D.C. Circuit Sides with FCC on Illegal Verizon Retention Marketing
Verizon violated local number porting rules when it used porting requests from departing phone customers to trigger marketing to them, said the U.S. Court of Appeals for the District of Columbia Circuit. It denied a Verizon petition to review (CD Dec 8 p1) last year’s FCC order on the subject. In a 11-page decision Tuesday, the court called “reasonable” the FCC’s interpretation that Section 222(b) of the Communications Act prohibits using porting information in marketing efforts. The ruling is a “clear-cut” loss for Verizon, and the odds of the carrier winning on further appeal are “very small,” said David Kaut, an analyst with Stifel Nicolaus.
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The D.C. Circuit rejected Verizon’s argument that the FCC order infringed upon the company’s First Amendment rights. The agency’s “concern is really to assure the losing carrier’s neutral role” in the number porting process, it said. “There is evidence in the record that the combination of Verizon’s retention marketing with its [local service request] process has introduced unnecessary errors into its number porting.”
Verizon is reviewing the ruling, a company spokesman said. “This looks like a loss for consumers, who now will have less information available when choosing between different competitors.” Comcast, which made the complaint against Verizon at the FCC, disagreed: “Today’s ruling is a win for consumers who are saving billions of dollars a year because of the entry of cable companies into the local phone business. The decision will allow competition to continue to develop and ensure that consumers who choose to leave their incumbent phone provider will have their wishes respected.”
Competitive phone companies joined the cable industry in celebrating the court order. “The decision sends a clear message to all incumbent carriers that using the confidential carrier change information they receive from a competitor for their own marketing purposes will not be tolerated,” CompTel said.
In December’s oral argument, the FCC and Verizon went back and forth on the proper reading of Section 222(b). 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’s lawyer said the rule didn’t apply to the company because the telecom service at stake would be supplied by another carrier. But the FCC attorney argued that the second carrier wouldn’t be able to offer service without Verizon’s cooperation in porting.
“We do not believe that the statutory language is unambiguously contrary to the FCC’s interpretation,” the D.C. Circuit said Tuesday. Therefore, it meets the standard set in Chevron U.S.A. vs. NRDC that a court should defer to the agency’s reasonable interpretation so long as it doesn’t contradict unambiguous text in the law, it said. “Understandably … the FCC looked to the context of [Section] 222(b), including its own precedent” on slamming violations, it said.
The court rejected Verizon’s argument that Comcast and Bright House are not common carriers to which the rule applies. Three pieces of evidence, taken together, “appear enough to render the Commission’s conclusion reasonable,” the court said. The cable companies self-certified that they are common carriers, entered into interconnection agreements with Verizon and obtained state certificates giving “public notice of its intent to act as a common carrier,” the court said.