A federal appeals court declared a Federal Communications Commission rule limiting the use of customer information by telecommunications companies to market products and services unconstitutional last week.
Adopted last year, the rule was challenged by a large segment of the telecommunications industry led by U.S. West with AT&T Corp., Southwestern Bell Telephone Co., Pacific Bell, MCI Telecommunications Corp.; several smaller companies, and industry trade associations.
A three judge panel of the Denver-based 10th U.S. Circuit Court of Appeals, in a 2-1 decision said that requiring telecommunications companies “to obtain affirmative approval from a customer before [it] can use that customers Customer Proprietary Network Information (CPNI) for marketing purposes” violated a customer’s constitutional rights under the First Amendment.”
The majority opinion, written by Circuit Judge Deanell Tacha, went on to state that “the FCC failed to adequately consider the constitutional ramifications” of the its rule.
Indirectly suggesting that the rule, which the FCC voluntarily modified several days before the court ruling, could have passed muster if it provided telephone customers with a way of opting out from having information about them from being used for marketing purposes, Judges Tacha and David Ebel said in their majority opinion that the FCC “insufficiently justified” the opt-in provision of the rule.
The FCC “merely speculate[d] that there are a substantial number of individuals who feel strongly about their privacy, yet would not bother to opt-out,” they said.
But Judge Mary Briscoe, dissenting, said the opt-in provision “is entirely reasonable [and] legitimately forwards Congress’ goal of ensuring that customers give informed consent for use of their individually identifiable Customer Proprietary Network Information (CPNI)” for marketing purposes.
The opt-out method “does not guarantee that a customer will make an informed decision about his or her individually identifiable CPNI,” she said adding that opting in “is the only method of obtaining approval that serves the governmental interests at issue while simultaneously complying with the express requirement of the statute, obtaining informed consumer consent.”
While the FCC, which is considering the possibility of seeking U.S. Supreme Court review, would not comment on the ruling, Mark Roellig, executive vice president, public policy, human resources and law for U.S. West, called the decision “consumer friendly” in a statement.
In that statement he said the ruling, if undisturbed, reaffirmed the First Amendment rights of the telephone companies and their customers, helping them “to more easily determine what new services are available”
The FCC, divided 4-1, softened the rule last week to allow telecos to use CPNI information, relating to the quantity, configuration, type, destination and amount of services, without permission to market equipment and other services to existing customers. (Direct Newsline, Aug. 19, 1999).
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