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C D T P
O L I C Y P O S T
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A BRIEFING ON PUBLIC POLICY ISSUES
AFFECTING CIVIL LIBERTIES ONLINE
from
THE CENTER FOR DEMOCRACY AND TECHNOLOGY
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Volume 5, Number 20 August 26, 1999
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CONTENTS:
(1) Federal Appeals Court Vacates Rules Protecting Phone Customer Privacy
(2) Background on Customer Proprietary Network Information
(3) Subscription Information
(4) About the Center for Democracy and Technology
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(1) FEDERAL APPEALS
COURT VACATES RULES PROTECTING PHONE CUSTOMER PRIVACY
In a 2-1 decision dated August 18, 1999, the U.S. Court of Appeals for the
Tenth Circuit vacated privacy regulations issued by the Federal
Communications Commission limiting how telephone companies can use for
marketing purposes personal information about their customers' calling
patterns. The rules covered so-called customer proprietary network
information -- information about to whom, where, and when a customer places
a call, as well as the types of service offerings to which the customer
subscribes and the extent the service is used.
The decision, in U.S. West v. FCC, can be found at
http://www.kscourts.org/ca10/cases/1999/08/98-9518.htm
U.S. West, joined
by other incumbent local exchange carriers, challenged the FCC's rules. MCI
WorldCom, Sprint, the Competition Policy Institute and others intervened in
the appeal in support of the FCC.
In vacating the FCC's regulations, the Court of Appeals embraced the novel
theory that limits on the use of customer information violated the First
Amendment rights of the telephone companies to engage in "targeted
[commercial] speech."
While the issue before the appeals court was in some respects very narrow,
the decision's rationale speaks more broadly to the ability of Congress to
enact legislation that gives individuals the right to control their
personal information. The appeals court questioned whether the protection
of telephone users' privacy rises to the level of a substantial
governmental interest, stating, "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."
Judge Briscoe wrote a vigorous dissent, stating that "In my view, Supreme
Court and circuit precedent clearly supports the conclusion that both of
these interests [protection of privacy and promotion of competition] are
'substantial' for First Amendment purposes." In conclusion, Judge Briscoe
stated, "In the end, I reiterate my point that the opt-in method selected
by the FCC is the only method of obtaining approval that serves the
governmental interests at issue while simultaneously complying with the
express requirement of the statute (i.e., obtaining informed customer
consent)."
FCC Chairman William Kennard has indicated that the decision will be appealed.
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(2) BACKGROUND ON CUSTOMER PROPRIETARY NETWORK INFORMATION RULES
The appeals court's decision vacated regulations implementing Section 222
of the Telecommunications Act of 1996. 47 U.S.C. section 222. In section
222, Congress required telephone companies to obtain the "approval" of
customers before using information about customers' calling patterns
(customer proprietary network information, or CPNI) to market new services
to the customers. While the statute requires telephone companies to obtain
"approval" before using customer's information, Congress did not specify
how companies should obtain such approval. Responding to several requests
from the telecommunications industry for guidance, the FCC issued an order
interpreting the "approval" requirements in February of 1998.
http://www.fcc.gov/Bureaus/Common_Carrier/Orders/1998/fcc98027.txt
Under the FCC's rule, telephone companies must give customers explicit
notice of their right to control the use of their CPNI and obtain express
written, oral or electronic approval for its use.
The precise issue before the appeals court was whether the FCC's
regulation interpreting the word "approval" was consistent with the
statute. The appeals court suggested, but did not expressly rule, that the FCC
should have adopted an "opt out" requirement that allowed the telephone
companies to use the personal information unless the customers contacted the telephone
companies to request that the information not be used
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