Communications Law Bulletin -- December 2004
Special Announcement
Morrison & Foerster LLP is pleased to announce that William F. Maher, Jr. has joined its Washington office as a partner in
its Communications Practice. Until recently, Mr. Maher served as Chief of the Wireline Competition Bureau at the Federal Communications
Commission (FCC), where he led an operating bureau of more than 180 lawyers, economists, engineers, and other professionals.
While at the FCC, Mr. Maher supervised the development of U.S. polices regarding Internet services, including Voice over Internet
Protocol (VOIP) services, network unbundling, compensation arrangements, and universal service.
Prior to Mr. Maher’s service as Bureau Chief at the FCC, he was a partner at a Washington, D.C. telecommunications law firm
for 8 years. Earlier, Mr. Maher was an associate administrator for policy at the National Telecommunications and Information
Administration (NTIA) in the U.S. Department of Commerce and special counsel at the FCC. Before becoming a lawyer, Mr. Maher
worked as an engineer for Bell Laboratories.
Mr. Maher received his J.D. from Harvard Law School in 1984. He also received a S.M. in Electrical Engineering from the Massachusetts
Institute of Technology in 1980 and a B.S. in Electrical Engineering from the University of Notre Dame in 1978.
If you would like to contact Mr. Maher he can be reached at (202) 887-1574 or wmaher@mofo.com.
The Month in Brief
We closed out 2004 with developments in all of the industry segments regulated by the Federal Communications Commission ("FCC"
or "Commission"). Among other December news, the FCC adopted its long-awaited, updated unbundling rules; the U.S. Supreme
Court agreed to hear a case that could determine the future regulation of broadband Internet access service; and broadcast
indecency controversies continued and showed no sign of abating. Those and other developments are described here, along with
our usual list of deadlines for your calendar.
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International Bureau Provides New Electronic Filing Form
In early December, the International Bureau announced that a new electronic form is available that now permits the electronic
filing of international Section 214 transfer of control or assignment applications. Previously, initial Section 214 applications
could be filed electronically, but there was no form for transfer or assignment applications.
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FCC Adopts Final Unbundling Rules in Its Fourth Attempt to Implement the 1996 Act
On December 15, after weeks of furious lobbying by industry representatives and members of Congress, the FCC, by a party-line
vote of 3-2, adopted its final network unbundling rules to replace the rules struck down by the D.C. Circuit decision vacating
and remanding the Triennial Review Order ("TRO"). The FCC modified its standard for determining when competitive local exchange carriers ("CLECs") are impaired, under Section
251 of the Communications Act, in competing with incumbent local exchange carriers ("ILECs") without access to ILEC facilities.
Among other changes, the FCC stated that it would evaluate "impairment" with regard to the capabilities of a reasonably efficient
competitor and that it would draw reasonable inferences regarding the prospects for competition in one geographic market based
on the state of competition in other, similar markets. Based on its new impairment standard, the Commission held that, after
a one-year transition, ILECs would no longer be obligated to provide CLECs serving mass market customers with access to local
circuit switching facilities as an unbundled network element ("UNE"). The elimination of the local switching UNE also eliminated
access, after a one-year transition, to the UNE platform ("UNE-P"), i.e., the combination of an unbundled local subscriber line, or "loop," unbundled switching and shared transport, used by CLECs
for the provision of local services to residential and small business customers.
The FCC also eliminated dark fiber loops as a UNE, after an 18-month transition, and reduced the availability of high-capacity
loops and dedicated transport. After a one-year transition, high-capacity loop UNEs will be eliminated in wire centers with
more than a specified number of business lines and a specified number of fiber-based service providers collocating in the ILEC central office, and high-capacity dedicated interoffice
transport UNEs will be eliminated in areas with more than a specified number of business lines or a specified number of fiber-based collocators. According to Wireline Competition Bureau ("WCB") Chief Jeffrey Carlisle, the
different impairment standards for high-capacity loops and transport are deliberate and are intended to limit the unavailability
of high-capacity loops to the most competitive wire centers. He also noted that, under the new standard, access to high-capacity
DS-1 loops would be curtailed only in the most densely populated 0.5 percent of the nation’s wire centers. The FCC also announced
the pricing formulas that would apply to the eliminated UNEs during the various transitions.
The FCC also resolved other highly disputed issues. It decided that denying CLECs access to a UNE simply because they could
compete using a tariffed ILEC service, such as special access service, would be inappropriate. It also decided not to restrict
the wireline local and access services that could be offered over high-capacity loops, an issue that had been of concern to
CLECs that want to use them for data. It held, however, that no UNEs could be used to provide wireless or long distance services.
In his separate statement, FCC Chairman Powell stated that the majority’s decision "does not attempt to make all sides happy"
and characterized the impairment criteria applied to high-capacity loops and transport as an attempt "to satisfy the court,
while preserving access to incumbent’s networks outside the most competitive and densest business districts." He stated that
the FCC’s decision was based on a record showing that "competitors still depend[] significantly on [high-capacity loops and
transport] in the overwhelming majority of markets . . . ." He stated to the press that, although the commissioners tried
to compromise on a decision that all could support, that ultimately was not possible. Nevertheless, the rules that were adopted
include various provisions that the majority had proposed as concessions intended to secure unanimous support, such as longer
transition periods and higher thresholds in applying impairment criteria to high-capacity loops and transport.
Commissioner Abernathy similarly characterized the majority’s decision as eliminating unbundling requirements where its "costs
. . . outweigh its benefits," while establishing "an obligation to unbundle the vast majority of DS-1 loop facilities, and
significant amounts of DS-1 transport, in light of the many factors that typically make duplication of such facilities uneconomic."
She indicated that compromise could not be reached because the dissenters sought "nationwide impairment findings or tests
that focus exclusively on actual competition, to the complete exclusion of potential competition," which would be inconsistent
with the D.C. Circuit’s decision.
In his dissenting statement, Commissioner Copps ripped into the majority decision as one that "effectively dismantles wireline
competition" in a long line of decisions that have done a "bang up job . . . on competition." He stated that "[a]fter having
abandoned residential competition earlier, today the majority also hangs up on small business consumers." Commissioner Adelstein
similarly accused the majority of "fundamentally undermining facilities-based competition." He was especially critical of
the majority’s approach to high-capacity loops in metropolitan areas, stating that competitors’ facilities investments were
selected to mesh with ILEC loop and transport elements that would no longer be available, thereby rendering their investments
in other facilities "essentially worthless."
The Consumer Federation of America ("CFA") echoed the dissents, referring to the decision as "the final nail in the coffin
of local competition for residential consumers." CFA Research Director Mark Cooper charged that the FCC’s national finding
of nonimpairment for local switching is contradicted by the record, noting that over half of the central offices in Texas
have no competitive switching and no economic possibility of having any for the foreseeable future. AT&T criticized the elimination
of the mass market switching UNE and the high-cap impairment standards. Previously, AT&T and other CLECs had argued that the
number of carriers collocating in an area is no indication of the number of wholesalers providing alternatives to ILEC transport.
Bell company representatives and other observers complained, however, that the decision, by retaining unbundling obligations
for the vast majority of high-capacity loops and dedicated transport, did not go far enough to cut back on the unbundling
approach that has led to three court reversals. SBC Senior Vice President James C. Smith characterized the impairment test
for DS-1 loops as a sham, saying that SBC will have to unbundle loops in Houston, the eighth-largest metropolitan statistical
area, with 10 carriers with fiber networks. Some observers expressed disappointment that the FCC had not addressed line sharing,
i.e., making the high-capacity portion of ILEC loops available to CLECs, thereby enabling them to provide data services to ILEC
local service subscribers.
Bureau Chief Carlisle indicated that the full text of the order probably would be released next month. He also commented on
the ILEC mandamus petition filed at the D.C. Circuit seeking the FCC’s compliance with the court’s decision overturning the
TRO, stating that the FCC would file a brief with the D.C. Circuit by January 4 explaining why the order comports with the court’s
ruling. Wireless Telecommunications Bureau Chief John Muleta said that his bureau and the WCB are discussing wireless carrier
arguments that backhaul and other network elements provided to wireless carriers should be offered under UNE rates. He would
not indicate any timetable for action, however.
The following day, Covad announced that it had signed a four-year agreement enabling it to use Verizon loops to provide DSL
services to residential and small and medium-sized business subscribers in 19 states. Together with line sharing agreements
with Qwest and SBC signed earlier this year, Covad stated that it now has agreements covering 90 percent of its line sharing
customer base at competitive rates. Chairman Powell and Commissioner Abernathy applauded Verizon and Covad for reaching this
agreement and, noting "the Commission’s elimination of mandatory line sharing last year," expressed the hope that other carriers
will "continue to pursue negotiations to preserve line sharing as a viable model."
Also on December 16, Rep. John Conyers (D. Mich.) said at a conference that the FCC’s new UNE rules are likely to raise consumer
telecommunications rates, adding that "[w]e’re actually going back to where we were before the breakup of the Bell System
. . . ." It was reported on December 17 that Michigan Public Service Commission Chairman Robert Nelson, head of the Telecommunications
Committee of the National Association of Regulatory Utility Commissioners, also expressed disappointment in the new unbundling
rules. He stated that they may hinder competition in a number of markets, such as Michigan, "where UNE-P has been a major
competitive entry strategy," especially in the small business market. He said that the one-year transition period may be too
short for CLECs to install their own switches and then transfer customers over to the new switches. Nelson is also disappointed
by the FCC’s failure to address line sharing.
State regulatory commissions ("PSCs" or "PUCs") continue to react to the D.C. Circuit’s decision and unbundling developments
at the FCC. At the end of November, BellSouth asked the Tennessee Regulatory Authority ("TRA") to open a generic docket involving
all of its interconnection agreements with CLECs to address "change of law" amendments arising from the D.C. Circuit decision
and the FCC’s interim unbundling order (reported in the July/August Communications Law Bulletin). BellSouth explained that
it is requesting the TRA to intervene because it has not been able to come to agreement with CLECs on whether these developments
changed the current interconnection agreements. On December 7, it was reported that the Wisconsin PSC agreed to a limited
rehearing of its previous decision to increase SBC’s UNE rates in order to address how the FCC’s interim order freezing DS-1
loop rates affects the PSC’s order reducing those rates. On December 8, it was reported that SBC, CLECs and consumer interests
all sought reconsideration of the Ohio PUC’s earlier decision raising SBC’s UNE rates 20 percent.
On December 10, it was reported that AT&T and Sprint asked the Texas PUC to suspend an interconnection arbitration proceeding
involving Verizon, on the ground that the forthcoming FCC final unbundling rules may eliminate any need to arbitrate new rates
and terms for unbundling. Verizon argued that the CLECs’ request for suspension is an attempt to delay modifying their interconnection
agreements to conform to federal law. On December 14, it was reported that the Maine PUC requested comments in a new docket
to determine whether to compel Verizon and other ILECs, under state law, to offer line sharing and at what rates. The PUC
stated that it did not want to delay broadband penetration into rural areas by waiting for the FCC’s ultimate resolution of
the line sharing issue under the Communications Act. It was reported on December 14 that CLEC interests urged the Alabama
PSC to hold off adopting its proposed new price cap regulation system until the FCC issues its final unbundling rules. The
CLECs explained that the FCC’s rules could have major effects on the competition that was a critical factor in adopting the
current price cap program. Finally, on December 21, it was reported that a Colorado PUC administrative law judge ("ALJ") recommended
that Qwest’s proposed $7.5 million settlement of the PUC complaints against Qwest regarding its unfiled interconnection agreements
be rejected. The ALJ said that Qwest should be required to show cause why it should not be compelled to compensate CLECs harmed
by the secret deal.
Supreme Court Will Hear Brand X Cable Modem Case
On December 3, 2004, the United States Supreme Court agreed to review a controversial decision of the Ninth Circuit Court
of Appeals, which had found that high-speed Internet access service provided over cable television systems is a regulated
telecommunications service rather than an unregulated information service. The Ninth Circuit’s decision, in Brand X Internet Services v. FCC ("Brand X"), potentially opens the door to imposition of common-carrier regulation, including interconnection requirements, on cable
operators that historically have avoided those obligations.
The narrow legal issue before the Supreme Court will be whether the Ninth Circuit was correct to rely upon the authority of
its own, earlier decision concerning the regulatory classification of cable modem service, or should instead have deferred
to the FCC’s expertise as the agency primarily responsible for implementing the Communications Act. The practical impact of
the Court’s decision, however, may shape the future regulatory environment for cable modem, digital subscriber line ("DSL")
and other platforms for the delivery of high-speed Internet access.
Enforcement Bureau Warns Cable Operators on Public Inspection Files
In a warning issued December 6, the Enforcement Bureau reminded cable operators that the failure to maintain an inspection
file could lead to significant fines and/or other enforcement actions. This warning comes just weeks after the Enforcement
Bureau and Comcast entered into a consent decree in which Comcast agreed to pay $225,000. The agreement stemmed from alleged
violations of the public inspection file requirement that the Communications Workers of America ("CWA") and the International
Brotherhood of Electrical Workers brought to the Commission’s attention. CWA criticized the consent decree, claiming that
it had documented 113 total violations that could have resulted in approximately $1.3 million in fines.
Cellular Telecommunications & Internet Association ("CTIA") Asks Commission to Reconsider CAN-SPAM Rules
CTIA filed a petition for reconsideration, asking that the Commission permit commercial mobile radio service ("CMRS") providers
to email commercial messages to their existing subscribers, even without prior consent. According to CTIA, "wireless customers
benefit from routine communications with their providers regarding new offers, special discounts, and the availability of
upgraded services or products."
In order to help CMRS providers identify wireless subscribers, the Commission’s rules require CMRS providers to file with
the Commission a list of all domain names used to offer e-mail messages that are sent directly to the mobile phones of subscribers.
In a public notice released December 17, the Commission announced that on December 20, CMRS carriers could begin providing
the Commission with their wireless domain names for inclusion in a database. CMRS carriers have until January 21, 2005, to
provide the Commission with all of the domain names they use to send e-mails. The Commission will eventually issue a second
public notice that will establish a date on which the database of domain names will be available to the public, through the
Commission’s website. CMRS providers will have 30 days from the date of that public notice to comply with the rules that prohibit
the sending of e-mail absent prior customer consent.
When it passed the Controlling the Assault of Non-Solicited Pornography and Marketing ("CAN-SPAM") Act of 2003, Congress directed
the Commission to adopt rules for mobile phone spam. CAN-SPAM allows service providers to email customers unless a recipient
opts out of those messages, but the Commission’s rule would require service providers to refrain from sending e-mails unless
a customer elects to opt-in.
The Commissioners favor the opt-in system because they do not want customers to pay for the time it takes to delete a message.
After the Commission voted on its final rules last August, Commissioner Adelstein explained, "We’ve all seen what spam has
done to the PC world. Nobody wants the same thing to happen to mobile phones." Chairman Powell added that spam is "the plague
of the information age." Service providers that violate the FCC rules are subject to penalties under CAN-SPAM, which provides
for fines of up to $6 million for illegal spamming.
Commission Announces 90 Day Waiver Relief for Untimely Notification of Consummation of Wireless License Assignment and Transfer
of Control Applications
The 90 day waiver of Section 1.948(d) began December 15, 2004, and ends March 15, 2005. Under Section 1.948(d), parties must
notify the Commission within 30 days of actual consummation. During this waiver period, parties to assignment and transfer
transactions to which the Wireless Telecommunications Bureau ("WTB") has previously consented, may file overdue consummation
notices. As long as the transaction in question was consummated within 180 days of public notice approval, the Commission
will accept and process the untimely consummation notices without penalty.
The Commission’s decision comes in the wake of its discovery that there are hundreds of assignment and transfer of control
applications to which the WTB had consented more than six months ago. However, the WTB has not received a consummation letter
or request for an extension of time to consummate for any of these outstanding transactions.
The Commission explained that it is critical for the WTB to have the capability to identify who holds a license, but the high
volume of outstanding notifications makes that process extremely difficult. After the waiver period, the WTB will dismiss
applications for which it has not received a notification or request for extension of time to consummate. Finally, the Commission
warned that the WTB may rule that a proposed assignee/licensee’s assumption of control over a facility constitutes unauthorized
operation of that facility if the WTB dismisses the underlying application for failure to file a timely consummation notice
or request for extension of time. Under those circumstances, the parties would be required to apply for and receive Special
Temporary Authority, and ultimately file a new assignment or transfer of control application.
President Bush Signs Satellite Home Viewer Extension and Reauthorization Act
On December 8, President Bush signed legislation to extend for an additional five years, until December 31, 2009, the authority
of satellite service providers to offer analog programming to customers who receive weak local broadcast signals. The Satellite
Home Viewer Extension and Reauthorization Act ("SHVERA") also permits satellite companies to provide high-definition signals
in markets where local stations do not broadcast digitally. Satellite companies can retransmit "significantly viewed" channels
from nearby markets to consumers who live outside a market. Additionally, direct broadcast satellite ("DBS") providers and
copyright owners independently may negotiate royalty contracts and file copies with the Copyright Office within 30 days of
execution. Effective June, 2006, SHVERA requires DBS providers to broadcast local programming using a single dish. The legislation
directs the FCC to begin a rulemaking proceeding and adopt rules within a year. The FCC also must report to Congress regarding
the impact of this legislation on cable operators, and methods for identifying areas that do not receive local digital broadcasts.
President Signs Critical Spectrum Relocation Fund Legislation
President Bush has signed legislation to facilitate the relocation of incumbent federal government operations from certain
frequency bands, including the 1710-1755 MHz band. The legislation establishes a relocation trust fund to reimburse federal
government users for the costs of relocation from the 1710-1755 MHz band and other frequency bands. Passage of the legislation
makes it possible for the FCC to commence an auction of 90 MHz of spectrum in the 1710-1755 MHz and 2110-2155 MHz bands for
third generation ("3G") wireless services. The FCC may commence the auction 18 months after providing notice to the National
Telecommunications and Information Administration. The legislation was strongly supported by CTIA and is expected to stabilize
spectrum prices, particularly for the upcoming Auction 58, by laying the groundwork for future auctions of additional spectrum.
FCC Provides Greater Flexibility for New Unlicensed Wideband Devices, but Declines to Modify Rules for Ultra-wideband Devices
On December 16, the FCC released an order amending its Part 15 rules governing unlicensed devices to facilitate the introduction
of new unlicensed devices that use wide bandwidths, but are not classified as ultra-wideband ("UWB") devices. The revised
rules permit increased peak emission limits, similar to those applicable to UWB devices, for unlicensed devices in the 5925
7250 MHz ("6 GHz"), 16.2-17.7 GHz ("17 GHz"), and 23.12-29.0 GHz ("24 GHz") bands. These higher limits are intended to foster
the development of new wideband devices such as radar systems used to improve automotive safety, as well as tracking systems
used for inventory control and personnel location. The FCC also revised its measurement procedures to permit devices using
frequency hopping, stepped frequency modulation, or gating in the 6 GHz, 17 GHz, and 24 GHz bands to be measured in their
normal operating mode. The FCC declined, however, to adopt significant revisions to its rules governing UWB devices, noting
that any premature changes could disrupt UWB product development efforts.
FCC Rules on Petitions for Reconsideration and Clarification of Slamming Rules
The FCC has ruled upon several petitions for reconsideration and/or clarification of its rules regarding unauthorized carrier
changes ("slamming" rules). First, the FCC denied requests to reconsider, waive or stay the requirement that all local exchange
carriers ("LECs") obtain verification of long distance carrier changes in cases in which a customer contacts an LEC directly
("in-bound" requests) and seeks to change to the LEC’s affiliated long distance provider. The FCC found that the LECs reaped
financial benefit from these changes and thus that verification was necessary. (In-bound requests to an LEC requesting a change
to an unaffiliated long distance provider do not require verification, however.) Although some of the Commissioners were sympathetic
to arguments that this requirement unduly burdened small and rural carriers, the FCC found insufficient information in the
record to waive the requirement.
Second, the FCC clarified its rule that verification is required for carrier changes, but not for initial carrier selections.
Some parties argued that prior FCC explanations of this rule were unclear with respect to situations in which a customer moves
and changes carriers at the same time. The FCC clarified that its verification rules are not triggered when a customer requests
a new line on an account or when the customer requests new service. The FCC cautioned, however, against carriers slamming
a customer and changing the customer’s number, thus trying to argue that it was a new service for which verification was not
required. Because the customer in such a case has neither moved nor installed additional lines, this constitutes a carrier
change, and verification is required.
Despite Legislation Temporarily Resolving Universal Service Accounting Issues, Contribution Factor Increases to Double Figures
In an 11th-hour vote at the end of its lame-duck session, the 108th Congress approved a bill that exempts the Universal Service
Fund ("USF") from the Anti-Deficiency Act until the end of 2005. The President signed the legislation on December 23. The
exemption temporarily allows the Universal Service Administrative Company ("USAC"), which administers the USF, to follow generally
accepted accounting principles rather than government accounting principles as the FCC had directed. The change in accounting
practices should prevent USAC from loosing millions of dollars in funding as many predicted. Congress will consider a more
permanent fix to USAC’s accounting issues next year.
The bill also included other telecommunications issues that have been hotly debated, including a spectrum reallocation fund
and E-911 deployment. In order for the bill to pass, two senators released their hold on it. Specifically, Senator McCain
(R.Ariz.) released his hold on it only after getting assurances that legislation regarding the creation of a national boxing
commission would be addressed in the next session. Senator Byrd (D.W.Va.) signed the bill after he received certain assurances
regarding the spectrum reallocation fund.
Despite the legislation, the FCC proposed to increase carriers’ USF contribution factor from 8.9 percent to 10.7 percent for
the first quarter of 2005. The proposed increase already assumes that the legislation would go into effect by the end of 2004.
Absent FCC action, the new contribution factor was to become effective December 27, 2004. This would mark the first time that
the USF contribution amount has been more than 10 percent, which many considered the threshold that would trigger statutory
amendments to the universal service program.
In related events, the FCC’s Wireline Competition Bureau ("Bureau") modified the deadline for carriers to file revisions to
their Form 499-A Telecommunications Reporting Worksheets. Under the new filing requirements, any revisions that would result
in decreased contributions to the USF and the regulatory funds for telecommunications relay services, local number portability,
and the North American numbering plan administration must be filed within 12 months of the due date of the original filing.
(Under the prior requirements, revisions could be filed within nine months of the original filing deadline and after that
for good cause.) The Bureau concluded that a firm deadline would "help ensure the stability and sufficiency" of the USF and
"improve the integrity of the universal service contribution methodology and promote efficiency in the administration" of
the various regulatory support mechanisms.
Accordingly, carriers will only be able to seek a refund or credit for overpaid contribution amounts if they file a revised
Form 499-A within one year of the original filing deadline. Carriers can revise the Form 499-A's that were due on April 1,
2004, within 12 months of the effective date of the Bureau’s decision. The Bureau also directed the Universal Service Administrative
Company, which processes the Form 499-A's, to consider any other revised Form 499-A;s filings that are pending or are filed
before April 1, 2005, under the prior standard (i.e., whether there is "good cause" to accept the revisions).
The FCC also expanded the availability of funding for rural telemedicine services through the universal service Rural Health
Care Support Mechanism. Hoping to increase the use of this mechanism, the FCC: (1) redefined what constitutes a "rural area"
for purposes of funding; (2) increased the amount of discounts under the program for mobile rural health care clinics and
for the purchase of mobile satellite services; and (3) streamlined the program’s application process. The FCC also initiated
a further notice of proposed rulemaking seeking comment on whether it should apply a flat 25 percent discount for Internet
services and whether network infrastructure should be funded under the program.
VOIP Developments at Home and Abroad
In the wake of the FCC’s decision last month to preempt state regulation of voice over Internet protocol ("VOIP") services,
the Minnesota Public Utilities Commission ("MPUC") stayed its order that directed VOIP provider Vonage Holdings Corporation
to comply with certain common carrier regulations. The stay came shortly after the FCC’s decision asserting jurisdiction over
VOIP services and oral arguments before the U.S. Court of Appeals for the Eighth Circuit regarding whether the MPUC had authority
to regulate VOIP services. (The FCC’s decision and Eighth Circuit arguments were reported in the November edition of the Communications
Law Bulletin, available at
http://www.mofo.com/news/bulletin.cfm?MCatID=&concentrationID=19&ID=1383&Type=7.) The MPUC stated that the stay will be lifted only if the FCC’s ruling is modified by "Congress, the FCC or by a court of
appropriate jurisdiction."
SBC Communications, Inc. ("SBC") introduced a controversial new interstate access tariff called "True IP to PSTN" (or "TiPToP"),
for VOIP providers. The timing of SBC’s TiPToP filing raised suspicions for two reasons. First, the FCC is currently considering
whether legacy access charges apply to VOIP services. Second, SBC filed the tariff late in the afternoon on the day before
Thanksgiving. Under FCC rules, tariffs become effective one day after filing unless the FCC suspends the tariff. Some industry
members objected to SBC’s filing, given that it was unlikely any FCC staff would be available the night before the holiday
to review it.
Although SBC stated that the tariff is a voluntary offering pursuant to which VOIP providers can acquire access, some still
question whether the Bell company is trying to impose traditional tariffed access charges on VOIP services. Chairman Powell
warned that the FCC will investigate TiPToP if it is used to impose legacy access charges to VOIP services, but also supported
the filing, stating that the FCC wants to avoid "any action that might slow the IP-services revolution."
It appears that European regulators may be getting closer to resolving the issue of regulating VOIP. The European Regulators
Group ("ERG") and the Independent Regulators Group ("IRG"), both of which comprise national regulatory authorities, agreed
to an agenda for 2005 that focuses in part on VOIP issues. (The other issues include broadband development and international
roaming.) The regulators appeared to agree that the rollout of VOIP will be more successful under a coordinated regulatory
approach. Although a draft common position regarding the regulatory treatment was presented in early December to the ERG,
it was not released for publication. Regulators stated that they agreed to an approach that would allow lighter regulation
of smaller operators, and that another position paper would be presented at the ERG’s February meeting. The ERG hopes to address
by May 2005 issues including access to emergency services and numbering resources, VOIP’s effect on competition, and interconnection.
Commission Approves Assignments and Waives Rules for Bankrupt PCS Licensee
On December 8 the Commission approved applications to allow the assignment of personal communications service ("PCS") licenses
from bankrupt carrier Summit Wireless to its Debtor-in-Possession without payment of accrued interest and outstanding auction
debt, which is normally required when assigning licenses for which payments remain outstanding. The Commission waived its
rule that requires all accrued interest to be paid in full in connection with the assignment, waived its rule that requires
the payment of outstanding debt on or before consummation of the assignment, and waived its rule that requires the assignor
to remain responsible for payment to the Commission.
The Commission, Summit, the Department of Justice and Summit’s secured lender, Qualcomm, previously entered into a settlement
agreement pursuant to which the bankruptcy trustee is charged with finding a buyer for Summit’s licenses. The proceeds of
the sale will be applied, first, to outstanding debt that is owed to the Commission, with the balance, if any, paid to Qualcomm.
The Commission found that the settlement serves the public interest and will benefit consumers because it should reduce the
time period during which valuable PCS spectrum cannot be used. The Commission will allow the assignment of the licenses to
the Debtor-in-Possession with payment of outstanding installment obligations to the Commission on or before consummation of
the transfer of the licenses to subsequent qualified entities.
Decision Concerning Non-Thermal Effects of Radiofrequency Radiation Upheld
On December 7 the U.S. Court of Appeals for the D.C. Circuit issued a decision upholding the FCC’s rejection of a petition
to initiate an inquiry to revise the regulations governing the non-thermal effects of RF radiation. The petition, filed by
the EMR Network, relied on a letter prepared by the staff members of various federal agencies that identified a number of
issues the agency staff believed needed to be addressed to "provide a strong and credible rationale to support RF exposure
guidelines." Earlier, in 1997, the FCC declined to tighten the non-thermal RF regulations on the grounds that the scientific
effects and costs of increased regulations were uncertain; and that decision had been upheld by the Second Circuit Court of
Appeals. In this instance, the FCC’s Office of Engineering and Technology ("OET") had rejected EMR’s initial petition, and
the FCC affirmed that decision, again on the grounds that the evidence in support of stronger regulation was tentative. EMR
sought review of the FCC’s decision on the grounds that the FCC had violated Section 102 of the National Environmental Policy
Act ("NEPA") requiring agencies to consider the environmental effects of their decisions.
The D.C. Circuit upheld the FCC’s rejection of EMR’s petition, finding that the FCC had "relied on other governmental agencies
and non-governmental expert organizations with specific expertise on the health effects of RF radiation." The FCC had concluded
that the studies submitted by EMR in support of its petition were tentative and did not undermine "the Commission’s decision
to maintain a stance of watchful waiting." Under these circumstances the FCC’s decision neither violated NEPA nor was an abuse
of discretion.
FCC Votes to Auction Multiple Licenses for Air-to-Ground Services
The FCC voted at its December open meeting to open the air-to-ground ("ATG") services market to multiple competitors. Although
the ATG band consists of only four MHz of spectrum — a relatively small amount of bandwidth compared to other wireless services
— this proceeding was the subject of intense lobbying over very diverse licensing proposals. As a compromise between the various
proposals, the FCC concluded that the market could decide through an auction which licensing solution and business model best
suited the development of ATG services. The FCC’s decision demonstrates that it continues to promote flexible, market-based
solutions over potentially limiting regulations whenever possible.
The FCC ultimately adopted a flexible licensing scheme in which two ATG licenses will be auctioned either as: (1) two overlapping
3 MHz licenses; or (2) exclusive 3 MHz and 1 MHz licenses where the 3 MHz license is at the bottom of the ATG spectrum band;
or (3) exclusive 1 MHz and 3 MHz licenses where the 1 MHz license is at the bottom of the ATG spectrum band. Under any of
these approaches, at least one ATG licensee will be able to provide broadband ATG services, which, with current technology,
requires 3 MHz of spectrum. Whether a shared approach (supported by AirCell and Boeing) or an exclusive approach (supported
by Verizon and Space Data) is adopted will depend on which licenses the auction participants bid for and the value of their
bids. The combination — (1), (2), or (3) — that has the highest aggregate gross bid wins.
To ensure that the ATG market is not monopolized, the FCC is prohibiting any entity from acquiring more than 3 MHz of ATG
spectrum. Some parties still voice concern, including Commissioners Copps and Martin who dissented from this portion of the
FCC’s decision, that under either of the exclusive approaches the licensee with 3 MHz of spectrum would dominate the market.
Chairman Powell, however, noted that it is not a foregone conclusion that Verizon Airfone — the incumbent with deep pockets
— will win an exclusive 3 MHz license or that the 1 MHz licensee would not be able to compete effectively. According to Powell,
this auction solution will provide all potential bidders with a bite of the apple without the FCC prejudging which business
model is best.
The new ATG licensees will be able to provide any type of service (voice, data, broadband, etc.) to any or all aviation markets
(commercial, private, military, etc.). Licensees will have to abide by interference requirements to protect adjacent public
safety operations in the 800 MHz band. The FCC anticipates auctioning the ATG licenses next year.
In a related action, the FCC adopted a notice of proposed rulemaking seeking comment on whether it should lift its prohibition
regarding the use of cellular telephones on airplanes. The FCC questions whether the prohibition, which was originally adopted
to protect terrestrial cellular systems, is still necessary given technological developments in the wireless industry. The
FCC’s decision, however, does not affect the Federal Aviation Administration’s policy that wireless devices must be turned
off on airplanes to protect the aircraft systems from harmful interference. (The FAA also is reviewing this policy.) The FCC’s
proposal immediately sparked opposition from those dreading the possibility that they will have to listen to other people’s
telephone conversations in the limited confines of an airplane — within one day after the open meeting, the FCC had received
more than one thousand e-mails on the subject.
FCC Signs Consent Decrees Settling Enforcement Actions for Improper Charges, Slamming and E-Rate Violations
On December 1, the FCC’s Enforcement Bureau ("EB") signed consent decrees with AT&T and LCR Telecom that included payments
of $500,000 by each of them. AT&T admitted that it improperly charged a total of nearly 1.3 million subscribers and non-subscribers
a monthly charge of $3.95 each for a calling plan they had not agreed to take. It began imposing the improper charge in January
2004 and, shortly there after, began taking steps to rectify the problem, including the issuing of billing credits to the
affected customers. It disclosed the problem to the FCC in March and agreed to make a $500,000 payment to the U.S. Treasury
and to take further corrective actions to settle the matter, including improvements to its billing system. The LCR consent
decree resulted from consumer complaints filed at the FCC and several state agencies charging that it "slammed" a number of
customers, i.e., submitted unauthorized changes of preferred service providers on their behalf, by using fraudulent verification recordings.
LCR agreed to take ameliorative steps, including the cessation of all marketing activities and the provision of additional
notice to the FCC of any service termination, and to make a payment of $500,000 to the U.S. Treasury to settle the matter.
LCR also agreed that its officers and principals may not join another regulated carrier for two years.
In another enforcement matter, the EB issued a Notice of Apparent Liability ("NAL") on December 1 proposing to fine Elf Painting
& Wallpapering $22,500 for delivering unsolicited advertisements to the fax machines of at least five consumers. The NAL alleged
that this practice continued even after the EB issued a citation to Elf warning it of fines of up to $11,000 per violation.
On December 8, the EB issued an NAL against Warrior Custom Golf proposing a fine of $23,500 for leaving unsolicited, prerecorded
advertising messages on consumers’ voice mail without their consent. This is apparently the FCC’s first proposed fine under
Section 227 of the Communications Act, which bans calls to residential telephones using "artificial or prerecorded voice to
deliver a message without the prior express consent of the called party." The NAL alleged that this practice continued after
the EB sent Warrior Custom Golf a citation warning of fines for any future violations. The EB sent a similar citation to Risk
Management Alternatives, Inc. on December 13 warning it that any future violations of Section 227’s ban on unsolicited prerecorded
advertising voice messages would be punished by a fine of $11,000 for each violation.
Finally, the EB signed a consent decree with SBC on December 16 settling allegations that SBC used or received USF "education-rate,"
or "E-Rate," funds improperly, including the invoicing of the Schools and Libraries Division ("SLD") of the Universal Service
Administrative Company for services that SBC had provided without authorization and for services that are not eligible for
USF support. SBC refunded to the SLD the amounts improperly invoiced and collected. In the consent decree, SBC agreed to make
a payment of $500,000 to the U.S. Treasury and to institute a Compliance Plan involving an E-Rate compliance training program
for its employees, the designation of E-Rate coordinators in each of its regional business sales organizations, the establishment
of an E-Rate oversight team and the appointment of an SBC principal point of contact with the SLD.
Broadcast Developments
FCC Order on DTV Children’s Obligations Released
On November 23, the FCC released its order addressing the obligations of digital TV broadcasters to provide children’s educational
programming. The order specified that digital broadcasters who provide streams of free video programming in addition to their
required free over-the-air service will have an increased core programming benchmark roughly proportional to the additional
amount of free video programming provided. In addition, the FCC capped the number of preemptions of children’s programming
for both analog and digital broadcasters to no more than 10% of the core programs in a calendar quarter. The order also concluded
the following: (a) analog and digital broadcasters must identify children’s programming with an "E/I" symbol during the entirety
of the program, (b) the FCC’s children’s television commercial limits apply to all digital video programming directed to children
under 12; (c) the display of Internet website addresses is permitted within the commercial time limits only if the website
offers a substantial amount of bona fide program-related or other noncommercial content; and (d) promotions of television
or video programs other than children’s educational and informational programming are, by definition, commercial matter. Lastly,
the order seeks further comment on several additional issues.
Indecency Rules Inapplicable to Satellite Radio
In response to a petition for rulemaking asking that the FCC apply broadcast indecency rules to satellite radio, Ken Ferree,
chief of the Commission’s Media Bureau, responded in a letter that "subscription-based services do not call into play the
issue of decency." Instead, according to case law and Commission precedent, the FCC does not regulate indecency on services
"lacking the indiscriminate access to children that characterizes broadcasting." Satellite radio provider Sirius recently
announced its hiring of shock jock Howard Stern, whose show has led to FCC fines on numerous occasions. Sirius rival XM Satellite
Radio has in its programming lineup Opie and Anthony, who were fired from a New York City broadcast station in 2002 for holding
a contest that encouraged people to have sex in St. Patrick’s Cathedral.
Viacom and FCC Reach $3.5 Million Indecency Settlement
The FCC and Viacom entered into a $3.5 million consent decree to resolve several violations of the Commission’s indecency
rules from March 1, 2001, to March 18, 2004. The decree covers notices of apparent liability for incidents including the Howard
Stern Show and a sex contest on the Opie and Anthony show, both aired on Infinity radio stations. The settlement does not
cover the $550,000 fine for Janet Jackson’s "wardrobe malfunction" at the Super Bowl halftime show. Viacom agreed to establish
a company-wide compliance plan aimed at preventing violations and to install video and audio time delay controls at stations.
Viacom also plans to continue encouraging parents to use ratings and V-chip technology to make informed decisions regarding
the programs their children watch.
Other Recent Indecency Rulings
The Commission denied indecency complaints against three broadcasters: (1) Fox, for an episode of "Keen Eddie"; (2) NBC, licensee
of WRC-TV, Washington, DC, and other affiliates for episodes of "Coupling"; and (3) WBDC-TV, Washington, DC, and other WB
affiliates for episodes of "Off Center." In addition, the Commission proposed a $55,000 fine against Beasley Broadcasting’s
WQAM(AM), Miami, for two broadcasts of "graphic and pandering" material on the "Scott Ferrall Show."
Powell Recommends Rejecting "Private Ryan" Complaints
FCC Chairman Powell has reportedly recommended denying viewer indecency complaints about the airing of an uncut version of
the award-winning film "Saving Private Ryan." According to a Commission official, Powell has concluded that the profanity
in the movie was part of accurately portraying the story about the Allied invasion of Normandy during World War II. Senator
John McCain, a decorated Vietnam veteran, and other leading conservatives also supported airing the Academy Award-winning
film.
Fox Opposes Indecency Fine
Fox Broadcasting Company filed with the FCC an opposition to the Commission’s $1.2 million indecency fine for broadcasts of
reality show "Married by America." Fox argued that the fine is a stark departure from First Amendment precedent regarding
indecency, that the Commission’s indecency standard is unconstitutionally vague and that Fox warned viewers that parental
discretion was advised, by rating the program TV-14 and airing a content advisory at the beginning of the program.
30-Day Extension Granted for Media Ownership Cert Petitions
The U.S. Supreme Court granted the FCC, NAB and other media organization requests for a 30-day extension to file a petition
for a writ of certiorari of the media ownership decision issued by the U.S. Court of Appeals for the Third Circuit, setting
the deadline for petitions at January 3, 2005. The FCC then asked for another extension to January 31, which will likely be
granted. The FCC has not yet decided whether to file a petition.
FCC Fines Los Angeles Stations for RF Radiation Exposure
The Commission fined Radio One’s KKBT(FM), Infinity Broadcasting’s KRTH(FM) and Telemundo’s KWHY-TV $10,000 each for violating
the FCC’s radio frequency radiation exposure limits. The stations operate from towers on Mt. Wilson, near Los Angeles. The
Commission’s policy, since October 2003, is that all licensees at multiuser sites are responsible for the full amount of a
public safety fine if collectively the stations’ transmitters exceeded the limit for maximum permissible exposure.
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.
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January 3, 2005
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Broadcast localism NOI reply comments due.
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January 3, 2005
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Reply comments due on NPRM regarding competitive bidding in 39 GHz band.
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January 4, 2005
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Parties to file further motions regarding how to proceed with TRO mandamus petition in D.C. Circuit.
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January 10, 2005
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Deadline for electronic filing of children’s TV reports for preceding four quarters.
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January 14, 2005
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Comments due on NOI regarding foreign mobile termination rates.
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January 16, 2005
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Radio license post-filing announcements due for Colorado, Minnesota, Montana, North Dakota and South Dakota.
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January 16, 2005
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Radio license pre-filing announcements due for Kansas, Nebraska and Oklahoma.
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January 16, 2005
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TV license post-filing announcements due for Alabama and Georgia.
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January 16, 2005
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TV license pre-filing announcements due for Arkansas, Louisiana and Mississippi.
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January 18, 2005
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Comments due on secondary markets FNPRM.
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January 21, 2005
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Mock auction for Auction No. 58 (broadband PCS).
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January 24, 2005
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Reply comments due on advanced wireless services ("AWS") NPRM.
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January 26, 2005
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Auction No. 58 (broadband PCS) begins.
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January 31, 2005
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Reply comments due on unlicensed operation in TV broadcast bands NPRM.
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February 1, 2005
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Expiration date of radio licenses in Iowa and Missouri.
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February 1, 2005
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Radio license post-filing announcements due for Colorado, Minnesota, Montana, North Dakota and South Dakota.
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February 1, 2005
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Radio license renewal applications due for Kansas, Nebraska and Oklahoma.
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February 1, 2005
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Radio license post-filing announcements due for Kansas, Nebraska and Oklahoma.
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February 1, 2005
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Radio license pre-filing announcements due for Texas.
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February 1, 2005
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Expiration date of TV licenses in Florida, Puerto Rico and Virgin Islands.
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February 1, 2005
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TV license post-filing announcements due for Alabama and Georgia.
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February 1, 2005
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TV license renewal applications due for Arkansas, Louisiana and Mississippi.
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February 1, 2005
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TV license post-filing announcements due for Arkansas, Louisiana and Mississippi.
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February 1, 2005
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TV license pre-filing announcements due for Indiana, Kentucky and Tennessee.
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February 1, 2005
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FCC Form 502 (NANP Numbering Resource Utilization/Forecast Report) due.
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February 1, 2005
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FCC Form 499Q Telecommunications Reporting Worksheet due.
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February 8, 2005
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Comments due on Verizon broadband forbearance petition.
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February 14, 2005
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Reply comments due on NOI regarding foreign mobile termination rates.
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February 16, 2005
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Radio license post-filing announcements due for Colorado, Minnesota, Montana, North Dakota and South Dakota.
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February 16, 2005
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Radio license post-filing announcements due for Kansas, Nebraska and Oklahoma.
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February 16, 2005
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Radio license pre-filing announcements due for Texas.
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February 16, 2005
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TV license post-filing announcements due for Alabama and Georgia.
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February 16, 2005
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TV license post-filing announcements due for Arkansas, Louisiana and Mississippi.
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February 16, 2005
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TV license pre-filing announcements due for Indiana, Kentucky and Tennessee.
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February 17, 2005
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Reply comments due on secondary markets FNPRM.
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