Opinion ID: 158478
Heading Depth: 2
Heading Rank: 2

Heading: Do the CPNI regulations violate the First Amendment?

Text: 21 Petitioner argues that the CPNI regulations interpreting 47 U.S.C. § 222 violate the First Amendment. The First Amendment states, Congress shall make no law . . . abridging the freedom of speech. U.S. Const. amend. I. Although the text of the First Amendment refers to legislative enactments by Congress, it is actually much broader in scope and encompasses, among other things, regulations promulgated by administrative agencies. See, e.g., Rust, 500 U.S. at 192 (subjecting Department of Health and Human Services regulations limiting the ability of Title X fund recipients to engage in abortion-related activities to review under the First Amendment). 22
23 As a threshold requirement for the application of the First Amendment, the government action must abridge or restrict protected speech. The government argues that the FCC's CPNI regulations do not violate or even infringe upon petitioner's First Amendment rights because they only prohibit it from using CPNI to target customers and do not prevent petitioner from communicating with its customers or limit anything that it might say to them. This view is fundamentally flawed. Effective speech has two components: a speaker and an audience. A restriction on either of these components is a restriction on speech. Cf. Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 756-57 (1976) (noting that the First Amendment protects the communication, whether the speech restriction applies to its source or impinges upon the audience's reciprocal right to receive the communication); Martin v. City of Struthers, 319 U.S. 141, 143 (1943) (noting the First Amendment embraces the right to distribute literature and necessarily protects the right to receive it). In other words, a restriction on speech tailored to a particular audience, targeted speech, cannot be cured simply by the fact that a speaker can speak to a larger indiscriminate audience, broadcast speech. 24 Perhaps the Supreme Court case of Florida Bar v. Went For It, Inc., 515 U.S. 618 (1995), best illustrates this. In Went For It, a lawyer referral service and an individual lawyer challenged a Florida Bar rule that prohibited attorneys from using direct mail advertisements to solicit wrongful death and personal injury clients within thirty days of the accident or disaster causing death or injury. See 515 U.S. at 620-21. Despite the fact that the attorney could indiscriminately mail solicitations for his services, the court found that the targeted speech constituted commercial speech and that the restriction on the targeted speech implicated the First Amendment. See id. at 623 3 ; see also Ficker v. Curran, 119 F.3d 1150, 1153-56 (4th Cir. 1997) (applying First Amendment analysis to direct mail solicitations by attorneys to criminal and traffic defendants); Revo v. Disciplinary Bd. of the Sup. Ct. for the State of N.M., 106 F.3d 929, 932-33 (10th Cir.) (determining that lawyer's direct mail advertising to personal injury victims and family members of wrongful death victims constituted protected commercial speech), cert. denied, 117 S. Ct. 2515 (1997). Therefore, the existence of alternative channels of communication, such as broadcast speech, does not eliminate the fact that the CPNI regulations restrict speech. 25
26 Because petitioner's targeted speech to its customers is for the purpose of soliciting those customers to purchase more or different telecommunications services, it does no more than propose a commercial transaction, Virginia State Bd. of Pharmacy, 425 U.S. at 762 (quoting Pittsburgh Press Co. v. Human Relations Comm'n, 413 U.S. 376, 385 (1973)). Consequently, the targeted speech in this case fits soundly within the definition of commercial speech. See id.; Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 66 (1983); Cardtoons, L.C. v. Major League Baseball Players Ass'n, 95 F.3d 959, 970 (10th Cir. 1996); see also, e.g., Bad Frog Brewery, Inc. v. New York State Liquor Auth., 134 F.3d 87, 97 (2d Cir. 1998) (The 'core notion' of commercial speech includes speech which does no more than propose a commercial transaction. (internal quotation marks and citation omitted)). It is well established that nonmisleading commercial speech regarding a lawful activity is a form of protected speech under the First Amendment, although it is generally afforded less protection than noncommercial speech. See, e.g., Went For It, 515 U.S. at 623; Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y., 447 U.S. 557, 562-63 (1980). The parties do not dispute that the commercial speech based on CPNI is truthful and nonmisleading. Therefore, the CPNI regulations implicate the First Amendment by restricting protected commercial speech. 4
27 We analyze whether a government restriction on commercial speech violates the First Amendment under the four-part framework set forth in Central Hudson. First, we must conduct a threshold inquiry regarding whether the commercial speech concerns lawful activity and is not misleading. See Central Hudson, 447 U.S. at 566. If these requirements are not met, the government may freely regulate the speech. See Went For It, 515 U.S. at 623-24; Revo, 106 F.3d at 932. If this threshold requirement is met, the government may restrict the speech only if it proves: (1) it has a substantial state interest in regulating the speech, (2) the regulation directly and materially advances that interest, and (3) the regulation is no more extensive than necessary to serve the interest. Revo, 106 F.3d at 932 (citing Central Hudson, 447 U.S. at 564-65). 5 As noted above, no one disputes that the commercial speech based on CPNI is truthful and nonmisleading. We therefore proceed directly to whether the government has satisfied its burden under the remaining three prongs of the Central Hudson test. 28
29 The respondents argue that the FCC's CPNI regulations advance two substantial state interests: protecting customer privacy and promoting competition. While, in the abstract, these may constitute legitimate and substantial interests, we have concerns about the proffered justifications in the context of this case. 30 Privacy considerations of some sort clearly drove the enactment of § 222. The concept of privacy, though, is multi-faceted. Indeed, one can apply the moniker of a privacy interest to several understandings of privacy, such as the right to have sufficient moral freedom to exercise full individual autonomy, the right of an individual to define who he or she is by controlling access to information about him or herself, and the right of an individual to solitude, secrecy, and anonymity. 6 See Fred H. Cate, Privacy in the Information Age 19-22 (1997); Joseph I. Rosenbaum, Privacy on the Internet: Whose Information Is It Anyway?, 38 Jurimetrics J. 565, 566-67 (1998). The breadth of the concept of privacy requires us to pay particular attention to attempts by the government to assert privacy as a substantial state interest. 31 When faced with a constitutional challenge, the government bears the responsibility of building a record adequate to clearly articulate and justify the state interest. [T]he Central Hudson standard does not permit us to supplant the precise interests put forward by the State with other suppositions. Edenfield v. Fane, 507 U.S. 761, 768 (1993). Although we agree that privacy may rise to the level of a substantial state interest, see, e.g., Went For It, 515 U.S. at 625 (Our precedents leave no room for doubt that 'the protection of potential clients' privacy is a substantial state interest' (quoting Edenfield, 507 U.S. at 769)), the government cannot satisfy the second prong of the Central Hudson test by merely asserting a broad interest in privacy. It must specify the particular notion of privacy and interest served. Moreover, privacy is not an absolute good because it imposes real costs on society. 7 Therefore, the specific privacy interest must be substantial, demonstrating that the state has considered the proper balancing of the benefits and harms of privacy. In sum, privacy may only constitute a substantial state interest if the government specifically articulates and properly justifies it. 32 In the context of a speech restriction imposed to protect privacy by keeping certain information confidential, the government must show that the dissemination of the information desired to be kept private would inflict specific and significant harm on individuals, such as undue embarrassment or ridicule, intimidation or harassment, or misappropriation of sensitive personal information for the purposes of assuming another's identity. Although we may feel uncomfortable knowing that our personal information is circulating in the world, we live in an open society where information may usually pass freely. A general level of discomfort from knowing that people can readily access information about us does not necessarily rise to the level of a substantial state interest under Central Hudson for it is not based on an identified harm. 33 Neither Congress nor the FCC explicitly stated what privacy harm § 222 seeks to protect against. The CPNI Order notes that CPNI includes information that is extremely personal to customers . . . such as to whom, where, and when a customer places a call, as well as the types of service offerings to which the customer subscribes, CPNI Order at ¶ 2, and it summarily finds call destinations and other details about a call . . . may be equally or more sensitive [than the content of the calls], id. at ¶ 94. The government never states it directly, but we infer from this thin justification that disclosure of CPNI information could prove embarrassing to some and that the government seeks to combat this potential harm. 34 We have some doubts about whether this interest, as presented, rises to the level of substantial. We would prefer to see a more empirical explanation and justification for the government's asserted interest. Cf. Went For It, 515 U.S. at 630 (describing the record provided by the Bar cataloguing citizen outrage at being solicited just after injury or family tragedy). In addition, the authority relied upon by the government, Edenfield v. Fane, recognizes a state's interest in protecting against unwanted intrusions caused by solicitations, see 507 U.S. at 769; see also Went For It, 515 U.S. at 625, but it says nothing about the disclosure of allegedly sensitive information. On the other hand, we recognize the government may have a legitimate interest in helping protect certain information. Cf. Lanphere & Urbaniak v. Colorado, 21 F.3d 1508, 1514 (10th Cir. 1994) (finding a substantial state interest in the need to protect the privacy of those charged with traffic offenses and DUI against dissemination of charging information for commercial purposes). Therefore, notwithstanding our reservations, we assume for the sake of this appeal that the government has asserted a substantial state interest in protecting people from the disclosure of sensitive and potentially embarrassing personal information. 8 35 We harbor different reservations about the government's asserted interest in competition. While we afford agencies broad deference in interpreting a statute they are charged to administer, they must obey the dictates of Congress and administer the statute true to Congress' intent. See Ernst & Ernst v. Hochfelder, 425 U.S. 185, 213-14 (1976). We are not satisfied that the interest in promoting competition was a significant consideration in the enactment of § 222. 36 While the broad purpose of the Telecommunications Act of 1996 is to foster increased competition in the telecommunications industry, 9 the language of § 222 reveals no such concern. 10 Rather, the specific and dominant purpose of § 222 is the protection of customer privacy. Indeed, the FCC and members of Congress characterize § 222 as striv[ing] to balance both the competitive and consumer privacy interests with respect to CPNI, Joint Statement of Managers, S. Conf. Rep. No. 104-230, at 205 (1996) (emphasis added), which suggests that § 222's purpose in fostering privacy may even run counter to the broad pro-competition purpose of the Telecommunications Act. In any event, three other considerations persuade us that Congress did not intend for competition to be a significant purpose of § 222. First, and most important, the plain language of the section deals almost exclusively with privacy. Section 222 is entitled Privacy of customer information and is replete with references to privacy and confidentiality of customer information. In contrast, § 222 contains no explicit mention of competition. Although § 222(c)(3) and § 222(e) impose nondiscrimination requirements with respect to disclosure of aggregate customer and subscriber list information which could be construed as pro-competition measures, we find that these do not sufficiently indicate that increasing competition was a purpose of § 222. Moreover, the provisions of § 222 relating to CPNI which the challenged regulations interpret contain no reference to nondiscrimination requirements and reflect solely a concern for customer privacy. See 47 U.S.C. § 222(c)(1)-(2), (d). Second, § 222 differs from previous CPNI restrictions designed to foster competition because it applies to all telecommunications carriers, not just the dominant ones. This indicates a different purpose for the new restriction. Finally, § 222 contains measures that will allow full use, disclosure, and access to CPNI if customer approval is obtained. Assuming that a carrier is able to obtain a high rate of customer approval, the alleged competitive effect of § 222's CPNI restrictions is minimal and can perhaps even be nullified. Consequently, we find that Congress' primary purpose in enacting § 222 was concern for customer privacy, not the broader purpose of increasing competition. 37 Even though we conclude that competition did not constitute the primary purpose of the section, we recognize that Congress may not have completely ignored competition in drafting § 222. While we believe that the asserted interest in increasing competition would not suffice, by itself, to justify the FCC's rule, we will, in this case, consider it in concert with the government's interest in protecting consumer privacy. 38
39 Under the next prong of Central Hudson, the government must demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree. Edenfield v. Fane, 507 U.S. 761, 771 (1993); accord Rubin v. Coors Brewing Co., 514 U.S. 476, 487 (1995). This burden is not satisfied by mere speculation or conjecture. Edenfield, 507 U.S. at 770. On the record before us, the government fails to meet its burden. 40 The government presents no evidence showing the harm to either privacy or competition is real. Instead, the government relies on speculation that harm to privacy and competition for new services will result if carriers use CPNI. In Edenfield, the Supreme Court struck down a Florida ban on CPA in-person solicitation because the state had presented no evidence -- anecdotal or empirical -- that such solicitation created the dangers of fraud, overreaching, or compromised independence that the state sought to combat. See 507 U.S. at 771; cf. Florida Bar v. Went For It, Inc., 515 U.S. 618, 626-27 (1995) (upholding restriction on solicitation of accident victims within thirty days of accident, based on two-year study and written report analyzing statistically and anecdotally the impacts of such solicitation). The FCC faces the same problem here. While protecting against disclosure of sensitive and potentially embarrassing personal information may be important in the abstract, we have no indication of how it may occur in reality with respect to CPNI. Indeed, we do not even have indication that the disclosure might actually occur. The government presents no evidence regarding how and to whom carriers would disclose CPNI. By its own admission, the government is not concerned about the disclosure of CPNI within a firm. See CPNI Order at ¶ 55, n.203 ([W]e agree . . . that sharing of CPNI within one integrated firm does not raise significant privacy concerns because customers would not be concerned with having their CPNI disclosed within a firm in order to receive increased competitive offerings.). Yet the government has not explained how or why a carrier would disclose CPNI to outside parties, especially when the government claims CPNI is information that would give one firm a competitive advantage over another. This leaves us unsure exactly who would potentially receive the sensitive information. 41 Similarly, the FCC can theorize that allowing existing carriers to market new services with CPNI will impede competition for those services, but it provides no analysis of how or if this might actually occur. Beyond its own speculation, the best the government can offer is that [t]he vigor of US West's protests against the rules . . . indicates that US West also believes that this restriction will be effective in promoting Congress's competitive interest. Appellees Br. at 30. This is simply additional conjecture, and it is inadequate to justify restrictions under the First Amendment. See Edenfield, 507 U.S. at 770-71. 42
43 Even assuming, arguendo, that the state interests in privacy and competition are substantial and that the regulations directly and materially advance those interests, we do not find, on this record, the FCC rules regarding customer approval properly tailored. The CPNI regulations must be no more extensive than necessary to serve [the stated] interest[s]. Rubin, 514 U.S. at 486. In order for a regulation to satisfy this final Central Hudson prong, there must be a fit between the legislature's means and its desired objective a fit that is not necessarily perfect, but reasonable; that represents not necessarily the single best disposition but one whose scope is in proportion to the interest served. Board of Trustees of the State Univ. of N.Y. v. Fox, 492 U.S. 469, 480 (1989) (internal quotation marks omitted). While clearly the government need not employ the least restrictive means to accomplish its goal, it must utilize a means that is narrowly tailored to its desired objective. Id.; Florida Bar v. Went For It, Inc., 515 U.S. 618, 632 (1995). Narrow tailoring means that the government's speech restriction must signify a carefu[l] calculat[ion of] the costs and benefits associated with the burden on speech imposed by its prohibition. Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 417 (1993) (internal quotation marks omitted). The availability of less burdensome alternatives to reach the stated goal signals that the fit between the legislature's ends and the means chosen to accomplish those ends may be too imprecise to withstand First Amendment scrutiny. 44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 529 (1996) (O'Connor, J., concurring); see also, e.g., Went For It, 517 U.S. at 632; Rubin, 514 U.S. at 490-91; Discovery Network, 507 U.S. at 417 n.13. This is particularly true when such alternatives are obvious and restrict substantially less speech. 11 See Fox, 492 U.S. at 479 ([A]lmost all of the restrictions disallowed under Central Hudson's fourth prong have been substantially excessive, disregarding 'far less restrictive and more precise means.' (quoting Shapero v. Kentucky Bar Ass'n, 486 U.S. 466, 476 (1988))). 44 It is difficult, if not impossible, for us to conduct a full and proper narrow tailoring analysis, given the deficiencies that we have already encountered with respect to the previous portions of the Central Hudson test. Nevertheless, on this record, the FCC's failure to adequately consider an obvious and substantially less restrictive alternative, an opt-out strategy, indicates that it did not narrowly tailor the CPNI regulations regarding customer approval. The respondents argue that the record contains adequate support that the CPNI regulations are narrowly tailored because a study conducted by petitioner U.S. West shows that a majority of individuals, when affirmatively asked for approval to use CPNI, refused to grant it. The U.S. West study shows that 33% of those called refused to grant approval to use their CPNI, 28% granted such approval, and 39% either hung up or asked not to be called again. See CPNI Order ¶ 99 n.380. Additionally, U.S. West secured a 72% affirmative response rate from customers whom it solicited after they initiated contact with the company for some other reason. 12 See id. ¶ 99 n.378. This study does not provide sufficient evidence that customers do not want carriers to use their CPNI. The results may simply reflect that a substantial number of individuals are ambivalent or disinterested in the privacy of their CPNI or that consumers are averse to marketing generally. The FCC stated that the study supported an equally plausible interpretation . . . that many customers value the privacy of their personal information and do not want it shared for purposes beyond the existing service relationship. CPNI Order ¶ 100. We are not convinced that the study supports the FCC's interpretation, and the FCC provides no additional evidence to bolster its argument. 45 Even assuming that telecommunications customers value the privacy of CPNI, the FCC record does not adequately show that an opt-out strategy would not sufficiently protect customer privacy. The respondents merely speculate that there are a substantial number of individuals who feel strongly about their privacy, yet would not bother to opt-out if given notice and the opportunity to do so. Such speculation hardly reflects the careful calculation of costs and benefits that our commercial speech jurisprudence requires. 46 Finally, respondents assert that under FCC v. National Citizens Comm. for Broad., 436 U.S. 775 (1978), the FCC can rely upon its common sense judgment based on experience, notwithstanding the inclusiveness of the rulemaking record. We refuse to extend the rule announced in National Citizens in the manner respondents suggest. National Citizens involved agency conclusions regarding elusive concepts, not easily defined let alone measured without making qualitative judgments, id. at 796-97 (internal quotation marks omitted), and information that was difficult to compile. We see no such problems in this case. Furthermore, in National Citizens, the FCC's common sense judgment only supported a finding that it acted rationally in promulgating a rule. Id. at 796. The burden under the fourth prong of Central Hudson is significantly higher. The FCC must not only demonstrate that it acted rationally, but that it narrowly tailored its regulations to meet its stated goals. 47 In sum, even assuming that respondents met the prior two prongs of Central Hudson, we conclude that based on the record before us, the agency has failed to satisfy its burden of showing that the customer approval regulations restrict no more speech than necessary to serve the asserted state interests. 13 Consequently, we find that the CPNI regulations interpreting the customer approval requirement of 47 U.S.C. § 222(c) violate the First Amendment. 14