Opinion ID: 172231
Heading Depth: 2
Heading Rank: 2

Heading: Restriction on Use of Customer Data

Text: GoAmerica contends the restriction on the use of customer data constitutes a legislative rule and, as such, was improperly issued without notice and comment. The FCC argues the restriction is an interpretative rule which does not require notice and comment. [5] See 5 U.S.C. § 553(b)(3)(A). Under the APA, legislative rules can be issued only following notice and comment procedures. Ballesteros v. Ashcroft, 452 F.3d 1153, 1158 (10th Cir.2006), aff'd in relevant part on reh'g, 482 F.3d 1205, 1205 (10th Cir.2007). A rule is legislative when it has the force of law, and creates new law or imposes new rights or duties. F.D.I.C. v. Schuchmann, 235 F.3d 1217, 1222 (10th Cir.2000) (quotation omitted). Interpretative rules, by contrast, advise the public of the agency's construction of the statutes and rules which it administers. Shalala v. Guernsey Mem. Hosp., 514 U.S. 87, 99, 115 S.Ct. 1232, 131 L.Ed.2d 106 (1995) (quotation omitted). The agency's own label for its action is not dispositive. Truckers United for Safety v. Fed. Highway Admin., 139 F.3d 934, 939 (D.C.Cir.1998). In support of its argument that the restriction on the use of consumer data is an interpretative rule, the FCC points to a prior order (the 2000 Order) where it stated, [TRS customer] data may not be used for any purpose other than the provision of TRS. Telecommunications Relay Servs. (2000 Order), 15 F.C.C.R. 5140, 5175 (2000). This was codified as a regulation stating, [TRS customer] data may not be used for any purpose other than to connect the TRS user with the called parties desired by the TRS user. 47 C.F.R. § 64.604(c)(7). The FCC argues the 2000 Order and the regulation created the restriction on the use of customer data, and the Declaratory Rulings at issue in this case serve only to remind regulated entities of this obligation. Therefore, the FCC argues, the restriction on the use of customer data was an interpretative rule, not subject to the APA's notice and comment requirements. GoAmerica argues the 2000 Order concerned an entirely different issue and context. The relevant portion of the 2000 Order concerned the transfer of customer data during changeovers between providers. 2000 Order, 15 F.C.C.R. at 5173. In order to minimize disruptions in TRS, outgoing providers were ordered to give customer data to incoming providers. Id. at 5175. To protect the privacy expectations of customers, however, the FCC also prohibited providers from using customer profile information for any purpose other than to connect TRS calls. Id. According to GoAmerica, the restriction on the use of customer information applies in the narrow context when providers are replaced without the knowledge and consent of customers. The FCC's use of this restriction in the current context is entirely different, GoAmerica argues, and the FCC has conceded the new restrictions were not motivated by privacy concerns. Because the restriction arises in a new context and is meant to achieve a different purpose from the restriction in the 2000 Order, GoAmerica contends it constitutes a new rule for which notice and comment were required. The regulation at 47 C.F.R. § 64.604(c)(7) restricting the use of customer data came about in the context of transfers between outgoing and incoming providers, but the regulation unambiguously prohibits the use of customer data except to connect TRS calls. The declaratory rulings at issue in this case did not create any new duties with respect to customer data, but merely informed providers of the FCC's interpretation of the existing regulation. As a consequence, the restriction contained in the declaratory rulings was an interpretative rule, and the FCC was not required to comply with notice and comment procedures.
Sorenson and GoAmerica both argue the restriction on the use of customer data was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law in violation of 5 U.S.C. § 706(2)(A). An agency must provide a rational explanation when it departs from an existing regulation or position. Utahns for Better Transp. v. U.S. Dept. of Transp., 305 F.3d 1152, 1165 (10th Cir.2002). Sorenson and GoAmerica argue the prohibition on using customer data to contact customers runs directly contrary to prior and ongoing FCC requests for providers to engage in outreach efforts to customers. GoAmerica also argues the prohibition is contrary to the FCC's prior interpretation of the statute requiring TRS to be functionally equivalent to the telephone service available to persons without disabilities. 47 U.S.C. § 225(a)(3). In support of the argument that the prohibition is contrary to prior FCC positions regarding customer outreach, GoAmerica cites specifically to 47 C.F.R. § 64.604(c)(3), which requires telecommunications carriers to make the public aware of the availability of TRS. Sorenson claims FCC staff recently contacted the company asking for help in publicizing the transition to digital television. The 2008 Declaratory Ruling clarified that providers could use customer data to comply with a federal statute, a Commission rule or order, a court order, or other lawful authority. 2008 Declaratory Ruling, 23 F.C.C.R. at 8997 (quotation omitted). Consequently, the restriction does not create competing obligations for providers or conflict with prior positions of the FCC. If another order or regulation requires providers to communicate with customers, it prevails. There is no conflict between the new restriction on the use of customer data and other FCC orders and regulations. GoAmerica also argues the prohibition is contrary to the FCC's prior interpretation of the ADA's functional equivalence mandate. The ADA defines TRS as telephone transmission services that enable persons with disabilities to use the telephone system in a manner functionally equivalent to how it is used by persons without disabilities. 47 U.S.C. § 225(a)(3). GoAmerica contends the FCC has interpreted the statutory phrase functionally equivalent broadly to require providers to do such things as retain auxiliary power sources for their facilities, handle complaints regarding enforcement issues, allow customers to make TRS calls from public telephones using coins, and provide ten-digit phone numbers for customers. According to GoAmerica, this broad interpretation of functional equivalence demonstrates a requirement that TRS customers enjoy the same relationship with their providers as persons without disabilities. It further argues this relationship includes the ability to solicit feedback from TRS customers. Additionally, if providers are unable to notify customers of pending changes to TRS being contemplated by the FCC, GoAmerica predicts customers will be less likely to participate in the proceedings, and the FCC will be more likely to take action contrary to the ADA. The FCC has never interpreted the ADA to require TRS customers to have the same relationship with their telecommunications providers enjoyed by persons without disabilities. By its very nature the TRS customer-provider relationship is different from the traditional telecommunications customer-provider relationship because TRS customers do not pay for the costs associated with the service. 47 U.S.C. § 225(d)(1)(D). The one regulation cited by GoAmerica that even touches upon the customer-provider relationship is the regulation requiring providers to handle complaints from customers. 47 C.F.R. § 64.604(c)(1)-(2), (6). This regulation does not support GoAmerica's position, however, because it does not address functional equivalence. Instead, it implements separate, specific statutory clauses regarding complaints. 47 U.S.C. § 225(e)(2), (g). GoAmerica cites no other regulation to support its position that functional equivalence requires the TRS provider-customer relationship to be identical to the traditional telephone provider-customer relationship. It likewise cites no authority for its argument that a necessary aspect of this relationship is the ability to solicit feedback regarding service. The prohibition on the use of customer data therefore does not conflict with prior interpretations of the functional equivalence mandate, and consequently it is not arbitrary or capricious. GoAmerica also claims functional equivalence may be threatened in the future if it is unable to warn customers in the event the FCC decides to undertake proceedings that would diminish functional equivalence. This argument relies upon a chain of questionable inferences and is purely speculative, as GoAmerica identifies no pending FCC action that threatens functional equivalence. Such speculation does not render the prohibition arbitrary, capricious, or contrary to law.
GoAmerica and Sorenson argue the FCC's restriction on the use of customer data is a violation of the First Amendment under U.S. West, Inc. v. F.C.C., 182 F.3d 1224 (10th Cir.1999). In U.S. West, this court considered a challenge to the FCC's regulations regarding the use of consumer proprietary network information (CPNI) by telecommunications providers. Id. at 1228. CPNI was defined as information pertaining to the quantity, technical configuration, type, destination, and amount of use of a telecommunications service ... that is made available to the [telecommunications] carrier by the customer solely by virtue of the carrier-customer relationship as well as information contained in the bills received by customers. Id. at 1228 n. 1. The FCC prohibited telecommunications providers from using CPNI to market services to which customers did not already subscribe unless the customer opted in and gave affirmative approval to the provider. Id. at 1230. This court struck down the restriction as an unconstitutional infringement on commercial speech because the FCC failed to demonstrate its regulations restricted no more speech than necessary to safeguard the asserted state interests in protecting privacy and competition. Id. at 1239. As a threshold matter this court was required to determine whether the regulation affected speech at all, since on its face it only regulated the use of data. Id. at 1232. This court concluded the regulation did restrict speech because it made the speech between providers and customers more difficult by limiting the ability of providers to target their speech to a particular audience. Id. While providers could still conceivably contact the intended audience by indiscriminately broadcasting their speech to a larger audience, the speech was still impaired because the providers' preferred channel of communication was eliminated. Id. Sorenson and GoAmerica argue U.S. West is directly on point. They contend the FCC is restricting the ability of providers to use their preferred channel of communication to contact their intended audience. As a result, they claim the restriction must withstand First Amendment scrutiny. The FCC attempts to distinguish U.S. West on the grounds that it is not preventing providers from contacting customers directly so long as they do not use information derived from participation in the government-funded TRS program. The information at issue in this case, the FCC argues, was gathered as a result of participation in a government program. Because the providers only have this information as a result of the service provided to the government, the government may restrict the use of the information. The FCC argues any effect on speech resulting from such a restriction is permissible under Rust v. Sullivan, 500 U.S. 173, 193-94, 111 S.Ct. 1759, 114 L.Ed.2d 233 (1991). The FCC does not, however, argue it has a proprietary interest in the customer data. As in U.S. West, the restriction on using customer data to lobby customers affects speech because it limits a preferred channel of communication between the speaker and the intended audience. U.S. West, 182 F.3d at 1232. Both commercial and political speech are affected, as the Declaratory Ruling restricts the use of customer data for lobbying or any other purpose. 2007 Declaratory Ruling, 22 F.C.C.R. at 20176. The next question is whether the restriction must withstand the applicable First Amendment tests governing restrictions on political and commercial speech. The FCC does not argue it owns the customer information merely because it funds the TRS provided by petitioners. It instead relies entirely upon Rust as authority for its ability to promulgate the restriction. Rust, however, is not sufficient support for the government's position. Rust concerned the government's ability to restrict the use of funds distributed under a subsidy program. 500 U.S. at 193, 111 S.Ct. 1759. Because it is the government's prerogative to selectively subsidize some activities and not others, the Supreme Court in Rust held the government could prevent subsidy recipients from engaging in counseling activities outside a government program's intended scope. Id. at 193-94, 111 S.Ct. 1759. Here, the government is not directing the use of subsidies, but is instead restricting how providers can use information they collect from customers in the course of providing a federally mandated service. The TRS program, furthermore, is intended to provide a service to persons with disabilities and is not intended to spread a governmental message that would be jeopardized by the providers' use of data to communicate with customers. Legal Servs. Corp. v. Velazquez, 531 U.S. 533, 541-42, 121 S.Ct. 1043, 149 L.Ed.2d 63 (2001). The FCC has not cited to any case applying Rust to a restriction on the use of information gathered in the course of providing a government-mandated service, and this court has found none. Rust, therefore, does not permit the FCC to evade First Amendment scrutiny in this context. Absent any other authority categorically allowing the FCC to restrict the use of this information, this court analyzes the restriction under the First Amendment tests for restrictions on commercial and political speech. Restrictions on commercial speech must meet the test set out in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557, 566, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). If the restriction cannot meet the Central Hudson test for commercial speech, it will necessarily be unable to pass the more stringent strict scrutiny analysis applicable to restrictions on political speech. Under the Central Hudson test, three conditions must be met for the restriction to survive: (1) the government must have a substantial interest in regulating the speech, (2) the regulation must directly and materially advance[] that interest, and (3) the regulation must be no more extensive than necessary to serve the interest. U.S. West, 182 F.3d at 1233 (quotation omitted). The burden is on the government to prove the restriction on commercial speech is valid under the First Amendment. Id. Here, because it relied exclusively on Rust and its assertion it could regulate the use of data solely because it was obtained through participation in a governmentally funded program, the FCC has not attempted to meet its burden under Central Hudson. It asserted in the 2008 Declaratory Ruling that the use of customer data to contact customers outside the context of handling calls is inconsistent with the purpose of the TRS Fund. 2008 Declaratory Ruling, 23 F.C.C.R. at 8998. Nowhere in the Declaratory Rulings or the FCC's brief to this court, however, does the FCC articulate the governmental interest to be served by the restriction, or why the restriction is narrowly tailored to not restrict more speech than necessary. Under the Central Hudson analysis, this court may not supplant the precise interests put forward by the [government] with other suppositions. Edenfield v. Fane, 507 U.S. 761, 768, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993). The FCC's broad prohibition on all uses of customer data belies the notion that the prohibition is narrowly tailored. Because the FCC does not explain why the restriction on the use of customer data accords with the First Amendment, the restriction must fail. Upon remand, the FCC must vacate the restriction on using customer data for lobbying or any other purpose.