Communications Law Bulletin -- March 2005
The Month In Brief
As we discuss further below, on March 16, President Bush announced his selection of Republican Commissioner Kevin Martin as
Chairman of the Federal Communications Commission ("FCC" or "Commission"). As a sitting Commissioner since 2001, Martin will
not be required to undergo confirmation hearings before the Senate.
The FCC faces a number of contentious issues as the Martin era begins. Developments in several of these areas are reviewed
in this issue of our Bulletin, which also includes our usual list of deadlines for your calendar.
In this issue:
MCI Board Accepts Verizon Bid as Qwest Prepares a New Offer
As we reported in last month’s Bulletin, the telecommunications industry continues to consolidate as AT&T and MCI, the longtime
giants of the intercity telephone services market, prepare to be absorbed by former Bell operating companies. In AT&T’s case,
the buyer is SBC; in MCI’s case, Qwest continues to battle the MCI board’s preferred suitor, Verizon.
As this issue of the Bulletin goes to press, Qwest apparently is prepared to make yet another offer in its effort to beat
Verizon’s $7.6 billion bid. Reportedly, Qwest’s next proposal might raise the deal’s value to nearly $9 billion.
Triennial Review Developments
Shortly after publication of the FCC’s Triennial Review ("TRO") Remand Order in the Federal Register, the Bell Operating Companies
("BOCs"), the U.S. Telecom Association ("USTA"), and competitive local exchange carriers ("CLECs") have appealed the order
in various federal appellate courts. The BOCs and USTA filed a petition for review in the D.C. Circuit Court, while the CLECs
filed petitions for review in a number of other federal appellate courts in an effort to ensure that a lottery among the circuits
will result in a consolidation of the appeals in a court other than the D.C. Circuit Court, which has favored the BOCs on
unbundling issues. As a result of the lottery, the case was assigned to the Third Circuit Court, but that court subsequently
granted the motion of the BOCs and USTA to transfer the appeal to the D.C. Circuit Court.
The BOCs and USTA also filed in the D.C. Circuit Court a petition for writ of mandamus to direct the FCC to implement fully
the court’s prior decision regarding the unbundling rules. Additionally, the BOCs and USTA filed in the D.C. Circuit Court
a motion for expedited action and limited stay of the portion of the TRO Remand Order allowing CLECs to convert special access
circuits to UNEs. The BOCs and USTA maintained that the mandamus petition is the appropriate route for judicial review, but
that, if the court declines that route, it should act expeditiously on the petition for review and grant a partial stay of
the special access conversion rules.
On March 16, the D.C. Circuit Court dismissed the BOC/USTA mandamus petition. The court concluded that the issue was moot,
but noted that the dismissal did not foreclose the filing of a new petition for review or writ of mandamus. The court further
directed the clerk to assign petitions for review and mandamus to a new, randomly selected panel of the court.
On March 14, the FCC denied Verizon’s petition seeking partial stay, pending judicial review, of the special access conversion
rules. The FCC found that the challenged rules merely maintain the Commission’s preexisting policy allowing conversions and
that denial of a stay would not change the status quo. Accordingly, the FCC concluded that Verizon failed to demonstrate that
it will suffer substantial harm in the absence of a stay. The FCC also found that the petition was procedurally defective
because it did not seek to maintain the status quo pending judicial review, but rather to impose a new prohibition on competitive LECs’ access to UNEs.
In a separate, but related matter, the Association for Local Telecommunications Services ("ALTS") raised objections against
the BOCs’ lists of central offices where high-capacity unbundled network elements ("UNEs") no longer will be available after
March 11 because they purportedly satisfy the FCC’s standards for unbundling relief set forth in the TRO Remand Order. ALTS
complained that the BOCs were attempting to circumvent the TRO Remand Order’s requirement that unbundling relief must be implemented
through interconnection agreements, rather than unilaterally by the BOCs. ALTS also challenged the BOCs’ methodology for counting
business lines and fiber collocators, which are the FCC’s criteria for CLEC impairment. Consequently, ALTS asked the FCC to
instruct the BOCs to provide UNEs after March 11 to any CLEC certifying that it is entitled to purchase them and to comply
with the requirement that all changes to the UNE regime must be implemented through interconnection agreements.
In another UNE-related matter, the FCC on March 17 granted BellSouth’s request to preempt state regulations requiring incumbent
local exchange carriers ("LECs") to provide digital subscriber line service over the same UNE loops that a competitive LEC
uses to provide voice service. The FCC concluded that these state regulations are inconsistent with the unbundling rules and
policies set forth in the FCC’s 2003 Triennial Review Order.
Broadcast Developments
FCC Proposes First-Ever Fines for Closed Caption Rule Violations. For the first time in its history, the FCC proposed fines for violations of its emergency closed captioning rules. The Commission
issued notices of apparent liability to three San Diego TV stations for failing to provide in a timely manner, to persons
with hearing disabilities, critical information about the 2003 wildfires emergency. The information was provided aurally during
the stations’ programming, but was not provided through closed captioning or other visual presentation method until after
delays of at least 30 minutes. The wildfires, which spread quickly and required evacuation of residents in some areas, caused
loss of life, injuries and extensive property damage. The proposed fines were $20,000 for 12 separate violations for KGTV,
the ABC affiliate; $20,000 for 11 violations for KFMB-TV, the CBS affiliate; and $25,000 for 22 violations for KUSI-TV, the
UPN affiliate.
Sinclair and U.S. File Cross-Petitions on Media Rules. Sinclair Broadcast Group, which owns over 62 stations in the U.S., and the acting Solicitor General each filed a conditional
cross-petition for writ of certiorari to review the media ownership decision by the U.S. Court of Appeals for the Third Circuit.
In prior litigation brought by Sinclair, the D.C. Circuit Court of Appeals ordered the FCC to either justify or eliminate
the 8-voices test of the local television ownership rule. The Third Circuit Court of Appeals required the FCC to continue
to apply the 8-voices test until the agency acts on a remand order from the court. The Sinclair petition asks the Supreme
Court to determine whether the Third Circuit erred by not setting aside the local television ownership rule. The petition
filed by the U.S. argued that the petitions filed by various broadcast companies do not warrant review of the Third Circuit’s
decision. If, however, the Supreme Court grants review of the media ownership case, the U.S. requests that the Court consider
the issue of whether the Third Circuit erred in holding that the media rules were not supported by reasoned analysis.
Tribune Ordered to Divest Connecticut Station. The U.S. District Court for the District of Connecticut ordered Tribune Co. to divest WTXX, the WB affiliate in Waterbury,
Connecticut, to comply with FCC cross-ownership rules. Tribune also owns The Hartford Courant, the daily newspaper in the
market, and WTIC-TV in Hartford. The FCC had ordered Tribune to sell WTXX in 2001, but Tribune had requested and received
several FCC waivers to retain ownership of WTXX, arguing that it was a failing station. Tribune’s request for a permanent
waiver of the rule remains pending at the FCC.
Commission Denies Several Broadcast Indecency Complaints. The FCC issued orders denying indecency complaints against several TV broadcast licensees for the Terrell Owens/Nicolette
Sheridan "towel-dropping" introduction to "Monday Night Football," ABC’s uncut presentation of "Saving Private Ryan," and
episodes of "Angel," "Will and Grace" and "Arrested Development." In each case, the Commission concluded that the material
aired did not constitute an obscene or indecent broadcast.
Stevens Seeks to Apply Indecency Rules to Cable. During a speech to the National Association of Broadcasters, Senate Commerce Committee Chairman Ted Stevens (R-AK) called
for an expansion of indecency regulations to pay TV. Stevens said that viewers do not differentiate between over-the-air broadcasters
and cable and that the government should have the same power to deal with cable as it does with broadcast television. Later
in that week, the FCC denied indecency complaints against CNN’s broadcast of the Democratic National Convention and an episode
of FX’s program "Nip/Tuck," both of which were aired on cable and satellite services. The CNN program was alleged indecent
because a microphone captured a staff member uttering the "F-word" after Senator Kerry’s acceptance speech. In both cases,
the Commission ruled that as an initial matter, it does not regulate indecency and profanity on cable and satellite subscription
services, and furthermore, the material at issue does not meet the legal test for obscenity.
FCC Issues Report on Over-the-Air Broadcast Viewers to Congress. As Congress considers applying a date certain to the end of the digital transition, the FCC issued a report on the status
of over-the-air television, including potential options for assisting viewers when analog service ends. The report analyzes
the timing and nature of a switchover from analog to digital service (comparing a simultaneous end of analog and beginning
of digital service against a "fade-to-black" phase out of analog service), the cost of digital-to-analog converter boxes and
reasons why over-the-air viewers do not subscribe to pay services such as cable and satellite TV. The report describes the
consequences of various approaches to completing the transition, but does not recommendation any particular course of action.
FCC Releases Further Notice of Proposed Rulemaking Seeking Comment On Intercarrier Compensation Reform Proposals
On March 3, the FCC released a Further Notice of Proposed Rulemaking ("FNPRM") reviewing the record in its four-year old Intercarrier
Compensation proceeding and requesting comment on the intercarrier compensation ("IC") reform proposals submitted by several
industry groups. Unlike the typical rulemaking notice, the FNPRM makes no tentative findings of its own. In that respect,
the FNPRM resembles a further notice of inquiry as much as a rulemaking notice and reflects a lack of progress by the FCC
staff in developing a preferred approach to IC reform.
The FNPRM states that the current IC regime is outmoded and inefficient. The existing rules are based upon distinctions between
carrier type, traffic type, service classifications and the end points of communications, all of which are no longer appropriate
distinctions given current market developments. Federal and state access charge rules govern interexchange carrier and wireless
carrier payments to local exchange carriers ("LECs") that originate and terminate long distance and wireless calls, while
reciprocal compensation rules established under Section 251(b)(5) of the Communications Act govern compensation between carriers
for the transport and termination of local calls and other calls not subject to access charges. Although terminating access
charges and reciprocal compensation rates differ widely, the LEC call termination functions being compensated under those
rates are virtually identical.
The FNPRM states that any new IC approach should promote economic efficiency, preserve universal service, be competitively
and technologically neutral and administratively simple, address the impact on network interconnection rules, and provide
detailed information and/or a transition plan regarding implementation issues. The FNPRM summarizes several industry IC reform
proposals and seeks comment on whether it should adopt a single proposal in its entirety, a modified version of any of the
proposals, or a combination of components from different plans. Reform proposals or principles for reform were filed by various
ad hoc carrier coalitions, trade associations and two state regulatory agency associations. The FNPRM requests comment on
various legal issues raised by the proposals, such as the FCC’s jurisdiction to impose an IC system covering intrastate as
well as interstate intercarrier charges. Another set of legal issues is raised by the suggestion in some of the proposals
to replace all reciprocal compensation and access charges with a "bill-and-keep" system, under which carriers could not charge
each other for originating or terminating a call but instead would have to recover all of their costs from end-user customers.
The FNPRM also requests comment on the rules that should be imposed regarding carrier interconnection responsibilities and
costs and how detailed those rules should be. One significant aspect of any IC system is universal service reform. The FNPRM
seeks comment on whether any reduction in intercarrier charges that it requires must be made up by other charges or increased
universal service support in order to ensure revenue neutrality for incumbent LECs. The FNPRM also requests comment as to
what type of transition to a new IC system would be appropriate and how long the transition should be. Finally, the FNPRM
seeks comment on various wireless carrier-related issues, such as whether wireless carriers should continue to be allowed
to have numbers with different routing and rating points.
Comments are due on May 23 and reply comments on June 22.
FCC Extends Truth-In-Billing Rules To Wireless Providers And Seeks Comment On Additional Measures
At its March 10, 2005 open meeting, the FCC expanded certain federal consumer protection rules to wireless services by extending
its truth-in-billing rules to wireless carriers and it announced that it seeks comments on additional measures that will aid
consumers in making informed choices among competitive telecommunications services. The Commission’s actions came in response
to increased consumer complaints about billing practices of wireless and other interstate providers and a petition filed by
the National Association of State Utility Consumer Advocates ("NASUCA").
Specifically, the FCC removed the existing exemption for Commercial Mobile Radio Service ("CMRS") carriers from the rules
requiring that billing descriptions be brief, clear, non-misleading and in plain language. It also held that it is misleading
to represent discretionary line item charges in any manner that suggests such line items are taxes or government mandated
charges; and clarified that the burden rests upon the carrier to demonstrate that any line item that purports to recover a
specific governmental or regulatory program fee conforms to the amount authorized by the government to be collected. Finally,
it concluded that its regulations should preempt state regulation requiring or prohibiting the use of line items on wireless
carriers’ bills because this activity constitutes rate regulation. The Commission emphasized, however, that this in no way
limits states’ ability to enforce their own generally applicable consumer protection laws.
The FCC also released a Second Further Notice of Proposed Rulemaking at this meeting, seeking comments on the distinction
between government "mandated" and other charges and whether it is "unreasonable" to combine federal regulatory charges into
single line items. It tentatively concluded that providers should place government mandated charges in a separate section
of the bill, and that carriers must disclose to customers at the point of sale the full rate, including any non-mandated line
items and a reasonable estimate of government mandated surcharges.
This Truth-in-Billing item was the most controversial of the meeting, and provoked mixed reactions from Commissioners and
consumer groups. Commissioners Copps and Adelstein dissented from the decision to preempt state efforts to curb line item
abuses or require that these charges be explained. The Consumers Federation of America, the Consumers Union, the National
Consumer Law Center and State PIRGs strongly criticized the Commission action. NASUCA opposed the Commission’s decision, arguing
that it blocks the states from taking action against billing abuses while refusing to solve a nationwide problem. On the other
side, the CTIA applauded the Commission for rejecting NASUCA’s petition, stating that this was a major victory for wireless
consumers. Finally, NASUCA has decided to take its objections to court, and filed a petition for judicial review with the
Eleventh Circuit Court of Appeals.
Oregon Settlement Permits Consumers To File Complaints Against Wireless Carriers
Verizon Wireless, Sprint, and Cingular agreed to give Oregon regulators authority to investigate customer complaints. They
agreed to provide accurate coverage maps, disclose all costs and conditions associated with service contracts, and allow customers
to cancel new contracts within two weeks for any reason.
This decision, announced on February 18, resulted from a settlement agreement reached last July following allegations that
the nations’ three largest wireless phone providers engaged in deceptive sales practices. While most American cell phone customers
must take up complaints with the FCC, Oregon residents will now be able to file their complaints with the Oregon Public Utility
Commission. This agency will team up with the Oregon Attorney General’s Office for Consumer Protection to handle complaints
and monitor compliance.
California Consumer Bill Of Rights
Introduced In California, the battle over a wireless consumer’s bill of rights continues. The rules enacted last May by the
California Public Utilities Commission ("CPUC") put heavy restrictions on wireless carriers’ billing and customer contracts,
forcing companies to disclose more information and give customers 30 days to cancel a contract without penalty. They also
required carriers to post rates on the Internet and get written permission from customers to change services.
In late January, the CPUC suspended these rules after a three to one vote by the commissioners. Telecommunications carriers
must continue to comply with all rules currently in place, including rules on slamming (the unauthorized switching of service)
and cramming (placing unauthorized charges on a bill). The suspension will be in place until a new decision is issued sometime
this year. In the meantime, state legislators proposed a telecom reform proposal at the CPUC Open Meeting on February 24,
2005. The utility commission, for its part, is also looking beyond the bill of rights. It has drafted a proposal to launch
a rulemaking to assess and revise the regulation of all telecommunications in California except for small incumbent local
exchange carriers.
While this battle is far from over, lawmakers and the CPUC hope to have a resolution by the end of 2005.
Commission Releases Dual Carriage Order
As we reported in the February CLB, the Commission decided on February 10th that cable systems are not required to carry all
digital signals generated by broadcast stations. In the Second Report and Order, released on February 23rd, the Commission resolved: (1) not to impose a dual carriage requirement on cable operators during
the broadcast transition from analog to digital, on the grounds that the must-carry statute "neither mandates nor precludes
the mandatory simultaneous carriage" of both analog and digital signals, and that a dual carriage requirement would likely
violate a cable operator’s First Amendment rights; and (2) not to impose a multicast must-carry obligation on cable operators.
Under the Commission’s decision, if a digital broadcaster elects to divide its spectrum into several unrelated programming
streams, cable operators are required to carry only one of the programming streams – the one designated as "primary" by the
broadcasters.
FCC Adopts Rules for Smart Radios
On March 10th, the Commission adopted modified rules for cognitive, or "smart," radios to encourage continued development
and deployment of the technology. Smart radios make possible the improved use of vacant spectrum by tuning or adapting to
vacant spectrum according to certain external information identified by the smart radio. Some smart radios use geographic
positioning system (GPS) data to determine location and permissible transmissions. Others sense the radiofrequency (RF) environment
and use this information to decide on an optimal frequency range and transmit power in order to avoid harmful interference.
Smart radios are viewed as potentially useful for facilitating secondary markets use of spectrum, by allowing leased use of
the spectrum when a licensee is not actively using the spectrum, and rapid reversion to the licensee when needed. Industry
forums and standards bodies are working on internationally accepted standards for smart radios.
In the Report and Order, the Commission modified and clarified the requirements for software and cognitive radios. Radios that incorporate software
must be designed to provide reasonable security measures to prevent unauthorized modifications that could affect the RF operating
parameters or affect the circumstances under which the transmitter operates. The Commission also eliminated the requirement
that manufacturers of software-defined radios supply software "source code" at the time of certification. Instead, such manufacturers
must supply high level operational descriptions of the software that controls the radio’s radiofrequency characteristics,
and a description of the software security measures employed to prevent unauthorized modifications. The Order also describes technical measures cognitive radios can employ to allow secondary use of spectrum by lessees while maintaining
the availability of the spectrum for a higher priority use by the licensee.
FCC Issues First Notice of Apparent Liability Under Do-Not-Call Rules
On March 1, the FCC proposed a forfeiture of $770,000 against Dynasty Mortgage, L.L.C. ("Dynasty") for calling residential
consumers who had registered their phone numbers on the National Do-Not-Call Registry (the "Registry"). The FCC proposed the
maximum forfeiture of $11,000 for each of Dynasty’s seventy violations because it continued to call numbers on the Registry
even after the FCC warned it about potential penalties. Dynasty also allegedly told consumers that it was exempt from the
Do-Not-Call rules. The FCC’s proposed maximum forfeiture in this case, which follows sixteen citations against non-common
carriers and two consent decrees with common carriers, indicates that the FCC will vigorously enforce the Do‑Not‑Call rules.
In other recent enforcement developments, the FCC entered into a consent decree with Sprint for slamming violations and a
consent decree with Publix Companies ("Publix") for violations related to the Telecommunications Relay Service ("TRS"). The
FCC entered into the consent decree with Sprint on March 10. The consent decree ended an FCC investigation that was based
on consumer complaints that their service was changed to Sprint without authorization. Under the consent decree, Sprint agreed
to make a voluntary contribution to the United States Treasury in the amount of $4,000,000. The consent decree also requires
Sprint to implement a compliance plan in which it will implement a process to confirm authorized consumer changes, train employees
and non-employee sales representatives regarding this process, and compile monthly reports with respect to complaints that
Sprint receives alleging unauthorized preferred carrier changes and deceptive marketing complaints.
In its consent decree with the FCC, Publix agreed to cease operations as a common carrier and pay $7.9 million to reimburse
the TRS Fund. The consent decree ends an FCC investigation into whether Publix received TRS funds "under false pretenses."
Publix and its owner, Raanan Liebermann, entered a guilty plea with the U.S. Attorney’s Office for making a false statement
to the FCC via the TRS fund administrator and conducting an unlawful monetary transaction.
Months of Speculation End as Commissioner Martin Named FCC Chairman
On March 21, FCC Commissioner Kevin Martin took over as FCC chairman. As one of his first actions, Martin requested that bureau
chiefs temporarily refrain from releasing public notices, acting on personnel matters, or authorizing travel. The request
allows Chairman Martin and his staff the opportunity to review the status of important matters currently before the bureaus.
Sources at the FCC indicated that Chairman Martin’s request is fairly common from a newly appointed chairman.
In the meantime, the White House has completed the paperwork for President Bush to officially designate Martin as "chairman."
Although the Senate must confirm all commissioners, the President may appoint one of the five commissioners as chairman without
subjecting the appointee to confirmation hearings. Martin issued a statement that the FCC has several challenging issues before
it, such as advancing homeland security and promoting broadband deployment.
On a related note, Commissioner Abernathy announced that she will leave the FCC. However, in a news conference on March 17,
she indicated that she will not leave the Commission until the Bush administration appoints her successor. Abernathy added
that although she will not seek reappointment, her departure is not necessarily "imminent."
FCC Issues Expected Order on "Naked DSL," But Criticizes ILEC Number Porting
In an expected ruling on a BellSouth preemption petition, the FCC preempted state rules that required BellSouth to provide
digital subscriber line ("DSL") service to customers obtaining voice service from competitive local exchange carriers ("CLECs")
using an unbundled network element ("UNE") loop. The FCC held that such state rules conflicted with the FCC’s Triennial Review Order ("TRO") by effectively requiring unbundling of the low frequency portion of the loop ("LFPL"). The FCC based its decision in part
on the availability of line splitting arrangements under which two CLECs team up to provide voice and data service over the
UNE loop.
The FCC did not rule upon BellSouth’s arguments that the state decisions constituted unlawful regulation of interstate service
and/or unlawful regulation of an information service.
In a warning to the incumbent local exchange carriers ("ILECs"), however, the FCC warned that ILECs cannot delay the porting
of telephone numbers until a customer cancels the associated DSL service. The FCC stated that it intended to enforce its non-discriminatory
porting requirements and would not permit non-porting-related restrictions or delays.
Finally, the FCC issued a related Notice of Inquiry ("NOI") on the broader question of the tying or bundling of services.
Specifically, the FCC has asked how such tying affects intramodal and intermodal competition, and whether such bundling harms
new providers such as voice over Internet protocol ("VOIP") providers.
Commissioners Copps and Adelstein supported the number porting portion of the order, but dissented from the core ruling, raising
concerns that wireless-only consumers or VOIP consumers might be denied broadband service.
D.C. Circuit Court Upholds FCC Orders Requiring Intermodal and Wireless-to-Wireless Number Portability, but Stays Effectiveness
of Intermodal Order on Procedural Grounds
On March 11, 2005, the D.C. Circuit Court issued two separate decisions disposing of challenges to the FCC’s number portability
orders addressing wireless-to-wireless porting and wireline-to-wireless porting. In the first case, Central Texas Telephone Cooperative v. FCC, the court rejected a challenge by certain rural telephone companies against an FCC order that (i) required wireless carriers
to port numbers to other wireless carriers if their service areas overlap and (ii) declined to limit wireless-to-wireless
porting only to wireless carriers with facilities or numbering resources in the same rate center. The court found that the
FCC order qualified as an interpretative rule, rather than a legislative rule, under the Administrative Procedure Act ("APA")
because the order interpreted regulations adopted in a prior FCC order. Consequently, the court ruled that the FCC was not
required to prepare an analysis regarding the order’s impact on small entities under the Regulatory Flexibility Act ("RFA"),
which applies only to legislative rules. The court also found that the FCC order was not arbitrary and capricious.
In the second case, United States Telecom Ass’n v. FCC, the court addressed a challenge by the U.S. Telecom Association and other wireline interests against an FCC order regarding
wireline-to-wireless porting. The parties raised only procedural arguments and did not challenge the merits of the order.
The FCC order required LECs to port numbers to wireless carriers whose service areas overlapped the wireline rate center associated
with the number and declined to limit wireline-to-wireless porting only to carriers with facilities or numbering resources
in the same rate center. The court concluded that the FCC order was a legislative rule because it constituted a substantive
change in a prior rule. The court nonetheless found that the FCC effectively complied with the notice-and-comment requirements
of the APA by publishing a public notice in the Federal Register, and that any deviations from the APA’s procedural requirements
were harmless error. Because, however, the FCC failed to prepare the analysis required under the RFA, the court remanded the
order to the FCC to prepare an RFA analysis and stayed the effect of the order as applied to carriers qualifying as small
entities under the RFA.
FCC Initiates Rulemaking to Implement SHVERA Provisions Imposing Reciprocal Retransmission Consent Bargaining Obligations
on MVPDs
On March 7, the FCC issued a notice of proposed rulemaking to implement Section 207 of the Satellite Home Viewer Extension
and Reauthorization Act of 2004 ("SHVERA"). Specifically, the FCC proposed to extend to multichannel video programming distributors
("MVPDs") the existing good faith retransmission consent bargaining obligations imposed on television broadcasters. Comments
are due on April 23, and reply comments on May 8.
FCC Streamlines Earth Station Licensing Rules to Expedite Satellite Broadband Deployment
On March 15, the FCC released two decisions that will expedite deployment of satellite broadband services and offer greater
flexibility in implementing state-of-the-art earth stations by streamlining the procedures for licensing certain earth stations
and modifying the technical rules governing those earth stations. In the Fifth Report and Order, the FCC adopted two new streamlined procedures for case-by-case review of non-routine earth stations, which have smaller
antenna diameters or operate at higher power levels than those permitted under the FCC’s "routine" licensing procedures. Under
the new streamlined procedures, an applicant can either (1) reduce the power transmitted from its non-routine antenna to prevent
interference; or (2) provide certifications of prior coordination with adjacent satellite operators. These new streamlined
procedures generally apply to earth stations communicating with geostationary satellite orbit ("GSO") systems in the conventional
C-band (i.e., 3700-4200 MHz and 5925-6425 MHz) and with GSO and nongeostationary satellite orbit ("NGSO") systems in the conventional Ku-band
(i.e., 11.7-12.2 GHz and 14.0-14.5 GHz). The FCC also relaxed certain mobile earth terminal ("MET") licensing requirements, such
as revising the rules to require MET licensees to bring their network of METs into operation within a year, without requiring
that all or a certain number of METs must be operational. Additionally, the FCC revised certain technical and licensing rules
applicable to very small aperture terminals and Ku-band earth stations.
In the Sixth Report and Order, the FCC adopted additional revisions to its technical rules, including revisions to the earth station antenna gain pattern
requirements and to the technical rules governing VSATs. In a related notice of proposed rulemaking, the FCC proposed to adopt
an "off-axis EIRP envelope" approach for fixed satellite service ("FSS") earth stations in the C‑band and Ku‑band, consistent
with the procedures for other earth stations such as Ka-band FSS earth stations.
Recent Universal Service Developments
FCC Adopts Additional ETC Requirements
The FCC has adopted additional requirements for carriers that seek designation as eligible telecommunications carriers ("ETC"),
which are eligible to receive universal service support for providing service to high-cost areas. The decision is generally
consistent with the recommendations that the Federal-State Joint Board on Universal Service made last year and codifies the
ETC criteria adopted in the Virginia Cellular and Highland Cellular ETC cases in late 2003.
The FCC’s new ETC rules apply only when the FCC designates a carrier as an ETC. This occurs only when a state declines to
exercise jurisdiction over the ETC-designation process, which is typically in the case of wireless carriers seeking ETC status.
The FCC, however, encouraged states to incorporate the FCC’s new rules into state ETC-designation practices.
In order to obtain ETC status under the new rules, a carrier must: (1) provide a five-year plan demonstrating how it will
use universal service support to improve its coverage, service quality or capacity throughout its ETC service area; (2) demonstrate
its ability to operate in emergency situations; (3) demonstrate that it will satisfy consumer protection and service quality
standards; (4) offer local usage plans comparable to those offered by local carriers in its ETC service area; and (5) acknowledge
that it may be required to provide equal access if all other ETCs in the designated service area relinquish their designations.
These requirements apply on a prospective basis to all ETCs previously designated by the FCC. These ETCs must submit evidence
demonstrating how they comply with that new ETC designation framework by Oct. 1, 2006.
Each FCC-designated ETC must submit on an annual basis: (1) updates on its five-year service quality improvement plan; (2)
information on network outages; (3) number of requests for service from potential customers that were unfulfilled for the
past year and the number of complaints per 1,000 handsets or lines; (4) a certification that it is complying with applicable
service quality standards and consumer protection rules, can operate in emergency situations, and is offering a local usage
plan, and an acknowledgment that it may be required to provide equal access to long distance carriers.
The FCC also is expanding its public interest examination for ETC designations by considering the benefits of increased consumer
choice offered by the applicant, unique advantages or disadvantages of the applicant’s service offering, and whether designating
a carrier as an ETC may result in cream-skimming.
The FCC rejected the Joint Board’s recommendation that an ETC applicant demonstrate that it has the financial resources and
ability to provide quality services throughout its ETC service area. In addition, the decision did not address a controversial
"primary line" proposal that would limit universal service support to one line per customer. The FCC also: (1) concluded that
its redefinition proceedings did not warrant a change at this time; (2) modified its rules so that newly designated ETCs can
file high-cost certification and line count data within 60 days of their ETC designation date; and (3) delegated authority
to the administrator of the universal service program to develop standards for any maps submitted under the FCC’s ETC rules.
Tenth Circuit Rejects Non-Rural High-Cost USF Decision
The U.S. Court of Appeals for the Tenth Circuit for the second time has rejected portions of the FCC’s rewrite of its non-rural
high-cost universal service support rules. Specifically, the court denied the definition used by the FCC to evaluate when
rates are "reasonably comparable" between urban and rural areas. The court, however, did affirm the portion of the FCC’s decision
that creates a mechanism designed to induce states to implement universal service goals.
The court had previously reversed and remanded to the FCC a decision that costs, rather than rates, were the best indicator
in achieving rate comparability between rural and urban areas. In that decision the FCC established non-rural high-cost support
as a 135% benchmark of the national average cost per line, but this benchmark was rejected by the courts because the FCC failed
to define certain statutory terms and to adequately justify the benchmark.
On remand, the FCC defined "sufficient" universal service support as "enough federal support to enable states to achieve reasonable
comparability of rural and urban rates in high-cost areas served by non-rural carriers." It defined "reasonably comparable"
in terms of a national urban benchmark rate: rural rates will be considered "reasonably comparable" if they fall within two
standard deviations. On appeal, the court again struck down the FCC’s rules, concluding that the FCC failed to demonstrate
"why reasonable comparability outweighs the principle of affordability, or any other principle, for that matter, in this context."
The court did not set a deadline by which the FCC must revise its non-rural high-cost universal service rules, but stated
that it fully expects the FCC to comply with its remand in an "expeditious manner, bearing in mind the consequences inherent
in further delay."
Universal Service Contribution Factor Increases Again
The universal service contribution factor for the second quarter of 2005 has been set at 11.1%, which is an increase in the
contribution factor from 10.7% for the first quarter of 2005. According to the FCC, the increase reflects a $50 million increase
in projected demand for universal service support and related expenses, and a nearly $70 million decrease in industry revenues
that are included in the contribution base.
Reform of the Universal Service Program
The FCC has contracted with the National Academy of Public Administration ("NAPA"), a nonprofit consulting group, to evaluate
the effectiveness of the universal service mechanism and whether it can be improved. NAPA will be paid $400,000 for an analysis
of the existing support system and alternatives that are used by other similar grant programs. The process is expected to
take five to six months. The contract also includes a $350,000 option in which NAPA would make specific recommendations for
improvements to the universal service program, if required.
The FCC’s review of the universal service program comes at a time when it and the program are under significant scrutiny.
The House Energy and Commerce Committee’s subcommittee on oversight and investigations recently held a hearing in which the
FCC was severely criticized for its poor management of the Schools and Libraries universal service support mechanism, or E-Rate
Program. The criticism was fueled in large part by a recent study by the Government Accounting Office that suggested that
the FCC was slow to take steps to prevent fraud and abuse in the program.
Jeffrey Carlisle, then-chief of the Wireline Competition Bureau, testified that the E-Rate Program "continues to experience
operational and management challenges" and that the FCC is considering "whether to modify the manner in which the [Universal
Service Fund] is administered, including possible changes to the underlying administrative structure." Carlisle also stated
that the FCC is working to establish better defined performance measures for the program, although they likely will not be
implemented until the FCC’s next fiscal year because of the need to seek public comment on them. In addition, Carlisle noted
that there are more than 500 cases pending before the FCC appealing decisions of the administrator of the E-Rate Program,
but that the FCC is committed to reducing the backlog of appeals by the end of 2005.
Recent VOIP Developments
Vonage Sued For Emergency 911 Services
The Texas Attorney General has sued Vonage for failing to adequately disclose to consumers the limitations of its emergency
911 services. The lawsuit, which charges Vonage with deceptive trade practices, claims that Vonage advertises its VOIP service
as an alternative to traditional telephone service, but does not disclose that the company’s 911 service differs from that
of traditional 911 service. Specifically, 911 calls are routed through administrative lines at emergency call centers rather
than directly to a dispatch operator, and calls placed after regular business hours may go unanswered. Operators also may
be unable to identify the caller’s phone number and thus the caller’s address. In addition, Vonage’s 911 service does not
work during electrical or broadband service outages. The lawsuit was prompted in large part by a Vonage customer’s recent
inability to contact emergency assistance during a home invasion which resulted in two people being shot. In addition to injunctive
relief, the Attorney General is seeking $20,000 per violation of the state Deceptive Trade Practices Act. Vonage is disputing
the lawsuit, claiming that it explicitly discloses the nature of its emergency 911 service to consumers through various types
of customer notices. According to Vonage, its repeated requests to the incumbent local carriers for access to selective routers
that connect directly to emergency call operators have gone unanswered, which is clearly leading to public safety issues.
Level 3 Forbearance Petition Withdrawn
On March 21, Level 3 Communications withdrew a controversial petition that asked the FCC to forbear from applying certain
intercarrier compensation obligations to VOIP providers. Level 3 had argued in its petition that VOIP traffic (i.e., Internet
protocol traffic that connected to the public switched telephone network) is an interstate information service that is not
subject to interstate or intrastate access charges. Under FCC procedures, the FCC had until March 22 to either act on the
petition or allow it to automatically go into effect. Level 3 Communications stated that it decided to withdraw the petition
because of new leadership at the agency, referring to the recent appointment of Commissioner Kevin Martin as chairman. However,
it had also been widely rumored that the petition was going to be denied, potentially on procedural grounds. Consequently,
intercarrier payment obligations for VOIP traffic remains unclear, but the FCC could rule on this issue as a part of a comprehensive
rulemaking on reforming the intercarrier compensation regime that is currently pending.
Additional VOIP Providers Seek Numbering Resources
Following the FCC’s decision last month allowing SBC Internet Services, Inc. ("SBCIS") to obtain telephone numbers directly
from the North American Numbering Plan Administrator ("NANPA") or Pooling Administrator ("PA"), at least five additional VOIP
providers have sought similar relief from the FCC. Under existing policies, the NANPA or PA will only allocate numbering resources
to telephone companies with state operating certificates, thus excluding unregulated VOIP providers. Mirroring SBCIS’s arguments,
the VOIP providers contend that it is inefficient and onerous to require VOIP providers to either become certificated or to
obtain numbering resources from state certificated carriers. SBCIS’s waiver to obtain numbering resources is in effect only
until the FCC adopts numbering rules for VOIP providers, which is being considered in a pending rulemaking regarding the regulation
of IP-enabled services. If the FCC grants the other VOIP providers waivers, they will likely be similarly limited. They also
would likely be required to comply with federal and state number utilization and optimization requirements and industry numbering
guidelines and practices.
FCC Settles First VOIP Blocking Case
The FCC entered into a consent decree with Madison River Communications, a telephone company based in North Carolina that
operates in rural areas throughout the Southeast and Midwest, pursuant to which Madison River agreed to stop blocking the
ability of consumers to use VOIP calling services. Madison River also agreed to pay a fine of $15,000 under the consent decree.
The case was prompted in large part by complaints from Vonage that Madison River was blocking consumers from using Vonage’s
services. Vonage has stated that this is likely not an isolated incident, and is investigating possible instances of blocking
by other small telephone companies.
The consent decree ended an investigation regarding Madison River’s compliance with Section 201(b) of the Communications Act,
which prohibits telecommunications carriers from engaging in unjust and unreasonable practices. Former FCC chairman Powell,
however, later remarked that the FCC’s ability to prevent similar blocking cases does not necessarily rest on Title II jurisdiction
over broadband providers. Rather, Powell and other FCC staffers indicated that the FCC’s jurisdiction is largely premised
on Title I of the Communications Act.
Nebraska, and Potentially Kansas, Imposing Universal Service Fees on VOIP
The Nebraska Public Service Commission ("NPSC") has ruled that VOIP providers must contribute to the state universal service
fund based on the intrastate portion of their services. According to the NPSC, VOIP providers can determine whether a VOIP
call is intrastate or interstate by looking at the termination point of the call, despite claims from the industry that they
do not know where a VOIP call goes. The NPSC ruled that if VOIP providers cannot determine the percentage of intrastate calls
based upon a sampling of actual call data, the universal service assessment will be based upon a default safe harbor of 71.5
percent intrastate and 28.5 percent interstate. The NPSC concluded that requiring VOIP providers to make equitable contributions
to the state universal service fund places telecommunications providers operating in the state on a level playing field. The
NPSC’s decision takes effect April 1.
The Kansas legislature also is considering imposing universal service fees on VOIP calls. The Kansas House Utilities Committee
is holding hearings on a bill that would require VOIP customers to contribute to two state subsidy programs. Representative
Tom Sloan (R-Lawrence) in testimony, however, warned that the FCC previously indicated that states cannot force VOIP customers
to pay into state universal service funds.
FCC Rules on Wireless Termination Tariffs
At the end of February, the FCC ruled on a long-pending petition filed by several wireless carriers regarding local exchange
carrier ("LEC") wireless termination tariffs. The wireless companies had asked the FCC to find such tariffs to be an improper
method of establishing reciprocal compensation.
In a partial victory for the wireless industry, the FCC amended its rules on a going-forward basis to require negotiated interconnection
agreements and to prohibit wireless termination tariffs. The FCC declined, however, to declare the wireless termination tariffs
illegal on a retroactive basis, finding that the existing rules did not prohibit such tariffs and that the wireless carriers
therefore were obligated to accept the terms of those tariffs. Going forward, LECs and wireless carriers are obligated, upon
request, to negotiate interconnection agreements in good faith, and disputes over such agreements will be subject to state
arbitration pursuant to Section 252 of the Communications Act.
Upcoming Deadlines for Your Calendar
Note: Although the dates listed below are accurate as of the day this edition goes to press, please be aware that these deadlines
are subject to frequent change. If there is a proceeding in which you are particularly interested, we suggest that you confirm
the applicable deadline.
| April 1, 2005 |
Radio license expiration date for Colorado, Minnesota, Montana, North Dakota and South Dakota. |
| April 1, 2005 |
Radio license post-filing announcements due for Kansas, Nebraska and Oklahoma. |
| April 1, 2005 |
Radio license renewal applications due for Texas. |
| April 1, 2005 |
Radio license post-filing announcements due for Texas. |
| April 1, 2005 |
Radio license pre-filing announcements due for Arizona, Idaho, Nevada, New Mexico, Utah and Wyoming. |
| April 1, 2005 |
TV license expiration date for Alabama and Georgia. |
| April 1, 2005 |
TV license post-filing announcements due for Arkansas, Louisiana and Mississippi. |
| April 1, 2005 |
TV license renewal applications due for Indiana, Kentucky and Tennessee. |
| April 1, 2005 |
TV license post-filing announcements due for Indiana, Kentucky and Tennessee. |
| April 1, 2005 |
TV license pre-filing announcements due for Michigan and Ohio. |
| April 1, 2005 |
Deadline for TV stations to simulcast 100% of analog content on digital channel. |
| April 1, 2005 |
Comments due on NPRM regarding cable and DBS children’s TV requirements. |
| April 1, 2005 |
Form 499-A (Telecom Reporting Worksheet) due. |
| April 8, 2005 |
Comments due on SHVERA NPRM regarding "significantly-viewed" out-of-market signals. |
| April 11, 2005 |
Oppositions to petitions to deny Sprint/Nextel merger due. |
| April 11, 2005 |
Comments due on use of cell phones on aircrafts NPRM. |
| April 15, 2005 |
Comments due on prepaid calling cards NPRM. |
| April 16, 2005 |
Radio license post-filing announcements due for Kansas, Nebraska and Oklahoma. |
| April 16, 2005 |
Radio license post-filing announcements due for Texas. |
| April 16, 2005 |
Radio license pre-filing announcements due for Arizona, Idaho, Nevada, New Mexico, Utah and Wyoming. |
| April 16, 2005 |
TV license post-filing announcements due for Arkansas, Louisiana and Mississippi. |
| April 16, 2005 |
TV license post-filing announcements due for Indiana, Kentucky and Tennessee. |
| April 16, 2005 |
TV license pre-filing announcements due for Michigan and Ohio. |
| April 18, 2005 |
Replies to oppositions to petitions to deny Sprint/Nextel merger due. |
| April 18, 2005 |
Comments due on DTV tuner requirements NPRM. |
| April 22, 2005 |
Comments due on Wireless Broadband Task Force report. |
| April 25, 2005 |
Comments due on SHVERA NPRM regarding MVPD good faith retransmission consent bargaining obligations. |
| April 25, 2005 |
Petitions to deny SBC/AT&T merger due. |
| April 29, 2005 |
Reply comments due on SHVERA NPRM regarding "significantly-viewed" out-of-market signals. |
| May 1, 2005 |
Radio license post-filing announcements due for Texas. |
| May 1, 2005 |
Radio license pre-filing announcements due for Arizona, Idaho, Nevada, New Mexico, Utah and Wyoming. |
| May 1, 2005 |
TV license post-filing announcements due for Indiana, Kentucky and Tennessee. |
| May 1, 2005 |
TV license pre-filing announcements due for Michigan and Ohio. |
| May 1, 2005 |
Deadline for certifying compliance with rate averaging/rate integration requirements. |
| May 2, 2005 |
Reply comments due on NPRM regarding cable and DBS children’s TV requirements. |
| May 2, 2005 |
Reply comments due on DTV tuner requirements NPRM. |
| May 9, 2005 |
Petitions to deny Verizon/MCI merger due. |
| May 9, 2005 |
Reply comments due on SHVERA NPRM regarding MVPD good faith retransmission consent bargaining obligations. |
| May 9, 2005 |
Reply comments due on use of cell phones on aircrafts NPRM. |
| May 10, 2005 |
Oppositions to petitions to deny SBC/AT&T merger due. |
| May 16, 2005 |
Radio license post-filing announcements due for Texas. |
| May 16, 2005 |
Radio license pre-filing announcements due for Arizona, Idaho, Nevada, New Mexico, Utah and Wyoming. |
| May 16, 2005 |
TV license post-filing announcements due for Indiana, Kentucky and Tennessee. |
| May 16, 2005 |
TV license pre-filing announcements due for Michigan and Ohio. |
| May 16, 2005 |
Reply comments due on prepaid calling cards NPRM. |
| May 23, 2005 |
Comments due on intercarrier compensation NPRM. |
| May 23, 2005 |
Reply comments due on Wireless Broadband Task Force report. |
| May 24, 2005 |
Oppositions to petitions to deny Verizon/MCI merger due. |
