Carriers Lose Bid to Block FCC Consumer-Data Rule

(CN) - The Federal Communications Commission did not violate the First Amendment rights of Verizon and other phone carriers by forcing them to obtain customers' consent before releasing consumer information to third parties, the D.C. Circuit ruled.

The FCC's order in 2007 modified an evolving set of regulations on how carriers protect customer information, including customers' calling plans and special features, the pricing and terms of their contracts, and details about who they call and when. Carriers often use this information to sell specific services and upgrades tailored to their customers.

Initially, carriers had to obtain the express consent of customers before passing the data along to affiliates who offered related services, known as the "opt-in" method.

But carriers convinced the 10th Circuit that this method constituted an unconstitutional restriction on their First Amendment right to speak to customers.

The FCC responded by issuing an order in 2002 that allowed carriers to assume customer consent unless customers specifically objected, or "opted out."

The 2002 order also let carriers share customer information with joint venture partners or independent contractors with communications-related services to sell, so long as they signed confidentiality agreements to safeguard the information.

The Electronic Privacy Information Center petitioned the FCC in 2005 to make the regulations stricter, noting how easily "data brokers" were able to glean customer information and sell it online. The center said data brokers grew increasingly deceptive about how they obtained the information: Some coaxed the information from customer service representatives by pretending to have the authority to receive it, others hacked into customers' online accounts, and some preyed on dishonest insiders in the carrier industry.

The FCC responded with the 2007 order, which required customer consent before carriers could share information with joint venture partners and independent contractors.

Around the same time, Congress passed the Telephone Records and Privacy Protection Act, which imposed criminal penalties on the tactics data brokers used to collect unauthorized consumer data.

The National Cable & Telecommunications Association, Qwest and Verizon viewed the third FCC modification as a violation of the First Amendment or the Administrative Procedure Act or both.

"Whatever the heading, their argument is basically the same - that the administrative record does not support the Commission's Order," Judge Randolph explained, adding: "There is nothing to this."

"The privacy of customer information cannot be preserved unless there are restrictions on the carrier's disclosure of it," Randolph wrote. "And the restriction Congress imposed was customer approval. But petitioners say the Commission violated the First Amendment by implementing this congressional requirement with an opt-in system."

Randolph said this argument "diverts attention from the fact that the carrier's sharing of customer information with a joint venturer or an independent contractor without the customer's consent is itself an invasion of the customer's privacy - the very harm the regulation targets."

The federal appeals court upheld the FCC's order.

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