“Enhanced” Transparency Requirements Expand Current Disclosure Obligations (But Temporarily Exempts Smaller Providers)

by Davis Wright Tremaine LLP

The Order does not formally modify the text of the existing “transparency” rule, which was upheld by the D.C. Circuit in Verizon v. FCC in 2014. However, the Order does prescribe numerous “enhancements” to the rule, which have the effect of significantly expanding disclosure obligations of broadband Internet access service (BIAS) providers. Specifically, in addition to the information that must be disclosed under the current rule, providers must also now disclose, among other things, information concerning: packet loss; promotional rates; data caps and allowances; and user or application-based practices that are likely to “significantly affect” an end user’s service. At the same time, the Order rejects the idea of requiring separate disclosures for different constituencies (i.e., end users and edge providers), as contemplated in the public notice underlying the Order.

At least for now, BIAS providers with less than 100,000 subscribers will be exempt from the new requirements (but still have to comply with the 2010 rules). The exemption will run until December 2015, at which point the agency will decide whether to continue, revise or terminate the exemption. The Commission also adopted (in concept) a rule that will permit BIAS providers to rely upon a safe harbor notice form for consumer-directed disclosures (as distinct from more technical disclosures directed towards edge provides). The precise language and form of the safe harbor, however, does not yet exist; it will be developed in further proceedings later this year. Because the safe harbor will only apply to disclosures to consumers, any entity utilizing the safe harbor will be required to maintain separate disclosures for edge providers.

New Disclosure Obligations Under “Enhanced” Transparency Rule

Incorporating Prior Guidance
The Order formally incorporates prior guidance issued by the Enforcement Bureau bearing on several disclosure obligations. First, the Commission affirms that all information described in paragraphs 56 and 98 of the 2010 Open Internet Order (information concerning network practices, performance characteristics, and commercial terms) have been required as part of the current transparency rule, and are still required under the new rule. Second, the Commission stated that BIAS providers have an ongoing “duty of accuracy” which includes the need to maintain the accuracy of these disclosures. Thus, providers must disclose any “material changes” in commercial terms, network practices, or performance characteristics, in a timely manner.

“Enhancements” to the Scope of Disclosures
The Order also requires certain additional information to be disclosed:

Commercial Terms – The Commission now requires additional specific information concerning rates, fees, and data caps or allowances. In addition, the Commission reaffirmed that disclosure of commercial terms must also include the provider’s privacy policies.

  • Price and Promotional Rates – Providers must disclose the full monthly service charge, as well as promotional rates (and the duration of the promotional period). This disclosure should also identify the full monthly service charge the consumer will incur at the expiration of the promotional period.
  • Other Fees – Providers must also disclose “all additional one time and/or recurring fees and/or surcharges” which customers may incur to initiate, maintain, or discontinue service. This disclosure should include explicit information regarding these fees, including the name, definition, and amount of each additional fee (e.g., modem rental fees, installation fees, service charges, and early termination fees must be disclosed).
  • Data Caps and Allowances – In addition, data caps or allowances that are part of the service plan must be disclosed. Disclosure of any consequence of exceeding the cap or allowance, such as the potential for incurring additional charges or losing service for remainder of billing cycle, must be disclosed.

“Actual” Network Performance Characteristics – Additional network performance metrics (beyond speed, latency, and information regarding certain specialized services) must now be disclosed:

  • Packet Loss – In addition to speed and latency, providers must now disclose packet loss as one of several metrics of network performance.
  • Regional Differences in Network Performance – Network performance disclosures should also be “reasonably related” to the performance the consumer would “likely experience” in the geographic area in which the consumer is purchasing service. This is intended to capture any differences in network performance that may occur in different markets (such as differences that may be seen on the network of a provider that serves both urban and rural markets). Further, network performance should be measured in terms of “average performance” over a “reasonable period of time” and during times of peak usage, although real-time measurements and updates are not required.  
  • Mobile Network Performance – For mobile broadband providers the obligation to disclose network performance information for “each broadband service” refers to separate disclosures for services associated with separate wireless technologies (e.g., 3G and 4G). Further, mobile broadband providers should utilize actual network data on their network performance to report these metrics, though to the extent that small providers don’t have access to such data, they may report a “Typical Speed Range” (“TSR”).
  • Specialized Services – Specialized services, such as interconnected VoIP and IP video offerings, will now be referred to as “non-BIAS data services.” Existing rules require providers to disclose the impact of these services on the performance of, and the capacity available for, broadband service. Under this new regime, providers will also have to describe whether non-BIAS data services “rely on particular network practices” and whether “similar functionality” is available to applications and services offered over broadband Internet access service. The Commission offered no further explanation to clarify these somewhat ambiguous concepts.

Notably, the Commission declined to require providers to disclose the source, location, timing or duration of network congestion. Nor are providers required to disclose packet corruption or jitter.

Finally, the Order re-affirmed that participation in the Measuring Broadband America (MBA) program will continue to be a safe harbor for fixed providers in meeting the requirement to disclose actual network performance. However, it otherwise declined to prescribe specific methodologies that may be suitable to measure “actual” performance, beyond the parameters described above. Notably, the Commission is also considering use of a safe harbor mechanism for mobile providers who participate in the mobile Measuring Broadband America program (once that program is fully developed).

Network Practices – The Order also expands the scope of current network practice disclosures beyond current requirements (i.e., congestion management, application-specific behavior, device attachment rules and security) to include the following:

  • User or Application-Based Practices – Providers must disclose network practices that are applied to traffic associated with a particular user or user group, including any application-agnostic degradation of service to a particular end user. The Order explained that “user groups” may define users based on the service plan to which users are subscribed, the volume of data that users send or receive over a specified period of time or under specific network conditions, or the location of users.
  • Likely Effect on End Users - Also, disclosures of user-based or application-based practices should include the purpose of the practice, which users or data plans may be affected by the practice, the triggers that activate the use of the practice, the types of traffic that are subject to the practice, and the practice’s likely effects on end users’ experiences with the broadband service.

The Order declined to require providers to disclose application-specific usage, or information that would permit the end user to distinguish which user or device contributed to which part of the total data usage.

“Enhancements” to the Means of Disclosures
In addition to mandating the content of disclosures, the Order now dictates the means of disclosures in certain situations. Specifically, providers must employ a “mechanism for directly notifying end users” if their individual use of a network will trigger a network practice, based upon the end user’s demand prior to a period of congestion, that is “likely” to have a significant impact on the end user’s use of the service. The Order contemplates that such notices will provide affected end users with sufficient information and time to consider adjusting their usage to avoid application of the practice.

Temporary Exemption for Small Providers
Recognizing that the enhanced transparency requirements may be particularly burdensome for smaller providers, the Order established a temporary exemption for providers, whether fixed or mobile, with 100,000 or fewer subscribers (as measured on their most recent Form 477).

At the same time, the Commission has directed the Consumer and Governmental Affairs Bureau to seek comments on the question of whether to maintain the exemption permanently, and if so at what level. The Bureau will adopt an Order resolving such issues no later than December 15, 2015. Note, however, that this decision only exempts small providers from these new “enhanced” transparency disclosure obligations. All providers of BIAS, including small providers, remain subject to the existing transparency rule adopted in 2010.

Safe Harbor for Disclosures Directed to Consumers
As previously noted, the Order does not require providers to use separate disclosures for end users and edge providers. At the same time, the Commission has a strong preference for separate disclosures. As such, providers using a single disclosure must provide information sufficient for both end users and edge providers.

To motivate providers to develop separate consumer-focused disclosures, the Commission will establish “voluntary” safe harbors for consumer disclosures. However, those providers who wish to take advantage of the safe harbor must produce a “consumer-focused” “standalone” disclosure. Providers that voluntarily adopt this safe harbor format will be presumed to be in compliance with transparency requirements that meet the needs of consumers.

Note, however, that a provider meeting the safe harbor could still be found to be in violation of the rule, for example, if the content of that disclosure is misleading or inaccurate, or the provider makes misleading or inaccurate statements in another context, such as advertisements or other statements to consumers. In addition, a separate disclosure for edge providers will be necessary, and the safe harbor will not limit a providers’ liability with respect to such disclosures.

Practically speaking, safe harbors for mandated disclosures often act as a floor, rather than a ceiling, for the amount of information disclosed. For example, in the privacy context under the financial privacy statute, GLBA, many covered entities supplement their safe harbor disclosures with additional disclosures. The same “escalation” of disclosures above the safe harbor level may be appropriate here.

Possible Delayed Effective Date for New Disclosures
Because these new “enhancements” expand disclosure obligations to the public, that mandate will require OMB review and approval to determine if the rule is necessary and/or burdensome. It is unclear when the OMB will review, or approve, this component of the Order. As such, while BIAS providers subject to the enhanced disclosure obligations should promptly begin the necessary reviews and other activities needed to comply, these new transparency obligations may not become effective until after other parts of the order become effective.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Davis Wright Tremaine LLP | Attorney Advertising

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Davis Wright Tremaine LLP

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