Federal Communications Commission (FCC)

House Commerce Committee will introduce new bill “in next month or so” to replace last session’s HR-2420 that would give Bells more regulatory freedom for data transmission and expects easy passage in House but harder job in Senate, Ken Johnson, spokesman for Committee Chmn. Tauzin (R-La.), said Thurs. Johnson, who participated in panel discussion at Precursor Group conference in Washington, urged audience not to “mistake inaction with indecision” on part of Committee because it still was committed to basic HR-2420 concept. Bill probably will be same as last year’s version although it could change during legislative process, Johnson said. Tauzin looks at current version of bill as setting tone for discussion, he said.

Qwest CEO Joseph Nacchio told state regulators fastest way to develop local competition was to “give competitors the freedom to take risks and enjoy the reward.” In keynote speech Mon. at NARUC winter committee meetings in Washington, he called himself “unabashed capitalist” willing to put money at risk where there’s best possibility of return. Talk came just one day before NARUC decision on its policy toward 2 federal-level deregulation proposals.

Four large TV group owners are devising plan to assure FCC exactly when they will give up analog Ch. 60-69 in planned switch to digital transmissions, Pax TV CEO Lowell Paxson said. After speaking at Federal Communications Bar Assn. lunch Wed. in Washington, he parried all reporters’ questions about what plan would entail, saying: “I'll get this plan to you when we finish it” in 2-4 weeks. In answer to another question, he said “it'll all come out in the plan.” He identified other licensees involved as Univision, Shop at Home and Pappas Telecasting -- which, Paxson said, represented more than 40% of 136 stations currently assigned to analog Ch. 60-69 which are to be auctioned to nonbroadcast users. Saying FCC Chmn. Powell had referred to upcoming switch to DTV as “a train wreck,” Paxson said to Powell (who wasn’t in audience): “You're the engineer now. Get us back on track.” Paxson said FCC’s recent rulemaking on DTV issues (CD Jan 22 p1) indicated agency was asking for direction from Congress. He urged Commission to hold hearings on transition to digital rather than solicit more comments. He said Pax TV Network was in black after 27 months of operation -- primarily due to help of NBC, although he didn’t mention that network -- while he said WB and UPN continued to lose money after several years of operation. Meanwhile, Moody’s (citing help from NBC) issued “outlook stable” notice on Paxson’s $122 million credit facility and $230 million in 11.625% notes, both due next year.

FCC denied petition by Operator Communications (Oncor) for forbearance of rule requiring that contributions to federal universal service fund be based on carrier revenue from prior year. Oncor contended that basing contributions on prior-year revenue harmed carriers with declining revenue. It asked FCC to forbear from assessing revenues for years 1998-2000 and then reassess contribution based on actual revenue for those years. Commission said requested action would give unfair advantage to carriers with declining revenue. FCC Comr. Furchtgott-Roth issued statement agreeing with FCC’s denial but emphasizing that problem raised by Oncor was serious: “Because carriers contribute to the universal service fund based on the prior year’s revenues, those carriers whose revenues have declined find themselves paying a higher percentage of their current revenues… than do carriers with stable or increasing revenues.” He said end-user surcharges could be “promising solution.”

Rural telephony is ripe for investment as regulatory reform, consolidation and divestiture of rural exchanges by Bell companies change way telephone service is offered in small communities, panelists told representatives of investment companies attending conference in N.Y.C. sponsored by Legg Mason. “This a good time for you to come in,” NARUC Pres. Bob Rowe said: “There is tremendous growth. Rural America awaits your participation.” Panelists at all-day conference represented telcos, regulators, financial investors.

FCC must-carry rules are filled with “legal and factual errors,” EchoStar said in letter signed by Vp-Gen. Counsel David Moskowitz. EchoStar joined rival DirecTV and Satellite Bcstg. & Communications Assn. in challenging constitutionality of must- carry rules in federal lawsuit. Under FCC rules, DBS companies must carry all stations in each market they serve. Satellite companies say those rules eat up valuable capacity and constrain their business. Moskowitz said Commission made “flatly mistaken observation” that Fla. federal court found Satellite Home Viewer Act that mandated must-carry rules to be constitutional. The court “never made such a finding and indeed it could not have, as it concerned a complaint relating to distant, not local signals.” EchoStar also criticized FCC for relying on “unsubstantiated comments” from NAB “without any empirical or other support” and treating them as facts. Finally, EchoStar said, satellite carriers in general, and EchoStar in particular, had devoted substantial resources to ensuring that all local TV broadcast signals carried on satellite systems enjoy superior signal quality.

As expected, FCC has embarked on reexamination of whether there is continued need for spectrum cap and cellular cross- interest rule for commercial mobile radio service providers. Notice of proposed rulemaking (NPRM) issued late Wed. (CD Jan 23 p1), but approved by FCC last Fri., seeks comment on whether wireless market has changed significantly since last time agency examined issue in 1999, when it decided to keep spectrum limits intact to safeguard competition. Point is to examine whether competition has grown to extent that spectrum restrictions can be lifted or relaxed, NPRM said. Questions in notice included role FCC plays in examining market impact of wireless deals vs. purview of Dept. of Justice.

As FCC Chmn. Kennard departs today, he leaves legacy as extremely decent man who might have been more effective if he were more of a politician, industry officials told us. “He is a prince of a man, honorable, honest,” said one telecom lobbyist. “But I don’t believe he’s a politician at heart and it’s hard for that kind of person to survive the political cauldron in Washington.” No one we talked with disputed Kennard’s honorable nature. Even his ideological opposite, Comr. Furchtgott-Roth, said Thurs. that he viewed Kennard’s departure to make way for Republican as “somewhat bittersweet” because Kennard was “one of the finest, most decent individuals I've ever met.”

Now that FCC finally has approved AOL’s takeover of Time Warner (TW) with additional regulatory conditions, cable operators, consumer groups, phone companies, state and local regulators, ISPs, broadcasters, DBS providers, cable overbuilders and others already are girding for next big fights over extending those regulations to rest of cable industry. Likely new battle fronts include 2 separate FCC proceedings on cable open access issue and interactive TV (ITV) rules, each of which covers part of leading conditions imposed on AOL-TW by FTC and FCC. Another new battle front could be expected bill in new Congress that would create comprehensive regulatory scheme for all broadband services, whether delivered by cable, telephone, satellite or wireless technologies. “It’s going to be more diffuse,” said Precursor Group CEO Scott Cleland. “The progress will still be made but it will be more difficult to track.”

LAS VEGAS -- FCC Comr. Powell endorsed free market vs. govt. regulation, pleasing consumer electronics officials at the CES here Sat. But reaction was more muted when he also indicated reluctance for govt. to move aggressively to spur DTV transition. Powell, who is widely rumored to become next chmn. of FCC, was interviewed one-on-one by CEA Pres. Gary Shapiro, also rumored to be candidate for position in new Bush Administration, despite recently signing new 10-year contract with CEA.