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Trends and developments
What is the current state of the telecoms market in your jurisdiction, including any trends and recent developments/deals?
The US telecoms industry is divided into multiple markets: traditional wireline providing telephony service, cable and wireless spectrum. The Federal Communications Commission (FCC) is the primary regulator of the telecoms industry and historically has been charged with regulating telephony, radio and broadcast television. However, changes in the industry over the past 50 years have obliged the FCC to also regulate cable television and commercial and private wireless telecoms. Further, the commission has recently become more involved in the regulation of internet infrastructure due to consumer reliance on wireless and wireline broadband services to access the Internet.
The telecoms industry and its various components continue to see consolidation. Major broadband providers are combining with major content producers to create vertically integrated companies. Local broadcast and radio station markets are increasingly consolidating in an effort to survive competition from non-traditional sources, including the Internet. Cable companies continue their own consolidation, with four operators now controlling most of the country’s cable systems. The commercial wireless market is comprised of four large providers.
Further, internet access is a high priority on the regulatory front, with the FCC prioritising the achievement of universal service and closing the broadband gap.
Technological innovation is also at the forefront of regulatory consideration. Next-generation topics such as 5G deployment, use of millimetre wave spectrum for broadband, the Advanced Television Systems Committee 3.0 broadcast standard and internet access and interconnection are receiving greater regulatory attention.
What is the primary legislation governing the telecoms market in your jurisdiction?
The Communications Act of 1934 (as amended) is the primary statue governing telecoms, radio spectrum and cable operators at the federal level. Among other things, the act defines the powers of the Federal Communications Commission (FCC) and regulates telephony, the use of spectrum, cable television and broadcast television. Each state has a framework to regulate its telecoms providers, often including rate regulation and measures to promote competition.
Are any regulatory reforms or initiatives envisaged?
The last major legislative reform to federal communications law was the Telecommunications Act of 1996, which was the only major rewrite of the Communications Act. No major legislative reforms or initiatives are expected to be adopted in the short term. A rewrite of the Communications Act is being considered, but it is unlikely to happen soon as it is still in the developmental stage. The FCC is considering proposals for spectrum frontiers, which would open up vast amounts of high-band frequency for 5G wireless broadband. The FCC is also considering scaling back net neutrality rules. The FCC has stated that it will open a rulemaking on reforming various media ownership limits. Other deregulatory measures are also being considered.
Universal service obligations
What universal services obligations apply?
The Communications Act established a goal of creating universal service for telecoms which, following the Telecommunications Act and several regulatory initiatives of the FCC, has come to include advanced services such as high-speed internet. Telecoms companies are required to pay a percentage of their interstate end-user telecoms revenues into the Universal Service Fund. Currently, the contribution factor hovers around 17% of a telecoms carrier’s end-user revenues. These monies are used to support projects for rural areas, schools and libraries, healthcare, low-income consumers and broadband internet access. The FCC is considering potential reforms for both the expenditure and contribution components of the universal service programme. State governments also have universal service programmes, which generally focus on subsidising telecoms in high-cost areas.
Which authorities regulate the telecoms sector and what is the extent of their powers?
The FCC regulates the telecoms sector at the federal level and has broad power over both wireline and wireless communications. It has the authority to set rates, ensure interconnection, facilitate access, grant and revoke licences and other forms of operating authority, investigate alleged violations of its rules and issue fines. The FCC also has authority over satellites used in the United States and international standardisation of telecoms issues. Further, the FCC regulates multi-channel video programme distributors and broadcasters. Each state has its own regulatory body that regulates intra-state communications issues (eg, pole attachments and rates). At the local level, cities and other local governing authorities have authority over the physical infrastructure that is used for telecoms (eg, the pole attachments or rights of way that are used by local exchange carriers and cable television providers). Generally, local agencies also have authority over cable operators through cable franchise agreements.
Are there any restrictions on foreign ownership or investment in the domestic telecoms market?
By law, the Federal Communications Commission (FCC) cannot grant a station licence to any company held by a foreign government (47 USC Section 310(a)). The FCC also cannot grant a licence to an alien, a corporation organised under the laws of any foreign government or any corporation of which more than one-fifth of the capital stock is owned by foreign citizens or a foreign country (47 USC Section 310(b)). The FCC can grant a licence to a corporation that is directly or indirectly controlled by a foreign person or corporation if the commission finds that granting the licence would be in the public interest. The transfer or assignment of a licence to a foreign person or corporation is allowed only if the FCC finds that it would be in the public interest. The FCC has rules to implement and enforce these statutory provisions. In recent years, the commission has adopted policies to streamline the applications and procedures applicable to foreign ownership of common carrier, aeronautical and broadcast licences. These rules have made it easier for foreign owners to receive a licence for a US subsidiary.
The FCC previously closely examined foreign ownership of telecoms companies but has become more comfortable with foreign ownership in the past decade. While foreign ownership is still scrutinised, it will generally be approved following a case-by-case review and waiver of the applicable rules. However, for critical infrastructure or certain mergers, foreign ownership can trigger heightened scrutiny involving multiple other agencies, including the Department of Justice, the Department of State, the Department of Defence and the Department of Commerce.
Licensing and authorisation
What licences/authorisations are required to provide telecoms services?
The licences and authorisations required vary depending on the service provided. Both commercial and non-commercial uses of spectrum require licensing or complying with rules for unlicensed devices. Owning and operating a radio station requires a licence from the Federal Communications Commission (FCC). Submarine cables also require a licence and approval from the FCC. Television stations, satellites and transmitting satellite earth stations can all require licences and approval from the FCC. Further, devices that emit radio waves such as WiFi routers or mobile phones, generally require equipment authorisation from the FCC and must comply with FCC standards. These licences or authorisations require FCC approval to be transferred or assigned, which provides the regulatory authority for FCC review of mergers of telecoms firms. Landline telecoms companies are typically licensed at the state level for their intra-state services, with the FCC holding Section 214 licensing authority over their interstate and international services. Cable systems generally hold FCC licences for certain types of transmitting equipment, but their operating authority is typically provided at a local level.
What are the eligibility, documentary and procedural requirements to obtain a licence/authorisation?
The procedure involves filing for a licence. The application must contain information about the applicant and the proposed use of the licence, including:
- ownership information;
- technical and operational parameters; and
- any previous disciplinary issues with the FCC or felony convictions.
Applicants must also demonstrate that granting the licence will be in the public interest. For licences that are being assigned or transferred, the statutory standard is whether the transfer is in the public interest.
Validity period and renewal
What is the validity period for licences/authorisations and what are the terms of renewal?
The term for a licence or authorisation varies, as do the requirements for renewal. For example:
- satellite licences are valid for 15 years;
- cable television relay service licences are valid for five years;
- wireless licences for spectrum use are valid for 10 years; and
- broadcast licences are valid for eight years.
For most spectrum licences, renewal is generally contingent on meeting certain build-out requirements. If those build-out requirements are met, there is generally an expectation that the renewal will be granted. Renewal requirements for broadcast stations and radio stations require public notification with specified language to allow the public the opportunity to comment on whether the station has served the public interest. Operating authority for a licensee continues even after a licence has expired if there is a valid pending renewal application.
What fees apply?
FCC licences are subject to application and annual regulatory fees. The FCC maintains a list of fees on its website (www.fcc.gov/licensing-databases/fees/regulatory-fees). Telecoms carriers must also contribute to a variety of funds such as the Universal Service Fund, the Telecommunications Relay Service and the North American Numbering Plan Administration, among others.
What is the usual timeframe for obtaining a licence/authorisation?
There is no set timeframe. An application for a new licence, if unopposed, can be processed and granted within 30-45 days. For assignments or transfers of licences, there is a 180-day timeframe, but the process can be longer if the assignment or transfer is highly contested or shorter if uncontroversial or a pro forma transfer or assignment.
Network access and interconnection
What rules, requirements and procedures govern network-to-network access and interconnection?
The Telecommunications Act of 1996 amended the Communications Act of 1934 and imposed network access and interconnection requirements on telecoms carriers. Incumbent local exchange carriers (ILECs) are required to provide network-to-network access and interconnection to competitive local exchange carriers, which often buy wholesale access from the ILECs and compete with them. The Federal Communications Commission (FCC) only evaluates the reasonableness of interstate and international services, as the Communications Act only gives the FCC jurisdiction for those rates. State commissions regulate intrastate rates, although deregulation is increasing at the state level for most services outside of basic services. Further, the net neutrality rules regulate internet access services, preventing internet service providers from blocking access to their customers or throttling legal internet applications. The FCC has jurisdiction over internet interconnection disputes that it will evaluate on a case-by-case basis.
Are access/interconnection prices subject to regulation?
Rates offered by incumbent local exchange carriers can be subject to rate regulation, especially for unbundled network elements and interconnection. The standard by which rates are evaluated is whether the rate is “just and reasonable” (47 USC Sections 201(a) and 202(b)). For certain services, the telecoms carriers are required to file tariffs containing the rates, terms and conditions of the services offered. These services include end-user access, switched access, special access and other services. Non-dominant carriers are not required to file tariffs and were detariffed in 2000. States also have some authority to require interconnection and evaluate the reasonableness of rates.
How are access/interconnection disputes resolved?
Carriers can resolve disputes through voluntary negotiations, mediation, mandatory arbitration or through procedures established by state commissions. Carriers can also file complaints with the FCC if a state commission fails to act.
Have any regulations or initiatives been introduced or proposed with respect to next-generation access?
The FCC is in the process of identifying initiatives for next-generation access, including identifying spectrum for advanced services. The current proposal includes opening up spectrum in the high-band frequency to develop for 5G use.
What rules and procedures govern telecoms operators’ access to land (both public and private) to install, maintain and repair infrastructure?
Access to install, maintain and repair infrastructure is generally regulated at the state level. However, some features such as pole attachment pricing and access are regulated by the Federal Communications Commission (FCC) (47 USC Section 224(f)(1)). The possibility of repeal of the net neutrality rules may affect the ability of the FCC to regulate pole attachment pricing.
Are infrastructure sharing agreements among operators popular and/or encouraged by the regulatory authorities? Which infrastructure sharing structures/agreements are commonly used? Do any regulations apply?
Yes. Infrastructure sharing agreements are used. They are generally encouraged by regulatory authorities. The types of sharing agreements that are common include the re-selling of telecoms capacity, spectrum leasing, collocation of equipment and shared services agreements.
Pricing and consumer protection
What rules govern retail pricing for telecoms services?
Retail pricing for telecoms services is generally regulated at the state level. States have authority to regulate prices, but in recent years many states have moved away from direct price regulation for most services.
What rules govern consumer service contracts?
The general rules of consumer protection govern consumer telecoms service contracts. In addition, the Federal Communications Commission has adopted the ‘truth-in-billing’ rules to regulate consumer telephone bills (47 CFR Section 64.2401). These rules require brief and non-misleading plain-language descriptions of services for each charge, full lists of all charges and other rules to ensure consumers are able to understand their telephone bills.
Are telecoms service providers bound by any consumer disclosure requirements?
Some sensitive customer proprietary network information is restricted from disclosure. This information includes the telephone numbers a subscriber calls, the frequency, duration and timing of such calls and additional services purchased by the customer. Telecoms carriers are required to file annual reports ensuring compliance with the Centre for the Protection of National Infrastructure rules.
Issues and concerns
Are there any particular competition issues or concerns in the domestic telecoms market?
The telecoms industry is highly consolidated. The wireline industry in particular has consolidated again after the break-up of the Bell system in the 1980s. The wireless industry has four major competitors. The cable industry is also highly concentrated, with most cable companies seeking to dominate their local franchise area. Further, major cable and telecoms companies are beginning to acquire content producers to create vertically and horizontally integrated companies. These companies also provide the vast majority of broadband access to consumers, providing additional competition concerns.
Do any sector-specific competition regulatory/legal provisions apply (eg, special conditions for dominant telecoms market players)?
Title II of the Communications Act of 1934 regulates telecoms companies as common carriers, while Title VI regulates cable systems and includes rules affecting must carry, retransmission consent, closed captioning, emergency alerts and franchising.
Are there any requirements for structural, functional or accounting separation of operators’ activities?
Telecoms carriers must separate out intrastate, interstate and international charges for the purposes of Universal Service Fund and other regulatory payment obligations such as the Telecommunications Relay Service numbering funds.
What rules and procedures govern spectrum allocation?
The spectrum between nine kilohertz (kHz) and 275 gigahertz is allocated and administered by the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA). The FCC is responsible for administering spectrum for non-Federal uses, while the NTIA is responsible for administering spectrum for Federal government usage. The FCC maintains a table on its website that describes how spectrum has been allocated for spectrum licenses (www.fcc.gov/engineering-technology/policy-and-rules-division/general/radio-spectrum-allocation). No licence is required for spectrum that has been designated unlicensed, but devices and users must comply with the FCC’s rules imposing technical requirements, such as power limits.
What fees apply to spectrum allocation/authorisation?
The fees associated with spectrum allocation are the application and regulatory fees. Further, for newly allocated spectrum, the FCC will generally conduct an auction when mutually exclusivity is present.
Can spectrum licences be transferred, traded or sub-licensed?
Spectrum can be transferred and sub-licensed, but a prior application must be made to the FCC before the assignment or transfer can be made. Spectrum can also be leased through a spectrum manager lease or through a de facto transfer lease. Such arrangements require FCC approval.
Voice over Internet Protocol
How is Voice over Internet Protocol (VoIP) regulated in your jurisdiction?
The Federal Communications Commission (FCC) regulates as telecoms interconnected Voice over Internet Protocol (VoIP), including requiring 911 services, local number portability and payment of certain telecoms charges such as Universal Service Fund contributions. Interconnected VoIP service is defined as VoIP that allows users to receive calls that originate on the public switched telephone network and to terminate calls from that network (47 CFR Section 9.3). VoIP providers and equipment manufacturers also must ensure that their services can be used by people with disabilities.
How are telephone numbers allocated in your jurisdiction?
Number allocation in the United States is administered by the North American Numbering Plan Administration, which is overseen by the Federal Communications Commission (FCC). The FCC has ultimate authority over number allocation in the United States (47 USC Section 251(e)). The actual administration is awarded by contract. The FCC faces two challenges in the administration of number allocation: ensuring number portability and handling the explosion in telephone numbers due to the growth of mobile phones. Further, it has recently begun to investigate the problem of abandoned or unallocated numbers being used for robocalling. It has an open rulemaking to determine what tools it can use to punish robocallers while ensuring that authorised robocalls are not disrupted.
What rules govern telephone number portability?
Both wireless and wireline telephone numbers are portable. Consumers can have their new carrier contact the consumer’s current carrier and begin the process of porting numbers. Carriers are not allowed to refuse to port numbers. However, carriers are allowed to charge fees for porting numbers but cannot refuse to port a number because a consumer has not paid for porting. The fees for porting numbers are required to be just and reasonable. It is possible to port wireline numbers to wireless numbers but some small carriers are exempt from this requirement.
Privacy and data security
What is your jurisdiction’s regulatory stance on net neutrality?
Currently, the Federal Communications Commission (FCC) has ex ante net neutrality rules and has classified broadband providers as common carriers. These rules prohibit blocking lawful content, throttling lawful content or engaging in paid prioritisation. The FCC adopted a broader internet conduct standard that prohibits practices that unreasonably interfere with or disadvantage the ability of consumers to reach the content of their choosing. The FCC also adopted transparency rules for internet service providers (ISPs) and heightened privacy protections for ISP customers. Further, the FCC has the authority to resolve a complaint that a broadband internet access provider is engaging in unfair or unjust practices for interconnection agreements. The FCC is currently considering a proposal to reclassify broadband providers as information services (rather than as telecoms services) and remove some or all of the ex anterules. Congress recently repealed the FCC’s regulations governing the use of customer proprietary information by broadband internet access providers. However, the statute requiring telecoms providers’ use of customer proprietary network information still applies. The regulatory future of the current net neutrality rules is currently uncertain, and many stakeholders have asked Congress to pass a net neutrality statute governing this space.
Are there regulations or restrictions on encryption of communications?
The United States does not restrict encrypted communications. Telecoms networks must be configured to allow law enforcement to serve warrants for the interception of communications, but nothing restricts the ability of consumers to encrypt their communications as they travel over the telecoms network. Export of encryption protocols is restricted in some cases.
Are telecoms operators bound by any rules or requirements on the retention of consumer communications data? If so, for how long must data be retained?
There is no general data retention requirement at this time. Telecoms providers are required to retain records for 90 days on the request of a government entity (18 USC Section 2703(f)). Some sensitive customer proprietary network information is restricted from disclosure. This information includes the telephone numbers a subscriber calls, the frequency, duration and timing of such calls and additional services purchased by the customer. Telecoms carriers are required to file annual reports ensuring compliance with the Centre for the Protection of National Infrastructure rules.
What rules and procedures govern the authorities’ interception of communications and access to consumer communications data?
Multiple statutes and the Constitution govern the interception of communications and access to consumer communications data. The Fourth Amendment prohibits the government from intercepting communications absent a warrant or special circumstances. Other laws, such as the Wiretap Act, prohibit the interception of communications made by radio or electronic transmission without lawful process. These laws provide civil and criminal penalties for violations. The scope of these laws can be the subject to litigation. However, telecoms providers are required to configure their systems in such a way that they can intercept customer communications when presented with a valid court order or warrant (47 USC Sections 1001-1010).
Data security obligations
What are telecoms operators’ general data security obligations to consumers?
As part of the net neutrality rules passed in 2015, the FCC required broadband ISPs to take reasonable measures to protect customer data from unauthorised disclosure. However, this portion of the net neutrality rules was stayed by the FCC in 2017 pending a petition for reconsideration. The rules would have required that ISPs comply with the Federal Trade Commission’s privacy protection framework along with Health Insurance Portability and Accountability Act and Gramm Leach Bliley Act requirements. The FCC is also charged with protecting the privacy of communications that are transmitted by interstate wire or radio (47 USC Section 605(a)) and has imposed limitations on incumbent telephone companies’ use of consumer data.