The four major U.S. wireless operators and Google Tuesday filed their responses to a Federal Communications Commission inquiry into the fees charged to customers who drop wireless service before their contracts end.
The carriers separately defended early termination fees (ETFs) as a necessary part of being able to offer discounted mobile devices and lower monthly rates while allowing operators to recoup a portion of lost revenue when customers cancel service prematurely. Google defended the "equipment recovery fee" on its Nexus One smartphone launched in January on similar grounds.
The FCC probe was initially sparked when Verizon Wireless doubled the ETF on smartphones and other high-end devices from $175 to $350 in November. The agency asked Verizon about the rationale behind the increase and how the company notifies customers about the ETFs.
The nation's largest wireless carrier in December told the FCC that the higher fee was justified not only by the cost of subsidizing higher-priced smartphones, but also the higher operational expenses required by the devices -- from advertising to running its broadband network. Verizon's reply drew the ire of at least one commissioner -- Mignon Clyburn -- who called Verizon's answers "unsatisfying, and, in some cases, troubling" in a sharply worded public rebuke.
Late last month, the FCC opened a formal inquiry into ETFs, sending letters to Verizon, AT&T, T-Mobile Sprint and Google asking about their policies and disclosure practices concerning the fees. For its part, Verizon essentially reiterated its prior response to the agency on the subject, maintaining that the increased ETF was commensurate with increased upfront costs associated with more sophisticated phones.
"In brief, term contracts with ETFs benefit consumers by enabling them to obtain access to devices at a significantly lower up-front cost, while enabling Verizon Wireless to recoup the extraordinarily expensive investment required to support its wireless network and operations and the cost of providing the devices at a substantial discount," stated Verizon's letter to the FCC.
Since its initial response, however, the carrier pointed out that it had removed 10 phones from the list of 46 "Advanced Devices" it sells that carry the $350 ETF. The $175 penalty is charged on other Verizon contract phones.
Other carriers made similar arguments, emphasizing the consumer benefits that ETFs help to make possible, including reduced pricing on high-end devices and product and service innovation. They also reiterated that customers are free to buy phones without contracts at full retail price to avoid ETFs.
"In that regard, despite the "no contract/no ETF" choices available to them, the overwhelming majority of AT&T customers choose a term plan arrangement that enables them to obtain a new handset at a discounted price," stated AT&T's letter. In contrast to Verizon, AT&T charges an ETF of $175 on all phones, while Sprint and T-Mobile impose a $200 fee across all models.
The wireless operators also defended their procedures for informing subscribers about ETFs as transparent and extensive, detailing disclosures made through print and online advertising, checklists for sales reps, contract language and sales receipts, among other ways of providing notification.
Google acknowledged that there had been "some concerns and confusion" in relation to separate early-termination penalties charged by itself and carrier partner T-Mobile in connection with the Nexus One device sold directly online by Google. The tech giant has also made the biggest concession to date on ETFs, dropping what it calls its equipment recovery fee, or ERF, on the Nexus One from $350 to $150 earlier this month.
The tech giant faced a backlash when it was revealed that customers who canceled or downgraded their T-Mobile service plans for the Nexus One within 120 days of purchase (but after the 14-day trial period) would have to pay the $350 fee to Google in addition to the standard $200 penalty owed to T-Mobile.
Google told the FCC the ERF -- albeit lower -- is necessary to help recover the device subsidy it provides when someone buys the Nexus One with a T-Mobile contract. The company said T-Mobile pays it a commission for each new subscriber buying the phone through its online store or existing ones upgrading service plans for the Nexus One.
The commissions are then passed along to consumers in the form of discounted pricing. New T-Mobile customers can buy the Nexus One for $179 instead of the full retail price of $529 for an unlocked version of the phone.
For its part, T-Mobile still imposes its $200 ETF on Nexus One service contracts, but stated that -- as with other phones -- the fee is intended to recoup a portion of lost revenue from early terminations rather than specific equipment costs. T-Mobile's letter also stated that Google and the carrier "have made changes to further enhance disclosures regarding the ERF and T-Mobile's terms and conditions, including the ETF, as part of the Google sales process."
Thursday, February 25, 2010
FCC To Propose 'Mobile Future Auction'
As part of a national broadband plan, FCC Commissioner Julius Genachowski Wednesday outlined a new initiative allowing television broadcasters to give up spectrum in exchange for a cut of auction revenue.
Speaking at the New America Foundation think tank, Genachowski said the FCC would propose a "Mobile Future Auction" in which broadcasters and other licensees could trade in spectrum in return for a share of the proceeds of spectrum auctions as a way to help expand mobile broadband.
"The Mobile Future Auction would allow broadcasters to elect to participate in a mechanism that could save costs for broadcasters while also being a major part of the solution to one of our country's most significant challenges," said the FCC Commissioner, who set a goal of freeing up 500 Megahertz of spectrum over the next decade.
He pointed to one study that suggested as much as $50 billion in value could be unlocked if we adopted policies to convert some of the broadcast spectrum to mobile broadband. To date, broadcasters have strongly opposed the FCC possibly taking back some of the national airwaves from TV stations to help meet growing demand for wireless broadband services.
TV executives say they want to use their broadcast spectrum to be able to offer more digital channels, HD and programming for mobile devices. The Mobile Future Auction would potentially provide a market-based incentive for broadcasters to free up spectrum for mobile broadband.
But Genachowski argued that spectrum allotted for broadcast TV isn't being used efficiently. "About 300 megahertz of spectrum have been set aside for broadcast TV," he said. "Even in our very largest cities, at most only about 150 megahertz out of 300 megahertz are used." That's true even with the recent reallocation of spectrum in the digital TV transition, he noted.
The National Association of Broadcasters fired back Wednesday in a statement defending its spectrum use: "As a one-to-many transmission medium, broadcasters are ready to make the case that we are far and away the most efficient users of spectrum in today's communications marketplace," read the NAB release.
"We look forward to working with policymakers to help expand the roll-out of broadband without threatening the future of free and local television, mindful of the fact that local TV stations just returned more than a quarter of our spectrum following our transition to digital."
But Genachowski suggested the future auction could be beneficial for all parties. "For broadcasters, who win more flexibility to pursue business models to serve their local communities; and for the public, which wins more innovation in mobile broadband services, continued free, over-the-air television, and the benefits of the proceeds of new and substantial auction revenues," he said.
To help increase broadband adoption, Genachowski also proposed a "Mobility Fund" as part of wider reforms to the Universal Service Fund. Without increasing the size of the USF, it would seek to provide one-time funding to build infrastructure enabling "robust mobile broadband networks, to bring all states to a minimum level of mobile availability."
For its part, the CTIA expressed support for the chairman's remarks. "By proposing to free up 500 MHz of new spectrum for mobile broadband use, Chairman Genachowski has taken a tremendous step toward maintaining our worldwide mobile ecosystem leadership," said CTIA head Steve Largent, in a statement.
Genachowski's speech Wednesday was the latest in a series of talks he has given on the national broadband plan which the FCC is scheduled to submit to Congress March 17.
Speaking at the New America Foundation think tank, Genachowski said the FCC would propose a "Mobile Future Auction" in which broadcasters and other licensees could trade in spectrum in return for a share of the proceeds of spectrum auctions as a way to help expand mobile broadband.
"The Mobile Future Auction would allow broadcasters to elect to participate in a mechanism that could save costs for broadcasters while also being a major part of the solution to one of our country's most significant challenges," said the FCC Commissioner, who set a goal of freeing up 500 Megahertz of spectrum over the next decade.
He pointed to one study that suggested as much as $50 billion in value could be unlocked if we adopted policies to convert some of the broadcast spectrum to mobile broadband. To date, broadcasters have strongly opposed the FCC possibly taking back some of the national airwaves from TV stations to help meet growing demand for wireless broadband services.
TV executives say they want to use their broadcast spectrum to be able to offer more digital channels, HD and programming for mobile devices. The Mobile Future Auction would potentially provide a market-based incentive for broadcasters to free up spectrum for mobile broadband.
But Genachowski argued that spectrum allotted for broadcast TV isn't being used efficiently. "About 300 megahertz of spectrum have been set aside for broadcast TV," he said. "Even in our very largest cities, at most only about 150 megahertz out of 300 megahertz are used." That's true even with the recent reallocation of spectrum in the digital TV transition, he noted.
The National Association of Broadcasters fired back Wednesday in a statement defending its spectrum use: "As a one-to-many transmission medium, broadcasters are ready to make the case that we are far and away the most efficient users of spectrum in today's communications marketplace," read the NAB release.
"We look forward to working with policymakers to help expand the roll-out of broadband without threatening the future of free and local television, mindful of the fact that local TV stations just returned more than a quarter of our spectrum following our transition to digital."
But Genachowski suggested the future auction could be beneficial for all parties. "For broadcasters, who win more flexibility to pursue business models to serve their local communities; and for the public, which wins more innovation in mobile broadband services, continued free, over-the-air television, and the benefits of the proceeds of new and substantial auction revenues," he said.
To help increase broadband adoption, Genachowski also proposed a "Mobility Fund" as part of wider reforms to the Universal Service Fund. Without increasing the size of the USF, it would seek to provide one-time funding to build infrastructure enabling "robust mobile broadband networks, to bring all states to a minimum level of mobile availability."
For its part, the CTIA expressed support for the chairman's remarks. "By proposing to free up 500 MHz of new spectrum for mobile broadband use, Chairman Genachowski has taken a tremendous step toward maintaining our worldwide mobile ecosystem leadership," said CTIA head Steve Largent, in a statement.
Genachowski's speech Wednesday was the latest in a series of talks he has given on the national broadband plan which the FCC is scheduled to submit to Congress March 17.
Wednesday, February 24, 2010
Widespread Data Breaches Uncovered by FTC Probe
FTC Warns of Improper Release of Sensitive Consumer Data on P2P File-Sharing Networks
The Federal Trade Commission has notified almost 100 organizations that personal information, including sensitive data about customers and/or employees, has been shared from the organizations’ computer networks and is available on peer-to-peer (P2P) file-sharing networks to any users of those networks, who could use it to commit identity theft or fraud. The agency also has opened non-public investigations of other companies whose customer or employee information has been exposed on P2P networks. To help businesses manage the security risks presented by file-sharing software, the FTC is releasing new education materials that present the risks and recommend ways to manage them.
Peer-to-peer technology can be used in many ways, such as to play games, make online telephone calls, and, through P2P file-sharing software, share music, video, and documents. But when P2P file-sharing software is not configured properly, files not intended for sharing may be accessible to anyone on the P2P network.
“Unfortunately, companies and institutions of all sizes are vulnerable to serious P2P-related breaches, placing consumers’ sensitive information at risk. For example, we found health-related information, financial records, and drivers’ license and social security numbers--the kind of information that could lead to identity theft,” said FTC Chairman Jon Leibowitz. “Companies should take a hard look at their systems to ensure that there are no unauthorized P2P file-sharing programs and that authorized programs are properly configured and secure. Just as important, companies that distribute P2P programs, for their part, should ensure that their software design does not contribute to inadvertent file sharing.”
As the nation’s consumer protection agency, the FTC enforces laws that require companies in various industries to take reasonable and appropriate security measures to protect sensitive personal information, including the Gramm-Leach-Bliley Act and Section 5 of the FTC Act. Failure to prevent such information from being shared to a P2P network may violate such laws. Information about the FTC’s privacy and data security enforcement actions can be found at http://www.ftc.gov/privacy/privacyinitiatives/%20promises_enf.html
The notices went to both private and public entities, including schools and local governments, and the entities contacted ranged in size from businesses with as few as eight employees to publicly held corporations employing tens of thousands. In the notification letters, the FTC urged the entities to review their security practices and, if appropriate, the practices of contractors and vendors, to ensure that they are reasonable, appropriate, and in compliance with the law. The letters state, “It is your responsibility to protect such information from unauthorized access, including taking steps to control the use of P2P software on your own networks and those of your service providers.”
The FTC also recommended that the entities identify affected customers and employees and consider whether to notify them that their information is available on P2P networks. Many states and federal regulatory agencies have laws or guidelines about businesses’ notification responsibilities in these circumstances.
Samples of the notification letters can be found at:
The FTC appreciates the assistance of the Department of Health and Human Services, the Securities and Exchange Commission, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Office of Comptroller of the Currency.
The new business education brochure – titled Peer-to-Peer File Sharing: A Guide for Business – is designed to assist businesses and others as they consider whether to allow file-sharing technologies on their networks, and explain how to safeguard sensitive information on their systems, and other security recommendations.
This information is available at www.ftc.gov/bcp/edu/pubs/business/idtheft/bus46.shtm.
Tips for consumers about computer security and P2P can be found at www.onguardonline.gov/topics/p2p-security.aspx.
The Federal Trade Commission works for the consumer to prevent fraudulent, deceptive,
and unfair business practices and to provide information to help spot, stop, and avoid
them.
To file a complaint in English or Spanish, click http://www.ftccomplaintassistant.gov/
or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other
fraud-related complaints into Consumer Sentinel, a secure, online database available to
more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad.
For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.
MEDIA CONTACT:
Claudia Bourne Farrell,
Office of Public Affairs
202-326-2181
STAFF CONTACT:
Alain Sheer,
Bureau of Consumer Protection
202-326-3321
The Federal Trade Commission has notified almost 100 organizations that personal information, including sensitive data about customers and/or employees, has been shared from the organizations’ computer networks and is available on peer-to-peer (P2P) file-sharing networks to any users of those networks, who could use it to commit identity theft or fraud. The agency also has opened non-public investigations of other companies whose customer or employee information has been exposed on P2P networks. To help businesses manage the security risks presented by file-sharing software, the FTC is releasing new education materials that present the risks and recommend ways to manage them.
Peer-to-peer technology can be used in many ways, such as to play games, make online telephone calls, and, through P2P file-sharing software, share music, video, and documents. But when P2P file-sharing software is not configured properly, files not intended for sharing may be accessible to anyone on the P2P network.
“Unfortunately, companies and institutions of all sizes are vulnerable to serious P2P-related breaches, placing consumers’ sensitive information at risk. For example, we found health-related information, financial records, and drivers’ license and social security numbers--the kind of information that could lead to identity theft,” said FTC Chairman Jon Leibowitz. “Companies should take a hard look at their systems to ensure that there are no unauthorized P2P file-sharing programs and that authorized programs are properly configured and secure. Just as important, companies that distribute P2P programs, for their part, should ensure that their software design does not contribute to inadvertent file sharing.”
As the nation’s consumer protection agency, the FTC enforces laws that require companies in various industries to take reasonable and appropriate security measures to protect sensitive personal information, including the Gramm-Leach-Bliley Act and Section 5 of the FTC Act. Failure to prevent such information from being shared to a P2P network may violate such laws. Information about the FTC’s privacy and data security enforcement actions can be found at http://www.ftc.gov/privacy/privacyinitiatives/%20promises_enf.html
The notices went to both private and public entities, including schools and local governments, and the entities contacted ranged in size from businesses with as few as eight employees to publicly held corporations employing tens of thousands. In the notification letters, the FTC urged the entities to review their security practices and, if appropriate, the practices of contractors and vendors, to ensure that they are reasonable, appropriate, and in compliance with the law. The letters state, “It is your responsibility to protect such information from unauthorized access, including taking steps to control the use of P2P software on your own networks and those of your service providers.”
The FTC also recommended that the entities identify affected customers and employees and consider whether to notify them that their information is available on P2P networks. Many states and federal regulatory agencies have laws or guidelines about businesses’ notification responsibilities in these circumstances.
Samples of the notification letters can be found at:
- http://www.ftc.gov/os/2010/02/100222sampleletter-a.pdf
- http://www.ftc.gov/os/2010/02/100222sampleletter-b.pdf
- http://www.ftc.gov/os/2010/02/100222sampleletter-c.pdf
The FTC appreciates the assistance of the Department of Health and Human Services, the Securities and Exchange Commission, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the Office of Comptroller of the Currency.
The new business education brochure – titled Peer-to-Peer File Sharing: A Guide for Business – is designed to assist businesses and others as they consider whether to allow file-sharing technologies on their networks, and explain how to safeguard sensitive information on their systems, and other security recommendations.
This information is available at www.ftc.gov/bcp/edu/pubs/business/idtheft/bus46.shtm.
Tips for consumers about computer security and P2P can be found at www.onguardonline.gov/topics/p2p-security.aspx.
The Federal Trade Commission works for the consumer to prevent fraudulent, deceptive,
and unfair business practices and to provide information to help spot, stop, and avoid
them.
To file a complaint in English or Spanish, click http://www.ftccomplaintassistant.gov/
or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other
fraud-related complaints into Consumer Sentinel, a secure, online database available to
more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad.
For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.
MEDIA CONTACT:
Claudia Bourne Farrell,
Office of Public Affairs
202-326-2181
STAFF CONTACT:
Alain Sheer,
Bureau of Consumer Protection
202-326-3321
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