On October 19, 2016, the FCC’s Enforcement Bureau entered into a Consent Decree with T-Mobile USA, Inc. (“T-Mobile”) for failing to disclose limits applied to T-Mobile and MetroPCS “Unlimited” data plan (“UDP”) customers under a “de-prioritization” policy.  Under the policy, T-Mobile would de-prioritize the data usage of UDP customers who had exceeded a certain threshold of data usage during times of network “contention.”  The Consent Decree closed the Bureau’s investigation into whether T-Mobile provided sufficient disclosure of the policy as required by the FCC’s Open Internet Transparency Rule, which has been in effect since November 20, 2011. 

The Transparency Rule requires fixed and mobile BIAS providers to publicly disclose accurate information regarding network management practices, performance, and commercial terms, including privacy policies.  The disclosures are aimed at ensuring, among other things, that consumers receive accurate information that is sufficient for them to make informed choices about the purchase and use of broadband Internet access service.  In its 2015 Open Internet Order, the FCC provided clarifications concerning compliance with the Transparency Rule, and reiterated guidance previously issued by its Enforcement Bureau in a 2014 Enforcement Advisory.  The 2014 Enforcement Advisory stressed that a “core purpose of the Transparency Rule is to allow consumers to understand what they are purchasing” and emphasizing the need for Open Internet disclosures to be both accurate and consistent with statements regarding network management practices, performance and commercial terms in advertising and other consumer-facing statements.  The 2015 Open Internet Order stated that the Transparency Rule “prevents a broadband Internet access service provider from making assertions about its service that contain errors, are inconsistent with the provider’s disclosure statement, or are misleading or deceptive.”  Together, these statements reflect an expansive view of the Commission’s Transparency Rule authority as encompassing not only a BIAS provider’s actual Open Internet disclosures, but also related assertions about service performance in other consumer-facing statements. 

Investigation.  In March 2015, the FCC opened an investigation into T-Mobile’s practice of de-prioritizing its UDP customers during times of network “contention” (i.e., when customer demand for mobile wireless resources exceeded available supply).  During the investigation period, the FCC received hundreds of complaints from T-Mobile and MetroPCS UDP customers who were unhappy with the de-prioritization policy, including customers who claimed that they did not receive “unlimited” data as promised and customers that found their speeds after de-prioritization caused their service to be unusable for many hours each day.  The Bureau determined that T-Mobile’s disclosures (between August 2014 and June 12, 2015) did not satisfy the Transparency Rule because they did not adequately inform consumers of the details of the de-prioritization policy, including the specific data usage threshold that would trigger the “heavy data user” flag and how de-prioritized customers would be affected.  Specifically, the disclosures did not inform consumers of:

• The specific data threshold that triggered the de-prioritization;
• How application of the de-prioritization policy could impact consumers’ ability to use data services;
• The specific speed reductions that consumers could face; and
• The types of apps and data services that could be adversely affected.

The Bureau further noted that T-Mobile’s disclosures after June 12, 2015 were significantly improved, as they included information about when the policy was triggered and how de-prioritized customers would be affected.  The Bureau found that the modifications increased consumers’ knowledge about the operation and effect of the policy and allowed them to make more informed choices in selecting and using their UDP.

Consent Decree.  Under the terms of the Consent Decree, T-Mobile agreed to designate a compliance officer, develop and implement a five-year compliance plan and make certain expenditures and payments.  The plan will include updated disclosures for T-Mobile and MetroPCS plans regarding the de-prioritization policy, including clearly and conspicuously disclosing material restrictions on the amount and speed of data in all sale, advertising and marketing materials for UDPs or alternatively, taking various steps, including no longer using the term “unlimited” or other actions to provide subscribers of UDPs with the experience they expected for the plan.  T-Mobile also agreed not to misrepresent the performance or characteristic of any unlimited data plan and to provide direct and individual notification to all customers when their data usage is nearing the threshold necessary to trigger a de-prioritization policy, and avoid misrepresenting the performance or central characteristics of any unlimited data plan.  T-Mobile will also implement a training program to ensure customer service representatives can sufficiently explain the polices to customers and potential customers. 

 Additionally, T-Mobile agreed to spend at least $35,500,000 to make certain consumer benefits available to current T-Mobile and MetroPCS UDP customers, spend at least $5 million dollars, plus any unredeemed consumer benefit funds, to purchase devices that students in low-income school districts may take home and use for school work, and provide mobile broadband to those devices at no cost to the students or their families, and pay a $7,500,000 civil penalty to the U.S. Treasury. 

Significance.  This case demonstrates the FCC’s continued emphasis in enforcing its Open Internet Transparency Rules and its willingness to impose significant fines on against providers it deems to have violated the Transparency Rule, even in cases where the provider has taken steps to self-correct.   

Alleged violations of the 2010 Transparency Rule have been the subject of two other recent FCC enforcement actions, one of which, like the T-Mobile case, also involved the imposition of set data thresholds and significant speed reductions for “unlimited” mobile broadband services without adequate disclosure to consumers.  These actions also carried hefty forfeitures and compliance plans.

The FCC’s enforcement activities in this area highlight the need for BIAS providers to be vigilant in ensuring their compliance with the FCC’s Open Internet Transparency Rule and associated guidance.  Most importantly, providers need to ensure that their Open Internet disclosures, and related consumer-facing statements are accurate and consistent and are not misleading and or deceptive.

If you have questions about the Transparency Rule, please contact Barbara Esbin at besbin@cinnamonmueller.com or (202) 872-6811 or Bruce Beard at bbeard@cinnamonmueller.com or (314) 394-1535.

Nationwide Class Action Suit Filed Against Comcast

Seeks Refund of Broadcast TV and Regional Sports Fees

            On October 15 2016, a class action lawsuit was filed against Comcast Corporation (“Comcast”) and its practice of charging separate “Broadcast TV” and “Regional Sports” fees on top of the price of its advertised fixed monthly service plans.  The complaint alleges breach of contract, breach of an implied duty of good faith and fair dealing, unjust enrichment and violation of various state consumer protection laws, and seeks a full refund of all Broadcast TV and Regional Sports Fees paid by subscribers, an amount the complaint alleges exceeds $5,000,000.  The case was filed in the United States District Court for the Northern District of California.

            The suit alleges that Comcast, through its Broadcast TV and Regional Sports fees, is falsely advertising its cable television packages for lower prices than customers who sign-up are charged.  The Broadcast TV fee was applied to all video customers and the Regional Sports fee was charged to all customers who received a regional sports network in their package.  The suit claims that Comcast deceptively advertises a lower price for its video service packages that excludes these extra fees, which are then added to the customer’s bill under a separate category of fees and charges.  Among the numerous allegations are that Comcast fails to adequately disclose or explain the fees in its advertising, as part of its ordering process, on its bills, or on its website.  The complaint alleges that customers were told by customer service representatives that the advertised package price for the service was the total cost, other than taxes, only to find the Broadcast TV fee and the Regional Sports fee tacked onto their bills.  The complaint also claims that some customers were told the fees were governmentally mandated and the money collected went to the government.  The complaint alleges that the fees were deceptively “hidden” in the Taxes and Fees or Other Charges and Fees section rather than in the Recurring Charges section of the bills, which further misrepresented the true nature of the fees.  The complaint contends that the fees were also used to increase the rates of customers who had been promised a flat rate for the term of their contract.  The complaint charges that Comcast’s practices are fraudulent, unfair and intended to mislead consumers.  

Comcast has not yet responded to the Complaint, but is likely to strongly contest the allegations.  The filing of this class action is a reminder to all cable operators of the need to explain the true nature of any additional fees and to always disclose the true price of the service, including any additional fees, in all consumer-facing statements, including advertising, on your website, on your bills, and in your discussions with customers.  Operators who include a line item for a Broadcast TV fee, Regional Sports fee or other similar type fee should review their advertising, website, billing and other communications to customers to make sure the fees are adequately and accurately disclosed and explained and are not misleading.

If you have any questions regarding the lawsuit or the disclosure of fees, please contact Bruce Beard at bbeard@cinnamonmueller.com or 314-394-1535.