FCC unanimously adopted notice of proposed rulemaking (NPRM) that eyes frequencies, including those now occupied by military users, for 3rd-generation and other advanced wireless services. Commission also denied petition by Satellite Industry Assn. (SIA) seeking additional spectrum for mobile satellite services (MSS), move that Multichannel Multipoint Distribution Service (MMDS) licensees opposed (CD Aug 30 p1). FCC adopted notice Dec. 29, meeting White House’s year-end deadline for approving item, although text hadn’t been released by our deadline.
Sprint PCS became latest carrier to drop out of FCC’s C- and F-block auction, which resumed Thurs. and reached $12.01 billion in net high bids. Sprint’s bidding eligibility was reduced to zero after 27 rounds Thurs., FCC said. Lehman Bros. research note issued before auction resumed after holiday hiatus said Sprint was among carriers likely to abandon bidding, path already taken by Nextel and several other carriers since auction started Dec. 12. (Bidding was suspended between Dec. 22 and Thurs. for holidays). Lehman said Sprint PCS didn’t place bids Dec. 21, using waivers instead. “It seems as if Sprint PCS feels the prices are too high and is going to exit the auction shortly after bidding resumes,” Lehman said. Following CDMA agreement with Palm, Sprint shares soared 15.41% Thurs. to close at $23.88. (Pact covers Sprint’s provision of first CDMA solutions for Palm’s handheld devices). Meanwhile, Verizon maintained strong lead with $4.06 billion in net high bids, followed by AT&T-backed designated entity Alaska Native Wireless with $2.67 billion and Cingular Wireless-backed Salmon PCS with $2.19 billion. Verizon Wireless had been high bidder for 2 N.Y. licenses for last several rounds, but ended Thurs. with high bid for only one license at $968.6 million. Alaska Native Wireless bid $716.57 million for another N.Y. license, with Salmon PCS vying for 3rd with $714.45 million. Lehman Bros. indicated auction could wrap up in several weeks. DCC PCS placed high bid of $519.7 million for L.A. license. Verizon also placed high bids for licenses in L.A., Chicago, San Francisco, Philadelphia, Boston, Seattle. Alaska Native Wireless placed high bid for L.A. and Salmon for Atlanta. In top 15 markets, VoiceStream had high bid for Washington license.
Coalition of major broadcasters, cable networks, movie studios, record companies, sports leagues and other content owners lobbied FCC for strong copy protection technology for advanced digital cable set-top boxes. In joint 4-page letter to FCC Chmn. Kennard Thurs., ABC, BMI, CBS, ESPN, Fox, Minor League Baseball, MPAA, NBC and RIAA argued that “cable interface devices must include the capability to protect certain high-value content against unauthorized copy and Internet retransmission” because of “the economics of producing and distributing high-value programming.” Responding to letter by House Telecom Subcommittee member Boucher (D-Va.) to Kennard last month, group also contended that advanced digital set-tops must be capable of providing some level of content protection “so consumers that purchase such devices will be able to receive the widest variety of program choices, including high-value programs that may be made available only if content protections are in place.” It said “alternative is to introduce devices in the marketplace that cannot provide content protection, and therefore cannot receive certain types of high-value programming.” Content owners also disputed Boucher’s contention that “freely broadcast programming should remain freely copyable,” contending that local broadcasters would be relegated to “the position of ‘low-value’ content distributors.” They questioned whether there was any public interest “in allowing consumers to make multiple copies of broadcast programming, or to retransmit broadcast programs over the Internet.”
NCTA submitted 2nd brief to U.S. Supreme Court, seeking to convince high court to review appellate court ruling that struck down FCC’s authority over pole attachment rates for cable lines carrying Internet service. In 10-page reply brief filed Jan. 2 in Gulf Power case, NCTA argued that decision by 11th U.S. Appeals Court, Atlanta, “improperly rejected the FCC’s reasonable construction of Section 224” of Telecom Act and wrongfully concluded that “Congress intended to repeal the regulatory authority that the FCC admittedly possessed over pole attachments regardless of the type of service provided over the equipment attached to the poles.” NCTA also contended that “this case squarely presents an issue of national importance that was improperly decided” by lower court. It said utilities’ claims that “they are constitutionally entitled to recover so-called monopoly ‘market rates’ for providing access to essential bottleneck facilities is contrary to settled law and, if accepted, would render all rate regulation of monopoly enterprises unconstitutional.” Cable operators charged that utilities had been increasing pole attachment rates substantially since 11th Circuit ruling last spring. But utilities contended that they were entitled to get what market would bear.
FCC will consider possible reform of intercarrier compensation at its Jan. 11 open meeting but long-awaited reciprocal compensation didn’t show up as companion item (CD Jan 4 p1). FCC is overdue to act on reciprocal compensation, which is one of many intercarrier payment schemes that will be addressed in broader notice of inquiry listed on agenda. Other agenda items agency will consider at meeting: (1) Proposal for technical and operational rules for use of frequencies by public safety entities. Idea is to assure various jurisdictions could talk to each other. (2) Memorandum opinion and order on reconsideration concerning rules that require broadcasters, cable operators and other video programming distributors to provide video description and make emergency information more accessible to visually impaired. (3) DTV transition and reception issues for broadcasters. (4) Declaratory ruling in case of DTV-only Fla. station that’s seeking cable must-carry status. (5) Implementation of Satellite Home Viewer Improvement Act, including DBS local-into-local, must-carry, network non-duplication, syndicated exclusivity and sports blackout rules.
“Nothing would be gained by further delaying a decision” on core DTV must-carry issues, NAB Pres. Edward Fritts said in letter Thurs. to FCC in which he said Commission could defer decision on must-carry itself while adopting some “rules of the road” for carriage of DTV stations. He said there would be no benefit in delay, “certainly nothing that would be worth the harm to the progress of the transition.” NAB also pressed FCC for requirement that all new TV sets have tuner capable of receiving DTV.
Rural Task Force (RTF) asked FCC to act within 45 days on task force proposal for rural universal service revisions. In Jan. 3 ex parte letter, RTF said Federal-State Joint Board on Universal Service already had developed “extensive record” of comments on recommendation, so swift action was plausible: “Because the recommendation now in front of the FCC is unchanged from that put out for comment by the Joint Board, it is highly unlikely that an additional round of comments from the FCC is required.” If FCC decides to seek more comments, it ought to complete comment process in 30 days, RTF said. RTF Chmn. William Gillis said group realizes Commission had many demands but “each additional day of delay in implementing universal service reform for rural carriers puts at risk much-needed investment in rural America.”
In defiant response to AT&T Broadband’s request for waiver of franchise fees on cable modem service (CD Jan 3 p3), Lakewood City, Cal., warned company that withholding payment of franchise fee “will jeopardize your franchise or subject you to penalties.” Accusing AT&T of misstating federal policy in its letter requesting waiver, Asst. City Mgr. Michael Stover said city should neither agree to waive franchise fees nor indemnify AT&T against various potential costs. “We expect AT&T Broadband to continue to pay all required franchise fees, including those based on cable modem service revenue,” city said. Referring to AT&T’s contention that it passed through franchise fee on cable-delivered Internet service to subscribers under federal law, he said Telecom Act “only permits cable operators to pass through increases in franchise fees on regulated cable service rates. Federal law does not authorize or otherwise address the ability of cable operators to pass through franchise fees on cable modem and other services.” Although federal law allows cable operators to include line item on subscriber bills indicating amount assessed as franchise fee, Stover said including line item was “entirely different concept” than passing through those costs to subscribers. In City of Dallas v. FCC, 5th U.S. Appeals Court, New Orleans, “made it clear that, even when such a line item is included on subscriber bills, franchise fee are imposed upon cable operators, not on subscribers,” he said. As for concerns raised by AT&T over potential class action lawsuits, he said that since franchise fees were paid by AT&T and not subscribers, there were no fees collected from subscribers that could be refunded. “This imaginary exposure to litigation is not a legitimate basis for not paying the required franchise fees.” However, Stover proposed 2 options to allay AT&T concerns about potential litigation: (1) Refrain from itemizing franchise fees on cable modem service because federal law doesn’t require such action. Doing so won’t reduce amount company can collect from subscribers “because you can essentially set your rates at any level you choose.” (2) Agree, as alternative, to pay 5% telecom franchise fee on cable modem service. That appears to be consistent with 9th U.S. Appeals Court, San Francisco, ruling classifying cable modem service as telecom service, he said.
Tex. PUC Comr. Judy Walsh resigns to take position with President-elect Bush’s energy policy development team; she will stay on until Tex. Gov. Rick Perry (R) appoints replacement to fill remaining 3 years of her term. Walsh was first appointed to PUC in 1995 by then Gov. Bush… WorldCom names Donna Sorgi, northern region public policy vp, to head its Washington-based federal regulatory group… Rosemary Kimball moves from FCC Office of Media Relations to press liaison at agency’s Consumer Information Bureau… Douglas Hanson, CEO, Internet Commerce & Communications, named CompTel chmn., replacing Global Crossing’s Anthony Cassara, who stepped down… Named partners in Wiley, Rein & Fielding law firm: Mary Borja, John Burgett, Tanja Hens, Scott McCaleb and Suzanne Yelen; named of counsel to firm are Christopher Kelly, ex-U.S. Patent & Trademark Office, and David Southall, ex-Information Management Consultants.
Four major MSOs swapped or purchased cable systems from one another as new year began, furthering trend toward industry consolidation that has snowballed in last 3 years. Adelphia, AT&T Broadband, Comcast and Mediacom all announced system exchanges or acquisitions that would result in 2.4 million subscribers, or more than 3% of all U.S. cable customers, changing corporate hands overnight. Transactions will create even bigger cable clusters in such large markets as N.Y.C., L.A., Washington, Chicago, Detroit, Philadelphia, Atlanta, southeastern Fla. But some industry observers said deals, concluded as FCC continued to weigh final govt. approval of AOL’s pending purchase of Time Warner (TW), would lead to even more as scale became ever more important. “Cable consolidation is not over,” ABN AMRO analyst John Martin said.