Precursor Conference Notebook...

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Following Sept. 11 terrorist attacks, FCC increased emphasis on redundancy and interoperability of communications networks, Comr. Abernathy said at Precursor Group conference Wed. In Communications in New Security Environment, she said Commission should work toward redundancy in networks that include “multiple pipes in physical diverse locations.” Need for more diversity of networks could lead to “more investment in infrastructure than will be justified by the current economic situation,” Abernathy said. FCC Comr. Martin said network redundancy also called for more facilities-based deployments. He said Commission had begun to move in that direction and should “remove the disinclination of incumbents to deploy new facilities.” Benefit of redundancy had been demonstrated clearly by Sept. 11 attacks. Abernathy said interoperability of networks was particularly important for public safety groups. Emphasis for FCC will be on “finding more spectrum, clearing spectrum and making sure equipment out there is compatible and robust.” Martin said increases in spending on new technology would lead to much more efficient use of spectrum through technologies such as smart antennas, frequency and time division and techniques that “make use of fallow spectrum.” In many cases spending will be by military, which later will spill to commercial applications. “Internet protocol originally was military technology, where information was spread throughout the network to use the network more efficiently.” Challenge faced by govt. is for efforts to be harmonized, Martin said: “We'll need less of a fiefdom mentality and more emphasis on sharing.” Deputy Asst. Secy. of State David Gross said increased spending on technology would have uncertain impact on economy. “This will create new technologies, and by definition it is impossible to predict the long-term effects.” Asst. Secy. of Commerce Bruce Mehlman predicted emphasis on secure communications would be boost to voice- over-IP in next 5 years. “The underlying technology is maturing and packet data -- the basis for voice over IP -- works much better in higher volumes,” he said. On Sept. 11, both wireline and wireless networks were overloaded, “but the Internet kept going.” IP networks can be highly secure through encryption and because of data networking underpinning networks are easier to make interoperable, he said: “Finally, voice-over-IP offers savings to customers and carriers, and profitability definitely is a watchword these days.”

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FCC expects to approve 20-30 Sec. 271 petitions this year, FCC Common Carrier Bureau Chief Dorothy Attwood told investors at Precursor Group conference Wed. “This is a market-changing event,” she said. “It has nothing to do with Tauzin-Dingell” but rather it’s happening because Telecom Act “contemplated Bell entry when conditions were right,” she said. Attwood was on panel of telecom industry lobbyists, all of whom were asked by moderator to name most important issues affecting telecom investment. Among their answers: (1) AT&T Vp Leonard Cali said “dramatic” increase in cost of nonrecurring charges (NRCs) was impeding facilities-based competition. NRCs are what facilities-based competitors pay Bells for to connect to standalone local loops. While rates for unbundled network elements (UNEs) are dropping, enabling more competition using UNE platforms, he said, rising cost of NRCs is hurting competitors with their own switches. (2) USTA Pres. Walter McCormick cited growth in “intermodal” competition and need to change definition of market to take it into consideration. He defined intermodal as competition among wireline, cable, wireless and other forms of communication, saying customers didn’t make differentiation and this would be big issue for FCC. (3) Verizon Senior Vp Thomas Tauke said completion of Sec. 271 process by Verizon would have “profound impact” on way company marketed bundles to customers and at same time nationwide market for wireline would develop, similar to that of wireless, where “minutes become minutes regardless of location.” Asked what they considered most important “sleeper issues,” they said: (1) Tauke said Supreme Court decision on TELRIC (Total Element Long-Run Incremental Cost) pricing. He also cited outcome of Microsoft legal issues and question of “who gets control of the customer.” Tauke said “the real competition is coming from players who aren’t part of this industry.” (2) ALTS Pres. John Windhausen cited FCC proceeding on UNE and special access performance measures. He said effect of Supreme Court decision on TELRIC was “overestimated” because prices charged CLECs were built into contracts. Court’s action won’t be felt for 3-4 years, he said.

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NTIA plans spectrum policy summit in March to “explore the most effective spectrum management policies and procedures,” Commerce Secy. Donald Evans told Precursor Group’s Washington conference Wed. Formal announcement on spectrum summit is expected today (Thurs.). NTIA Dir. Nancy Victory has described forum as a way to solicit innovative ideas on spectrum policy, focusing on auction process, how to expand secondary markets for spectrum, how to encourage innovation in new wireless technology and how to define spectrum rights without limiting technology that could be used. Evans also said Commerce Dept. planned to complete comprehensive assessment of viability of allocating certain spectrum for advanced wireless services such as 3G. Last fall, govt. revised its assessment of 3G spectrum to focus on potential use of 1710-1770 MHz and 2110-2170 MHz, taking off table military-occupied band of 1770-1850 MHz that had been under consideration. Without speculating on final outcome of ultra-wideband (UWB) proceeding, Evans said NTIA and FCC were negotiating “aggressively” on possible deployment of UWB. UWB item is expected to be on agenda of FCC’s open meeting Feb. 14 and govt. negotiators have been working out details such as how to protect GPS and other restricted bands from potentially harmful interference. UWB technologies “offer not only great economic promises but protect our critical life and defense systems,” Evans said. He touted important role that information technology industry was playing in job creation during current economic downturn. He said he was disappointed that Senate leadership this week pulled back floor vote on stimulus package. “We were disappointed… that they pulled back,” Evans said, “but we're not going to give up hope yet.” He said: “I think it’s important that we focus on this recovery as not a jobless recovery.” In separate panel discussion, UWB developer Time Domain’s Chmn.- CEO, Ralph Petroff, said FCC had opportunity to build on success of Part 15 unlicensed bands. Past decisions of NTIA and FCC allowed technologies to operate in band if they were below certain power level and didn’t create interference, he said. “That allowed a flourishing of consumer devices and is now in the ultra-wideband proceeding where the FCC is recommending that these bands be put toward some use of effectively creating new spectrum.”

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Companies are lobbying for antitrust enforcement against competitors, strategy that could backfire, said Deborah Majoras, Justice Dept. (DoJ) deputy asst. attorney gen.- antitrust, at Precursor Group workshop in Washington. In effort to influence regulators into bringing antitrust cases, companies are employing lobbyists to put pressure on regulators. Majoras said lobbyist representing one major computer company told DoJ during Microsoft investigation that if it didn’t push case against software manufacturer, it would “never get help from Silicon Valley” in future criminal investigations. Problem with that philosophy, she said, is that court decisions based on those cases have precedent that could affect very companies that lobbied for enforcement. “They're lobbying for their own short-term interest, but one day they could be looking down the barrel of the same gun,” she said. If parties don’t get results they desire from federal regulators, they're turning to state attorneys gen. and the European Union, she said. Both Majoras and FTC Gen. Counsel William Kovacic defended proposed agreement between agencies on merger review that would give DoJ authority over cable, Internet and other media reviews. Representatives of the Justice Dept. (DoJ) and FTC expressed confidence on substance of their proposed agreement on delineation of merger review authority. However, Kovacic was pessimistic about Capitol Hill reaction. “I don’t have a confident prediction,” he said, calling agreement a “modest, useful step forward.” Agreement was postponed Jan. 17 after Sen. Hollings (D-S.C.) expressed concerns about its substance as well as its behind-scenes creation (CD Jan 18 p3). DoJ and Senate staffs have continued discussions on situation. Agreement would give DoJ merger review authority over Internet, cable and other media mergers, while FTC would handle computer hardware mergers. Kovacic said it shouldn’t matter which agency handled reviews because both DoJ and FTC apply “sound economic principles” to merger reviews. Some on panel addressed proposed EchoStar takeover of DirecTV. Douglas Melamed, Wilmer, Cutler & Pickering partner, said spectrum allocation could be issue in merger review. He said there may be effort to “reduce redundancy of scarce spectrum.” Donald Russell, of Robbins, Russell, Englert, Orseck & Untereiner, said it wouldn’t require significant change in antitrust principles to approve merger. Russell said FCC was adopting merger review policies similar to those of FTC and DoJ with economics as guiding principle. “They're moving away from counting spectrum to analyzing competition conditions,” Russell said. Several panel members predicted antitrust regulators would soon be faced with Bell long distance provider merger. Majoras said DoJ was up to challenge and would analyze issues on case-by-case basis. There would be no “emotional or psychological hurdles” to overcome in such review, she said.

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Panelists expressed dismay that Senate might shelve economic stimulus legislation. Richard Clarida, asst. secy.- designate at Treasury Dept., said Administration “regrets” Senate announcement. ITAA Pres. Harris Miller said worst part was that accelerated depreciation, part of package, also could go by wayside. Miller also expressed concern about demand for broadband, saying industry had been working on “Field of Dreams” theory that if broadband were built, customers would come. Problem is, he said, even “techy types” aren’t signing onto high-speed access and many are saying e-mail isn’t enough to lure them onto broadband. “Content is king,” he said. “At the end of the day, you have to answer the value questions, why should I get this stuff.” He also warned that “CIOs [corporate information officers] don’t make the buying decisions, CEOs do.” There was a time when companies bought high-tech services without specific reasons for it, he said, but now CEOs need to know there’s business reason for buying something.