WASHINGTON-A federal appeals court has thrown out recently changed rules on how telecommunications carriers use information about their customers.
The court issued the ruling as the wireless industry celebrated the Federal Communications Commission’s decision to relax some of its rules regarding how carriers use information about their customers.
The seemingly obscure rulings from the FCC and the appeals court go to the heart of how telecom carriers market products and services to their customers.
The legal saga centered on how to implement regulations for Section 222 of the Telecommunications Act of 1996, which cover customer proprietary network information, or CPNI.
CPNI is the information carriers collect about their customers, including name, address, billing and when and where calls are placed. The telecom act required the FCC to develop rules to protect the privacy of telecom customers in a competitive environment. The rules originally were adopted in February 1998.
The FCC has been refining the use of CPNI since it first adopted the rules. Its current iteration of the rules has not been enforced because the commission was re-examining the issue.
However, the commission’s decision to relax some of the rules was expected to be in place one month after being published in the Federal Register. Now all that has been thrown into doubt as the FCC decides how to react to the appeals court decision.
In ruling that one aspect of the CPNI rules was unconstitutional, the appeals court voided all of the rules.
“The FCC failed to adequately consider the constitutional implications of its CPNI regulations … At the very least, the foregoing analysis shows that the CPNI regulations clearly raise a serious constitutional question, invoking the rule of constitutional doubt. Accordingly, we vacate the FCC’s CPNI order and the regulations adopted therein,” said the majority in the 2-1 ruling from the U.S. Court of Appeals for the 10th Circuit in Denver.
“This suggests, at least for now, that there are no FCC CPNI rules, said Michael F. Altschul, vice president and general counsel for the Cellular Telecommunications Industry Association.
“The court’s decision wipes the slate clean and the [FCC] will have to go back to the drawing board,” said Todd Lantor, director of government relations for the Personal Communications Industry Association.
The appeals court ruling injects huge uncertainty into whether and how carriers use CPNI.
“It is a formula for chaos,” said Tom Power, senior legal adviser to FCC Chairman William Kennard.
This message was echoed by one of the litigants in the lawsuit, BellSouth Corp., which said it was “not sure where we are until the FCC takes the next step.”
That next step could be a variety of avenues, including taking the 10th Circuit’s decision to the Supreme Court.
Power said in the interim, the FCC would “keep the balls rolling” on its decision of Aug. 16. “It doesn’t make sense to halt the recon order. The order was adopted so we can’t unadopt it,” he said.
Wireless carriers have complained they should be exempt from CPNI rules because they are already in a competitive environment unlike their landline colleagues. Prior to adopting the FCC’s rules, commercial mobile radio services carriers never had restrictions on the use of CPNI. Wireline carriers always have been restricted in how they can use the information, although the new rules are more stringent.
For this reason, Wednesday’s appeals court ruling could actually be a victory for the wireless industry because now the landscape may have changed back to the way it was before. In fact, Lantor called the ruling “a very positive development.”
The FCC never released details of its decision. But wireless industry observers said those rules (which again are in doubt due to the 10th Circuit ruling) said CMRS carriers could use CPNI to market services and equipment, including handsets, to their own customers to repair and maintain CMRS units, and eliminated the requirement that carriers maintain an electronic audit mechanism that tracks access to customer accounts.
Additionally, the FCC relaxed the electronic safeguards rule allowing carriers to adapt their record keeping systems based on their size and technical capabilities.
The FCC hopes to release the text of its order this week, Power said. The order may contain a footnote acknowledging the 10th Circuit decision, he said.
Unlike the uncertainty the telecom industry was left with at the end of the week, it was a different scene earlier in the week when Altschul proclaimed the FCC’s ruling on reconsideration to be “a great day for wireless.”
In relaxing the rules governing the use of CPNI, the FCC reversed its decision that said this information could not be used to win back customers. The FCC said it “reasoned that `win-back’ campaigns are good for competition and consistent with the [telecom] act.”
FCC Commissioner Gloria Tristani dissented in part with the FCC decision because she believes information services and customer premises equipment should not have been included.
“I believe that had Congress intended [the telecom act] to extend to equipment, it would have said so explicitly … Because petitioners have not presented any new arguments, facts, or evidence that persuades me that we incorrectly interpreted the text of this section, I continue to believe that the statutory language precludes the inclusion of equipment within [the telecom act], even if the equipment is `necessary to, or used in, the provision of … telecommunications service,’ ” Tristani said.
The industry has consistently fought the FCC to get the rules changed. Both CTIA and PCIA filed forbearance petitions requesting relief in this area.
