U.S. Supreme Court agreed Mon. to hear oral argument in FCC’s appeal of D.C. Circuit’s NextWave ruling, creating another layer of uncertainty for spectrum on which carriers and govt. had failed to reach settlement late last year. Some industry observers said high court’s grant of certiorari in NextWave case could heighten incentives to reopen settlement talks over licenses that fetched $15.8 billion in Jan. 2001 re-auction. But several analysts and industry sources pointed out that FCC had strong legal interest in having Supreme Court uphold what it viewed as integrity of auction process under Communications Act compared with limitations of U.S. Bankruptcy Code. Valuations of licenses also are widely seen as lower than they were even several months ago as carriers’ stocks have been battered on Wall St. Grant of certiorari marks victory for FCC, which sought review of June decision by U.S. Appeals Court, D.C. D.C. Circuit had reversed agency’s decision to cancel NextWave’s licenses for missed payment, throwing results of $17 billion re-auction of those licenses into disarray. With high court’s decision to review that ruling, “the mess just got messier,” said Legg Mason analyst David Kaut: “There’s a new round of legal uncertainty.”
Broadcasters have little choice but to complete DTV transition because they face $500 million spectrum fee for analog channels beginning in 2007, MSTV Pres. David Donovan said Wed. at group’s DTV conference. But he said govt. wasn’t doing enough to promote transition, including DTV must-carry for cable, dual tuner requirement and requiring DTV-cable compatibility: “The light at the end of the tuner may be a train.”
FCC is “very sympathetic to regulation parity” between broadband services provided by cable companies and telcos “but there are limits to what the Commission can do,” Comr. Martin said Wed. in Comnet session in Washington. In What’s Ahead in Communication Policy and Regulation he said 2 deployment models were “regulated very differently.” Citing current cable open access proceeding at FCC, Martin said he was “hesitant to apply legacy regulations” to cable industry: “I am worried about regulating up.” When Commission opens proceeding and then fails to reach decision, uncertainty created can dampen investments in new technology, he said: “The Commission needs to be careful with regulatory parity” and “not impose new burdens on new technology.” Regulatory parity should be implemented “with very subtle tools,” otherwise it could “slow deployments [in markets] where cable has been very successful,” he said.
FCC spectrum auctions make cameo appearance in current box office and critical hit A Beautiful Mind. Film biography of Nobel prize winner John Nash lists auctions among public and economic policies influenced by his seminal contributions to game theory.
Commercial broadcasters should “foot the bill” to set up trust fund that will take public broadcasting off “annual federal dole, remove corporate program sponsorship and free the service to pursue its mission without constant censorship pressures that come with private funding,” said Jerold Starr, exec. dir. of Citizens for Independent Public Bcstg. (CIPB). He said commercial broadcasting was only industry that made money off public resource without paying for it. “Oil drillers, cattle grazers, cable operators and cellular phone companies all pay a fee for using public resources. Why not commercial broadcasters?” Starr asked. CIPB estimated public broadcasting needed $1 billion per year for all TV and radio, local and national programming and said funding could be accomplished by 5% tax on sale or transfer of TV and radio licenses, 2% tax on broadcast advertising and 2% annual spectrum fee or tax on spectrum auctions. Gore Commission, which explored social responsibilities of digital broadcasters, had suggested in 1998 that Congress create trust fund for public broadcasting and that, if it did, PBS should reduce or eliminate “enhanced underwriting,” which “closely resembles full commercial advertising,” Starr said.
FCC Wed. turned back petition for rulemaking filed by Public Employees for Environmental Responsibility (PEER) that had sparked strong opposition from wireless, wireline and undersea cable operators. Commission unanimously adopted order, although Comr. Copps issued separate statement saying PEER had raised “important questions” about how FCC carried out environmental duties mandated by Congress. PEER had asked FCC to change how environmental rules were applied to undersea cables, fiber lines, wireless towers. Group of govt. employees concerned about environment wanted agency to conduct rulemaking to ascertain whether it needed to create Office of Environmental Compliance and separate joint rulemaking with other agencies. Companies ranging from Verizon to Global Crossing had balked at PEER petition, telling FCC such action wasn’t needed and unjustifiably would add to regulatory burdens. Commission rejected PEER arguments that due to explosive growth in wireless and wireline infrastructure since Telecom Act, agency should take fresh look at cumulative impacts of spectrum auctions, tower registrations, undersea cable landing licenses, Sec. 214 authorizations. PEER doesn’t offer “rationale for treating all actions as actually or potentially damaging to the environment,” FCC said. “We do not believe that the evidence of environmental harm proffered by PEER reflects any environmental processing failings by the Commission.” Even if PEER successfully pointed to such shortfalls, “a few examples in no way justify the complete overhaul of the Commission’s long-standing environmental rules across all service areas,” it said. PEER had challenged FCC environmental rules that implemented National Environmental Policy Act (NEPA), which required federal agencies to account for environmental impact of projects they oversaw. PEER had urged FCC to require applications for all Commission actions involving submarine cables, fiber lines and spectrum requiring communications towers to file environmental assessment for public utility facility. Private utility would have to file environmental impact statement. PEER defined public utilities as supplying last-mile connections while private utilities would be parts of network needed to transmit over long distances. FCC said its regulations implementing NEPA already identified 9 types of actions that could have significant environmental impact and evaluate through environmental assessment all actions that involved projects that fit into those categories. In its May 2000 petition, PEER had cited growing number of cases in which laying of fiber cable had damaged coral beds and harmed habitat of endangered marine species. PEER said that in other cases, buildings and towers could have significant effect on environment and historic areas. Copps said that “while this proceeding did not provide adequate record evidence for a restructuring of our policies at this time, the Commission should undertake a thorough review of our obligations under the National Environmental Policy Act and the National Historic Preservation Act.” He said that as part of Chmn. Powell’s recently launched review of FCC procedures, assessment of agency’s responsibilities under NEPA and National Historic Preservation Act should be included. Copps said FCC should: (1) Determine whether it had devoted enough resources to meet its environmental responsibilities under those laws. (2) Examine how accessible such proceedings were to “nontraditional stakeholders” such as small businesses. PEER Gen. Counsel Daniel Meyer told us group planned to file petition for reconsideration at FCC by early Jan. “I do take Commissioner Copps’s separate statement as an indication the Commission knows it’s not addressing environmental concerns from environmentalists in an appropriate manner,” Meyer said. He said one example of types of cumulative environmental impacts that FCC must consider involved wireless towers that hadn’t complied with Sec. 106 review under National Historic Preservation Act. Assessing cumulative impacts of towers, Copps said, “the danger is the actual spectrum auction will have to be environmentally reviewed. That would be a nightmare for industry.” Lack of uniformity in compliance and enforcement means that most of industry has been erecting towers without environmental review, he said.
House Speaker Hastert (R-Ill.) expects to move broadband legislation by year-end, but it will remain separate from any economic stimulus package that reaches House floor, aide Timothy Kurth said Tues. at Schwab Capital Markets conference in Washington. Kurth said bill (HR-1542) by House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.) was seen by Hastert as legislative vehicle to spur broadband deployment, particularly since it already had been approved at the committee level: “My boss is looking at completing action on this by the end of the year.” He declined to comment on possible movement of Tauzin-Dingell or other deregulatory measures in the Senate, where opponents such as Senate Commerce Chmn. Hollings (D-S.C.) not only have vowed to block such legislation, but have introduced bills that would bolster regulation of Bell companies and increase fines for noncompliance.
FCC auction policies deter deployment of wireless service in rural areas, according to survey issued Tues. by National Telephone Co-op Assn. (NTCA). NTCA Regulatory Counsel Jill Canfield said survey “didn’t tell us anything we didn’t expect” and would be used to buttress group’s arguments. “It’s not the Telecom Act, but the implementation of the Act by the FCC,” NTCA Pres. Michael Brunner said. Telecom Act requires FCC to provide rural telcos with “meaningful opportunities” to participate in spectrum auctions and Commission isn’t complying with that mandate, he said. Survey was completed by 49% of NTCA’s members and 77% percent of respondents said they wouldn’t participate in any auctions in future because of high cost of spectrum, inability to compete with large carriers, inability to obtain license for limited geographic areas they wanted to cover. Only 1/3 of those that had tried partitioning were successful, survey said. Partitioning involves splitting off part of one company’s service area or splitting off portion of spectrum for another company’ use. Canfield said several Commission policies hurt rural companies: (1) It auctions large geographic blocks that include rural and urban areas. (2) Such auctions attract large companies with lot of money, so bidding credits do little to soften blow to small telcos. (3) “Lenient build-out rules” enable large carriers to hold onto spectrum in rural areas without using it in hope of seeing its value increase. FCC should consider smaller service areas, possible alternatives to auction process for rural telcos, seeking other incentives specifically for rural America, she said. One example of FCC’s lack of understanding of rural telephony, she said, is treatment of income earned by directors of rural co-ops in determining eligibility for bidding credits. Unlike regular companies, co-op directors have outside jobs, often as farmers. Because owning their own farm can cause directors’ income to be too high under FCC rules, co-ops are disqualified for credits, she said. Spectrum leasing may prove useful although, like partitioning, it involves dealing with larger companies in secondary markets, which adds uncertainty, NTCA officials said.
Finding effective stimulus for mass broadband deployment will require “inspiring vision” on level of what was envisioned during U.S. efforts to put first man on moon, 3Com Chmn. Eric Benhamou said. At New America Foundation broadband and spectrum reform discussion Mon., he said creation of “compelling content” and development of technology-neutral govt. policy was needed to “re-energize broadband.” He said more than $100 billion in U.S. fiber deployment investments and “sufficient advances” optical equipment development made it possible to strive for eventual offering of 100 Mbps interactive broadband services. Although he also warned against creation of “artificial competition” as primary policy goal, he said govt. subsidies were required to ensure “sufficient penetration and coverage” throughout country. He acknowledged sympathy for concerns of CLECs, whom he described as “dying breed.” However, he said both CLECs and ILECs had legitimate complaints about impediments to broadband deployment. He said ILECs had “done a good job of stalling” competitors who sought lawfully required access to ILEC facilities in order to provide services. However, he said ILEC argument against investing billions of dollars for infrastructure that would have to be provided below cost to CLECs wasn’t without merit: “There’s not enough incentive to adopt the behavior we would like them to adopt.” NCTA spokesman said in response to Benhamou’s comments on need for govt. subsidies that cable industry was “example of marketplace success” in broadband deployment and delivery: “We share Mr. Benhamou’s enthusiasm, that’s why the cable industry has invested more than $52 billion in private risk capital to bring broadband to more than 60 million households in a few short years. The cable industry has found that private market solutions are not only preferable but are effective.” As for role of spectrum auctions in hastening 3rd generation wireless broadband deployment, Benhamou suggested that U.S. regulators learn from “mistiming of the auctions” in Europe. He said one of drawbacks to “open and democratic” auction process was “incredible levels” of spectrum prices often paid by entities that had significant cash flow but lacked responsible business plans. He said if and when such companies suffered financial problems because of lack of swift return on their investments, European govts. would have to subsidize them to keep them afloat. That will result in “huge loss of credibility of government,” Benhamou said. He also said current economic downturn predated Sept. 11 terrorist attacks: “Frankly speaking, the ‘New Economy’ has been flat on its ass, and has been for months.”
As expected, FCC asked U.S. Supreme Court late Fri. to review June ruling by U.S. Appeals Court, D.C., that had overturned earlier Commission decision to cancel NextWave licenses for nonpayment. Industry observers had expected Commission to take step, although negotiations among stakeholders on potential $16 billion settlement involving licenses were continuing Fri. FCC filed writ of certiorari asking high court to consider whether Sec. 525 of U.S. Bankruptcy Code “conflicts with and displaces” Commission’s rules for congressionally authorized spectrum auctions. Thirty-five-page document said auctions “provide that wireless telecommunications licenses obtained at auction automatically cancel upon the winning bidder’s failure to make timely payments to fulfill its winning bid.”