FCC Defends Ruling on Verizon Retention Marketing
In oral argument Friday, Verizon and the FCC fought a battle of semantics over a commission decision on the carrier’s retention marketing program. Verizon is challenging, in the U.S. Court of Appeals for the District of Columbia Circuit, an FCC ruling that the company broke rules on porting local numbers when it used porting requests from departing phone customers to trigger marketing to them. Judges David Sentelle, David Tatel and Stephen Williams heard the case. They extended the argument 30 minutes to question the FCC attorney.
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The FCC punished Verizon for its retention marketing program because the commission was concerned that permitting it would give the company incentive to unfairly delay porting numbers, said FCC attorney James Carr. Verizon’s retention marketing program doesn’t delay number ports, said Michael Kellogg, an attorney for Verizon. But Carr cited evidence that Verizon hasn’t always carried ports out properly. Verizon has cancelled some orders by customers who “spurned” the company’s retention efforts, he said. Other transfers have been delayed because the consumers accepted Verizon’s retention offer but then cancelled and made new porting requests, he said.
The FCC wants to lock consumers into their decision to change phone providers, Kellogg said. Retention marketing gives the consumer a chance to come back to Verizon, possibly for a lower price, he said. But Carr said the FCC’s order promotes facilities-based competition. Companies like Comcast and Time Warner are the facilities-based competitors that “Congress had in mind when it passed the 1996 Act,” and their proprietary information should be protected, he said. The purpose of the marketing rule is to protect the consumer’s new carrier, not the old one, said Donald Verrilli, attorney for interveners from the cable industry.
Judges spent far more time questioning the FCC than Verizon. Questions revolved mainly around how to read Section 222(b) of the Communications Act. The rule says a “telecommunications carrier that receives or obtains proprietary information from another carrier for purposes of providing any telecommunications service shall use such information only for such purpose, and shall not use such information for its own marketing efforts.”
Verizon can use porting information for marketing because the telecom service at stake would be supplied by another carrier, Kellogg said. Not so, Carr said: Through porting, Verizon is only “enabling” its competitor to offer a telecom service. The competitor couldn’t offer telecom service without Verizon’s cooperation in porting, so the incumbent is still effectively offering a telecom service, he said.
The FCC’s reading would require adding new language to the rule, Kellogg said. Tatel said the phrase “providing any telecommunications service” appeared to modify only the subject “[a] telecommunications carrier,” not the competing carrier as well. There’s “really no way” the phrase can refer to anything other than the telecom carrier, in this case, Verizon, he said. That it could refer also to the competitor is “to me a very awkward notion,” Williams said.
But Carr said the rule is ambiguous, largely because of the rule’s use of the word “any.” The phrase “any telecommunications service” could include the competitor’s service, he said. The FCC did a “reasonable job” of interpreting a statute that’s “not entirely clear,” he said.
Williams asked whether port information is part of the “totality” of telecom service. A port isn’t itself a telecom service but part of a retail service, Kellogg said. But Carr said a port is “essential” to offering telecom service. Talking about a port as a retail service is “misleading” because the competing carrier, not the consumer, makes the porting request, he added.
Sentelle asked whether the marketing restriction should apply in this case, since the cable company complainants aren’t conventional common carriers. Carr said the companies get state certificates to act as common carriers and certify themselves as such to the FCC. Sentelle appeared skeptical, saying there’s a difference between calling a company a common carrier and saying it can become one. It doesn’t matter, Verrilli said, because the carriers in the specific case have stated they should be treated as common carriers.
It’s unclear whether the court will reverse the FCC order, “given the legal intricacies and potential fallout on other government mandates,” Stifel Nicolaus analysts said in a note Friday. The court seemed more “sympathetic” to Verizon’s side, but “the case appears very tricky, given semantic hair-splitting, statutory and regulatory inter- relationships, and the comments made by the judges [Friday].”