Communications Law Bulletin - October 2006
The Month in Brief
The outcome of the election season, with the possibility of a change in party control of the House and Senate, is likely to
affect a number of pending legislative and regulatory issues. In the meantime, however, developments in all areas of the
industry continued to unfold. Those developments are reported here, along with our usual list of deadlines for your calendar.
ALLTEL Completes Purchase of Midwest Wireless
ALLTEL Corporation (“ALLTEL”), following federal and state government approval, completed its $1.075 billion purchase of Midwest
Wireless Holdings, LLC (“Midwest”). As a result, ALLTEL gained approximately 450,000 wireless subscribers in southern Minnesota,
northern and eastern Iowa and western Wisconsin. Government approval of the transaction was conditioned on ALLTEL’s agreement
to divest certain wireless assets and businesses in southern Minnesota.
The Federal Communications Commission (“FCC” or “Commission”) approved ALLTEL’s acquisition of Midwest’s licenses and other
authorizations, subject to ALLTEL’s divesting its cellular operating units (including subscribers) in four cellular market
areas in southern Minnesota: (1) Minnesota 7 – Chippewa, (2) Minnesota 8 – Lac qui Parle, (3) Minnesota 9 – Pipestone, and
(4) Minnesota 10 – Le Sueur. In addition, ALLTEL is required to divest 10 MHz of personal communications service (“PCS”)
spectrum in Lac qui Parle County. The FCC divestiture conditions generally mirror those set forth in a settlement arrangement
between ALLTEL, Midwest, the U.S. Department of Justice (on behalf of the United States government), and the State of Minnesota,
with the exception that the FCC also required the divestiture of PCS spectrum.
The FCC concluded that the public interest benefits gained from ALLTEL’s acquisition of Midwest generally outweigh any potential
public interest harms that might be triggered by the transaction. To the extent there are competitive concerns raised by
the acquisition, the divestiture conditions address those concerns. Under the divestiture conditions, ALLTEL transferred
the divested assets to a management trust upon consummation of its acquisition of Midwest. A court-appointed and FCC-approved
management trustee will manage the divested assets while ALLTEL seeks a purchaser(s) for the assets. ALLTEL must divest the
assets within 120 days after acquiring Midwest (or five days after a notice of entry of the judgment with the Department of
Justice, whichever is later), subject to government-approved extensions of up to 60 days.
The FCC also approved at the same time a separate application to transfer control of Great Western Cellular Holdings, L.L.C.
(“Great Western”), to ALLTEL. The FCC considered the Great Western transaction in conjunction with ALLTEL’s acquisition of
Midwest because both transactions implicated overlapping spectrum in southern Minnesota (Minnesota 11 – Goodhue). The FCC
concluded that the cumulative effect of both transactions would not result in competitive harm.
Amateur Radio Operators Appeal FCC’s Modified Interference Rules For BPL As States Begin To Establish BPL Policies
As expected, the American Radio Relay League (“ARRL”) appealed the FCC’s radio frequency interference rules related to broadband
over power line (“BPL”) systems, as modified by its memorandum opinion and order released on August 7. The FCC established
its BPL interference rules in a 2004 Report and Order, and modified those rules in the August 7 order (discussed in the August
2006 Bulletin), ruling on petitions for reconsideration. Among the rejected petitions was a request by the amateur radio
community to rescind the BPL interference rules and prohibit BPL operations pending further study of BPL interference characteristics
and to prohibit BPL operations in the frequencies used for amateur radio communications.
Although the ARRL petition for review filed in the U.S. Court of Appeals for the D.C. Circuit on October 10 does not specify
its objections, an ARRL press release and previous statements by ARRL’s General Counsel, Chris Imlay, indicated that it is
challenging those aspects of the rules that ARRL believes provide inadequate protection for mobile radio operators from BPL
interference. In particular, ARRL is challenging certain measurement guidelines used to test BPL emissions -- the so-called
“40 dB per decade extrapolation factor” reaffirmed in the August order -- and a provision that a BPL operator causing interference
to a mobile station need only reduce RF emissions 20 dB from Part 15 maximum levels. Imlay charged that the 20 dB attenuation
requirement is “intolerable” because it would still leave a “tremendously powerful signal” interfering with the amateur receiver.
He stated that a clarification in the August 7 order “hardened” the FCC’s previous assumption that the 20 dB attenuation requirement
would be sufficient to eliminate interference into an irrebutable presumption.
The ARRL press release characterized the clarification in the August 7 order as a “new rule” that had not been included in
the FCC’s notice of proposed rulemaking initiating the proceeding, thereby violating the Administrative Procedures Act (“APA”).
Industry observers point out, however, that other parties raised the issue in comments and that the August 7 clarification
is a “logical outgrowth” of the FCC’s notice of proposed rulemaking and the other parties’ comments, thereby satisfying APA
requirements. They also predict that the D.C. Circuit is likely to uphold the FCC on such a purely technical point.
On October 27, the FCC announced the agenda for its next open meeting, to be held on November 3, which includes a BPL-related
item deferred from the August 3 meeting. The FCC will consider an order resolving a petition for declaratory ruling filed
by the United Power Line Council (“UPLC”) concerning whether BPL Internet access services should be classified as information
services, in the same manner as wireline broadband and cable modem Internet access services, or as telecommunications services.
The states are also taking action on BPL activities. On October 18, the New York Public Service Commission (“PSC”) issued
a Statement of Policy providing regulatory guidance with regard to BPL deployment. Although the PSC “believe[s] that regulated
electric utilities should not be … BPL providers,” utilities may operate BPL systems for communications services through a
“structurally separate affiliate” if “appropriate affiliate transaction, cost allocation and general business relationship
rules” are followed. Utilities’ BPL affiliates may seek joint venture or partnership arrangements. The utility and BPL provider
also should develop procedures for sharing and protecting customer and system information. The PSC stated that it expects
BPL providers to respond to interference complaints and to minimize or stop any interference promptly. California also has
adopted BPL rules. PSC Chairman William Flynn said that the PSC will advise the National Association of Regulatory Utility
Commissioners (“NARUC”) of its Policy Statement shortly, as the issue of BPL deployment is expected to be a hot topic at NARUC’s
November meeting in Miami.
Brett Kilbourne, UPLC Regulatory Director, stated that, with FCC rules complete, the UPLC will begin to deal more with the
states in seeking regulatory clarity for BPL. He characterized the PSC’s rules as “more regulatory” than California’s rules
or Texas BPL legislation. He stated that “[t]here is no clue” in the rules how the PSC will enforce compliance with its directive
to minimize reported interference and suggested that the PSC’s directive will not have “any practical impact.” The “cloud
on the horizon” is that the PSC will come back with more regulations. The approach taken in Texas merely requires BPL operators
to comply with FCC rules, which, he asserted, is “a much better way of doing it.”
“In-building” BPL also has gained considerable traction recently and is making more rapid inroads than access BPL, which uses
the medium- and high-voltage power lines running up to the utility customer’s house or building. EarthLink announced that
it is teaming with Telkonet to test broadband and Voice over Internet Protocol (“VOIP”) services in nine Washington, D.C.
area apartment complexes using Telkonet’s BPL backbone. Customers will receive a voice, broadband, and home networking package
marketed by EarthLink. Motorola, which recently debuted its Powerline MU solution, indicates that Comcast, Charter, and Cox
are among cable firms interested in the technology. In-building BPL has generated so much interest because it is easy to
deploy, compared with cable, in multiple dwelling units (“MDUs”), is cheaper and less intrusive than access BPL, and has no
interference or other regulatory issues.
Including EarthLink, Telkonet is teaming with seven Internet Service Providers (“ISPs”) to target 31 million families living
in MDUs, according to Telkonet Executive Vice President Albert Diehl. He notes that broadband penetration currently is only
45 percent of MDUs, leaving a large market that is “right for delivery of services.” Telkonet also is reaching out to electric
utilities’ communications subsidiaries, signing an agreement with Ameren Communications, a subsidiary of Ameren Energy, to
provide in-building BPL service in Missouri and Illinois. Telkonet also is talking to all of the major cable and satellite
companies. Rewiring MDUs long ago fitted with analog cable would be costly and disruptive, making in-building BPL an attractive
alternative.
FCC Denies Fones4All Forbearance Petition
On September 29, the FCC released an order denying a petition filed by Fones4All Corporation seeking forbearance from certain
rules relaxing the FCC’s previous unbundling requirements. Fones4All specializes in Lifeline services for low-income consumers.
In the 2005 Triennial Review Remand Order (discussed in a February 2005 Special Edition of the Bulletin), the FCC decided that incumbent local exchange carriers (“ILECs”) no longer would be required to make “mass market local
switching” -- i.e., local switching facilities used for the competitive provision of local exchange services to mass market
customers -- available on an unbundled basis to competitive local exchange carriers (“CLECs”). Fones4All asked the FCC to
forbear from enforcing this exemption from the unbundling requirements and to reimpose them on ILEC local switching used for
residential local service under a state or federal Lifeline program.
In denying relief, the FCC held that the petition was procedurally defective because forbearing from the unbundling exemption
for mass market local switching would not reimpose the unbundling requirements on ILEC local switching facilities. Unbundling
requirements under Section 251 of the Communications Act cannot be expanded through a forbearance petition but may be established
only after a finding that CLECs would be impaired in competitive markets without access to unbundled services or facilities.
Forbearance from the exemption thus “would simply create a vacuum rather than confer any rights upon requesting [CLECs] or
obligations upon [ILECs].” The FCC also found that Fones4All had not demonstrated any of the criteria for forbearance or
any basis to revisit its prior decision finding that mass market local switching need not be unbundled.
Commissioners Copps and Adelstein were sympathetic with the petition, given the goal of providing more telephone service to
low income consumers. With Commissioner McDowell recusing himself from the matter, however, an even split among the other
four commissioners would have resulted in approval of the petition by default. Commissioners Copps and Adelstein accordingly
concurred with the denial of the petition in order to prevent a default approval, which Commissioner Copps characterized as
“not the responsible choice . . . . , much as I might find the policy outcome appealing.” CompTel President Earl Comstock
criticized Commissioners Copps and Adelstein for concurring in the denial of the petition “when they claim to support its
objective.” He charged that, by concurring in a denial of a forbearance petition simply to avoid a grant by default, they
have given Chairman Martin and Commissioner Tate the power to decide which forbearance petitions are granted “until Commissioner
McDowell is able to participate.”
For companies seeking a way to expand others’ regulatory obligations, the significance of the decision is that the FCC is
not likely to forbear from regulations that relax, reduce or provide exemptions to general requirements. Forbearance from
the removal of, or from an exception to, an obligation would not resurrect the obligation but would simply leave a void.
Level 3 to Buy Broadwing
In a deal announced in October, Level 3 Communications Inc. (“Level 3”) agreed to buy Broadwing Corp. (“Broadwing”) for $1.4
billion in cash and stock. This deal is the latest in a string of acquisitions by Level 3, which earlier this year agreed
to purchase the privately held firms Looking Glass Networks Inc., TelCove Inc., and ICG Communications. Level 3 and Broadwing
both own fiber networks that carry Internet and voice traffic and sell capacity wholesale to other companies.
Observers remarked that the deal was motivated by tough competition and growing consolidation among the giants in the industry,
epitomized by AT&T Inc.’s acquisition of SBC and planned acquisition of BellSouth Corp., and the Verizon Communications purchase
of MCI. In a move to generate economies of scale and save money, Level 3 plans to migrate Broadwing’s customers onto its
network, and shut down much of Broadwing’s network. The acquisition also gives Level 3 access to Broadwing’s business customers,
which contribute almost half of Broadwing’s revenue. Level 3 had just recently entered the business customer market. The
deal is expected to close in the first quarter of 2007.
Net Neutrality Awaits Election Outcome
Net neutrality issues have been biding their time this past month. On one front, the FCC announced that a net neutrality
notice of inquiry (“NOI”) on broadband industry practices was on the agenda for the October 12 open meeting. When the AT&T/BellSouth
merger vote was postponed (see separate article), however, the net neutrality NOI followed. The merger conditions proffered
by AT&T to obtain consent for the merger include a net neutrality condition (see separate article) similar to those attached
earlier to the Verizon/MCI and AT&T/SBC mergers.
In Congress, there is now widespread speculation that a Democratic takeover could shift the prospects for net neutrality.
In the House, the chairmanship of the House Energy and Commerce Committee would shift to Rep. John Dingell (D-Mich), who has
been sympathetic to net neutrality supporters. Rep. Ed Markey (D-Mass), who drafted a net neutrality amendment in the House
earlier this year, would take over the Internet and Technology subcommittee. In the Senate, although a Democratic takeover
appears less likely, even a small shift of seats to Democrats could impact the net neutrality issue, as the Senate amendment
tied by a vote of 11-11 before the Senate Commerce Committee.
Therefore, those on both sides of the issue will be refining their strategies in light of the outcome of the November elections.
AT&T/BellSouth Merger Developments
Toward the end of September, Congress sought a delay in the AT&T/BellSouth merger. Representatives Sensenbrenner (R-Wis.)
and Conyers Jr. (D-Mich.) sent a letter to Attorney General Gonzales asking the Department of Justice (“DOJ”) not to rule
on the merger until a federal court rules on the consent decrees underlying last year’s SBC/AT&T and Verizon/MCI mergers.
Lawmakers pushed for the delay, reasoning that because the court decision potentially could impact the AT&T/BellSouth merger,
the DOJ should refrain from issuing its ruling. In spite of Congress’s efforts, the DOJ approved the merger October 12 with
no concessions, but received some substantial criticism for the lack of conditions.
Due to Commissioner McDowell’s recusal based on his former ties with Comptel, which opposed the AT&T/BellSouth merger, the
Commission faced a possible 2-2 split on the vote. Chairman Martin originally planned an FCC vote on the merger on October
12 (immediately after the DOJ vote), reportedly seeking no conditions but accompanied by a Notice of Inquiry on net neutrality
issues in the broadband industry (see separate article on net neutrality). Opposition to the lack of conditions led by numerous
consumer groups and technology companies -- and taken up by Democratic Commissioners Copps and Adelstein -- stalled the FCC’s
vote on the merger. Faced with this Democratic opposition, Chairman Martin then pushed the vote to the following day, during
which he tried to broker a deal on possible concessions with Copps and Adelstein.
AT&T offered various voluntary conditions in hopes of securing a 4-0 vote in favor of the merger. In response to pressure
from the Democratic commissioners, AT&T’s proposed conditions were opened to public comment, and the vote on the merger was
delayed again to November 3 to allow time for public comment. Among the proposed conditions are the provision of broadband
Internet service to all customers within the combined entities’ territories, a freeze on Unbundled Network Element (“UNE”)
and collocation service rates and rules, wireless broadband trials, naked Digital Subscriber Line (“DSL”) offerings, compliance
with the FCC’s net neutrality policy statement, and a service quality measurement plan for special access similar to the one
included in the SBC/Ameritech conditions. Many of these conditions are similar to those imposed on the SBC/AT&T and Verizon/MCI
mergers, although for shorter time frames.
Since the proposed conditions were made public, there has been further pressure from many parties to impose more stringent
conditions on the merger, including more stringent special access, standalone DSL, and net neutrality conditions, as well
as to require BellSouth to additionally divest some of its WiMax spectrum. The continued pressure and lobbying on these issues
had led some to speculate that the agenda item would not be ready for the FCC's November 3 open meeting, and in fact the item
was pulled from the agenda late on November 2. Our next edition will continue to report on these merger developments.
Broadcast Developments
Disney Initiative Targets Links between Advertising and Childhood Obesity
In an effort to promote healthful eating habits in young children, the Walt Disney Company announced an initiative to gradually
eliminate promotion and advertisement of junk food. The new guidelines will affect Disney’s own advertising during its kids’
programming block on ABC and its Toon Disney cable channel, as well as all sponsor messages on the Disney Channel. FCC Commissioner
Deborah Taylor Tate released a public statement October 16 applauding Disney’s commitment to healthier eating habits for children.
FCC Chairman Kevin Martin previously had unveiled an initiative at the Commission to address links between advertising and
childhood obesity, but clarified that he hopes all interested parties can find a solution without the need for a rulemaking
proceeding.
FCC Holds Field Hearing in Los Angeles on Media Ownership Issues
On the media ownership front, the FCC held a field hearing in Los Angeles in early October to address proposed revisions to
the current media ownership rules. In his remarks, Chairman Martin acknowledged public concern about further relaxation of
current media ownership restrictions, but insisted that revisions to the rules are needed in light of the “struggling nature”
of some sectors of the media industry and the “competitive environment in which media companies operate.”
FCC Affirms its Use of Consent Degrees to Settle Broadcast Station Indecency Violations
On October 17, the FCC denied petitions for reconsideration challenging its decisions to implement two indecency consent decrees
with Emmis and Viacom. In the Emmis Order, the Commission denied petitions filed by, among others, the Illinois Family Institute
and the Illinois Chapter of Concerned Women for America, challenging a consent decree under which Emmis paid a monetary settlement
for possible violations of broadcast indecency regulations. Right to Decency, Inc., and the American Decency Association
sought reconsideration of the Viacom consent decree under which a similar settlement had been entered into following Viacom’s
possible violation of indecency rules. Both sets of petitioners claimed that the FCC lacked the requisite authority to employ
consent degrees to settle indecency enforcement actions. The Commission affirmed its decisions in both proceedings, explaining
that as a general matter administrative agencies are presumed to have the discretion to settle or dismiss an enforcement action.
FCC Issues New Post-DTV Transition Table of Channel Allotments
On October 20, the FCC released its Seventh Further Notice of Proposed Rulemaking (“FNPRM”) concerning the Digital Television
(“DTV”) transition, which proposes a new table of allotments for DTV channels. The existing allotments were designed to provide
all eligible, full-service broadcasters with a second channel to provide DTV service in addition to their existing analog
service. This second channel is intended for use during the DTV transition, after which each licensee must revert to broadcasting
on one 6 MHz channel. The new FNPRM’s table of allotments, once finalized, will govern the channel designations after the
DTV transition in 2009 and is designed to accommodate broadcasters’ channel preferences. Once the channel designations are
locked, broadcasters can plan for their future build-out obligations. Comments are due January 11, 2007 and reply comments
are due February 12, 2007.
CBS Radio Ends Probe into Possible Payola Practices by Monetary Settlement
The New York State Attorney General’s payola probe into CBS Radio Inc. was concluded on October 19. The probe investigated
allegations that some CBS radio stations had been accepting payment in exchange for playing certain songs on the air. Under
the terms of the settlement, CBS will pay $2 million to several non-profit entities in the state to fund music education.
FCC Commissioner Adelstein commended New York Attorney General Eliot Spitzer for coordinating the settlement, saying that
CBS Radio’s exemplary commitment to better practices will benefit the radio industry and all its listeners nationwide.
California Moves Toward New Video Franchise Rules
In a move to introduce competition in the video marketplace, the governor of California on September 29 signed the Digital
Infrastructure and Video Competition Act of 2006 (“DIVCA”). The law transfers to the state’s Public Utility Commission (“PUC”)
the video franchising authority formerly held by local agencies. Local authorities, however, will continue to oversee customer
service and protection rules, wield limited control over rights-of-way, and will receive a 5% franchise fee. Most large service
providers, such as AT&T California and Verizon, applauded the move as pro-competitive and likely to stimulate private investment
and job growth. The bill’s sponsors explained that under the old regime, local franchising authorities tended to discourage
new entrants into local markets due to the often years-long process of negotiations with prospective video providers. Critics
of the new legislation expressed concern over degradation of customer protection measures and quality of service once local
authorities no longer oversee franchising.
The California PUC will be accepting applications for state video franchises until no later than April 1, 2007. The new law
requires the PUC to act on franchise applications within 14 days of determining that the application is complete. After January
1, 2008, incumbent franchisees may opt out of their current local franchises in favor of a state franchise, provided that
a state-franchised operator has already commenced service in the same market. Following the passage of the new law, the California
PUC began a rulemaking procedure seeking comment on procedures to implement the DIVCA, including the scope of the PUC’s authority
under DIVCA, the content of new state video franchise rules and processes, eligibility requirements for applicants, and the
rights granted to state franchisees. Opening comments were due October 25 and reply comments were due November 1.
FCC Adopts Measures To Permit Fixed Low-Power Devices On Vacant TV Channels
On October 18, the FCC released an order allowing fixed low-power devices to operate on television channels that are not already
being used for television or other authorized services. The FCC, however, barred operation of low-power devices on TV channel
37, which is used by radio astronomy and wireless medical telemetry services, and on TV channels 52-69, which have been reallocated
for other services. It also barred operation of portable low-power devices on TV channels 14-20, which are used for public
safety services in 13 cities, but sought comment on whether fixed low-power devices should be permitted on those channels.
Moreover, the FCC prohibited marketing of TV band devices prior to February 18, 2009, the deadline for completing the DTV
transition.
Additionally, the FCC issued a further notice of proposed rulemaking seeking comment on a number of issues including (1) whether
TV-band devices should operate on an unlicensed, licensed, or hybrid basis; (2) whether portable low-power devices can operate
in any of the TV channels without causing harmful interference; (3) whether low-power devices should be permitted on TV channels
2-4, which are used by VCRs and other TV interface devices; and (4) whether to require TV-band devices to employ dynamic frequency
selection technology to ensure that the devices operate only on vacant TV channels.
FCC Acts on Qualcomm Interference Petition in 700 MHz Proceeding
The FCC acted on a January 10, 2005 Petition for Declaratory Ruling filed by Qualcomm Incorporated regarding interference
protection in the 700 MHz band. Qualcomm holds Lower 700 MHz covering the entire United States and plans to use the spectrum
to deliver video, audio and data content through its subsidiary MediaFLO. MediaFLO intends to deploy and operate a nationwide
mobile multimedia network delivering video, audio, and data content to advanced mobile phones, using Qualcomm’s 700 MHz spectrum
licenses as a base station transmit block (downlink). Qualcomm sought clarification of certain rules and streamlined processing
of applications to accelerate deployment of new services in the 700 MHz band before the transition of DTV has been completed.
Several parties largely representing the interests of 700 MHz licensees filed supporting comments, and parties mainly representing
the interests of broadcasters filed opposing comments.
The FCC granted Qualcomm’s request to use the procedures set forth in Office of Engineering and Technology Bulletin No. 69
(OET-69), with certain modifications, as an acceptable basis for demonstrating whether MediaFLO complies with the FCC’s rules
on interference protection in the 700 MHz band. The FCC reasoned that OET-69 is an established engineering methodology for
making radio field strength predictions in the context of broadcast television service and that the FCC and its licensees
have substantial experience with OET-69 particularly as it relates to predicting interference to television service from
transmitters located outside and inside another station’s service contours. MediaFLO signals share many similarities with
broadcast digital television signals.
The FCC, however, did not grant Qualcomm’s request to declare that, for purposes of making engineering showings, predicted
interference from a DTV station to not more than two percent of the population served by another DTV or TV broadcast station
is considered de minimis and therefore acceptable. Instead, the FCC granted Qualcomm a limited waiver under which the allowable
predicted interference caused by the MediaFLO operation to a TV or DTV station will increase incrementally each year from
October 13, 2006 (the date of the release of the order) until the conclusion of the DTV transition in February 2009, with
the following limits: 0.5 percent of the population within the first year; 1.0 percent within the second year; and 1.5 percent
for the remainder to the DTV transition. Lastly, the FCC declined to adopt streamlined processing of the applications.
Chairman Martin and Commissioner Copps issued separate statements. On balance, it appears that Qualcomm scored a victory
on its petition and that reasonable groundwork has been established to enable the new technology provider to move forward.
FCC Adds VOIP and Makes Other Changes to List of Eligible Services List for E-rate Program
The FCC has released the list of services that are eligible for discounts under the universal service schools and libraries
or “E-rate” program for the 2007 funding year. According to the FCC, the major changes made to the eligible services list
are intended to simplify the list and make it more user friendly. The list also includes for the first time VOIP services.
The FCC’s changes should provide applicants and service providers with new funding opportunities under the E-rate Program.
Changes and/or clarifications to the list include:
- Overall Changes: The list has been shortened and slightly reorganized, although it still provides essential eligibility information about
product and service categories and includes an index and a new glossary of terms.
- Interconnected VOIP: Interconnected VOIP has been added as an eligible service. Interconnected VOIP is defined as a service that: (1) enables
real-time, two-way voice communications; (2) requires a broadband connection from the user’s location; (3) requires Internet
protocol-compatible customer premises equipment; and (4) permits users generally to receive calls that originate on the public
switched telephone network and to terminate calls to the public switched telephone network.
- Redundant Components: Components that are installed in standby mode, redundant, not active and online, or otherwise not an essential element in
the transmission of information within the school or library are not eligible for discount under the E-rate Program.
- Installation and Configuration (Training): So long as training occurs within a reasonable time after installation of eligible components it is coincident with installation.
- KVM Switch: A “keyboard-video-mouse” switch has been added as an eligible service.
- Fees for Universal Service Administration: Customer charges for universal service fees are eligible under the E-rate Program, but charges for universal service administration
are not eligible.
- Wireless Internet: The requirement that an auditable system be in place in order for applicants to receive funding for wireless Internet access
service designed for portable devices has been removed.
The FCC’s rules require it to issue a public notice with the final list of eligible services at least 60 days before the administrator
of the E-rate Program can open the application window for the next funding year. To facilitate the application process for
the 2007 funding year, the FCC also decided to waive its rules and directed the program administrator to open the application
filing window for the 2007 funding year on November 14, 2006.
Companies Detail AWS Plans and High Interest Expressed In Upcoming 700 MHz Auction While 2.1 GHz Clearinghouses Named and
WARN Act Signed Into Law
There have been several developments in the wireless industry in the past month. The wireless industry is showing significant
signs of expansion and development based upon the just concluded auction of Advanced Wireless Service (“AWS”) spectrum and
recent comments filed with the FCC regarding the upcoming auction of 700 MHz spectrum. In addition, the FCC named two clearinghouses
to administer the relocation and cost-sharing plans for the 2.1 GHz band. Furthermore, legislation for a national security
alert system has been signed into law.
Winning bidders in the AWS auction have started to detail their plans for the new spectrum they acquired. T-Mobile USA, the
top winner in the AWS auction, plans to spend $2.7 billion on installing new third generation or “3G” equipment that will
deliver Internet, multimedia, and other new advanced services. T-Mobile also reported that it had already upgraded half of
its network in New York City and expects “most of the work” across its national network to be finished by the conclusion of
2008.
SpectrumCo LLC, the consortium that includes Sprint Nextel and four cable companies, has stated that it is in the process
of assessing its options for the AWS spectrum it won at auction. One of those companies, however, stated that it will test
an “integrated wireless service” in a venture with Sprint Nextel in two cities this year. Other cable operators that participated
in the auction have indicated that they may use the AWS spectrum to deliver wireless broadband, although the services may
not be commercially available for several years. The scarcity of spectrum prompted many cable companies to acquire spectrum
in the AWS auction, although they have not reached final decisions on how to use the spectrum.
Leap Wireless, which won 100 AWS licenses, also outlined in a Securities Exchange Commission filing its plans to begin building
out the new licenses in 2007 with substantial completion by the end of 2009. Leap Wireless also stated that it may sell some
of its AWS spectrum in some rural areas, including the Great Lakes region, explaining that it did not consider some of the
spectrum to be well-suited for its prepaid wireless services.
Recent comments filed with the FCC also demonstrated a very high interest in 700 MHz spectrum, of which the FCC statutorily
is required to auction 60 MHz by early 2008. As one industry official stated, “from a business standpoint, if AWS is beachfront
spectrum, [700 MHz spectrum] is the Riviera of beachfront.” The 700 MHz spectrum is considered by many in the industry to
be more valuable than AWS spectrum because of its propagation and penetration characteristics. DirecTV and EchoStar, which
dropped out of the AWS auction, urged the FCC to make available at least one nationwide 700 MHz license to encourage nationwide
entrants.
In related matters, the Wireless Telecommunications Bureau announced that CTIA – The Wireless Association (“CTIA”) and Personal
Communication Industry Association (“PCIA”) are qualified to serve as clearinghouses to administer the relocation and cost-sharing
plans for the 2.1 GHz Band. The Bureau concluded that “the benefits of having two or more clearinghouses outweigh any disadvantages.
By offering participants a choice, we increase the incentive for both clearinghouses to operate in an efficient manner, thus
benefiting the consumers of these services.” The Bureau advised CTIA and PCIA to begin preparing their clearinghouse operations,
but that the Bureau will release further details of the clearinghouses’ duties and responsibilities.
In addition, President Bush signed into law the Warning, Alert & Response Network (“WARN”) Act, which mandates a national
emergency alert system. The WARN Act requires the Department of Homeland Security (“DHS”) to adopt technical standards and
create a testing program for the alert system. The WARN Act also provides a voluntary process for wireless carriers to participate
in the alert system. Those participating in the alert system are exempt under the WARN Act for liability from any act related
to “harm from the transmission of, or failure to transmit” an alert.
The legislation also requires the FCC to establish an advisory committee within 60 days (i.e., by December 12) that will make
recommendations to the FCC on technical standards, protocols, and other procedures. The committee has one year to issue its
recommendations, after which the FCC has 180 days to adopt technical requirements for carriers participating in the alert
system. The FCC then must complete a proceeding within 120 days that allows carriers to actually transmit alerts and requiring
those that elect not to transmit alerts to notify current and potential subscribers. Carriers then will have 30 days to notify
the FCC whether they plan to participate in the alert system. The FCC has solicited nominations to serve on the advisory
committee, which should be submitted as soon as possible. Members should represent state and local governments, carriers,
vendors, the disabled, and other technical experts.
Legislative Developments
As expected, Congress adjourned for the October recess without taking further action on communications reform legislation.
Some slim hope remains, however, that a compromise could be reached to allow passage of the legislation during the Congressional
lame duck session. Net neutrality continues to be a divisive issue (see separate article). Although Senate Commerce Committee
Chairman Ted Stevens (R-Ak.) expressed willingness to carve net neutrality from the Senate bill, many Democrats have insisted
that the bill include stronger net neutrality provisions. Moreover, even assuming that the Senate approves the bill in the
lame duck session, differences between the House and Senate versions, such as provisions regarding the broadcast flag and
the operation of unlicensed devices on vacant TV channels, will have to be reconciled in conference.
California Legislative Session Ends
The 2005-2006 California legislative session has ended and all bills delivered to Gov. Schwarzenegger have either been signed
or vetoed. Of those vetoed by Schwarzenegger, Senate Bill 440 would have permitted customers to rebut the presumption that
all direct dialed telephone calls are presumed to be authorized by using evidence that the call was made from a lost or stolen
device. The bill also would have required carriers to provide customers with certain information if they disputed an invoice.
The Governor stated that he vetoed the bill because it duplicated existing consumer protection rules. The Governor also vetoed
AB 1388. This bill would have established two additional programs, the Community Based Supplemental Educational Grant Program
and the Telemedicine Grant Program, with funding for the new programs coming from the existing Teleconnect Fund (which is
supported by a surcharge on California end-users’ telephone bills). The Governor stated that the Teleconnect Fund did not
have enough money to support the additional programs.
Schwarzenegger did sign SB 1627. This bill limits local governments’ powers to impose permit requirements on qualifying wireless
collocation facilities (including antennas). As adopted, wireless collocation facilities that satisfy certain requirements
set forth in the statute are deemed to be “permitted uses” and are not subject to a city or county discretionary permitting
process (which means that the project is exempt from California Environmental Quality Act review). In addition, a city or
county may not, as a condition for approval of an application to construct wireless facilities (1) require escrow deposits
for removal of wireless facilities; (2) limit permits to periods less than ten years, (3) or restrict wireless facilities
to only those locations owned by particular parties. This bill is part of a larger policy effort by the Schwarzenegger administration
to encourage investment in communications facilities.
California CPUC Issues Decisions in Longstanding Proceedings
In early October the California PUC adopted rules governing the migration of customers of local exchange carriers that voluntarily
exit the market. This proceeding began in early 2003 as result of concerns at that time over customers potentially being
left without telephone service if their local carriers ceased providing service on short notice, either because of bankruptcy
or other business decisions. This proceeding had been dormant since mid-2004 and, although the potential for the problem
has diminished in the intervening years as the competitive local exchange market has matured, the Commission nonetheless issued
a decision addressing the matter. The adopted guidelines, known as the “Mass Migration Rules,” require an exiting carrier
to provide its customers with notice sixty days and again thirty days before it intends to stop service. The exiting carrier
also must notify interconnecting carriers and the PUC ninety days before it intends to cease operating. Customers that do
not choose an alternate service provider in the time allowed will be assigned to a default carrier, which could be a provider
that volunteers to be the default carrier or a carrier chosen by the PUC, typically the underlying carrier or the designated
carrier of last resort. The guidelines also include processes for transferring NXX codes and unlocking numbers in the E911
databases.
Similarly, also in early October, the PUC initiated a new rulemaking in an effort to rationalize its environmental review
of the construction of telecommunications facilities. The CPUC first considered how it should comply with its obligations
under the California Environmental Quality Act (“CEQA”) in early 2000 but had taken no action until this summer, when it rejected,
on a 3 2 vote, a proposal by Commissioner Geoffrey Brown on the grounds that his proposal was burdensome and inconsistent
with the environmental concerns currently presented by the construction of telecommunications facilities. During the intervening
years the CPUC has imposed different environmental compliance requirements on otherwise similar local exchange carriers, with
the applicable rule depending only on when the carrier was certified. The PUC readily conceded that the lack of consistent
regulations has resulted in uncertainty, deterred investment in critical infrastructure, and hindered the deployment of advanced
telecommunications services. The new rulemaking closes the earlier proceeding and establishes an aggressive schedule for
the adoption of procedures that will be applied consistently to all carriers. Interested parties are asked to comment on
a variety of potential compliance procedures in November and the PUC anticipates a final decision within a year.
Missouri Public Service Commission Attempts to Regulate VOIP Services
Disagreeing with the FCC’s decisions preempting state regulation of VOIP services, the Missouri PSC has ordered Comcast Internet
Protocol Phone to explain why it has not applied for state certification of the VOIP services that it began providing in Missouri
earlier in the summer. Missouri PSC staff had complained that Comcast’s VOIP service differs from the other VOIP services
considered by the FCC, in particular Vonage’s, because Vonage customers can “plug in anywhere in the broadband world” while
the Comcast VOIP services require a customer to use the Comcast network located in Missouri. Comcast has countered by filing
suit in federal district court seeking a declaratory ruling that the PSC lacks jurisdiction over its service and injunctive
relief. In its response to the Comcast lawsuit, the PSC argues that, unlike the Vonage service, Comcast knows where its calls
originate and terminate because the service uses Comcast’s existing coaxial cable, connects to an ordinary telephone with
an adapter, and assigns numbers based on the geographic location of the customer. As a result, the PSC argues, the jurisdiction
of any particular call can be determined and the FCC’s reasons for preempting the Vonage service do not apply here. The District
Court has denied Comcast’s motion for a temporary restraining order but has set an accelerated briefing schedule for the preliminary
injunction.
Judicial Review of Preemption of State Wireless Regulation Continues
The courts’ review of the scope of federal preemption of the states’ regulation of the terms and conditions of wireless services
continues. Most recently, the U.S. Supreme Court refused to review a lower court ruling striking down a Minnesota statute
that would have required wireless carriers to obtain customer permission before changing the rates and terms of a service
contract. The 8th Circuit Court of Appeals had found the Minnesota act unlawful because it would have permitted state regulation
of wireless rates in violation of Section 332 of the federal Communications Act.
In addition, the 11th Circuit Court of Appeals has modified its earlier decision voiding the FCC’s Truth-in-Billing rules
(see the August Communication Law Bulletin for more information about the 11th Circuit decision). This most recent action
by the court clarifies that it reversed only those portions of the FCC order that relate specifically to the issues raised
by appellant the National Association of State Utility Consumer Advocates (“NASUCA”). Any remaining portions of the order
that had not been challenged by NASUCA remain in place. A Supreme Court appeal of this order is likely.
Upcoming Deadlines for Your Calendar
Note: Although we try to ensure that the dates listed in the attached PDF 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. In addition, although we try to list deadlines and proceedings
of general interest, the list below does not contain all proceedings in which you may be interested.
