FCC: CBS Appeals, Vonage Exempt

As I stated here in September when the FCC unanimously imposed a fine against CBS for Janet Jackson’s Nipplegate, it was time to close the book and move on.

CBS disagrees and has appealed the $550K fine (the maximum $27,500 for each of the twenty Viacom-owned CBS affiliates), the largest in TV broadcast history:

In a 78-page filing with the FCC, CBS argues that the fine violates its First Amendment rights and would have a “broad chilling effect” on broadcasters. “The ‘costume reveal’ was as much a shock to Viacom as to everybody else,” the filing says. It blames the incident on a “stunt concocted by the performers.”

….CBS can go to federal appeals court if the FCC stands firm. Some constitutional experts say the case could reach the Supreme Court.

First Amendment expert Jonathan Katz believes that current indecency rules are “entirely unconstitutional” and that CBS has a case. “All we saw is a brief glimpse of a breast. That’s not enough to justify these chilling fines,” says Katz, an attorney at Marks & Katz in Silver Spring, Md. “We’re seeing more nudity … on TV than ever before. Whether you like it or not, it’s First Amendment protected.”

However, Martin Garbus, a partner at Davis & Gilbert in New York, thinks it’s “very unlikely” the current Supreme Court would side with CBS. Still, he thinks it is smart to challenge the limits of the indecency rules. “All the TV networks want to be as free from regulation as they can be,” he says. [USA Today]

CBS argued the FCC wrongly concluded the performance was designed to “pander, titillate, and shock” viewers:

“Something cannot be ‘designed’ without advance knowledge,” the stations said in their reply to the FCC. Viacom and CBS have said they knew nothing in advance about plans by Jackson and her duet partner, Justin Timberlake, to rip her costume and expose her breast.

“If it stands, the (proposed fine) will lead to the end of live broadcasting as we know it by placing broadcasters on notice that they risk massive liability and perhaps license revocation if they fail to adopt technical measures to avoid the possibility of a spontaneous transgression,” they said. [Reuters]

The FCC received about 542,000 complaints about the indiscretion – I like the symmetry of about $1 per complaint.

The busy beavers at the FCC also made an important ruling today on VoIP:

The Federal Communications Commission declared today that a type of Internet telephony service offered by Vonage Holdings Corp. called DigitalVoice is not subject to traditional state public utility regulation.

The Commission also stated that other types of IP-enabled services, such as those offered by cable companies, that have basic characteristics similar to DigitalVoice would also not be subject to traditional state public utility regulation.

The decision adds to the regulatory certainty the Commission began building with orders adopted earlier this year regarding Voice over Internet Protocol by making clear that this Commission, not the state commissions, has the responsibility and obligation to decide whether certain regulations apply to IP-enabled services. The Commission has the power to preempt state regulations that thwart or impede federal authority over interstate communications.

Acting on a petition from Vonage seeking federal preemption of an order by the Minnesota Public Utilities Commission, the FCC found that the company’s DigitalVoice service cannot practically be separated into intrastate and interstate components, precluding dual state and federal regulatory regimes. DigitalVoice customers can use their phones from a broadband connection anywhere in the world, making it difficult to determine whether a call is local, interstate or international in nature.

The Commission also found that regulations that would have been imposed by the Minnesota Commission were inconsistent with the FCC’s deregulatory policies, and that preemption was consistent with federal law and policies intended to promote the continued development of the Internet, broadband and interactive services. Divergent state rules, regulations and licensing requirements could impede the rollout of such services that benefit consumers by providing them with more choice, competition and innovation.

….The Commission’s order does not express an opinion about the applicability to Vonage of general laws in Minnesota governing taxation, fraud, commercial dealings, marketing, advertising and other business practices. But the Commission expects states to continue playing a vital role in protecting consumers from fraud, responding to complaints, and enforcing fair business practices.

The Commission noted that the question of whether DigitalVoice should be classified as an unregulated “information service” under the Communications Act or a telecommunications service will be addressed in the Commission’s IP-Enabled Services Proceeding. The Commission will also address whether VoIP providers must provide access to the disabled, pay intercarrier compensation and contribute to the universal service fund, in the Commission’s IP-Enabled Services Proceeding, which commenced in February of this year. [FCC]

Vonage said the ruling was a victory for consumers:

“Because the FCC has acknowledged the reality of the Internet — which knows no state boundaries and no borders — more people will enjoy the benefits of Internet phone service,” said Vonage chief executive officer Jeffrey Citron.

There are more than 600,000 subscribers to VoIP services in the United States, up from about 130,000 last year, according to The Yankee Group. The Boston-based communications research firm projects about 1 million subscribers by year’s end.

VoIP technology shifts calls away from wires and switches and instead uses computers to convert sounds into data and transmit them via the Internet.

With a special box, Vonage subscribers can use their conventional phones and existing broadband connection to make calls over the Internet. The company offers unlimited calls in the United States and Canada for $25 a month and has more than 300,000 subscribers.

Vonage argued its service is interstate because it lets customers make calls from any place that has a high-speed Internet connection. That means there’s no way to tell if a customer who has a billing address in Minnesota is making a call from that state or another one, the company said. [AP]

More on VoIP here, and the FCC’s previous VoIP ruling here.