Settlement Unlikely in Telnyx Robocall NAL

The FCC will likely stick to its guns, said Eric Troutman of Troutman Amin. Since Telnyx has similarly staked out strong opposition to the NAL, there doesn't seem much room for a negotiated settlement, he said. The precedent that will come from the fine will be significant, regardless of how it ends.

Troutman said the FCC's KYC approach has resulted in a "very loosey goose standard" that has never been fleshed out. He said most carriers understood that the agency required them to use good faith and common sense in verifying customers. The proposed Telnyx fine was the first FCC action that put teeth into KYC rules, he said.

Virginia Bell Flynn of Troutman Pepper emailed that the bipartisan support for the proposed fine and the administration's "proclivity for directness" points to an all-or-nothing approach. FCC Chairman Brendan Carr has made robocalls a top priority, and the Telnyx case is an opportunity for the FCC to demonstrate a commitment to stringent enforcement, she said. Telnyx "will likely serve as the tip of the spear in the FCC's broader strategy to deter similar violations and reinforce regulatory compliance across the industry."

The FCC has other options, though. A negotiated settlement based on the arguments and mitigating factors raised by the company and its supporters would let the FCC enforce the rules while showing flexibility and responsiveness to industry concerns, Bell Flynn said. There also could be a conditional compliance plan for Telnyx, which would provide a model for other companies. Or the agency could consider issuing a public censure or warning or a deferred prosecution agreement, she said.

The issue seems inevitably headed to a federal appellate court, Joe Bowser of Roth Jackson told us. Carr's office took an aggressive position even knowing that Commissioner Nathan Simington wasn't likely to support the fine and that President Donald Trump's White House had issued executive orders about regulation that appear to favor a less aggressive stance, Bowser said. Simington has said he will dissent from all votes on fines -- which he did on the Telnyx fine -- while there are questions about the FCC's enforcement authority following the U.S. Supreme Court's SEC vs. Jarkesy decision (see 2409060054).

Bowser said it's unclear why the FCC thinks it has statutory authority to levy such a fine once a carrier has implemented secure telephone identity revisited (Stir) and signature-based handling of asserted information using tokens (Shaken) authentication standards. He said it was surprising the Carr FCC was so aggressive on KYC issues, given the lack of guidance and the statutory authority issues SCOTUS raised. The FCC also arguably should have referred the issue to DOJ, he said, since there are so many personal issues in a case where FCC staffers and family members were targeted by fraudulent robocalls.

According to the Telnyx NAL, the fraudulent caller made roughly 1,800 calls on Feb. 6-7, 2024, including to more than a dozen FCC employees and some family members who were contacted on their personal and work numbers. It said the calls came with a prerecorded message claiming to be from the agency's "fraud prevention team" -- which doesn't exist -- and were apparently aiming "to threaten, intimidate and defraud." The agency determined that Telnyx was the originating voice-service provider, and Telnyx found that a pair of accounts were responsible. Those were shut off Feb. 7 last year, the FCC said. The identity of the people behind the fraudster that initiated the calls -- MarioCop -- hasn't been determined.

Telnyx CEO David Casem has argued that singling out FCCers was part of a strategy to target Telnyx. "In a sense, Telnyx was effectively 'swatted' -- these calls were designed to trigger a reaction by the Commission, and it worked," he said. Telnyx said it's unclear how MarioCop obtained FCCers' mobile numbers or the identities and personal mobile numbers of staffers' family members.

The fairness of the FCC's proposed fine is questionable, said telecommunications consultant Alan Quayle in an email, given how many Americans get robocalled with no ensuing enforcement actions. The Telnyx incident involved fewer than 2,000 calls, and they were closed down within 17 hours of MarioCop's accounts being opened, Quayle pointed out.

The proposed fine is "quite excessive," and Telnyx and the FCC could be talking about a negotiated settlement, said telecom lawyer Rob Jackson, who's affiliated with Marashlian & Donahue. He told us the agency might have overreacted in this situation to what's not clearly a violation. While there needs to be a clear KYC rule, the FCC also must thread the needle of not being too detailed, as that would give bad-faith operators ways of finding loopholes and workarounds.