HASTERT SEES MOVEMENT OF TAUZIN-DINGELL BY YEAR-END

Kurth said House version of stimulus package that would benefit communications sector is 30% depreciation provision: “It will be very beneficial to the telecom-tech sector… Depreciation is a topic that is being taken very seriously across the board.” When asked whether stimulus bill contained provisions that would benefit struggling CLEC sector, he said House leadership intentionally sought to include language that didn’t target specific technologies or industries: “It was a struggle to find something that would help across the board.”

House Commerce Committee Senior Counsel Howard Waltzman said that “passage of the Tauzin-Dingell bill would be a fantastic shot in the arm for the economy… That’s what the telecommunications sector needs right now.” He also said broadband deregulation bill by Sen. Brownback (R-Kan.) showed that support existed in Senate for legislative boost to broadband deployment. Waltzman said Tauzin has doubts about effectiveness of tax credit proposals in encouraging broadband investment: “If a company doesn’t have $100 million [to build a network], they probably they won’t have $90 million” still necessary despite the proposed 10% tax credit. Although related bill by Rep. English (R-Pa.) has gained support, Kurth said Hastert hadn’t “heard from the Ways & Means Committee that’s there’s something they're going to move on this year.” Companion bill by Sen. Rockefeller (D-W.Va.) also has gained support, but hasn’t gone to full Senate for vote.

When asked what Congress should do if it were to rewrite 1996 Telecom Act, Waltzman said that it would eliminate mandatory provision to CLECs of unbundled network element platform (UNE-P). He described UNE-P as attempt by former FCC Chmn. Reed Hundt to create opportunity for “resale at a greater discount.” If Act were to be changed, “that’s something that certainly would be done differently.”

Waltzman decried structural separation provision called for in Hollings bill, which he said was unnecessary: “[Competitive] requirements are on the books. There isn’t a need for further requirements.” He said Tauzin was supportive of measure that would increase fines for companies that failed to comply with competitive provision of Telecom Act. Although he’s focused on moving HR-1542, Tauzin supports enforcement bill (HR- 1765) by House Telecom Subcommittee Chmn. Upton (R-Mich.) and is open to introduction of Upton measure on floor, Waltzman said. Kurth said Hastert was open to Upton measure, but wouldn’t support structural separation legislation. -- Steve Peacock

Schwab Conference Notebook…

Former NTIA Dir. Greg Rohde had harsh words for latest developments in federal 3rd generation wireless policy in speech at Schwab conference Tues. Rohde headed NTIA during Clinton Administration when his agency and FCC were developing 3G policies on using bands such as 2.5 GHz occupied by MMDS and Instructional TV Fixed Service users or 1.7 GHz used mostly by military. He cited FCC’s recent decision to take 2.5 GHz band off table for relocation. In Sept., FCC decided to provide flexible use allocation for that band, but said incumbents wouldn’t be relocated for 3G users. Such “unilateral action by the Commission to take one band off the table -- that makes a final decision more difficult,” he said. Rohde said current NTIA last month took out of near-term running for 3G bulk of 1755-1850 MHz band occupied by Defense Dept. that had been under consideration. He said such steps amounted to “a significant backtrack of where we were a year ago for allocation of 3G.” Rohde said he disagreed with characterizations that Sept. 11 attacks put “chill” on public debate on 3G spectrum by putting increased emphasis on security and spectrum needs of military. “I would argue the chill we have had over the debate occurred long before Sept. 11,” he said. Terrorist attacks drove home extent to which adequate spectrum capacity is public safety issue, he said. Debate on 3G has centered too closely on which incumbents win or lose in spectrum battle, rather than on larger policy considerations, he said. “The 3G debate has really gotten off track in this country,” Rohde said. “The political debate has largely been reduced to a question of who is going to lose and who is going to win.” Looking ahead, he said federal govt. should stop using proceeds from spectrum auctions as “a budget tool.”

----

ILECs aren’t deploying fiber-based broadband facilities because of regulatory uncertainty about competitive access and pricing, and only beneficiary is cable industry, Verizon Senior Vp Thomas Tauke said at Schwab conference Tues. Delay doesn’t benefit ISPs or CLECs that ride on ILEC facilities, he said. “If ILECs are not building the infrastructure that ISPs and competitors rely on, it’s not going to help anyone but cable,” he said. At issue isn’t DSL, but higher speed services that are provided via fiber to home and require building new networks, he said. Regulation has all but stopped deployment of remote terminals, integral part of new networks, he said. Arguing for lessened regulations for new networks, Tauke said “no one is going to invest if we take all the risks but someone else can come and take the benefits.” Tex. PUC Comr. Brett Perlman said he had trouble differentiating between new and old networks and determining why they should represent different rules, as Tauke has said in past in proposing compromise plan. Perlman said “some UNE-P [unbundled network element platforms] may be the way to go” in regulating ILEC fiber networks. He said he wanted to make sure competitors could offer individualized services and not just resell ILEC service. Tauke said ILECs were “doing what regulators say they should” -- investing in their wireless services that weren’t regulated. There are incentives to make money in wireless, but not in traditional networks because of regulatory treatment, he said. Perlman said markets, rather than regulators, determined companies’ business plans. “When a company like Verizon sees competition from cable, it will invest.” Tauke responded “we would be deploying if we could deal with the remote terminal issue.” He said ILECs had “a great interest in attracting broadband customers” for 2 reasons: (1) To compete with cable. (2) To keep up with technology’s move to IP telephony. -- EH

----

In separate wireless panel discussion at Schwab conference, FCC Wireless Bureau Chief Thomas Sugrue said he expected Commission to make decision on local number portability forbearance for wireless carriers by year-end “or shortly thereafter.” Verizon Wireless in July had submitted petition for forbearance from LNP requirements under FCC rules that require commercial mobile radio service carriers to support service provider LNP in top 100 metro areas by Nov. 24, 2002. Sprint PCS has urged FCC to make decision on LNP by year-end, saying quick action would free up technical resources that operators must spend on compliance with other requirements. Industry arguments for wireless forbearance including fact that it’s not requirement of Telecom Act were persuasive enough for FCC earlier to grant additional time, until Nov. 2002, for LNP to be implemented, Sugrue said. “Whether those arguments are still persuasive… they are essentially the same arguments. We'll have to see.” In its petition, Verizon had argued that forbearance was appropriate because LNP requirements imposed complex technical burden and expense wasn’t justified by economic benefits. In panel discussion Cingular Wireless Vp-Federal Relations Brian Fontes said LNP had “staggering” costs associated with it, both in upfront expenses and recurring costs. Based on typical industrywide churn rate among wireless subscribers, consumers’ desire to keep their phone number doesn’t appear to be primary motivator of service decisions. “Number portability is probably something that will have its day,” Fontes said. “Consumers will demand it. It’s just not there yet.” Diane Cornell, CTIA vp-regulatory policy, said that having Commission decision on forbearance petition as early as possible was “very important” to provide certainty to industry. -- MG

----

With FCC vote on spectrum cap coming up Thurs., wireless panel at Schwab conference turned to what would happen without 45 MHz ceiling for most wireless markets and potential consolidation that might ensue. (FCC is expected to lift cap to 55 MHz for all markets for interim period before cap would be eliminated). Asked by Schwab analyst Paul Glenchur if there was optimum number of wireless competitors in post-cap environment, CTIA’s Diane Cornell said her group didn’t believe there was right number “but there is a right process.” She reiterated CTIA argument that federal safeguards already existed for reviewing such mergers, including FCC license transfer review and Justice Dept. approval. However, Cingular Wireless Vp-Federal Relations Brian Fontes said that without “bright line” test of spectrum cap, FCC’s job would become more complicated when it comes to evaluating merger proposals. “The job of the Commission has been very easy,” he said. “Either you qualified or you didn’t qualify.” Industry wouldn’t want merger review process in absence of bright line test to enter into “a quagmire of uncertainty,” Fontes said. He cited lengthy period of time that some broadcast mergers had taken to clear Commission. Asked by Glenchur what if anything could be done to assess whether carriers were using spectrum efficiently, CTIA’s Cornell said one concern was that FCC was relying too heavily on “flexible spectrum allocations as silver bullets.” She said: “There are technical limitations and there are trade-offs.”