readily achievable,” the provider must ensure that the service is compatible with existing devices or specialized customer premise equipment (CPE) commonly used by individuals with disabilities to achieve access. A provider also must ensure, if readily achievable, that information and documentation provided in connection with an interconnected VoIP service is accessible. A manufacturer of equipment or CPE designed to provide interconnected VoIP service must ensure, if readily achievable, that the equipment is designed and fabricated to be usable by individuals with disabilities. If such compliance is not readily achievable, the manufacturer must ensure that the equipment is compatible with existing devices or specialized CPE commonly used by individuals with disabilities to achieve access, if such compatibility is readily achievable. A covered manufacturer also must ensure that information and documentation provided in connection with covered interconnected VoIP equipment or CPE is accessible—again, if such accessibility is readily achievable.

For more information, please contact:

James M. Smith, Washington, D.C., (202) 973-4200, jamesmsmith@dwt.com

K.C. Halm, Washington, D.C., (202) 973-4200, kchalm@dwt.com

Gregory J. Kopta, Seattle, Washington, (206) 622-3150, gregkopta@dwt.com

This advisory is a publication of the Communications Group of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent developments in the communications industry. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may be given only in response to inquiries regarding particular situations.

Copyright © 2007, Davis Wright Tremaine LLP.

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In another important decision limiting the imposition of burdensome and discretionary local zoning requirements on wireless telecommunications deployment, on June 20, 2007, the United States District Court for the Central District of California granted NextG Networks of California, Inc. (NextG) a preliminary injunction, enjoining the County of Los Angeles (the County) from enforcing its zoning requirements on NextG’s installation of wireless telecommunications facilities. In doing so, the court found that the County’s zoning requirements, as applied to the deployment of wireless facilities, was preempted by Section 253(a) of the federal Communications Act and did not fall within the authority reserved to local governments under Section 253(c) to manage the public rights-of-way.¹

NextG is a telecommunications company that constructs Distributed Antenna Systems (DAS), which combine a fiber optic network with low power antennas located on utility or street-light poles in public rights-of-way. NextG uses its DAS networks to provide transport and networking to wireless carriers, empowering them to provide greater coverage and capacity. Because NextG’s network included antennas, the County required NextG to comply with the County zoning code. Like many local wireless zoning ordinances, the County’s code was complicated, burdensome and highly discretionary. Moreover, the County did not impose the requirements on non-wireless facilities, even though located in the public rights-of-way, like NextG’s.

NextG filed for preliminary injunction, alleging that the County’s zoning requirements violated its federal rights and prevented it from meeting obligations requiring NextG to construct facilities for customers by specified dates.

In granting NextG’s motion for preliminary injunction, the court identified four common elements that result in preemption of a local ordinance by Section 253: “(1) a complicated application process (including reporting of financial information) and high fees; (2) a public hearing on the application; (3) imposition of criminal and civil sanctions for violations; and (4) unfettered discretion to approve or deny the application, or revoke a permit once issued.” The court found that all of the common elements were present in the County’s zoning requirements, which required submission of a variety of detailed plans, maps, and any other information that the County might require, and put the burden on the applicant to prove such “subjective and imprecise concepts” as: “health, peace, and comfort” of area residents; “use, enjoyment or valuation of property;” and “public health, safety or general welfare.” The court found that these requirements were “so burdensome and Byzantine as to erect a barrier to providing telecommunications services.” The court also found that the highly burdensome application process was complicated by two separate public hearing requirements, including one that was not codified, and by the imposition of criminal and civil sanctions. Finally, the court found that the County’s zoning ordinance “provides unfettered discretion to County officials at multiple points in the approval process, including discretion to ultimately deny the application, the ‘ultimate cudgel’ in the preemption analysis.”

The court rejected the County’s arguments that its zoning code (1) does not require a franchise, and (2) is of general applicability. The court noted that the County’s “not a franchise” argument was recently rejected by the Ninth Circuit in Sprint Telephony PCS, L.P. v. County of San Diego. The court held that the deciding characteristic is not the label attributed to the requirement, but whether the requirement has the effect of prohibiting the provision of telecommunications services. For similar reasons, the court also found the general applicability of the zoning requirements to be irrelevant, stating that Section 253(a) “plainly preempts not only statutes that may ‘prohibit’ the provision of services on their face, but also that ‘have the effect’ of prohibiting the provision of services in their application…”

The court also rejected the County’s argument that its zoning requirements constituted “management” of the public rights-of-way within the “safe harbor” of Section 253(c). The court found that the requirements went beyond management of the right-of-way because they incorporated unrelated factors such as the “use, enjoyment and valuation of adjoining property, and the peace, comfort and welfare of neighbors.” Of perhaps even greater importance, the court found that County’s broad discretion to deny an application on amorphous factors, such as “good zoning practice” and “functional development design,” as well as the County’s discretion to request whatever additional information it wanted from the applicant, also exceeded the County’s management of the right-of-way. Lastly, the court found that the zoning requirements exceeded the Section 253(c) safe harbor because they discriminated against wireless facilities.

Having found NextG likely to succeed on the merits of the case, the court held that absent the requested relief, NextG would suffer irreparable harm to its goodwill and reputation. The court noted that “[t]he wireless telecommunications industry is capital-intensive and consists of only a small number of major players, so the inability to dispatch services and the resulting loss of current revenue could result in insufficient funding for future projects and inhibit Plaintiff’s ability to grow its business.” The court rejected the County’s argument that NextG brought the harm upon itself by agreeing to unrealistic contractual commitments, holding that NextG should not be required to build into its contracts time to comply with an invalid permit process and that the harm stems from the passage of the requirements, not from NextG’s contractual obligations.

The NextG v. Los Angeles County decision provides further support for the proposition that local governments cannot impose burdensome and open-ended zoning codes on wireless telecommunications providers. The decision reiterates that federal policy promoting the rapid deployment of competitive and advanced telecommunications networks must not be thwarted by a patchwork quilt of local requirements and the fickle winds of local politics.

Footnote

¹ NextG also made claims under Sections 7901 and 7901.1 of the California Public Utilities Code. However, finding that federal law was dispositive on the issues presented, the court declined to consider whether the zoning ordinance was also preempted by state law. The scope of local government’s authority over wireless telecommunications facilities in the public rights-of-way under Section 7901 and 7901.1 is presently at issue before the California Supreme Court in Sprint Telephony PCS v. County of San Diego.

For more information, please contact:

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On May 31, 2007, the Federal Communications Commission (FCC) moved to extend its Telecommunications Relay Service (TRS) requirements, which oblige telecommunications service providers and manufacturers to afford persons with hearing and speech-impaired disabilities reasonable access to telephone services and equipment. The Order imposes those same requirements on “interconnected” [to the public switched network] Voice over Internet Protocol (VoIP) providers and manufacturers of VoIP equipment. VoIP providers will also be required to offer abbreviated “711” dialing to access these services and contribute to TRS funding. The text of the FCC’s Order has not yet been released, and so the specific details and effective date of these new VoIP regulations are not yet known. We will issue further advice when those details are released.

The objective of the TRS rules is to provide telecommunications services to disabled persons “functionally equivalent” to those enjoyed by persons without disabilities. The services mandated under the FCC’s TRS rules (47 C.F.R. §§ 64.601-64.605), currently designed to serve hearing and speech-impaired persons, comprise seven categories, the first four of which are mandatory for telecommunications providers and, henceforth, VoIP providers and equipment manufacturers:

1. Text-to-Voice (TTY): the most basic type, where a TRS calling party calls an access number and types a message on a special phone keyboard, and a dedicated operator (the “Communications Assistant” (CA)) reads the message to the called party;
2. Voice Carry Over (VCO): wherein a hearing-impaired person speaks directly to the called party, but receives responses in text form through the CA;
3. Hearing Carry Over (HCO): wherein a speech-impaired person keyboards an outgoing TTY message but hears the response directly from the called party;
4. Spanish Relay Services (SRS): interstate TRS in Spanish;
5. Speech-to-Speech Relay (STS): enabling a speech impaired person to speak to a CA who is specially trained in speech disorders and so can “translate” the voice message to the called party, without the use of TTY;
6. Video Relay Service (VRS): enabling those who use sign language to “sign” to a CA via a video link (typically broadband Internet), who then speaks the signed message to the other party; and
7. IP Relay: TRS using a computer, PDA or like device rather than a TTY keyboard.

Providers must offer the mandatory services, and must (unless granted a waiver) adhere to various “mandatory minimum” operational, technical and functional standards set forth in Section 64.604 of the FCC’s rules.

Importantly, these new rules apparently include funding obligations. Therefore, all affected providers must contribute a percentage of their interstate gross end-user revenues into the Interstate TRS Fund, which is administered by USAC in a very similar way to the Universal Service Fund (USF). Such entities are also eligible for compensation from the Interstate TRS Fund for both the mandatory and non-mandatory services they provide.

This action is the latest in a series in which the Commission has gradually imposed various “telephone-type” public safety, consumer protection and law enforcement-related regulations on VoIP services, even as it declines to decide whether VoIP services are “telecommunications” subject to traditional FCC regulation. The Commission had already imposed 911/E911, universal service, CALEA (wiretapping) and CPNI (subscriber privacy) obligations on VoIP services. As FCC Chairman Kevin Martin stated yesterday, “VoIP services are increasingly being marketed and used as a substitute for traditional landline phones. While technologies will continue to evolve, core social goals in the Act regarding the provision of communications services to all remain unchanged.” Indeed, he added that the Commission will “continue to evaluate” the applicability of other telephone-type obligations to VoIP, including: “numbering. . . and consumer protection issues (service discontinuance notifications, slamming, and billing issues, etc). Chairman Martin stated that he hoped that “by addressing these obligations, the Commission will be able to continue to protect the interests of consumers and establish a competitively neutral playing field for competing services.” VoIP providers and equipment manufacturers thus may expect additional FCC regulation in the future.

For more information, please contact:

James M. Smith, Washington, D.C., (202) 973-4200, jamesmsmith@dwt.com

K.C. Halm, Washington, D.C., (202) 973-4200, kchalm@dwt.com

Gregory J. Kopta, Seattle, Washington, (206) 622-3150, gregkopta@dwt.com

This advisory is a publication of the Communications Group of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent developments in the communications industry. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may be given only in response to inquiries regarding particular situations.

Copyright © 2007, Davis Wright Tremaine LLP.

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On April 2, 2007, the Federal Communications Commission (FCC) released a Report and Order and Further Notice of Proposed Rulemaking (“Order”) in response to a petition filed by the Electronic Privacy Information Center (EPIC) addressing the practice of “pretexting” and privacy concerns over customer proprietary network information (CPNI). This Order substantially amends the FCC’s existing rules governing the use and disclosure of CPNI by imposing more stringent access and authentication standards and procedures on telecommunications carriers.

The Order also extends the same obligations to interconnected VoIP service providers. Relying on its ancillary authority under Title I of the Communications Act, the FCC imposed these new privacy obligations on interconnected VoIP providers without classifying VoIP as a telecommunications service, or subjecting that service to other Title II obligations. In addition, the Order solicits additional comment on related implementation issues.

Password requirement for release of CPNI

Under the new rules, carriers may not release call detail information during a customer-initiated telephone contact unless the customer provides a password. Non-call detail CPNI may be released without a password, but the carrier is still under a duty to authenticate a customer prior to disclosure. (Non-call detail is information that does not pertain to the transmission of specific telephone calls. For example, while the number called and the duration of the call are considered “call detail” information, remaining minutes of use would not be.) If a customer forgets his or her password, the carrier may use backup customer authentication methods, but these methods may not rely on readily available biographical information or account information. If the customer does not provide a password, then the carrier may only release call detail information by sending it to the address on the account or calling the customer at the telephone number on the account. Carriers must also establish a password protection mechanism for online account access, although for in-store visits, carriers may release CPNI if the customer presents a valid, government-issued photo ID that matches the name on the account.

Customer notification

Carriers will be required to notify customers immediately when a password, customer response to a back-up means of authentication for lost or forgotten passwords, online account, or address of record is created or changed. Such notification may be in a voicemail, text message, or by mail to the address on the account.

In the event of an unauthorized disclosure of CPNI, carriers must first notify the United States Secret Service (USSS) and the FBI and then the customer, unless urgency requires immediate notification to the customer or the public. These new requirements do not alter existing law regarding access by law enforcement to customer records (e.g., ECPA), nor are they intended to mandate customer notice when a carrier is permitted by law to disclose customer personal information without subscriber notice in order to protect its property or users of its services and other carriers.

Disclosure to joint ventures and independent contractors 

In a major change, carriers must have customer consent to share CPNI with their joint venture partners and independent contractors for purposes of marketing communications-related services. This essentially rejects the ruling in U.S. West v. FCC, 182 F.3d 1224 (10 th Cir. 1999), in which the U.S. Circuit Court of Appeals for the Tenth Circuit threw out the FCC’s earlier rules implementing an opt-in regime for CPNI use and disclosure.

Annual certification and continued vigilance by carriers to protect CPNI

Carriers will now have to file an annual certification with the FCC that includes an explanation of any action taken against a data broker and a summary of all consumer complaints received in the previous year regarding the unauthorized release of CPNI. Under prior rules, carriers were only required to certify annually that the company had established procedures to protect CPNI. Carriers must also now take reasonable steps to protect CPNI from hackers and other unauthorized attempts by third-parties to access CPNI, although the FCC is not requiring encryption of CPNI in storage.

Further notice of proposed rulemaking

The FCC is seeking additional comment on several other issues related to these new rules, and specifically whether there is a need for additional privacy protections, including: (1) additional password protections; (2) audit trails; (3) physical safeguards; (4) limits on data retention; and (5) protection of information stored on mobile communication devices.

The FCC’s Order reflects the growing concern surrounding the privacy and protection of CPNI and customer information generally. Telecommunications carriers and interconnected VoIP providers will need to pay even more attention to how they maintain customer data and who has access to it, in addition to determining how these new rules apply to carriers’ relationships with joint venture partners and independent contractors.

Davis Wright Tremaine counsels interconnected VoIP service providers and telecommunications carriers on these and other issues. If you would like additional information or assistance with these matters, please contact us.

For more information, please contact:

John D. Seiver, Washington, D.C., (202) 973-4212, johnseiver@dwt.com

Charlene A. Brownlee, Seattle, Washington, (206) 628-7616, charlenebrownlee@dwt.com

James M. Smith, Washington, D.C., (202) 973-4288, jamesmsmith@dwt.com

Treg Tremont, San Francisco, California, (415) 276-6521, tregtremont@dwt.com

K.C. Halm, Washington, D.C., (202) 973-4287, kchalm@dwt.com

Brian J. Hurh, Washington, D.C., (202) 973-4279, brianhurh@dwt.com

This advisory is a publication of the Privacy/Security and Communications Groups of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2007, Davis Wright Tremaine LLP.

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