Federal Communications Commission (FCC)

City of Chicago is seeking to force cable operators to pay franchise fees on cable modem service by invoking state law that requires companies to honor contracts. In lawsuit filed in Circuit Court in Cook County, city said cable operators voluntarily had signed agreements to pay franchise fees on all revenue “regardless of what the Federal Communications Commission says.” City Cable Administrator Joyce Gallagher told us cable operators had notified city March 15 they would stop paying cable modem franchise fees following FCC decision to classify it as interstate information service. Fees on cable modem weren’t included in their quarterly payment, she said, and companies “would be in default as far as we are concerned on June 30.” Under contract law companies are obliged to honor conditions agreed to in their 15-year franchise agreements. Despite FCC ruling, condition that companies pay percentage of gross revenue as franchise fees hadn’t changed, she said: “We believe strongly that we are entitled to that [cable modem fees] by contract.” Companies operating in city are AT&T Broadband, RCN Corp. and Wide Open West. Chicago has joined National Assn. of Telecom Officers & Advisors (NATOA) challenge to FCC cable modem ruling in 9th U.S. Appeals Court, San Francisco, Gallagher said. Declining to comment on lawsuit until he had read it, RCN spokesman said cable operators now faced difficult situation because FCC took long time to resolve issue of cable modem classification. “We completely understand the need to generate revenue on the cities’ side,” he said, but given FCC ruling operators would face complaints from consumer groups and subscribers if they continued to collect and pay franchise fees on cable modems. “It’s a policy matter that we have to abide by,” he said: “The cities will have to fight this one out.”

Citing depressed capital markets for wireless carriers, FCC Thurs. floated alternatives for allowing NextWave re- auction bidders that now face potential payment obligations of $16 billion to opt out of all or part of payment commitments. Public notice said that even since Commission in March issued refund of all but 15% of down payments to Jan. 2001 re-auction winners, economic outlook for sector “has continued to decline rapidly.” Move comes just weeks before U.S. Supreme Court is to hear oral argument in FCC challenge to U.S. Appeals Court, D.C., reversal of agency decision to cancel NextWave’s licenses for missed payment, leading to return of that spectrum to bankrupt C-block bidder.

Verizon Wireless asked U.S. Court of Federal Claims to grant summary judgment on issues it was raising in litigation against U.S. govt. on pending NextWave license payment obligations. Verizon Wireless has mounted parallel challenges in U.S. Appeals Court, D.C., and Court of Federal Claims involving FCC decision to retain small amount of deposits from Jan. 2001 NextWave re-auction and to hold carriers to their bid obligations until pending U.S. Supreme Court case plays out. One key difference in Court of Federal Claims suit is that Verizon Wireless is seeking damages against govt. for not releasing it from what it argues are now void contract obligations connected to NextWave re- auction bids. If Claims Court were to grant latest Verizon request, filed late Mon., that could pave way for case to be decided before Supreme Court ruled on FCC appeal. At high court, govt. is challenging D.C. Circuit ruling last year against agency’s decision to cancel NextWave’s licenses for missed payment. Verizon Wireless has been pushing for either congressional or court relief of its more than $8 billion in NextWave re-auction obligations. Some analysts have suggested that govt. ultimately would release re-auction winners from collective $16 billion in bidding commitments, in part because even Supreme Court ruling siding with govt. could result in several more years of litigation of outstanding issues before D.C. Circuit (CD Sept 5 p11). Summary judgment by Federal Claims Court, if granted, could lead to decision on auction overhang before Supreme Court rules after Oct. 8 oral argument, industry observer said. In motion for summary judgment, Verizon told court that “there are no genuine issues of material fact” and that carrier should be “entitled to judgment as a matter of law.” Following last year’s D.C. Circuit ruling, FCC returned PCS licenses to NextWave. Earlier this year, Commission agreed to return all but 3% of total winning bids and kept liability intact for outstanding auction obligations of winners, which would come due if FCC were to prevail in court cases that upheld Jan. 2001 re-auction. Verizon described auction process as constituting “contract that requires prompt delivery of the licenses at the close of the auction.” It told court that FCC’s failure to deliver licenses in timely way was “a material breach of the auction contract, entitling Verizon Wireless to recission of the contract and refund of its entire down payment.” FCC’s failure to deliver PCS licenses that it auctioned in Jan. 2001 in timely manner gives Verizon Wireless right to rescind its auction “contract” with Commission and receive full down payment for licenses, carrier said. Verizon cited auction public notice in arguing that FCC had committed to return down payments to bidders if licenses became unavailable. Separately, Verizon Wireless filed opposition to FCC motion to stay proceedings in Court of Federal Claims until D.C. Circuit and Supreme Court issued their rulings in case. Govt. had argued that suit that had yet to play out at D.C. Circuit and Supreme Court could moot issues that were before Federal Claims Court. Govt. also argued that lawsuits pending in other courts could produce conflicting decisions. In objecting to stay motion, Verizon Wireless said cases before Claims Court and Supreme Court were different. High court will not rule on whether licenses should be awarded to Verizon Wireless but will examine only whether Sec. 525 of U.S. Bankruptcy Code barred FCC from cancelling NextWave licenses as part of its regulatory obligations under Communications Act, Verizon said.

EarthLink joined coalition of consumer groups in calling on FCC to demand that Comcast and AT&T Broadband disclose all documents relating to restructuring of Time Warner Entertainment (TWE) partnership with AOL Time Warner. EarthLink filed its own motion for order requiring companies to submit all additional materials referenced in restructuring agreement, including 13 exhibits. Thus far, FCC has neither asked for nor received copy of particular exhibit that has drawn interest -- that involving carriage of AOL on what would be merged companies’ lines. Last week, Center for Digital Democracy, Consumer Federation of America, Consumers Union and Media Access Project filed motion asking for similar relief from FCC (CD Sept 6 p4). EarthLink filed its motion separately from those groups. ISP asked FCC, not only to require companies to disclose agreement, but also to provide for supplemental comment period and to suspend 180- day merger review period until after that public comment period. “The Commission cannot effectively carry out its public interest analysis under Sections 214 and 310 of the Communications Act without having access to the documents [in question] and without taking public comment on those documents,” attorneys for EarthLink wrote FCC. “If AOL’s access to Time Warner Cable was important enough for the FCC and FTC to require multiple ISP access, then clearly AOL’s access to an even larger cable system ought to require the same safeguards,” said EarthLink Vp-Law & Public Policy David Baker. He was referring to FTC consent decree that allowed AOL and Time Warner to merge but required AOL Time Warner to carry multiple ISPs. Commission spokeswoman said FCC hadn’t requested those documents from companies but hadn’t ruled out doing so. “We are still reviewing EarthLink’s request,” she said. Comcast spokesman wouldn’t go beyond earlier comments, in which he said company had gone out of its way to make information public, that critics’ arguments were “wildly speculative and inaccurate” and that company would fight any delay in merger review (CD Sept 9 p9)

Coalition of consumer groups asked FCC to cease its review of proposed merger of AT&T Broadband and Comcast until companies disclosed agreement that gives AOL carriage on what would be merged company’s high-speed Internet lines. FCC already had issued protective order with confidentiality provisions, allowing parties willing to sign it to examine certain proprietary information submitted by companies on merger. Despite those protections, AT&T and Comcast, as of our deadline, had not submitted to FCC 3-year nonexclusive agreement that makes AOL High-Speed Broadband available to homes served by what would be merged AT&T Comcast. “If the applicants [AT&T and Comcast] do not trust the Commission to follow its own rules and decline to risk providing the Commission with copies of the agreement, the applicants can withdraw their merger application,” said petition filed by Consumer Federation of America (CFA), Consumers Union, Center for Digital Democracy, Media Access Project. Consumer groups contended that Internet agreement was crucial to determining whether AT&T Comcast would have unfair market power over broadband Internet. Comcast spokesman hadn’t returned phone call seeking comment by our deadline.

FCC established Federal-State Joint Conference on Accounting Issues Thurs. that it said would ensure that regulatory accounting data and related information filed by telecom companies were adequate, truthful and thorough. Commission said joint conference also would provide forum for state and federal policymakers to coordinate initiatives that would ensure that collection and exchange of regulatory accounting information was adequate and effective. Joint conference plans to begin reexamination of federal and state regulatory accounting and related reporting requirements and make recommendations for improvements, FCC said. Comr. Copps said Commission planned to put on hold all action to eliminate additional accounting requirements until joint conference completed its evaluation. However, he said “we need a prompt, pre-elimination review” of existing accounting requirements whose scheduled elimination, effective Jan. 1, 2003, Commission put in motion last year: “While several of these rules may remain good candidates for elimination, others may still be needed.” Commission sets out accounting rules called Uniform System of Accounts, which govern how ILECs record and allocate their costs and revenues for regulatory purposes. It also maintains Automated Reporting Management Information System, through which certain ILECs are required annually to report regulatory accounting information. Joint conference will include representatives of up to 5 state PUCs and will be chaired by FCC Chmn. Powell or someone he designates. All FCC commissioners may participate in joint conference, agency said. Powell said establishment of joint conference “puts in place an effective means for examining the Commission’s regulatory accounting and reporting requirements… to protect consumers and carry out our regulatory responsibilities under the Communications Act.” He said regulatory accounting data filed by telecom carriers were used by federal and state telecom policy-makers to meet various responsibilities, and Commission’s prior efforts in this area had concentrated on consolidating reporting requirements “that were unnecessary or which reflected a changed environment in the area of competition policy, broadband deployment and universal service.” Establishment of joint conference “expanded our efforts” by allowing policy-makers to work together to ensure that regulatory accounting information is adequate and truthful, he said. NARUC said it was encouraged by broad scope of review implied in FCC joint conference proposal. It said FCC should seek recommendation from conference before taking actions on any pending “Phase II” reconsideration requests or other requests that directly affect application of accounting rules and reporting requirements to particular carriers.

In case with implications for development of competition in rural telephony, OPASTCO and AT&T offered strongly divergent views Tues. on petition for rulemaking by Alaskan ILEC ACS Fairbanks (CC Doc. 96-45, DA 02-1853). ACS petition sought ruling that unbundled network element (UNE)-based competitive telcos couldn’t get high-cost universal service loop support unless price they paid for UNEs exceeded 115% of national average loop cost. OPASTCO said: “ACS has convincingly demonstrated that when a competitive eligible telecommunications carrier’s (CETC) loop costs knowingly fall below the Commission’s high-cost standard, providing the CETC with [ILEC]-based universal service support gives the competitor a windfall of unneeded support that violates [Sec. 254 of Telecom Act.]” OPASTCO urged agency to “put a halt to this occurrence” by ruling that “high-cost loop support should be based on the CETC’s per-line UNE-based costs, rather than on the actual costs of ILEC.” OPASTCO said there was no basis for theory that CETCs and ILECs had same costs or were eligible for same level of universal service support. ACS petition stems from its relationship with competitor General Communications, which leases loops from ACS at prices below what it’s eligible to receive in high-cost support, ACS said in filing. AT&T said ACS petition “would deny its competitors what the Commission has determined to be necessary for local competition to develop in rural jurisdictions -- portable high-cost loop support.” AT&T said FCC’s rules “are clear” on issue: “A… CETC that wins a customer from an incumbent LEC is eligible to receive the same amount of federal universal service support that was received by the incumbent ILEC formerly serving that line.” AT&T urged FCC to deny ACS petition “because it would undermine the procompetitive goals of the 1996 Act and would reverse well-established Commission policy, which has been fully upheld by federal courts.”

Federal Election Commission should consider rewriting its proposed rulemaking on electioneering communications “so as to avoid the possibility of overbroad enforcement of the statute and constitutional challenge to it,” FCC said in comments to FEC. FEC is considering portion of Bipartisan Campaign Reform Act (BCRA) passed earlier this year involving political announcements on broadcast, cable and satellite systems. Act itself is under multiple constitutional challenges already, and several FEC commissioners said at hearing last week (CD Aug 29 p1) that much of their work in rulemaking might be rendered moot by court. FCC’s concern was fact that FEC was supposed to regulate only electioneering communications reaching more than 50,000 people. FCC Mass Media Bureau Chief Ken Ferree wrote that whenever data on potential viewership or listenership were “incomplete or ambiguous, the process should err on the side of permitting the communications to take place without restriction, rather than the opposite.” Otherwise, Ferree wrote, rule could be “deemed unconstitutionally overbroad.” His primary concern in his 3 pages of comments was burden FEC was looking at placing on FCC in terms of creating online database of electioneering communications. BCRA designates FCC for creating that database as part of agency’s Web site, but Ferree said he wanted “to make clear that this undertaking could be extraordinarily complex and will require the expenditure of substantial resources in terms of time, money and personnel.” Among burdens: (1) FCC would have to integrate population information, congressional and state boundary geographic information, and service area data for broadcast, cable and satellite systems. (2) New technology would have to be acquired to create database, as existing databases couldn’t be used because they contained much proprietary information that FCC couldn’t disclose. (3) New forms and electronic filing systems would be needed, which would “require spending significant funds.” Ferree said he was confident agency could meet BCRA requirement, but emphasized that FEC’s rulemaking must “simplify the task as much as possible.” He also said rulemaking sought comment on how to define reach of given communications, and asked that FCC be allowed to make that determination, “based upon our expertise and available data resources.”

Federal Election Commission (FEC) “should not exacerbate the constitutional problems” already raised by court appeals of new campaign finance law, NAB said. In comments for record in FEC hearing (CD Aug 29 p1), NAB said that while FEC was “statutorily obligated” to adopt new political spending rules while judicial review was pending, agency shouldn’t interpret “electioneering communications so broadly as to encompass communications beyond paid advertisements.” New law doesn’t empower FEC to regulate all political broadcasts, only “certain electioneering communications” that should be limited to “paid advertisements,” NAB said. In adopting rules, NAB said FEC “must be cognizant of the limits of its authority and expertise and not unjustifiably expand that authority” to encompass matters that are under FCC jurisdiction and expertise.

With partial dissent by Comr. Martin, FCC gave only narrow relief to radar detector industry Wed., providing 30 more days to market devices that meet Part 15 limits on emissions in 11.7-12.2 GHz band but denying request for more time to make and sell compliant devices. Commission also turned down request by RadioShack to allow radar detectors that didn’t meet new emissions limits to be marketed for 6 months beyond original Sept. 27 deadline. FCC adopted emission limits earlier this summer to protect VSAT satellite terminals that complained they were suffering interference from radar detectors. Latest order, which FCC adopted Tues. and released Wed., said radar detector industry had failed to show its request for stay of rules wouldn’t cause substantial harm to other parties in proceeding, including VSAT operators. If marketing cutoff date had been delayed to extent sought by industry and RadioShack, FCC said “conservatively” up to 300,000 noncompliant detectors would have been sold.