Congress Will Pass Telecom Bill This Session, Upton Predicts

Upton expects a “strong vote” when the House bill comes to the floor, “most likely” next week, Upton said. That vote will “add to the pressure” to get the bill to the President. He has conferred monthly with FCC Chmn. Martin on the bill, and thinks the White House is happy with the progress, he said: “We've not needed them to strong arm anyone” for votes at the committee or subcommittee level, he said, and “we won all but one Republican” with “Dingell and Markey working hard against us.”

The bill’s progress could slow if Judiciary Committee Chmn. Sensenbrenner (R-Wis.) gets his way -- “if he gets it,” Upton said. But Upton and Commerce Committee Chmn. Barton (R-Tex.) raised points of order in markup to keep the bill from coming under Judiciary jurisdiction, he said. Of chances the Senate will pass its bill out of committee, Upton said: “We'll see.”

As it was in the house, net neutrality will be a major challenge for the Senate bill, Senate Commerce Committee Staff Dir. Lisa Sutherland told reporters. The Senate bill calls for an annual FCC study of the Internet to learn of problems with information flow. If it finds problems, the agency would make recommendations to Congress on how to fix them.

That’s a softer approach than in the House bill, which would give FCC net neutrality principles the power of law. Bell and cable firms welcomed the approach, in contrast to public interest groups’ deep disappointment. Some view the Senate’s approach as an opening move in a negotiation in which Senate Democrats likely will press to strengthen the language. A soft provision leaves room to add muscle, Hill sources said. The Senate Commerce Committee plans 2 hearings on the bill on May 18 and 25, with markup tentatively set for June 8.

Bill Would Retain Strong Local Govt. Role

Cable likes the bill’s franchise provisions, which would retain more local govt. jurisdiction than would the House bill. “Our effort was to honor the Burns-Inouye principles,” Sutherland said, referring to doctrines the duo outlined in Feb. (CD Feb 3 p3), calling for a timetable for franchise negotiations and keeping local govt. control over the process. But the Stevens bill would require a national franchise application administered by the FCC. New entrants still would have to deal with local authorities but there would be only one application.

The bill essentially would eliminate rate regulation if a new entrant comes into a market, Senate sources said. The bill also differs from the House bill in that it would allow state-level, rather than federal, handling of complaints. But both bills seek to address the goal of boosting competition, Sutherland said: “The net result will be the same.”

The Senate bill’s redlining and anti-bias provisions would be set nationally but monitored locally. State commissions could levy penalties or revoke franchises. Localities would have power to audit video service provider records to ensure the full franchise fee is paid. Communities would set fees, which would be capped at 5% of gross revenue.

Rural govts. would get favorable treatment in the Senate bill, especially its Universal Service Fund provisions. For the first time, broadband providers getting USF would have to deliver broadband services within 5 years. The bill would set up a $500 million fund under USF to encourage deployment in hard-to-reach rural areas.

The USF contribution base would expand -- all broadband providers would have to pay in -- so individual consumers’ bills would shrink, Senate sources said. The bill would direct the FCC to devise a contribution methodology that could be numbers-based, connections-based, linked to intrastate and interstate revenue or any combination. The bill also would exempt seniors and other low-income uses, and reduce fees for families using multiple phones.

Interconnection requirements appear in the bill’s USF section, since it would ensure competition for voice service providers. The bill would give VoIP providers interconnection rights, duties and obligations as if they were telecom carriers.

“The USF is critical to ensuring that all consumers have access to affordable telecommunications services,” NTCA Pres. Shirley Bloomfield said. The bill’s USF provisions would “provide consumers access to exciting new products and services, which will enable all to thrive in the global community,” Bloomfield said. OPASTCO praised the bill for its “vision” on USF and rural telecom networks. The group hailed provisions on video content and broadband access in rural areas. “This is a good bill,” OPASTCO Pres. John Rose said in a statement.

Cable Praise for Stevens

Cable officials and analysts generally praised the Stevens bill for taking what they called a better approach to video franchising by allowing municipalities to keep control. The bill has a 30-day time limit for municipalities to approve franchises -- which cable considers a better deal than federalizing the process. Cable’s biggest win in the bill may have been the franchise rules, said an industry source.

“The bill moves in the direction of enabling all providers to compete on a level playing field in both video and voice services,” said NCTA Pres. Kyle McSlarrow in a written statement. A Comcast spokesman called it “a constructive proposal.” A proposal from Inouye and Sen. Burns (R-Mt.) that relies on local and state authorities could accomplish “many of the bill’s goals,” said the spokesman.

Cable officials praised the bill for a hands-off approach to net neutrality. The bill said the FCC should monitor “developments in Internet traffic processing, routing” and related matters. “We are very pleased that the bill avoids new regulation of the Internet,” said McSlarrow. Bank of America analyst Douglas Shapiro wrote: “The provisions on net neutrality are completely benign… It provides no additional authority to police net neutrality ‘violations,’ whatever that means.” “It kind of punts really on the net neutrality issue,” said Womble Carlyle’s Ross Buntrock, adding that approach “isn’t really going to satisfy either side of the net neutrality debate.” Nonetheless, lawyers including Buntrock said the bill was a net gain for cable: “It certainly is a little bit better than various other versions.”

The bill probably won’t pass as-is, agreed lawyers and industry officials we spoke with. “This is a starting point,” said attorney Richard Wiley, a former FCC chmn.: “There’s going to be some discussion and a lot of changes as it winds its way through.” Issues likely to be changed include a provision that would subject cable modem service to universal service fund contributions, said cable sources. “When you start marrying the issues into one comprehensive bill, I think it makes it very difficult to thread that needle,” said Buntrock. Other issues that don’t favor cable include program access rules that would end the so-called terrestrial loophole, which gives Comcast exclusive rights to carry some Philadelphia games, said sources. RCN supports that provision, Senior Vp Richard Ramlall told us: “Control over programming by incumbent cable operators is the most critical barrier to competitive entry, and this is a good start.”

Bill Would Set Audio Flag Advisory Committee

The FCC would establish an advisory committee called the “Digital Audio Review Board” to negotiate audio “flag” content protections for terrestrial and satellite digital radio under a sweeping 10-title telecom bill introduced Mon. by Senate Commerce Chmn. Stevens (R-Alaska).

Members of the board would be appointed by the FCC chairman and include representatives “nominated” by the CE, IT, broadcast, cable, satellite radio and recording industries, the bill said. Music publishers, performing rights societies, public interest groups, artists’ and performers’ organizations also would nominate delegates to the board, as would “any other group that the Commission determines will be directly affected by the adoption of broadcast flag technology regulations.”

Within a year of the bill’s enactment, the board would submit to the FCC proposed rules based on a consensus of the members and “consistent with fair-use principles,” the legislation said. The Commission would be free to extend the deadline up to 6 months if it finds the board is making “substantial progress” toward a solution and members are continuing to negotiate in good faith, the bill said. On receiving the board’s recommendations, the Commission would have 30 days to start a rulemaking to be completed within 6 months. If the board can’t reach consensus, the FCC can’t impose rules -- it must submit recommendations to the House and Senate Commerce committees.

It’s presumed the FCC would be precluded from setting its own rules as a safeguard against a possible legal challenge that the Commission lacks the authority. That’s what happened when public interest and consumer groups persuaded the U.S. Appeals Court, D.C., to throw out the Commission’s video broadcast flag rules. The Stevens bill also would establish the FCC’s authority on video broadcast flag that the Appeals Court said it lacked, setting the stage for those rules to be reinstated.

The Stevens bill refrains from deciding which flag protections are to be used for digital radio, reflecting Capitol Hill’s desire to have industries negotiate technical solutions on their own. But establishing the review board would give the industries added impetus to convene at the bargaining table, where private efforts have failed. For example, CEA has resisted RIAA’s efforts to convene a dialog on audio flag protections because CE interests believe the recording industry hasn’t proved potential harm from home recording of digital radio content, and regards the Audio Home Recording Act as sufficient to deal with any such concerns. Meanwhile, the NAB and RIAA have had a meeting of the minds and agreed to drop encryption of digital radio content in favor of seeking a flag solution. Still, the Stevens bill instructs the FCC to impose rules thwarting the unauthorized Internet redistribution of digital radio content and says nothing of the unauthorized home recording RIAA also has attempted to quash. One area RIAA particularly has targeted receives no mention in the Stevens bill -- the time- shifting function in digital radio receivers to allow consumers to compile extensive song lists of their favorite artists.

As for the video broadcast flag provisions of the Stevens bill, they would set exemptions on any retransmission restrictions for distance-learning purposes and other educational uses. But the bill would allow “the redistribution of news and public affairs programming (not including sports) in which the primary commercial value depends on timeliness as determined by the broadcaster or broadcasting network.” That would seem a setback for the content industry, which has argued vehemently against such exemptions.

Reaction from industry groups was slow in coming. A group representing Disney TV stations was an exception, praising the bill for including the video flag component and pledging to work closely with the Senate Commerce Committee to see it passed.