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Earlier today, the Federal Trade Commission announced that Google agreed to settle charges that parts of its Google Buzz social network violated federal law.  Specifically, in a draft complaint, the FTC alleged that Google’s practices were deceptive and in violation of Google’s announced privacy policies. While Google entered into a settlement agreement to address this potential regulatory buzzsaw, other service providers and web companies should consider taking a fresh look at their privacy practices and policies, using the proposed settlement as their lens. 

The proposed settlement, which remains subject to final FTC approval, stems from Google’s highly publicized efforts in 2010 to use its Gmail webmail service as a springboard for launching Google Buzz. According to the FTC complaint, Google provided Gmail users with a message announcing the service and two options: “Sweet! Check out Buzz” and “Nah, go to my inbox.”  The FTC alleged that, among other things, the opt-out was not fully effective, that the opt-in did not fully disclose that some of the user’s information would be made public by default and that the company’s “Turn Off Buzz” option did not fully remove the user from the Buzz network. The FTC also charged that Google misrepresented its compliance with the U.S.-EU Safe Harbor Framework relating to transfer of data to the United States from the European Union.  In a blog post today, Google apologized for “the mistakes we made with Buzz,” and stated that it reached agreement with the FTC “to address their concerns.”  

Under the proposed settlement, Google does not admit any legal violation with respect to the draft FTC complaint and does not have to pay heavy financial penalties to the U.S government. However, Google does agree to a set of new, extensive regulatory obligations, including: 

• No misrepresentation. Google agrees not to misrepresent “in any manner, expressly or by implication” the extent to which Google maintains and protects privacy and confidentiality of “covered information,” including the purposes for which such information is collected and used and the extent to which consumers may exercise control over collection, use or disclosure of such information. “Covered information” here includes first and last name; home or other physical address; email address or other online contact information (such as a user identifier or screen name); persistent identifier (such as IP address); telephone number (home and mobile); list of contacts; and physical location.
• New disclosure and opt-out requirements. These conditions would apply in each instance of new or additional sharing of a Google user’s specified information with any third party as a result of a change from stated policies at the time of collection or as a result of any change, addition or enhancement to Google’s products or services. These requirements include clear and prominent disclosure that the information will be disclosed to one or more third parties, the identity or specific categories of such third parties and the purposes for the sharing.
• Comprehensive privacy program. Google must implement a new program to address privacy risks associated with new and existing products and to protect the privacy and confidentiality of covered information. Google also must disseminate the order now and in the future to principals, officers, directors, managers and other personnel with relevant supervisory responsibilities.
• Assessments. Google will be subject to initial and biennial assessments by an independent professional of the company’s privacy controls and privacy protections.  These requirements will apply for 20 years. 
• New recordkeeping requirements will apply, such as records regarding the company’s “widely disseminated statements” regarding maintenance and protection of covered information, any relevant customer complaints, documents that “contradict, qualify, or call into question” Google’s compliance with the order and all materials replied upon to prepare the assessments mentioned above. Some records must be retained for as long as five years.
• Notification. Google must notify the FTC about major corporate changes (e.g., mergers, dissolution, bankruptcy) that may affect its compliance obligations. 

The FTC’s announcement is full of lessons for service providers and website operators.  

• First, the settlement sets a baseline for future FTC privacy enforcement and some “best practices” considerations for privacy policies. The settlement does not include any financial penalty, and given Google’s vast resources, this fact suggests that the FTC sought to make a broader policy statement rather than simply seeking financial penalties. That said, the FTC could seek civil penalties for violations of the order. 
• Second, the presence of the opt-in condition, if broadly applied, could have a dramatic effect on Google’s business practices and innovation. It remains to be seen whether the condition will slow down deployment of new services, even those that may be closely related to existing services.
• Third, the definition of “covered information” provides the latest insight over what the FTC likely considers to be personally identifiable information that must be protected.
• Fourth, the complaint teaches a litany of lessons in terms of ensuring that companies take precautions to ensure that their privacy practices are consistent with their published privacy policies.  

The FTC is accepting public comment on the proposed consent order through May 2, 2011. While the full Commission must still approve the order for it to become final, the FTC today sent a clear message about its enforcement priorities for privacy.

As part of the process of filing for FCC renewal of their broadcast licenses, commercial and noncommercial full power radio stations licensed to communities in the District of Columbia, Maryland, Virginia and West Virginia must begin their pre-filing announcements on April 1, 2011.  Radio stations must air these announcements at least once a day on the 1st and 16th days of April and May.  At least two of the announcements must be broadcast between 7:00 a.m. to 9:00 a.m. and/or between 4:00 p.m. to 6:00 p.m.  If the broadcast station does not operate during these hours, two of the announcements must be broadcast during the first two hours of operation. 

FM translator stations do not need to make any pre-filing announcements. 

For more information about the broadcast license renewal process, see my blog piece here.

Jon Allen attended the Spring 2011 FISPA/WISPA Service Provider Summit, which was held in Orlando, Florida from March 23-25, 2011.  He spoke about Federal Communications Commission proposals for reforms to the universal service fund (USF) and regulatory issues involving providers of interconnected VoIP services.

Obviously, Sprint must have been valuing T-Mobile for much less than the reported $39 billion price that AT&T has agreed to pay.  Given the high antitrust hurdles to approval of an AT&T/T-Mobile combination (this would give two carriers, AT&T and Verizon, a combined market share of almost 80 percent), we have to think that if Sprint had offered anything in the low $30s, Deutsche Telekom would have opted for a Sprint deal.  A combination of Sprint and T-Mobile would have had smooth sailing at the FCC and DOJ.

Notwithstanding, this is probably a good deal for T-Mobile.  First, if it goes through, this is a great price.  Second, if it doesn’t go through, T-Mobile gets a $3 billion break-up fee, which is equivalent to a whole year’s capital budget!

There is another important point to make.  Although I just threw out the 80 percent market share figure, as have many others, neither the FCC nor the DOJ looks at the USA as a single “market” for wireless services.  Traditionally, the regulators have looked at each metro area as a separate “market,” likening wireless service to local phone service.  Although there may be some individual metro areas where AT&T and T-Mobile combined have such a large market share that the regulators will balk, the likelihood is that this deal gets granted with “conditions,” as opposed to an outright denial from regulators.  To the extent that AT&T’s CEO says the FCC has to look at this merger on a market-by-market basis, he is just accurately summarizing what the FCC has done in the past.

At least in the short term, this deal is not good for Sprint or for other carriers whose main asset is ample spectrum, because T-Mobile gives AT&T additional spectrum, especially where AT&T needs it most, in the major metro areas.  That means AT&T has less need to go out and quickly acquire more spectrum somewhere else.

I say “in the short term,” because the flip side is this.  If and when this transaction is approved, it will then be very difficult for the regulators to say that Verizon can’t acquire Sprint, or for that matter, Clearwire.  So maybe, in a perfect world, this deal will turn out to be a big win for all these companies’ shareholders.  The impact is still unclear for consumers, who are bracing for higher prices; broadcasters, who are hoping that this transaction sheds new light on demand for spectrum; and wireless ISPs, who are concerned about preserving competition for spectrum and customers.  Keep your seat belts on, because this deal may take a year to 18 months to get done, if at all.

April 1st is, as Mark Twain described, “the day upon which we are reminded what we are on the other three hundred and sixty-four.” More specifically, April 1, 2011 is an important date for internet service providers who provide voice services, as well as for telecommunications carriers. This is the deadline for filing this year’s Form 499-A with the Federal Communications Commission, and devoting due attention now to the Form 499-A requirements can help prevent “foolish” problems down the road. 

With limited exceptions, intrastate, interstate and international providers of telecommunications services and interconnected VoIP services in the United States must file FCC Form 499-A within one week of offering service to the public and by April 1 of each year. Form 499-A registers the provider with the FCC and the Universal Service Administrative Company. The Form 499-A filing also paves the way for the provider, where required, to file quarterly and annual regulatory filings for its contributions to the Universal Service Fund (“USF”) and other federal programs. The amount of a service provider’s contribution is based on a government-established percentage of a “contribution base,” which is usually based on the provider’s report in Form 499-A of revenues from interstate and international services. Form 499-A also serves to designate the provider’s agent for service of process in the District of Columbia. 

Interconnected VoIP providers take note: due to the difficulties in separating interstate revenues from intrastate revenues for interconnected VoIP service, the FCC has established a “safe harbor” percentage for interconnected VoIP providers, who may choose to report their interstate revenues as 64.9 percent of their total VoIP service revenue.  Interconnected VoIP providers also may calculate their interstate revenues based on their actual revenues or by using traffic studies. Interconnected VoIP providers are required to make USF contributions unless such contributions would be de minimis under FCC rules. Contributions are considered de minimis if the amount owed for a particular year would be less than $10,000 based on the FCC’s formula, which takes into account revenues from interstate traffic. Nevertheless, even providers that qualify for the de minimis exception must file FCC Form 499-A annually and must retain documentation of their contribution base revenues for three years. There is no filing fee for the form (contributions are billed separately during the year), but failure to file the form may lead to FCC enforcement action. Late, inaccurate, or untruthful filings may result in actions to recover costs or other penalties. 

Ben Franklin once said that “you may delay, but time will not” – so it is with the Form 499-A deadline. So, procrastinators who have not yet tackled their form have until April 1, 2011 to determine whether the FCC’s rules require filing of Form 499-A, and if no exemption applies, to gather the required revenue data and other information to complete the form on a timely basis. Service providers will also need to keep detailed records and to determine whether their service triggers requirements to make other common filings with the FCC. For those who are required to File Form 499-A, and have not already done so, don’t forget Henry Longfellow’s words to the wise: “time is fleeting.”

The Federal Communications Commission’s job description includes the responsibility to implement rules and procedures for awarding new broadcast stations and for permitting incumbent AM and FM stations to relocate their facilities, and by extension, their service areas.  The FCC recently revised its criteria for selecting among competing proposals for new AM stations, new FM allotments and FM stations seeking to change their community of license. The new rules fall short of providing broadcasters with the necessary flexibility to relocate radio stations where they will provide the maximum service to the public. 

Section 307(b) of the Communications Act requires the FCC to make a fair, efficient and equitable distribution of radio service.  In discharging this obligation when awarding new AM or FM stations or approving community-of-license changes, the FCC relies upon four priorities for selecting among competing proposals: 

• (1) first fulltime aural (reception) service;
• (2) second fulltime aural service;
• (3) first local (transmission) service; and
• (4) other public interest matters. 

The FCC gives equal consideration to Priorities (2) and (3), and competing parties who propose the highest priority service or, if the priorities are equal, propose service to the larger community or population, will be entitled to a preference for their proposed station or community.  The FCC is concerned that reliance upon these priorities has caused the FCC to favor urbanized areas – at the expense of smaller communities or rural areas – when granting new AM stations, new FM allotments and community of license changes.  Under the new rules, the FCC will de-emphasize population differences as a principal metric in awarding Section 307(b) preferences in favor of a “more realistic” evaluation of the totality of the station’s proposed service.  The FCC will emphasize that the goal of Section 307(b) is to prevent excessive concentration of radio service in larger cities. To the FCC, Section 307(b) essentially is a listener-centric consumer statute rather than a broadcaster-centric mandate designed to promote spectral efficiency.

Revised Priority 3 Showing: First Local Service in A Community Located Near an Urbanized Area.  The most important change to the FCC’s rules is the rebuttable presumption that any proposal for first local service (Priority 3) for a community near an urbanized area that could place a principal community contour signal over at least 50% the urbanized area, or could be modified to place such coverage, will be presumed to serve the entire urbanized area rather than the proposed community.  This presumption may be rebutted by a compelling showing:  (1) that the proposed community is truly independent of the urbanized area; (2) of the community’s specific need for an outlet for local expression separate from the urbanized area; and (3) the ability of the proposed station to provide that outlet. 

The required showing can be based on the existing three-prong test established in Faye & Richard Tuck:  (1) the degree to which the proposed station will provide coverage to the urbanized area; (2) the size and proximity of the proposed community to the central city of the urbanized area; and (3) the interdependence of the proposed community of license and the urbanized area.  The FCC has heightened the scrutiny of factors in support of the third prong.  For example, applicants must submit evidence of the number of local residents who work in the community, not merely extrapolations from commute times or listing local business in the community.  Similarly, the application must include evidence that the community’s residents perceive themselves as separate and distinct from the urbanized area, rather than statements to that effect from town officials or business leaders.  In addition to demonstrating independence, a compelling showing sufficient to rebut the urbanized area presumption must also include evidence of the community’s need for an outlet of local expression.  Examples could include the community’s rate of growth, the existence of substantial local government necessitating coverage, and physical, geographical or cultural barriers separating the community from the remainder of the urbanized area. 

Revised Public Interest Showing (Priority 4).  In determining whether a proposed allotment betters serves the purposes of Section 307(b) under Priority (4), the FCC will look favorably upon proposals emphasizing service to underserved areas; i.e., those receiving fewer than five aural services.  A proposal to provide service to a third, fourth and/or fifth aural service to at least 25% of the population in the proposed primary service area, provided the proposed community of license has two or fewer local transmission services, will receive a dispositive Section 307(b) preference under Priority (4). 

The table below compares the rule changes for Priority 3 and Priority 4 for proposals for new AM services, for new FM services and for changes in communities of license: 

Proposals for New AM Service.  In considering competing proposals to provide new AM service, the FCC will apply the new rebuttable presumption of service to an urbanized area along with the revised Priority (4) showing. The determination of whether a proposal could cover 50% or more of an urbanized area will be limited to a consideration of minor modifications to the proposal, without changing the proposed antenna configuration or site, and the spectrum availability as of the close of the filing window.  If the FCC cannot make a 307(b) determination among competing applicants using these criteria, the FCC will make the selection using an auction process.  The FCC will not apply these new procedures to pending applications for new AM stations and major modifications to AM stations filed in the 2004 AM Auction 84 filing window.  The FCC will however apply these new procedures to any other pending applications.

Proposals for new FM Allotments.  In considering competing proposals for new FM service, the FCC will apply the new rebuttable presumption of service to an urbanized area along with the revised Priority (4) showing provided coverage is to more than a de minimis population.  The determination of whether a proposal could cover 50% or more of an urbanized area is more expansive for new FM allotments than new AM allotments.  The applicant must certify that there are no existing towers in the area to which, at the time of filing, the applicant’s antenna could be relocated pursuant to a minor modification application to serve 50% or more of the urbanized area.  If the revised Priority (4) does not apply, then the FCC considers raw population totals in support of Priority (4).  These new rules will not apply to any non-final FM allotment proceedings, including “hybrid” coordinated application/allotment proceedings.  The revised procedures will apply to all pending petitions to amend the FM Table of Allotments and to all other open FM allotment proceedings and non-final FM allotment orders. 

Proposals to Change Community of License.  The FCC’s strictest requirements will apply to existing broadcast stations seeking to change their community of license.  The FCC will apply the rebuttable presumption of service to an urbanized area along with the revised Priority (4) showing.  Proposals that would create a white or grey area would be prohibited.  The FCC would strongly disfavor any change that would result in the net loss of a third, fourth or fifth reception service to more than 15% of the population in the station’s current protected contour.  Applicants must not only set forth the size of the populations gaining and losing service but also the number of services those populations will receive if the application is granted and an explanation of how the proposal advances the revised Section 307(b) priorities.  The FCC will strongly disfavor any proposed removal of a second or local transmission service from a community of substantial size (with a population of 7,500 or greater).  These procedures will apply to any pending applications to change community of license. 

The FCC’s new procedures have several problems.  First, the agency presumes a problem where none exists in light of existing protections against the migration of radio stations from rural to urban markets.  New and existing stations have limitations on their ability to migrate into urbanized areas due to the FCC’s technical rules relating to mileage separation, city-of-license coverage, prohibitions against removing a sole first local service from a community, and restrictions on the filing of contingent applications. 

Moreover, the FCC does not consider the population of the urbanized area in adopting its new policies.  An “urbanized” area can have as few as 50,000 people but is treated under the rules the same way as one with hundreds of thousands, or even millions, of people.  The technical and policy restrictions already in place make it extremely difficult for an existing or new station to be located in one of the larger urban markets.  The new policies now will make it extremely difficult to relocate stations to the smaller or newer urbanized markets. The FCC also does not consider the population migration that has occurred over the past several decades.  Instead, the FCC would seem to prefer to lock radio stations in to their current communities, restricting a station’s ability to improve their service to better serve the public.  It is ironic that in adopting its policies for expanding broadband service, the FCC seeks to reclaim spectrum under the guise of promoting spectrum efficiency but in its new rules implicitly reject spectrum efficiency as an important objective for broadcast services. 

The FCC does not hide its preference for auctioning broadcast spectrum to the highest bidder instead of placing greater emphasis on Section 307(b) determinations.  The auction process works against the FCC’s goals of increasing broadcast ownership by minority and females. Further, the FCC fails to consider the considerable time between the initial proposal for a new AM or FM broadcast station and the auction of the station – a time lapse where changed economic conditions and business plans can affect construction and operation of the new station.  Case in point: Auction 91 will auction 144 new FM station construction permits, 37 of which are holdovers from the prior auction where no winning bid was placed.  This underscores the lack of interest of certain allotments made to rural areas. 

The FCC’s new procedures also are tilted against relocating new or existing radio stations near or within urbanized areas.  Concerned with the alleged migration of new and existing radio stations from rural markets to urbanized markets, the FCC creates roadblocks and imposes high costs for parties interested in a station near or within an urbanized area.  The new Tuck showings impose a financial burden that will deter many applicants from proceeding. 

In short, the new rules represent a missed opportunity to adopt a balanced approach between serving rural and urbanized areas.  Broadcasters must have the flexibility to go where the people go.  Sadly, the FCC’s new policies work against the public’s interest.