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Not every high-tech service enjoys iPod-like success. In July 2007, one wireless company, Amp’d Mobile Inc., filed for bankruptcy and then, with just several days’ notice, service was terminated to its more than 100,000 customers. Bankruptcies and service terminations are not new to the telecom sector. But this was the first time that a cell phone operator or, in Amp’d Mobile’s case, a mobile virtual network operator, went bust. This failure and sudden termination of service raises a question: What obligations do wireless providers have to give termination notice to consumers? In the traditional wireline telephone business, the answer is easy. The Federal Communications Commission has had rules in place for decades: Wireline telephone companies need to give at least 30 days’ notice before terminating service. Back in the 1990s, when the FCC decided to treat fast-developing commercial mobile radio service providers as common carriers — that is, like wireline phone service providers — in some cases but not others, it left several questions unresolved about CMRS providers’ responsibilities to the customers who rely on their services for their communication needs. As more of us leave our landline phones behind for cell phones, the need to understand cell phone providers’ legal obligations becomes far more acute. The Communications Act has long deemed a cut-off of telephone services without customer notice to be unreasonable and therefore unlawful. We think that consumers’ well-established expectations with wireline services, as well as a straightforward application of the Communications Act, also require CMRS providers to grant 30 days’ notice before terminating service. THE CASUALTY In many ways, Amp’d Mobile seemed primed for success. Launched in 2005, it was the first integrated mobile virtual network operator aimed at the youth, young professional, and early-adopters market. In addition to voice service, Amp’d Mobile offered multimedia content. It had several pay-as-you-go options for as low as $20, and its lowest monthly plan was an affordable $30 a month — more than one-third cheaper than the larger carriers’ cheapest plans. Initial capital flowed into the startup. MTV invested heavily and promoted the service on its networks. Universal Music Group also offered its music catalog to Amp’d Mobile users. The new company had deals with more than 20 networks to offer programming over its Amp’d Live TV mobile television service. Amp’d also developed content; more than 30 percent of its video offerings were original, such as the popular animated parody show “L’il Bush.” Its users responded to the company’s offerings. In the first quarter of 2007, Amp’d Mobile customers downloaded more than 4 million videos, songs, and mobile games, twice the amount downloaded in the last quarter of 2006. A mobile “third screen” — a real alternative to TV and the movie theater — finally seemed to be on the U.S. communications horizon. There was one difference between Amp’d Mobile and most of its cellular competitors, however, that turned out to be instrumental in its downfall. Unlike Verizon Wireless or AT&T, CMRS providers that offer cell phone service over their own networks, Amp’d, as a mobile virtual network operator, held no radio spectrum. Rather, it had a wholesale arrangement with Verizon Wireless allowing it to resell service over Verizon’s EV-DO network in certain specific geographic areas in return for a fee. Amp’d had trouble collecting subscription fees from a customer base inexperienced in the finer points of prompt bill payment, and its spectrum-leasing payments sent it spiraling into debt. By mid-May 2007, Amp’d Mobile owed tens of millions to Verizon Wireless — by far its largest creditor — in unpaid fees. BYE, NOW On May 22, Verizon Wireless sent a letter to Amp’d requesting payment of $4.5 million of the owed fees within nine days. In response, on June 1, Amp’d filed a petition for bankruptcy. On July 17, Verizon asked the bankruptcy court for permission to immediately disconnect service and terminate the wholesale agreement with Amp’d. Verizon requested a hearing for its petition on July 23. With the hearing looming, on July 21, heretofore-unaware Amp’d Mobile customers received a surprising, and somewhat cryptic, text message on their cell phones: Your svc may be disconnected on 7.24 @ 12:01 am. Go to www.ampd.com or contact the location where you activated your service for further information. Subscribers who bothered going to the Web site learned that the company was “potentially” disconnecting service just three days later, on July 24, and that its customer service department would be available only until close of business on July 23. Customers with unpaid credits, rebates, or refunds due to them would have to file claims, and shared plan minutes would no longer be honored, but customers with outstanding bills still had to pay them. On the eve of the hearing, Verizon Wireless and Amp’d struck a deal to allow Amp’d to continue offering voice services over its networks for an extra week in return for $2.5 million of the requested $4.5 million payment. But the deal only forestalled the inevitable. On July 31, Amp’d customers received one final, ominous text message: Ampd svc [email protected] 8/1. Keep your Ampd phone and get 100 free TXT by switching to Prexar Mobile. For info go to http://www.prexarmobile.com. Amp’d Mobile service was finished. (“L’il Bush,” however, would live on, in a new series on Comedy Central.) �JUST AND REASONABLE’ Section 201(b) of the Communications Act states that all practices in connection with communication services “shall be just and reasonable, and any such . . . practice . . . that is unjust and unreasonable shall be deemed to be unlawful.” The sufficiency of notice is an issue the FCC regularly analyzes in the wireline context under the “just and reasonable” standard. Parties in wireline notice proceedings often ask the FCC to consider end users’ ability to find alternate services in determining whether sufficiency of notice is just and reasonable under Section 201(b). The requirements in the wireless context, however, are less clear. In the 1990s, the FCC was faced with the difficult decision of whether to categorize providers in the rapidly developing CMRS industry as common carriers. The industry argued that onerous regulatory obligations would impede its growth at an important time in its development. As it often does when addressing new technologies, the FCC split the baby. It held CMRS providers to some of the common-carrier obligations that wireline phone companies must comply with, but excluded them from others. Among those requirements the FCC has determined apply in the wireless context are those that Section 201 sets out, and the FCC has applied the just-and-reasonable standard to such CMRS practices as rounding up to whole-minute increments and charging for incoming calls. Indeed, CMRS providers regularly acknowledge in court that their rates and practices are subject to Section 201(b)’s requirements. Because notice must be “just and reasonable” and the “just and reasonable” standard applies to CMRS providers, the question becomes: What is “just and reasonable” in providing notice to wireless customers before ending service? REQUIRING NOTICE In part because of the relative health and youth of the cellular communications industry, the FCC has yet to fully consider CMRS carriers’ obligations regarding service termination notice to their customers under the Communications Act. But in Gilmore v. Southwestern Bell Mobile Systems dba Cingular Wireless (2005), the FCC addressed this question in the analogous context of CMRS service charges to customers. It concluded that the two factors to consider in determining whether a practice is unjust and unreasonable are (1) “consumers’ expectations based on their wireline experience” and (2) “the role of competitive markets.” As for the first Gilmore factor, the expectations of CMRS customers based on their experience with wireline services are clear: The FCC requires that wireline carriers provide at least 30-day notice to customers before ending domestic telephone service. Section 63.71(a) of the commission’s rules states that a “carrier shall notify all affected customers of the planned discontinuance . . . of service.” Section 63.61 requires carriers to submit an application to the commission for permission to terminate, Section 63.71(c) states that such application is deemed granted on the 31st day after it was submitted, and Section 63.71(b) provides that the discontinuance application include a copy of the consumer notice. In short, based on their wireline experience, wireless customers have a reasonable expectation that they receive a month’s notice before they lose service. The second Gilmore factor — the role of the market in addressing any customer harms resulting from the operator’s allegedly unjust and unreasonable conduct — also supports a reasonable notice requirement. An immediate loss of service for cellular customers, particularly customers who have signed up for a service like that which Amp’d Mobile provided, could not be wholly addressed by the competitive marketplace. Although the FCC has found that the CMRS market as a whole is competitive, far fewer carriers offer the particular kind of service that Amp’d provided — low-cost monthly plans for those who likely couldn’t afford pricier services, and several pay-as-you-go options for multimedia services for as low as $20. Also, because most phones are not portable, changing service providers means purchasing a new phone and entering into a new agreement. Section 201(b) accordingly would have required such notice in the case of Amp’d Mobile. As the Communications Act’s Section 201 and subsequent FCC rules interpreting it show, Congress and the commission intended that as to certain aspects of phone service, cellular companies should be held to the same customer obligations as wireline phone companies. Providing reasonable notice to users before cutting off service is one such area.
Gerard J. Waldron is a partner with Washington, D.C.’s Covington & Burling and a chairman of its communications and media group. Enrique Armijo is an associate and also practices in the group.

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