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Welcome to Disco via SMS – Google Finds Itself Dancing in Court

This post was written by Judith L. Harris, with assistance from Rimon Summer Interns James Duchesne and Linda Shim.

A new trend is quickly taking hold. In recent months, a sizeable number of class action lawsuits have been filed involving unsolicited text messages. A messaging system called “Short Message Service,” better known as “SMS“, allows individuals to receive text messages on mobile phones.  Consumers unhappy with bulk, unsolicited SMS marketing messages are filing suit under the Telephone Consumer Protection Act 47 U.S.C. § 227 (“TCPA”) in alarming numbers. You can read a summary of the TCPA Rules [PDF], but to recap for these purposes, the TCPA prohibits any call from an automatic telephone dialing system to any mobile telephone service or any service for which the called party is charged. Since most mobile phone service plans charge on a message received/sent basis, the fact that SMS is subject to the TCPA’s prohibitions (just like land line phone calls), has caught many by surprise – including many of the most sophisticated operators in the mobile marketing space.

Lusskin v. Google [PDF] is one of the latest of these cases to be filed (Federal Court in California) and takes aim at Disco, launched by Google just this past March. In Lusskin, the plaintiffs are claiming that the Disco app gives Google the ability to “harvest all phone numbers” added by consumers so that Google “can independently send its own text message advertisements” promoting the Disco application. Individuals can use Disco to input names and mobile phone numbers (into groups); however, no permission or consent is required from someone whose name and number are added! When the group starts, Disco sends a message to members welcoming them, instructing them how the service works and how they can opt out. Once the groups are formed, messages can be sent from a single source, for a single charge, to all group members. Each member of the group receives the message and each can respond and, you guessed it, each response is sent to every other group member – an SMS mobile “chat room.”

Unbeknownst to Mr. Lusskin, he was added to one of these Disco groups and his mobile phone notified him of a text message from an unfamiliar number – the “welcome” message from Disco. Unfortunately, the “chat room” quickly turned into an angry and confused barrage of messages from the other unsuspecting group members responding to Disco’s first, unsolicited message. Messages poured in so rapidly and voluminously that Mr. Lusskin claims he was unable to use his mobile phone until the alleged 105+ SMS messages had all been received. Mr. Lusskin has filed as a class action, seeking relief for all persons who received the unsolicited initial welcoming text message from the Disco service. Mr. Lusskin also wants to include, as plaintiffs in the action, anyone who opted-out of the Disco service within 24 hours of receiving an unsolicited welcoming text message, or who was a member of a Disco group that was closed within 24 hours of its creation.

With a potential penalty of $500 in damages for each TCPA violation – each unsolicited message (and triple that number if a plaintiff can show the violation was willful or knowing) – no wonder consumers are seeking to use the TCPA to get some attention, or rather seeking to avoid getting unsolicited attention.

Are you in the mobile marketing arena? Need to understand the rules and regulations surrounding the medium? If you are an advertiser, marketer or sponsor involved in promotions, the message (content), we can help you keep abreast of Lusskin and its brethren as they seek to carve out a place under TCPA regulation. If you need help, contact Judith L. Harris, or me, Joe Rosenbaum, or any of the Rimon attorneys with whom you regularly work.

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Comcast v. FCC Fallout

This post was written by  Judith L. Harris and Amy Mushahwar.

The Federal Communications Commission (“FCC”) has just voted to open a formal proceeding regarding how best to respond to the D.C. Circuit’s decision in Comcast v. FCC (see our previous blog post, FCC Caught by (not in) the Web). In the Comcast case, the court reversed an FCC decision finding that Comcast had violated the Commission’s non-discrimination principles by interfering with traffic from broadband subscribers using an online peer-to-peer file-sharing technology from BitTorrent. The appellate court ruled the Commission, under the FCC’s previous (Republican) Chairman Kevin Martin, had improperly stretched its ancillary jurisdiction pursuant to Title I of the Communications Act to enforce one of its net neutrality principles against an Internet services provider. Earlier, the Commission had classified Internet access as an information service, only subject to light-touch Title I regulation, rather than as a telecommunications service, subject to more extensive Title II regulation, traditionally applied to common carriers.

At stake, in the minds of many, is nothing less than the future of the Internet: whether it is to be free and open and, assuming so, who is best positioned to determine what that means. In the eyes of some, especially the large Internet service providers such as Comcast, Verizon Wireless and AT&T, a free and open Internet equates to a complete government hands-off approach. Investment and innovation has flourished under the prior deregulatory steps, they argue. Others, especially edge players, including content and application providers such as Google, Amazon.com and Apple, focus on increasing Internet facilities consolidation and vertical integration in the industry. They see the need for a “cop on the beat” and explicit (e.g., net neutrality) rules to insure that those who control the “pipes” don’t interfere with consumer choice and play favorites when it comes to content.

In the two months that have ensued since the Comcast decision, handed down only two weeks after the FCC’s release of the Congressionally mandated National Broadband Plan, the debate has raged as to whether, and if so, how, the FCC should proceed to exercise oversight over the activities of Internet service providers. Not surprisingly, the question of increasing significance is where the FCC might turn for the power it needs to implement many of the recommendations contained in the National Broadband Plan. Everyone, it seems, has weighed in, from all branches of government (the White House, Congress and all the Commissioners at the FCC), to all of the private stakeholders, trade associations, coalitions that have come into existence to lobby the issue, media, academics, and Wall Street analysts (witnessing the recent volatility of ISP stocks).

Yesterday’s action by the FCC finally gets the ball really rolling. While Congress has threatened legislation (in both directions) and a court challenge is inevitable no matter where the Commission ends up, the FCC’s 3-2 decision opening this new proceeding is a necessary first step in breaking the current logjam.

The Notice of this new action is worded in neutral terms and presents three alternative solutions to the Commission’s current dilemma. The Notice also seeks other ideas from the public. However, FCC Chairman Julius Genachowski has made no secret of the course he prefers. In the aftermath of the Comcast ruling, he outlined what he dubbed a “third way,” (the third option, obviously not accidentally, in yesterday’s Notice). His approach, he believes, represents a middle road between continuing to limp along regulating ISPs under Title I, despite the limited power that would afford the FCC to implement some aspects of the National Broadband Plan, and simply reclassifying broadband as a telecommunications service under Title II, with the potential that would introduce for heavy-handed regulation – such things as oversight of rates and the imposition of interconnection and unbundling obligations. This “third way” envisioned by Chairman Genowchowski, WOULD involve Title II reclassification, but would also include explicit forbearance from use of those powers most feared by telcos and cable companies.

One thing is clear: it’s going to be a long, hot summer in Washington. The Chairman is determined to keep the proceeding moving (perhaps in part to encourage industry and public/private working groups that have already sprouted to come up with a negotiated solution). Comments from the public are due July 15, 2010, less than 30 days from now, with reply comments due August 12, 2010. An Order by the Commission is expected before year-end (and the start of a new Congress), with a decision possible as early as October. The effect of the outcome of the midterm elections and, before then, the tremendous amounts of money the upcoming election will infuse into the system from all of the stakeholders, create wildcards. The stakes are high; the decisions are likely to affect the shape of the Internet for a very long time.

Whether you want more information or need help filing comments with the FCC, look no further than our own Judith L. Harris and Amy Mushahwar in our D.C. office – authorities in the area. Of course, you can always call me, Joseph I. Rosenbaum, or any Rimon attorney with whom you regularly work.

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FCC Caught by (not in) the Web

This post was written by Judith L. Harris.

Last week, the U.S. Court of Appeals for the D.C. Circuit handed down a unanimous decision in the case of Comcast v. the FCC, holding, in effect, that the Federal Communications Commission (“FCC”) could not use its ancillary jurisdiction under Title I of the Communications Act to exercise broad oversight over the activities of Internet service providers (“ISPs”). The case involved a 2008 decision under prior FCC Chairman Kevin Martin, seeking to enforce 2005 “net neutrality” principles by banning Comcast’s blocking or slowing of traffic from broadband subscribers using BitTorrent, an online peer-to-peer file-sharing technology. You can download and/or read the entire case here Comcast v. FCC.

 At first blush, the ruling appears to be a total victory for Comcast but,as no one knows better than Comcast itself, nothing in the Nation’s capital is ever that cut and dried. Thus, Comcast was wise to respond in a conciliatory fashion: “We are gratified by the court’s decision today to vacate the previous FCC order. Comcast remains committed to the FCC’s existing open internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant internet.” .

After all, Comcast is awaiting the FCC’s judgment on Comcast’s $30 billion merger with NBC Universal. The Commission (along with the Department of Justice) has the power to sideline the deal altogether or to impose conditions that, depending on their severity, could place significant constraints on the business plan of the wanna-be merger partners. Stated another way: Comcast knows that its time for customer golf. Moreover, and possibly even more significant, the only options now available to a highly motivated FCC appear to be far more draconian to the ISP community than the relatively innocuous exercise of power that Comcast successfully challenged in court. The old adage “be careful what you wish for” comes to mind.

Not that any of this leaves the FCC smiling. From their perspective, the court’s ruling could cast a long shadow over the FCC’s ability to proceed with its pending rulemaking designed to codify even bolder net neutrality policies across all broadband platforms, including wireless. Moreover, the issue of the reach of the FCC’s jurisdiction over Internet services could constrain the FCC’s ability to deliver on President Obama’s promise of universal broadband access at high speeds and reasonable prices, and the FCC’s marquee project: implementation of the National Broadband Plan. That plan was released to Congress by the Agency just a few weeks ago (March 16), amid much fanfare and after a year’s worth of intensive effort involving no less than 36 public workshops, nine field hearings, and 31 public notices that produced 75,000 pages of public comment!

But, soldiers march forward. Only two days after the court’s decision, the FCC announced its “Broadband Action Agenda,” explaining the purpose and timing of more than 60 rulemakings and other proceedings recommended for action by the FCC in the plan, and quoting FCC Chairman Julius Genachowski defiantly proclaiming: “We are putting the National Broadband Plan into action,” immediately adding, “The court decision earlier this week does not change our broadband policy goals, or the ultimate authority of the FCC to act to achieve those goals.” Well, maybe not.

The ISPs will undoubtedly act with all deliberate speed to nail down the Comcast victory by vigorously lobbying Capitol Hill to oppose any effort by the FCC (and potentially other providers such as Google and Amazon.com, and tech companies such as Apple), to entreat Congress to mandate network neutrality or to enact legislation giving the FCC clear authority to regulate broadband. From the ISP perspective, even worse could be an effort by the FCC to unilaterally reclassify broadband transmission as a Title II telecommunications service, empowering the FCC (at least until the next court challenge) to regulate with impunity. This latter action, often referred to around town as the “nuclear option,” would only require an affirmative vote by three of the five Commissioners, a low hurdle given the unrestrained, unambivalent public reactions of all three of the Democratic Commissioners (including the Chairman) in the immediate aftermath of the court’s pronouncement.

This week (on April 14), Chairman Genachowski is scheduled to be the only witness at a hearing before the Senate Commerce Committee. That hearing was originally planned to focus exclusively on the National Broadband Plan. But now, in addition to examining the FCC’s substantive proposals, the hearing will likely focus on its power, in light of the Comcast decision, to move forward with its implementation plans. With lobbyists swarming the halls of power, expect fireworks. Hopefully, all-out war won’t be the only avenue considered. The public and private stakeholders would do well to take a deep breath and earnestly consider an immediate, good-faith attempt at serious industry self-regulation, with agreed-upon standards of conduct and meaningful enforcement mechanisms.

Time’s a-wasting. As the FCC moves to implement the administration’s broadband agenda, over at the Federal Trade Commission, net neutrality and open Internet advocates are undoubtedly pondering how best they can use their own powers to protect consumers from potentially abusive trade practices by vertically integrated ISPs with enormous market power in a world where the FCC might, in the end, have limited enforcement tools. Who knows, the FTC and the Antitrust Division might decide that its time to burnish tried and true antitrust laws as a way of curtailing any anti-competitive conduct. Comcast, to be sure, is ahead at half time but, as  they well know, there is still much more of the game to be played.

Whether you want to stay in touch and in tune with developments, you wonder how “net neutrality” and these skirmishes might affect your business; or if you need legal advice and representation, you need look no farther than our very own Judith L. Harris – she’s the authority, and she graciously contributed this timely and insightful post. Of course, you can always call me, Joseph I. Rosenbaum, or any Rimon attorney with whom you regularly work.

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Will Net Neutrality Compromise Net Profits?

Earlier today, Julius Genachowski, Chairman of the Federal Communications Commission (FCC), telegraphed the Commission’s plans to open a formal rule-making process on the issue of “net neutrality.” It’s likely the specifics regarding hearings and a timetable for any proposed rulemaking procedures will be on the agenda for the FCC’s October meeting.

While many of the major carriers – including wireless carriers who have typically been out of the fray when it comes to the Web – have argued against both the need and the wisdom of competitive regulation amongst carriers, open Internet advocates, many of whom were ardent campaign contributors and supporters of President Obama, have been aggressively pushing for regulation. Companies such as Amazon.com and Google, have long argued for rules that would prohibit carriers from denying their right to give consumers complete freedom of choice when it comes to both the content they receive and the devices they use to receive it. While not necessarily quibbling with what appears, on its face, to be a reasonable and market driven approach, opponents point out that the government stay away from intervening in yet another major marketplace – this time one, they argue, that isn’t broken. Further, and perhaps more significantly, companies such as ATT and Verizon, now joined by ATT Wireless, Verizon Wireless, Sprint (Sprint Nextel) and T-Mobile (Deutsche Telekom) argue that forcing carriers to open up their networks without corresponding economic counterbalances in place will force them to either raise consumer prices to keep up with virtually unrestricted broadband demand, but may require them to limit availability and accessibility for capacity and technological reasons. Wireless carriers may have special reasons to be concerned given current pricing models and the technological limits of current bandwidth capacity. That said, the major cable television, fiber optic and DSL-based Internet providers have long had to cope with government regulation and requirements.

Back in the days following the breakup of AT&T’s telephone monopoly (anyone remember Judge Green and his landmark 1983 rulings?), the regional and local companies spawned by carving up the nations’ previously regulated monopoly – the so-called ‘Baby Bells’ – worried about long-distance carriers (including the remaining long distance carrier, AT&T) making deals for preferential treatment over interconnections. Thus the principle of equal (“neutral”) treatment for interconnectivity arose. When cable companies started offering Internet service – previously the domain of phone-line intensive telephone companies (remember dial-up?) – they tried to convince everyone that neutrality didn’t apply to them. They carried information, and weren’t, after all, common carriers.

OK. Fast forward to the market response. Phone companies decided to get into the content business! Cable companies are offering Internet and VOIP services, telephone companies are offering entertainment, programming and information services, wireless phone services stream video content and provide messaging of news, sports scores and applications galore (oh, they do still carry voice traffic when you need to make a call).

So back to 2009 and the future. According to Commissioner Genachowski: “This is not about government regulation of the Internet,” adding that “We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity.” That said, his proposal would add a fifth principle to the FCC’s existing four that relate to the Internet. To wit, that carriers will not be permitted to be selective about the content they carry (subject, of course, to their continued ability to block illegal content) and will be required to be transparent about how they are managing the carriage of content across their networks. Violations and allegations of discriminatory practices would still be reviewed by the FCC as and when the facts of each specific case arise. You can read or download the complete statement of Commissioner Genachowski’s prepared statement today, entitled “Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity,” right here.

Clearly if you are a small Internet application provider or software developer that has traditionally had to pay for access through a carrier, open, non-discriminatory access would prove a major boon. Then again, Internet carriers – wired and wireless – have invested huge amounts of capital in building their own proprietary networks. Since there is no evidence that there is a lack of competition, why should the government tell any of them what they should or should not carry on their networks? Indeed, since the early 1990s, when the Web evolved from a glimmer in the eye of Tim Berners-Lee, to a reality, there have been so few real complaints (and so few complaints from consumers, even as competitors bash each other about), why fix something that doesn’t appear to be or have been broken for almost two decades?

Confused as to how the FCC proceedings might or might not affect your business? Thinking about participating in the dialog or submitting comments to the FCC? Let Rimon help you. To stay informed, keep your mouse tuned to Legal Bytes, and if you need to know more, please feel free to call me or the Rimon attorney with whom you regularly work.

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Broadband Network for the Birds? Not So Fast.

Under normal circumstances, this post would appear in the Useless But Compelling Facts section of Legal Bytes. But although this is compelling, it is not quite useless. 

It appears that a South African IT company (Unlimited IT) was so frustrated by the level of broadband Internet service it was receiving from Telkom, that it challenged Telkom to a race with a carrier pigeon. As you might have guessed, the absence of significant competition limited Unlimited IT’s choices of providers, hence the frustration.

The challenge was a simple one. The company would send a homing carrier pigeon from Howick (on the coast) to Unlimited’s head office in Durban, and at the same time upload the data using the ISP lines with the file addressed to the same location.

So they tied a 4 gigabyte memory stick data card to Winston’s (the pigeon’s) leg and released him to hone it on "home." Well, it took good old Winston, depending on which agency you listen to, somewhere between one to two hours to make the journey of less than 60 miles. Are you ready? By the time two hours had elapsed . . . . here it comes . . . . less than 4 percent (yes, less than 4 PERCENT) of the data had made the trip to its destination. We really can’t make this up.

As reported in The Christian Science Monitor, Kevin Rolfe, head of information technology at the Unlimited Group, reported that "Winston arrived after two hours, six minutes, and 57 seconds," but "when we finally stopped the computer, about 100 megs had transferred, which is about 4 percent of the total."

So next time you think your network or the Internet servers are for the birds, let’s be a little less insulting to our fine feathered friends.

If you need to know more, please don’t call me. I can’t explain it either.

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FTC Releases Mobile Marketplace Report

Earlier today, the FTC staff issued a report concerning consumer protection issues arising in the mobile commerce marketplace. A copy of the full report, Beyond Voice, Mapping the Mobile Marketplace is available by clicking the link. The key findings in the report:

  • Cost disclosures about mobile services continue to generate consumer complaints. The FTC staff intends to monitor cost disclosures, bring law enforcement actions, and work with industry to improve self-regulatory enforcement
  • The FTC and its law enforcement partners should continue to monitor the impact on consumers of unwanted mobile text messages, malware and spyware, and take law enforcement action if and as needed
  • Although spyware and malware are not yet significant problems on mobile devices, the FTC is encouraging development of strategies to prevent or minimize their spread, since the issue is likely to magnify as consumers increasingly use mobile devices for a wider range of applications, including Internet access
  • Increasing use of smart phones to access the mobile Web presents unique privacy challenges, especially regarding children. The FTC will expedite regulatory review of the Children’s Online Privacy Protection Rule to determine whether the rule should be modified to address changes in the mobile marketplace. This review was originally set for 2015, and will now begin in 2010 instead.

Given the numbers of wireless and mobile devices in the hands of individuals under the age of 18 (and 13), and the increasing proliferation of mobile devices, this will become a hotter topic in the months and years ahead. As if this point needed to be emphasized, it has been reported that as of January 2007—two years ago—there were approximately 800 million cars, 850 million personal computers, 1.5 billion television sets, but already 2.7 billion (yes, billion) wireless and mobile devices in use around the globe, with more than 800 million e-mail and 1.8 billion SMS text-messaging users.

The sheer numbers are staggering, and we are on top of this issue big time. Contact Joe Rosenbaum, John Feldman or Douglas Wood if you need more information or assistance.

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Court Affirms FCC’s Rule Requiring Prior “Opt-In” to Share Customer Data

A U.S. Circuit Court in the District of Columbia has upheld the FCC’s rule that requires telecommunications carriers to obtain prior “opt-in” consent from customers before disclosing their personal information to joint venture partners or independent contractors for marketing purposes. The rule, which was adopted in 2007, covers all Customer Proprietary Network Information (CPNI) and also applies to service providers offering VoIP (Voice Over IP) services to customers. For those who don’t stay updated on what the FCC rules mean by CPNI, it includes information such as the phone numbers called by a consumer, the frequency, duration, and timing of the calls and any additional services the consumer is receiving (e.g., call waiting). Our telecommunications experts expect the FCC to enforce this rule aggressively. If you want to read the case yourself, go to National Cable & Telecommunications Association v. FCC , but if you really want to understand what it means to you, contact Robert H. Jackson or Judith L. Harris in our Washington, DC Office.

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Better to Lose Face Than Facebook

Facebook, the very informal and ostensibly open social network, hinting at an apology for what its CEO acknowledged were “overly formal and protective” Terms of Service, did an abrupt about-face recently, retracting them and reverting to its old Terms of Service—presumably reacting to a sea of complaints from just about everyone. Complaints? Over legal terms—does anyone still read them? Well, they do, and they didn’t like what they read—particularly the part that claimed unrestricted, perpetual ownership of your personal data, even if you decide to delete your entire account and go away. 

While we respect Facebook’s right to better manage, control, and disclose to consumers how and for what purpose it treats and handles personal data, it highlights a number of things the online world continues to teach us. First, don’t assume those innocuous changes buried somewhere in terms of service, terms of use, privacy policies, codes of conduct, rules of the road, or whatever you choose to call them, aren’t being scrutinized—by consumers, by your customers, by the media and, lest we forget, by regulators and legislators. While Facebook has not admitted it was caught a bit red-faced, it is taking your feedback in a “Facebook Bill of Rights and Responsibilities” group to which you can contribute your thoughts. For those in the know, Facebook’s population has grown to more than 175 million users—does that make it the sixth-largest country in the world? Hmm, I wonder if that country has a growing budget deficit too; we’ll have to wait for the State of the Reunion speech, when results are posted, to find out.

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Motion Picture Association of America–Shaken, Not Stirred

In what sounds like a James Bond spy caper, an MPAA executive allegedly paid a hacker $15,000 to break into a server and snatch copies of emails. The hacker accomplished the dirty deed and emailed the MPAA dozens of pages of material—ostensibly for use by the MPAA in its copyright infringement action against a company whose servers were involved in file sharing. The MPAA released a statement that “The information was obtained in a legal manner from a confidential informant who we believe obtained the information legally.”

Now a federal appeals court in California is determining if a lower court ruling should re-define online privacy protection by interpreting “intercept” under the 1968 Wiretap Act. The case, Bunnel v. Motion Picture Association of America, revolves around a ruling a year ago that held the hacker didn’t really “intercept” emails because they were in storage—not technically in transit. The lower court ruled the hacker’s “…actions did not halt the transmission of the messages to their intended recipients. As such, under well-settled case law, as well as a reading of the statute and the ordinary meaning of the word ‘intercept,’ Anderson’s acquisitions of the e-mails did not violate the Wiretap Act.” In other words, “grab copies of emails sitting on your server for a nanosecond” and it’s not wiretapping. Stay tuned!

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Investigating Online & Interactive Advertising

The U.S. Congress appears determined to investigate online advertising. Early this month, the House Energy and Commerce Committee issued a letter to more than 30 companies, and what began as an inquiry into how Internet service providers use network data to target advertising, has morphed into a fishing expedition into all kinds of interactive advertising. Most notably, and despite urging by the FTC to allow self-regulation to take hold, the Committee does not differentiate between personally identifiable information and non-identifying, anonymous data used for traffic metrics, ad insertion and other common advertising purposes. Lumping different kinds of information together could needlessly undermine marketing as it has been practiced for decades. The “tailoring” of advertising, in the Committee’s words, based on consumers’ behavior and media consumption patterns, has been at the heart of marketing for as long as marketing has been around.

More disturbing are presumptions that “privacy” rights are being violated by any and all forms of behavioral or targeted marketing. Advocacy groups opposed to commercial communication seek to promote an implicit, yet fundamental redefinition of personal privacy—i.e., anything that derives from peoples’ activities, no matter how distanced or anonymous. Taken to logical conclusion, any academic, commercial or journalistic observation of consumer activity could fall under regulatory restrictions under such a framework. Not surprisingly, the FTC—with its long history of regulation of advertising practices—has argued before Congress that self-regulation is likely to be an effective means of protecting consumers’ real privacy interests. According to testimony by FTC Consumer Protection Bureau Director Lydia Parnes before the Senate Committee on Commerce, Science, and Transportation this July, the FTC is “cautiously optimistic that the privacy concerns raised by behavioral advertising can be addressed by industry self-regulation.” Nevertheless, in the letter released this month and in three previous inquiries over the past few months, both the House and the Senate seem to be searching for a rationale to regulate. Stay tuned.