FCC Refuses to Regulate Text Messages, Closing Door on ‘Texting Tax’

In the latest deregulatory action of the Trump era, the Federal Communications Commission (FCC) classified text message services as “information services” not subject to federal oversight.  Mirroring last year’s action deregulating internet access services to remove net neutrality rules and consumer protections, the FCC’s latest Declaratory Ruling deregulates text message services to foreclose federal or state text message rules, taxes, or regulatory fees. 

“This decision removes regulatory uncertainty, empowers providers to continue protecting consumers from unwanted text messages, and should foster further innovation and investment in messaging services,” the FCC wrote in its 3-1 decision release last week announcing the move.  Interested parties now have 30 days to file a petition for reconsideration with the FCC before the new classification decision becomes final.

In California, where the Public Utilities Commission (CPUC) had been considering imposing a “texting tax” since June 2017, the impact was immediate.  “In light of the FCC’s action …” a pending decision to impose the tax was “withdrawn from the CPUC’s Jan. 10, 2019 Voting Meeting agenda,” the CPUC wrote on Twitter.

The FCC’s leadership portrayed the deregulatory approach as support for providers combatting spam messages.  The FCC explained that regulated, common carrier service providers face regulatory hurdles to blocking messages, whereas deregulated providers would be free to combat spam.

But the lone Democrat on the Commission, Jessica Rosenworcel, disputed that claim: “Today’s decision offers consumers no new ability to prevent robocalls,” she wrote, labeling the FCC’s promotion of the Declaratory Ruling as a way to fight spam as “doublespeak.”  “Today’s decision is brought to you by the same agency that rolled back net neutrality rules and called it ‘restoring internet freedom,’” she wrote in dissent.

Commissioner Michael O’Rielly, on the other hand, signaled the FCC would continue to deregulate service offerings.  “Now that we have taken this important step, I am hopeful the Commission will also seek to expand this appropriate classification treatment to VoIP and VoLTE,” he wrote, referring to Interconnected Voice over Internet Protocol, a regulated service, and Voice over LTE, a technology that transmits wireless voice over a data network.

Mental Gymnastics: How the FCC Labeled Text Messages as an Information Service

To arrive at its decision, the FCC analyzed federal definitions of “information service” and “telecommunications service.”  Whereas regulated telecommunications are defined by the transmission of information without change in the form or content; information services offer the capability to generate, acquire, store, transform, process, retrieve, utilize, or make available information via telecommunications.  Traditionally, internet or computer based services fall within the definition of information services, while calls and messages are regulated telecommunications.

The FCC explained that text messages would now be classified as information services for a number of reasons, including:

  • When a device is powered off, the carrier stores the message until the recipient device is powered on. This is called the “storage and retrieval system.”  Storage and retrieval capabilities are part of the definition of an “information service.”  And according to the wireless industry, including CTIA and Verizon, storage and retrieval is similar to email, which is an information service. 
  • Consumers expect that wireless messaging services include more than just transmission. They include the ability to process, store, and retrieve text messages; allow users to send different types of media; and allow users to message on various platforms.  These information processing functions “must be combined with transmission for the services to work,” the FCC wrote.  Therefore, texts involve more than simply transmission of information.
  • The FCC makes clear that the fact that text messaging is usually bundled with voice does not change the analysis. The FCC analogizes that “the fact that fixed broadband internet access service is often bundled with wireline voice service does not render fixed broadband internet access service a telecommunications service.”
  • Channeling arguments put forward by AT&T, the FCC additionally argues that text message services do not meet the definition of a commercial mobile service because they do not connect to all users of the public switched telephone network (PSTN), such as landlines.

Impact on Regulation and Taxation of Text Messaging Services

The FCC’s classification of text messaging services has wide-reaching implications beyond the prevention of spam text messages.

Information services are excluded from the jurisdiction of many state utilities regulatory agencies, as well as the FCC.  Previously, the FCC had not ruled on the classification of text messaging, leaving room for state agencies to regulate text messaging.  California’s proceeding to apply a tax to text messages was the culmination of this uncertain treatment.  The FCC’s Declaratory Ruling forecloses regulating text messages without explicit statutory authority.

That said, in certain situations Congress has already granted statutory authority to oversee text messaging, and these situations are excluded from the impact of the Declaratory Ruling.  First, the Declaratory Ruling does not change the exposure of text messages in the Telephone Consumer Protection Act (TCPA).  Text messages remain subject to the TCPA, which restricts telemarketing communications generally.  In addition, the Declaratory Ruling does not impact statutes pertaining to 911.  There is no impact on text-to-911 rules, for example.

If you have questions about the FCC’s Declaratory Ruling, or would like to file a Petition for Reconsideration with the FCC, please contact Michael Donahue at mpd@commlawgroup.com or 703-714-1319.

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