REGULATORY PURVIEW OVER POTENTIAL WIRELESS SPAM PROBLEMS MURKY

“SMS spam is not a huge problem today but the Phoenix example shows you how big a problem it could be,” said attorney Ray Everett-Church, counsel to Coalition Against Unsolicited Commercial E-mail (CAUCE). “It shows how wanton some of these spammers can be in terms of their knowledgeable disregard for the problem.” Without Congress’s weighing in, several industry observers told us wireless spam fell somewhere between 1991 Telephone Consumer Protection Act (TCPA), which would give FCC some interest, and FTC Act, which may give that agency oversight in some cases.

TCPA covers certain telemarketing practices and outlaws junk faxes, said Everett-Church. “It’s not at all clear in existing case law whether or not the TCPA does extend to reach SMS in the cellular environment,” he said. “In the cellular environment, it seems like a logical extension of that statute but certainly there are other logical extensions of that statute that haven’t been extended by the courts.” Under TCPA, spam victim who receives infringing communications has private right of action to bring complaint against sender of message and includes provisions for state agency to act on behalf of citizens in certain cases if there is pattern of abuse, Everett-Church said. If state attorneys general pursues action, they must notify FCC, which can intervene, he said.

Still, FCC jurisdiction isn’t explicit since TCPA uses statutory term of telephone number and doesn’t mention e-mail. Phoenix resident Rodney Joffe, a founder of Genuity, is taking steps that may culminate in class-action lawsuit involving up to 170,000 mobile customers who were spammed with SMS messages sent by local mortgage company. Litigation efforts are hinging on TCPA’s being applied to SMS. FCC spokeswoman said agency didn’t appear to have authority under TCPA for wireless spam. FTC official said agency had authority to enforce Sec. 5 of FTC Act, which prohibits deceptive and unfair practices. “Our enforcement work is targeted largely to deceptive practices that cause economic harm,” she said. “We think of spam as unsolicited commercial e-mail. There is nothing per se illegal about sending unsolicited commercial e-mail on the Internet.” FTC last year held first workshop on wireless data and privacy issues, with participants stressing need for standards and technology development although no consensus emerged on need for govt. intervention (CD Dec 12 p2).

But federal agencies don’t necessarily lack jurisdiction, CAUCE’s Everett-Church said. “One of the interesting issues here is that the FCC has jurisdiction over these issues by virtue of things like the TCPA,” he said. But concerning spam and other telemarketing abuses, FCC “has largely washed its hands of all but technical matters,” with agencies such as FTC having enforcement of activities that go across these technologies, he said. Under FTC Act, agency can examine issues like deceptive trade practices, Everett-Church said. But as FCC wrestles with wireless location issues such as Enhanced 911, which potentially provides marketers with information they can turn to their advantage, “that’s going to bring some of these privacy issues and fraud issues squarely into the middle of the FCC’s purview,” he said. Lack of clarity is likely to push federal legislation that would cover enforcement, he said. Based on FCC enforcement of junk faxes and other telemarketing issues, “if it’s left solely to the FCC’s enforcement… we will be waiting a long time for a solution,” Everett-Church said. “If we depend on FTC, we may see a few high profile incidents litigated,” he said, noting agency doesn’t have resources to pursue large volume of such cases.

“I haven’t been delighted with the enforcement vigilance of either of those agencies,” said Jason Catlett, pres. of privacy group Junkbusters. “The best result would be if the Telephone Consumer Protection Act were found to be applicable,” he said, noting courts may decide issue if lawsuits such as that involving Phoenix wireless spam move forward. “It may also be appropriate for new legislation to address some of the specifics of cell phone spam,” he said.

Wireless spam isn’t receiving attention as particular problem now because mobile commerce still is in its infancy, said Dataquest analyst Tole Hart. “In the future, I suspect that wireless carriers will guard the rights that people have to their handsets for the primary reason that they don’t want to anger people and give them unwanted messages,” Hart said. Typically, this will play out with wireless carriers incorporating provisions into their agreement with content providers or e-commerce companies that prohibit disclosure of that information to 3rd parties or use of it for marketing purposes, Hart said.

Verizon Wireless spokesman said: “We do encourage our customers to let us know when they believe their privacy has been abridged and that would include potential spamming. We view our relationship with our customers as sacrosanct.” Spokesman said he wasn’t aware of any spamming incidents involving Verizon customers. If subscriber reported incident, Verizon Wireless would go directly to its mobile Internet partners to investigate claims, he said.

PCIA had expressed optimism late last month that Congress wouldn’t necessarily take action on wireless spam this year because industry model is nascent and govt. action now could be premature. Whether FTC or FCC ultimately has regulatory purview is “the $20 million question at this point,” said Leslie Kaplan, PCIA dir.-govt. affairs: “We are all very interested in where things will end up or who will have that jurisdiction.”

Much attention has focused on self-regulatory efforts for putting wireless privacy safeguards in place, including proposals covering spam. In recent FCC comment period on wireless location privacy principles submitted by CTIA, Wireless Location Industry Assn. (WLIA) outlined draft privacy standards group plans to finalize later this year. WLIA said it would provide forum for consumers to bring allegations of privacy abuses if companies involved can’t resolve complaints. Draft specifies that members will not engage in wireless spam, defined as push advertising sent by advertisers without confirmed “opt-in” decision by customer. This would mean that customer would have to provide permission each time that message is sent.

Meanwhile, Joffe said he had sent official demand letter to mortgage company, citing 2 spamming incidents and TCPA requirements that $500 is owed for each occurrence. Joffe said company sent unsolicited SMS messages to blocks of AT&T Wireless, Verizon Wireless, Nextlink and VoiceStream phones. Advertiser can discover one phone number in block of 10,000 and add wireless carrier’s suffix to every other number in block to send SMS, with identity of sender hidden if message originates on Internet, because headers of SMS aren’t displayed. Joffe said he doesn’t place blame on AT&T Wireless, which is his carrier, because nature of SMS simply provides spammers with means of taking advantage of cell phone number blocks. If letters are ignored, Joffe said he will file claim in Ariz. Small Claims Court based on TCPA. Meanwhile, Joffe said he was eyeing class action litigation based on estimated 170,000 Phoenix-area residents that were hit in spamming incident. “We're pushing the envelope over here because when the TCPA was formalized in 1991 no one really understood… that cell phones would be able to receive digital messages.” As result, TCPA refers to voice messages, and area that litigants are looking to stretch statute to is extent to which it covers use of automated equipment to send messages.

Joffe cited legislation such as bill offered by Rep. Holt (D- N.J.) earlier this year that would restrict wireless spam (HR- 113). “He is spinning out in black and white what really at the moment is gray,” he said. -- Mary Greczyn

Spam, 3G Spectrum Seen on Hill Agenda

Wireless spam is at intersection of popular issues for Hill this session. Spam is expected to be first telecom or Internet topic to get serious attention in Senate Commerce Committee soon after Congress returns April 23, several staffers told us last week. Panel has been kept busy with nontelecom consumer protection matters and Chmn. McCain’s (R-Ariz.) campaign finance reform crusade, and has held just 2 hearings on Internet issues, neither a legislative session. It’s also possible related issue of privacy can get hearing before Memorial Day recess, we're told, but that’s far from certain. Last year, McCain promised to hold privacy hearings by Jan., but topic has kept slipping as non- Internet matters take priority. Meanwhile, although telecom matters are even farther from agenda, we're told, 2 wireless issues are being talked about -- privacy matters pertaining to location technology and 3rd-generation spectrum allocation.

Sen. Burns (R-Mont.) introduced his spam bill (S-630) just over 2 weeks ago, but subject isn’t new to Committee. Last year, Burns and Sen. Wyden (D-Ore.) tried in session’s closing weeks to move through Committee companion to House-approved bill (HR-3113) by Rep. Wilson (R-N.M.). New version by Wilson (HR-718) has cleared House Commerce Committee, although some antispam advocates no longer support it (or Burns bill) after changes made at behest of direct marketers and other business organizations. In House markups, Rep. Pickering (R-Miss.) and others expressed desire to add wireless spam provisions, and Burns has said he hopes to address wireless spam, although his bill so far doesn’t. “It’s been years since the Senate had spam-related hearings, so they probably need to freshen up the record” before senators would be comfortable going to markup, one source said. Burns hopes to have hearing “the first week we get back,” his spokesman told us. Six other senators have joined Burns and Wyden in sponsoring S-630, including most recently Sen. Allen (R-Va.). Burns also is working on cellphone privacy bill in conjunction with Wyden, so spam provisions could be wrapped into that measure.