July 2013

The Senate Subcommittee on Consumer Protection, Product Safety and Insurance held a hearing to examine the consumer harm associated with fraudulent robocalls; the effectiveness of regulations and law enforcement in stopping these calls; and the feasibility of technological solutions aimed at preventing fraudulent robocalls from reaching vulnerable consumers.

When it comes to stopping pesky robocalls, Sen. Claire McCaskill (D-MO) likens the process to playing Whack-a-Mole in a space that has become a “criminal sandbox” for phone scammers. She played excerpts from two of the most infamous such recorded phone calls – the “Rachel from cardholder services” and the “your auto warranty is about to expire” messages – in calling on telecommunications carriers to offer technical solutions to help consumers block such calls. At the hearing, officials at the Federal Trade Commission and the Federal Communications Commission said they had stepped up their efforts but might need more authority from Congress to pursue some of the fraudulent robocallers that are based overseas. Saying that the FTC “is using every tool at its disposal to fight” robocall scammers, Lois Griesman – the agency’s associate director for marketing practices – told senators that “illegal robocalls are still a significant consumer protection problem today, because they repeatedly disturb consumers’ privacy and many of them peddle fraudulent goods and services that cause significant economic harm.” So far, the FTC has brought 34 cases involving illegal prerecorded calls against 97 companies and 77 individuals, including firms in Arizona and Florida that allegedly were involved in the “Rachel from cardholder services” calls.

AT&T and Verizon have failed in their attempt to block the French telecoms regulator from examining their secret interconnection agreements – deals that may be key to the erosion of network neutrality.

The regulator, ARCEP, is concerned that quiet battles between bandwidth providers and Internet service providers may in effect be degrading the quality of popular web services for French consumers — one specific case involves subscribers of the ISP Free getting lousy YouTube performance. The worry is similar to that in the US, where a spat between ISP Verizon and bandwidth provider Cogent Communications is thought to have been messing up Netflix performance for Verizon’s customers. This all comes down to net neutrality. Data carriage providers have traditionally carried each other’s traffic for free under so-called peering agreements, which have been essential to making sure all internet services get an equal chance for delivery at decent quality. Now, with high-bandwidth services such as video on the rise, consumer ISPs are seeing a chance to extract cash out of the internet backbone or bandwidth providers by charging them for delivering heavy traffic to the end user.

The House Communications Subcommittee has posted the testimony of witnesses in the July 11 Federal Communications Commission process reform hearing. The witnesses are split over the issue of whether the current proposed bills solve problems, though not so much on the issue of whether there are some problems to solve.

Analyst Larry Downes, Free State Foundation president Randolph May and former FCC Commissioner Robert McDowell support proposed bills.

A pair of academics on the panel -- Stuart Minor Benjamin of Duke Law School and Richard Pierce from George Washington University Law School -- said they had problems with the current draft legislation. Benjamin said he shared "many of the concerns" that underlie the bills and was particularly sympathetic to streamlining FCC reports. Those bills are ones that would take a host of actions, including imposing shot clocks and putting limits on the FCC's merger review function to only narrowly tailored remedies and a companion bill that would combine FCC reports. But he also said that he had reservations about the main bill, including that they were targeted at the FCC, which undercuts the Administrative Procedures Act (APA), and that it could create the basis for numerous legal challenges. He also argues that the merger review provisions leave the FCC with "little if any role." Pierce was even stronger in his critique. "The addition of twelve mandatory steps to the FCC rulemaking process would be a return to the uncertain, confused, ad hoc world of agency decision making that the Congress wisely and unanimously rejected when it enacted the APA in 1946." He says the new requirements would be extremely burdensome and time consuming.

Verizon Wireless may end up owing Apple as much as $14 billion in purchase commitments over time if the mobile carrier fails to sell an agreed number of iPhones, a report from Moffett Research LLC said.

Under a multiyear deal signed with Apple in 2010, Verizon Wireless is obligated to buy $23.5 billion worth of iPhones in 2013 alone, according to Craig Moffett, a telecommunications analyst who left Sanford C. Bernstein & Co. earlier this year to start his own research firm. Since the purchase commitment is more than twice what Verizon Wireless sold in 2012, the company may have a shortfall of $12 billion to $14 billion, worth $4 to $5 per share, Moffett said in the report. The report suggests sluggish demand for the iPhone, which accounts for about half of Apple’s sales. Other wireless providers around the world may be experiencing iPhone sales deficits as well, Moffett said. The sales shortfall bolsters analysts’ projection for Apple to report a 22 percent decline in net income to $6.87 billion in the third fiscal quarter.