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What Drives Broadband Adoption? An Aspen Institute Working Paper

WASHINGTON, December 5 – This report, authored by BroadbandCensus.com Editor Drew Clark for the Aspen Institute’s Communications and Society Program in August 2007, asks and attempts to answer a series of questions about broadband adoption.

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Drew Clark, Editor, BroadbandCensus.com

Editor’s Note:This working paper was originally written for the Aspen Institute’s Communications and Society Program’s August 2007 forum in Aspen, Colorado, in which the author participated. At the time, the author was Senior Fellow and Project Manager at the Center for Public Integrity. The paper was included in “A Framework for a National Broadband Policy” (PDF). Republished with permission of the Aspen Institute.

What do broadband users want? The ability to connect online through some form of access, obviously. Service that doesn’t cost a fortune, clearly. Fundamentally and personally, however, what do broadband users want by going online? Why do 47 percent of adult Americans subscribe to broadband? Conversely, why do a little more than half not subscribe? Why do subscribers keep paying their monthly bills? In considering a framework for a national broadband policy, what can we learn from considering broadband adoption trends, both quantitatively and qualitatively?

In this paper, two specific questions about broadband adoption are addressed. Both are framed in the context of also considering the availability of broadband access and the affordability of available choices; those topics are explored in other papers. For this paper, consider:
• What other factors, such as equipment subsidies and consumer education, are necessary for encouraging adoption?
• What applications—such as telemedicine, e-government, or online education—are likely to increase demand for highspeed broadband access?

Both questions are viewed from the lens of the individual broadband user to determine why individuals subscribe, or fail to subscribe, to broadband. In the first section, some of the quantitative and qualitative research about broadband adoption are surveyed. In the second section, I offer my own set of questions and personal answers about the combination of applications, education, experience, and other motivations that lead an individual to subscribe. The next section offers tentative conclusions about the broadband applications on the “supply side.” And, the fourth and final section, offers tentative conclusions about some aspects of directed “education” and “subsidies” that could potentially stimulate demand.

What Do Researchers Say about Who Subscribes to Broadband?

Research on broadband adoption shows that Americans are adopting broadband. Put aside, for the moment, the debate about whether the United States is adopting broadband as fast as other developed nations— or developing nations. The Pew Internet and American Life Project’s annual and semiannual surveys about broadband adoption show a consistent pattern of increase. Figure 1, from the June 2007 Home Broadband Adoption report, by John Horrigan, Associate Director for Research, and Aaron Smith, Research Specialist, shows the breakdown of broadband adoption across various demographic categories.

Figure 1: Trends in Broadband Adoption Across Population Subgroups (see PDF above for figures and tables)

Pew’s 2005 report argued that broadband adoption at home in the U.S. was “growing but slowing.” The 2005 report created the following model of broadband adoption:

• People do more things online the longer they’ve been online.
• Dial-up users are more likely to want broadband the longer they’ve been online.
• Not everyone wants broadband—and the people who do not want broadband typically have less online experience and are processing fewer bits.
• High-speed users switch to broadband to processmore bits, less so because of price.

Under this model, the decision to get broadband depends on the “intensity of Internet use,” which in turn is a function of time online and connection speed.69 Considering this model, Horrigan concluded in 2005 that although “years of online experience” may have driven broadband adoption in 2002, early in the growth phase, that was no longer the case in 2005.

On the one hand, this is not too surprising—early adopters, the “low hanging fruit,” have been picked. But it is important to recognize that there could be very different migratory patterns toward broadband. Internet use, rather than tapering off in recent years, could have continued its late ’90’s-early 00’s upward climb. Broadband prices could have been on the decline or network speeds might have improved substantially. That or other forces might have meant more switching from dial-up to high-speed and more adoption “de novo” of high-speed by new users.

Somewhat unexpectedly, the Pew 2006 report found home broadband adoption growing 40 percent from March 2005 to March 2006— twice the growth rate of the preceding year. Horrigan writes, “A significant part of the increase is tied to Internet newcomers who have bypassed dial-up connections and gone straight to high-speed connections. This is a striking change from the previous pattern of broadband adoption.” Among the factors, many of them new for that year, Horrigan identified:

• There was strong growth in broadband adoption by African Americans and by people with low levels of education.
• Digital subscriber line (DSL) market share increased, driven by aggressive price-cutting by DSL providers.
• About 48 million Internet users were posting online content, the majority of whom are home broadband users.
• Awareness about Voice over Internet Protocol (VoIP) increased 86 percent between February 2004 and December 2005.

Jump forward one more year, to the June 2007 report, and the adoption growth rate is down again. Figure 2 is Pew’s chart of year-to-year growth grates in home broadband adoption.

Federal Communications Commission (FCC) and Pew data from 2003 to 2007 show similar trends year-to-year growth grates in home broadband adoption. The number of “high-speed lines” (200 kbps in either direction) grew 32 percent, from 32.5 million on June 30, 2004, to 42.9 million on June 30, 2005. The number of such lines grew 52 percent, to 64.6 million, by June 30, 2006.

Figure 2:Year-to-year growth rates in home broadband adoption

Of those 64.6million lines (themost recent total fromthe FCC), 50.3 million served primarily residential end users. Of those residential broadband connections, the FCC reported that 55.2 percent of subscriptions were cable modem connections, 40.1 percent were asymmetric DSL connections, 0.2 percent were symmetric DSL or traditional wireline connections, 0.9 percent were fiber connections, and 3.7 percent were other types of technologies, including satellite, terrestrial fixed or mobile wireless (licensed or unlicensed), and electric power lines. The FCC says that broadband is available via DSL to 79 percent of local telephone company subscribers and via cable modem to 93 percent of cable television subscribers.

It is increasingly clear that there are two major groups of people who have not yet subscribed to broadband: dial-up users and non-Internet users.Dial-up usersmay be “happy dial-up users” because they get what they want out of their slower Internet experience. Alternatively, they may be frustrated dial-up users because of price or, more likely, availability constraints on broadband.

Non-Internet users have rejected the Internet experience, for whatever reason. Occasionally, as is evident in the spike of broadband adoption from March 2005 to March 2006, they can be lured directly to broadband subscriber status. Many, however, simply wish to avoid aspects of the Internet, such as pornography and the threat of various forms of identity theft.

Pew also has survey results on some of the reasons that individuals choose to take broadband, based on three separate surveys—January 2002, February 2004, and December 2005 (Table 1).

Table 1: Reasons for choosing high-speed Internet connection at home

The leading response to the survey: “Faster access/Greater speed” in January 2002 and December 2005 and “Previous connection was too slow/frustrating” in February 2004. The latter response may be effectively identical to the former. Indeed, at the spring 2007 meeting of the Aspen Institute Roundtable on Spectrum Policy, Andrew McLaughlin of Google gave a great definition of broadband: when a user isn’t constantly frustrated with the Internet experience.

If the goal is to get more people to subscribe to broadband, exclusive of considerations of availability and price, then happy dial-up users and non-Internet users are key groups to be targeted.

What Do Individuals Say aboutWhy They Subscribe to Broadband?

Understanding the demographics of broadband subscription begins to put some substance behind our key inquiry: How can individuals be motivated to subscribe to broadband?

The following model may be useful for thinking about this question:

1. Think of yourself: When did you subscribe to broadband in your home, and what led you to subscribe?
2. Think of other Americans, particularly the “happy dial-up users” and the “Internet rejecters.” How would a pitch to subscribe to broadband be targeted at them?
3. Think about individuals facing the prospect of adopting broadband in other parts of the world, such as China. It may be more exciting to consider a “fresher” market than the United States, with its more mature stage of broadband adoption.

Some questions to ask include:

• How long did you use the Internet before subscribing to broadband at home?
• How frequently did you experience the broadband Internet (i.e., at university, in the workplace) before subscribing at home?
• What companies were offering service to your home, what type of service were they offering, and at what price?
• What applications tipped the balance in favor of your subscribing to broadband at home?
• Were any other factors involved in your decision to subscribe to broadband at home?

Here are my own answers:

• I used a primitive form of Internet access, via an America Online dial-up connection, through a creaky Apple MacIntosh in February 1995. I first saw the high-speed Internet at Columbia University in August 1995. I finally subscribed to broadband on March 14, 2004—making nine years of Internet use before subscribing to broadband.
• I used broadband constantly at school, and then at work, in the years since 1995. My extensive use of broadband and work probably was a major factor in delaying my personal broadband adoption.
• I did not inquire about broadband availability in the homes and apartments I moved into in 1996 and 1997.When I moved to a home in 1999, I didmake an inquiry about DSL broadband availability (it was available), but I did not subscribe. When I decided to subscribe, I tried DSL, but the service did not work; I then subscribed to cablemodemservice. (I believe the price of DSL was $40,when included with traditional phone service; the price of cable modem service was $40, when included with basic cable television.)
• Saving money by subscribing to Voice over Internet Protocol (VoIP) service was the primary deciding factor in my decision to subscribe to broadband. I cancelled local telephone service and Internet service. A second motivating factor was the ability to get basic cable television programming—that is, assembling an ad-hoc “bundle.”
• A final factor motivating adoption was simple embarrassment: How could I be a decent technology journalist and not subscribe to broadband at home?

My responses offer one personal window on broadband adoption. I have asked the same questions of friends, neighbors, colleagues, and sources. I’d like to see and participate in ways to publish more of these responses. This kind of qualitative, even anecdote-driven, research also is instrumental in helping us better understand broadband deployment. Indeed, when I interviewed John Horrigan about this subject, I asked the same questions of him. He told me that he made the transition from dial-up to broadband in 2003 and that one of the factors influencing the decision was that his employer agreed to pay for a home broadband subscription. Cisco Systems is another company that pays the home broadband subscription costs as an employee benefit.

Broadband Applications on the “Supply Side”

Although speed frequently is identified as the reason for broadband subscription, my personal experience suggests that usually some particular application (or combination of applications) causes an individual to reach the tipping point. In my case, it was VoIP. Almost immediately thereafter, I installed a WiFi router, enabling broadband access anywhere in the house. That technology, in turn, facilitates a host of additional applications, any one of which could be the tipping point for others to subscribe to broadband.

Other heavily used high-bandwidth broadband applications in the Clark home include the following:

• Google Earth (Three-year-olds and seven-year-olds love it!)
• Educational videos and games
• Blogging
• Smugmug photo-sharing
• Video and audio streaming, including Internet radio
• Google Calendar for sharing schedules
• “Presence,” in the formof G-mail/instantmessage integration, etc.
• Online classes.

An application such as VoIP can prove successful in motivating a broadband purchase because it takes broadband off the desktop/laptop and into another device—such as a telephone—that is frequently used. I have been disappointed that equipment manufacturers and webcasters have not taken better advantage of opportunities to embed Internet radio applications into dedicated, IP-centric devices. Of course, the TV-PC convergence remains, after all these years, very much a work in progress. When I was watching an important cablecast that began to experience technical difficulties, I fired up my laptop and watched the webcast version of the program. Viewing on the larger TV screen was not possible, however.

In addition to IP-centric capabilities taking over telephones, radios, and televisions, such capabilities integrated into refrigerators, freestanding Webcams (whether for security or other purposes), or other household devices may reach those “happy dial-up users” and even some Internet rejecters. It is better to think about such applications in specific rather than general terms. In other words, diabetes patients or prospective diabetes patients may be motivated to subscribe to broadband to participate in a specific experimental trial but not to take advantage of “telemedicine” in general. The ability to enroll in a specific class may motivate a broadband purchase. The ability to do a job from home and avoid a commute is likely to be another key motivator in nudging broadband subscriptions upward.

Educating and Subsidizing for Broadband Demand

What forms of subsidization and education are necessary to stimulate demand for broadband? In the case of subsidization, consider various potential subsidizers: governments, employers, access providers, educators, and advertisers.

Subsidization of Internet services by the government or a business partner interested in advertising is central to many municipal wireless build-outs, including services to be offered by Earthlink in Philadelphia. In San Francisco, Google will subsidize a slower, ad-sponsored version of the wireless service. Other nationwide proposals, including that of M2Z Networks, contemplate free nationwide wireless Internet access through a 20 megahertz block of radio frequencies. As discussed above, employers play an important role—possibly a crucial role—in subsidizing their employees’ broadband use to facilitate work from home. According to a study by RVA Market Research for the Fiber to the Home Council, 13 percent of home fiber optic users work from home more often—a monthly average of 7.3 more workdays at home instead of the office. In most of these cases, having a fiber-optic connectionmade their employers’ attitude toward teleworkmore favorable.

Nevertheless, most discussions about subsidization deal with the Universal Service Fund’s (USF) system of cross-subsidization to broadband services offered by carriers, not subsidization of services or goods purchased by a consumer.

Equipment subsidies have received even less discussion. Here the question must be:What device to subsidize? Among the choices are the following:

• WiFi or other wireless-enabled laptops
• WiFi routers
• Wireless access devices (for non-WiFi fixed wireless services, such as a satellite dish in a rural area)
• Other standalone health- or home security-related IP devices.

Ironically, Congress has not chosen to subsidize any IP device at all. Instead, it has chosen to offer a $40 subsidy for a converter box that allows an analog device to receive digital television broadcasts. Aside from television, subsidies for equipment seem like a stretch for the government and for employers, for the simple reasons that prices are always dropping and government always seems to have more pressing priorities for its funds. Finally, worth noting is the fact that access providers routinely subsidize equipment (e.g., cable modems and wireless access devices) as part of a package of paid Internet service.

A final point for consideration is what kind of education consumers need to understand their broadband options. “Education” can include basics such as computer and Internet literacy. In most cases, this basic education is a prerequisite for home broadband use. Education also can include broader information about the true availability of broadband services in one’s area—as well as information about actual offers of service. The Center for Public Integrity’s Well Connected Project is engaged in one aspect of this effort: seeking to publicly display the names of each company that provides broadband within a particular ZIP code. If this effort is successful, it could enable consumers to see a complete list of all companies that offer broadband within their geographic area. The Federal Trade Commission (FTC) also intends to monitor the information that telecommunications and cable companies provide about high-speed Internet service in the service plans they offer to customers.

Broadband Breakfast Club:

Editor’s Note: Join the next Broadband Breakfast Club on Tuesday, December 9, 2008, on how broadband applications – including telemedicine – can harness demand for high-speed internet services. Register at http://broadbandbreakfast.eventbrite.com

Drew Clark is the Editor and Publisher of BroadbandBreakfast.com and a nationally-respected telecommunications attorney at The CommLaw Group. He has closely tracked the trends in and mechanics of digital infrastructure for 20 years, and has helped fiber-based and fixed wireless providers navigate coverage, identify markets, broker infrastructure, and operate in the public right of way. The articles and posts on Broadband Breakfast and affiliated social media, including the BroadbandCensus Twitter feed, are not legal advice or legal services, do not constitute the creation of an attorney-client privilege, and represent the views of their respective authors.

Digital Inclusion

Catherine McNally: The Digital Divide is an Equality Issue

To work toward equal access, more affordable options must be created, including community-based solutions.

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The author of this Expert Opinion is Catherine McNally, editorial lead for Reviews.org

Per the latest U.S. Census numbers, about one in four American households is stuck without internet. And a quarter million people with home internet still listen to the dial up screech when they hop online.

The majority of folks lacking home internet live in states with large rural populations and high rural poverty rates, like Mississippi, Arkansas and Alabama.

In Mississippi, as an example, 60% of homes don’t have broadband, satellite or dial up. And 53% of the state’s population is considered rural with a rural poverty rate of 23%.

Limited options and slow speeds top the list of reasons why rural states are home to high numbers of disconnected households. But steep costs are the most imminent barrier to home internet in rural areas.

According to a 2020 report on worldwide internet pricing by Cable.co.uk, the U.S. is the most expensive country for internet out of all developed Western nations. Here, internet costs an average of $60 a month. Internet in the cheapest country, Ukraine, costs an average of $6.40 a month.

Digital divide deep dive: Issaquena County, Mississippi

Issaquena County is Mississippi’s least-connected county with only 20% of homes paying for an internet connection. The median income there is $14,154 per individual in 2019, compared to a $31,133 national median income. The overall poverty rate in the county is 29%, which is about 16% higher than the U.S. as a whole.

That is a glaring contrast to the most-connected county in the most-connected state: Morgan County, Utah. Morgan County is home to 95% of households with an internet connection, the median individual income there was $37,091 in 2019 and the overall poverty rate is 3%.

Residents of Issaquena County are lucky if they can get download speeds of 25 Mbps, which is the Federal Communication Commission’s current definition of “high speed internet.” The slowest speeds available, 5–12 Mbps, are barely enough to stream in HD, let alone connect to a Zoom call.

If we narrow down our view to Valley Park, a town of just over 100 people in Issaquena County, we see that some residents have the option of a single AT&T DSL internet plan.

The AT&T plan costs $660 a year for speeds of 25 Mbps, which barely keep up with critical modern-day online tools like online learning and telehealth.

Our case study of Issaquena County and Valley Park, Mississippi, highlights further opportunities tied to home connectivity and equality:

  • Access to online learning. About 23.7% of Issaquena County residents have obtained a high school degree, while 3.2% have no schooling. Online education allows individuals to expand their knowledge and further their careers.
  • Greater access to livable wages.5% of residents earn a household income of $10k or less. This is further divided by race: In 2019, Black and African American residents earned a median household income of $21,146, while white residents earned a median household income of $52,188.
  • More employment opportunities. The employment rate in Issaquena County has steadily declined since 1990. Now, 10.6% of residents are considered unemployed.
  • Better access to health care. The U.S. Health Resources and Services Administration found that half of Mississippi’s residents live in counties with more than 2,000 patients per primary care physician. Issaquena County has been designated a Medically Underserved Area since 1978, meaning the county has a shortage of primary care, dental and/or mental health providers. Better access to telehealth also enables residents who cannot make the drive to the nearest hospital or clinic.

Solving the digital divide

To work toward equal access, more affordable options must be created. The Emergency Broadband Benefit fund is one option, but it remains largely untapped by American households. Subsidies like Lifeline may also lower barriers to internet access, but participation remains low.

Community-focused solutions are likely a better answer, such as Land O’Lakes’s American Connection Project. The project opened more than 2,800 free public Wi-Fi locations in spots like the Tractor Supply Store in Spooner, Wisconsin, in order to keep farming communities connected.

Also significant is this year’s infrastructure bill, which calls on states to determine localized needs and strategies for improving affordability and access to the internet.

State sponsored projects may also solve the severe lack of competition between U.S. broadband services. This should reduce costs last-mile providers incur to connect to middle-mile networks, which could, and should, pass savings down to households. Case in point: California recently introduced an open access middle-mile project with the goal of providing nondiscriminatory access. The bill passed unanimously.

A modernized definition of what qualifies as “high speed internet” would also benefit rural households. Currently, the standard of 25 Mbps download speeds and 3 Mbps upload speeds shorts rural users of opportunities tied to telehealth, online learning and remote work.

This outdated definition allows service providers to complete minimum-viable network expansions and mark areas as “connected.” It also de-incentivizes providers to improve existing-but-subpar networks, such as the 10 Mbps DSL line I found offered in nearby Morton, Mississippi.

One thing is clear: The way the U.S. has approached internet access in the past does not work. New strategies and policies are required to repair the digital divide. Internet access is a right, not a privilege in today’s world.

Catherine McNally is an Editorial Lead for Reviews.org, where she reviews internet service providers across the US. She has a passion for using data to highlight the need for better internet access across the US and believes that internet is a critical lifeline in today’s world. She has also published speed test and pricing reports to help everyday consumers make informed decisions. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Broadband's Impact

Steve Lacoff: A New Standard for the ‘Cloudification’ of Communications Services

The cloudification of communications services makes it easy to include voice, data, SMS, and video within any existing service.

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The author of this Expert Opinion is Steve Lacoff, general manager of Avalara for communications

The line of demarcation between what has traditionally been considered a telecommunications service was once very clear. It was tangible – there were wires, end points, towers, switches, facilities. Essentially, there was infrastructure required to relay voice or data from point A to point B.

Today that line is fuzzy, if not invisible. The legacy infrastructure remains, but an industry of cloud-based services that don’t require the physical connections has exploded. Voice, data, SMS, and video conferencing can now be conveniently delivered OTT. Enabled by simple API integrations, businesses can embed just one of these services or a complete communications platform-as-a-service (CPaaS) into an app, service, or product.

Cloudification is a game changer

This “cloudification” of communications services makes it easy to include voice, data, SMS, and video within any existing application, product, or service. These are essential components for many business models.

Consider these services we have come to rely on in our daily lives: food or grocery delivery, ride services, and business and personal communications. These require multiple methods of communication with shoppers, drivers, co-workers, watch party groups, and external business partners.

The exciting news is there is no end in sight. Use cases will continue to evolve and growth will continue to skyrocket. The scale cloud delivery accommodates is massive. These untethered, easy to embed communications services are a critical differentiator for both business-to-business and business-to-consumer buyers, and the lifeblood of the businesses providing both the end user subscriptions and the APIs.

In fact, one industry juggernaut saw H1 YoY video application service demand grow nearly 600% in 2020.

Not surprisingly, as business demand for these services increases smaller CPaaS players continue to enter the market to quickly snag market share. According to a recent IDC study, “the global market revenue for CPaaS reached $5.9bn in 2020, up from $4.26bn in 2019, and is expected to reach $17.71bn by 2024.”

Merger and acquisition activity is aligned with this hockey stick growth forecast. Large telcos, SaaS providers, and even other CPaaS providers are all on the hunt. Whether they want to add additional features to punch up their products or eliminate the competition in a very tight, nuanced market, the end game is clear – as the market expands, the players will ultimately contract leaving only the most competitive offerings.

Don’t let communications tax take you by surprise

One of the least understood risks when adding cloud-based voice, data, SMS, or video conferencing to an existing product or service is new eligibility for and exposure to the complex world of communications taxation. Making mistakes can get costly very quickly.

Here are some of the key pitfalls to keep an eye on:

  • Expanded nexus: Understanding communications tax nexus is different – and exceptionally more complicated – than sales tax. There are approximately 60,000 federal, state, local, and special taxing jurisdictions, each with uniquely complex rules that tend to change at their own pace. Rules are very different for each service.
  • More complex calculations: The more communications services you provide via API, the more complicated communications taxes will be. Each feature can be taxed at different rates in each individual jurisdiction, or the whole bundle can be taxed at one rate. It’s critical to monitor monthly to avoid audit issues.
  • Maintaining overall compliance: Just as tax rates and rules need to be maintained, so must tax and regulatory filing forms in each jurisdiction. Some of these are very long and require significant detail.  They must be filed in a timely, accurate cadence to avoid additional audit risk.

Bottom line: Don’t assume, be prepared! As these communications services become more pervasive a larger swath of technology providers will find themselves liable for communications tax. The more your business falls behind, the more it can cost you.

It pays to be proactive and prepared. Tax and legal advisory experts can help determine your level of risk, and tax and compliance software providers can help you keep up with changing rules and regulations. Don’t underestimate the ongoing value of networking with peers who are either struggling to answer the same questions or have already overcome the hurdles you’re facing today.

Steve Lacoff is General Manager of Avalara for Communications. With a focus on data, VoIP, and video streaming, Steve has spent 15 years in various product and marketing leadership roles in communications and technology industries, including Disney’s streaming services and Comcast technology solutions. Steve now drives business strategy on today’s changing industry landscape and associated tax impacts. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

Jonathan Marashlian: The Legal Landscape Emerging for Robocalls Under the TRACED Act

The biggest risk is likely to come through enforcement actions by state attorneys general and civil litigation, says Marashlian.

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Jonathan Marashlian, Managing Partner of Marashlian & Donahue, LLC, The CommLaw Group, is the author of this Expert Opinion

Requirements for voice service providers emerging from the TRACED Act and the Federal Communications Commission orders that followed have changed the risks and threats to voice service providers.

Voice service providers have just passed some major milestones: Certifying SHAKEN and/or robocall mitigation in the FCC database and refusing calls from unregistered upstream providers. Does that mean it is time to kick back and relax?

Not at all. The legal landscape in the new STIR/SHAKEN era is much larger and more diverse than mere technical compliance with FCC requirements.

We are already seeing clear and unmistakable signs that compliance with the bare minimum requirements established by the FCC—implementing STIR/SHAKEN and robocall mitigation plan procedures—is insufficient to mitigate the myriad of business risks arising from the government onslaught against the scourge of illegal robocalling.

Reading the tea leaves, the biggest risk or threat is likely to come through enforcement actions by state attorneys general and civil litigation initiated by private parties. Wherever the legal landscape provides the opportunity to recover damages, class action plaintiff’s lawyers and attorneys for large enterprise consumers of voice services, such as call center operators, are certain to seize upon those opportunities.

‘Know your Customer’ rules come to the telecom industry

We anticipate that questions around the meaning of and extent to which the “Know Your Customer” requirements apply in different contexts will ultimately be answered through litigation and enforcement, and less so through the FCC regulatory rulemaking process. Questions around damages and who is or can be held responsible for originating, passing, or terminating illegal robocalls are also going to be fleshed out by regulatory enforcement and private litigation.

Perhaps the most significant risk, even more so than the FCC, are the federal and state consumer protection laws that are being developed around robocall mitigation. Starting with the Federal Trade Commission (FTC), where the FTC’s strict “known or should have known” standard is applied to hold voice service providers accountable for illegal robocallers using their networks.

Many service providers and telecom consultants pore over FCC regulations to try and understand the requirements. Is that sufficient? Are there other things they need to worry about?

FCC regulations are a good starting point and, telecommunications providers should stay abreast of updated regulations and releases. However, FCC regulatory compliance alone may not be enough to defend an action if provider’s face the FTC and state attorneys general’s “known or should have known” standard or the creative, evolving litigation strategy of the plaintiff’s bar.

Marriott filed a lawsuit in federal court against unknown perpetrators, “John Does,” who made illegal robocalls misusing Marriott’s name. Why would Marriott do that? What’s the point?

This is sheer speculation, but as often turns out, the actual perpetrators who harmed Marriott likely will be insolvent or outside the reach of Marriott. By using “John Does,” Marriott preserves its ability to amend its complaint to implead carriers and providers that carried or transported the fraudulent traffic.

Marriott could rely on the FTC’s “known or should have known” standard to show underlying carriers are the “John Does” that profited from bad actors (now insolvent or extra-judicial). It’s unlikely Marriott would commence this litigation without a strategy outside positive public relations for pursuing bad actions; rather, the “John Does” will likely turn out to be carriers of bad traffic who settle Marriott’s claims.

The Call Authentication Trust Anchor Working Group issued Caller ID Authentication Best Practices, which the FCC published and endorsed as voluntary measures. Then the Fourth Report and Order on Robocall Prevention mandated affirmative obligations to prevent service providers from originating robocalls. It seems like momentum is building toward holding service providers responsible for knowing their customers and the nature of their calls.

Based on recent trends, there is certainly momentum in that direction and Know Your Customer will likely continue to grow in importance. Thus, providers should ensure they have a good KYC policy in place, particularly as new risks emerge, and scrutiny grows. However, as discussed above, this appears largely driven by the FTC and state attorney general actions.

Of note, the Industry Traceback Group in July 2021 published a Policies and Procedures booklet with a best practices section. All voice service providers should review the booklet, and particularly the best practices. Accountability will keep mounting and the weakest link—the weakest KYC policy—will be the first to break, and that provider will be accountable and “holding the bag.”

Jonathan Marashlian is Managing Partner of Marashlian & Donahue, PLLC, The CommLaw Group, a full-service telecom law firm located in the Washington, D.C., area catering to businesses operating in and around the dynamic and diverse communications and information technology industries. Their clients include providers of VoIP, wireless and traditional telecommunications services, SaaS-based and cloud computing technologists and Internet-of-Things application and network vendors. The CommLaw Group has formed a Robocall Mitigation Response Team to help clients achieve the level of compliance needed to avoid the emerging threats of litigation and regulatory enforcement. Jonathan S. Marashlian may be reached by email or by phone at 703-714-1313.

A prior version of this piece was published on October 6, 2021, on TransNexus. This lightly-edited Expert Opinion is reprinted with permission. Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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