Martin Prepares ETFS Item as FCC Seen Focusing More on Telecom

FCC Chairman Kevin Martin has drafted an ETF order, though it has not circulated on the 8th floor and has not been shared with the wireless industry, sources said Friday. The item is broader than just ETFs in the wireless industry, taking in cable operators and Internet service providers as well. “It’s worrying to carriers, but having a uniform federal rule is what we petitioned the FCC for,” said a wireless industry source: “The devil is always in the details.” The source noted that major wireless carriers have already announced they will prorate ETFs, alleviating some industry concerns about new regulation.

Martin told a Senate Commerce Committee hearing in December he has met with the wireless industry to express concerns about ETFs. “I think that the problems related to early termination fees are significant, and I am concerned about it and I think they're actually proliferating not just in the wireless industry, but we're beginning to see them pop up across other sectors as well,” he said. “I think that the commission would potentially be able to regulate them as a fair business practice under section 201 of the Communications Act.”

Early in 2008, much FCC attention is expected to be focused on the 700 MHz auction, which gets underway Jan. 24. The FCC will have to review the agreement between the public safety broadband licensee and the D block winner, which must be negotiated within six months of the closing of the auction.

Use of the broadcast white spaces is expected to reemerge as an issue in 2008, with a second round of testing of devices designed to operate in the band likely to start in January. The FCC originally was expected to vote on the issue at its October meeting.

Action in the near future also is likely on an 800 MHz order now on circulation. The rebanding is scheduled to be completed in June under the three-year timeframe in the FCC’s landmark 2004 rebanding order. At the very least, the FCC will have to address an expected flurry of requests for waivers from public safety licensees seeking additional time.

Also pending is the CMRS competition report and an order addressing petitions for reconsideration of automatic roaming rules the agency approved in August. A key issue in the reconsideration is the “home roaming” exclusion, under which a carrier need not honor a roaming request from a counterpart with spectrum in a market, even if the spectrum hasn’t been cleared to allow network buildout. The FCC is likely to eliminate or at least scale back the exclusion in response to complaints from numerous carriers.

The Year for Universal Service Reform?

This may finally be the year for comprehensive universal service reform, some telecom lobbyists say. “Part of me thinks the stars are starting to align” for universal service, said a Bell executive. “I would think universal service is one thing the chairman would want to accomplish before leaving.” Although FCC action on an interim cap on universal service subsidies reportedly has gone by the wayside because the issue has dealt with as part of merger orders (CD Dec 21 p2), it may remain hot on Capitol Hill in the coming year, she predicted. Wireless competitors have been on the Hill voicing their objections to a cap that’s limited to rural competitors and not incumbents, she said. “They're keeping the buzz alive that it’s not fair.”

The FCC could turn to universal service reform as soon as January, said Stifel Nicolaus analyst Blair Levin. It’s “the next big thing up” for action though it might slip a few months into the year, he predicted. Martin began circulating universal service items in the spring, so something already exists to enable the chairman to move forward, said Levin.

But it’s hard to envision the FCC taking on universal service as a complete package because it’s such a tough subject “with so many industry perspectives,” said Russ Merbeth, federal counsel for Integra Telecom. Universal service reform has been done on a piecemeal basis in recent years so it’s possible the agency would “split it up in chunks” if it tackled the complex subject in 2008, he said. Intercarrier compensation reform is another tough area that has been languishing because of differing industry viewpoints, Merbeth said. “A company like mine may not like everything about the current system but at least we understand it and our investors understand it,” Merbeth said.

The next important thing for CLECs is a set of Qwest petitions for forbearance from unbundling requirements in Minneapolis-St. Paul, Denver, Phoenix and Seattle, Merbeth said. The FCC must act by late April on the petitions, although it could extend the deadline for three months under Telecom Act rules. The Bells “are our primary wholesale providers” so in the policy arena “we are all forbearance all the time,” Merbeth said.

As FCC chairmen near the end of their terms they usually get a yen to fix universal service, said Phoenix Center President Lawrence Spiwak. The recent recommendation by the Federal-State Joint Board on Universal Service shows there’s some consensus on how to reform universal service so it’s pretty certain that Martin will “take a crack at universal service,” said Spiwak. “Everyone would like to see it happen if the commission can pull it off.”

Universal service is one of four items that Spiwak expects to dominate communications policy this year. Others are the 700 MHz auction with the related DTV transition, a renewal of net neutrality debate, and the development of a national broadband strategy. All are overlaid by election year factors, he said. “The DTV spectrum issue has all the makings of a perfect storm in an election year” and technology issues such as broadband and net neutrality will play a role in both Republican and Democratic election campaigns, he said.

The current administration will take credit for bringing broadband access to the country by the 2007 deadline promised by President Bush, Spiwak predicted. The Democrats meanwhile “like to run on technology issues” so they will call for a national broadband strategy and renew concerns about net neutrality that have resurfaced in petitions at the FCC filed by groups concerned about blocking BitTorrent peer-to-peer protocol and text messaging, he said. Plus, there undoubtedly will be issues no one is thinking about now, said Spiwak. “You never know what is going to get legs as the year goes on.”

“Universal service is always a tough issue because it’s so partisan” but one related issue has achieved “near total unanimity” among policy makers and lobbyists -- use of phone numbers as a USF contributions base, said Washington attorney Colleen Boothby. It’s a “pure public policy issue” that would be easy for the FCC to pass, she said: “If ever there was a way not to gore anyone’s ox, this is it.”

Special access will be on “the back burner” in 2008 as the FCC addresses such issues through forbearance, she said. It’s not a good for customers but that seems to be what is occurring, she said. Boothby represents large corporate buyers of telecom services.