Federal Communications Commission (FCC)

Federal Election Commission held hearing Wed. on its rulemaking that would create carveouts from regulation of what Chmn. David Mason (R) called “a new term” -- “electioneering communications” -- despite fact that underlying law, Bipartisan Campaign Reform Act (BCRA) of 2002, is undergoing multiple court challenges. Under BCRA, any electioneering communication on broadcast, cable or satellite airing within 30 days of primary or 60 days of general election for federal office would have to meet strict rules. Any funder of such communication that spent more than $10,000 annually on such communications would need to disclose communication within 24 hours, and corporations and labor groups would be prevented from funding such communications during that window. Guidelines were inserted, according to BCRA’s authors -- Senate Commerce Committee Chmn. McCain (R-Ariz.) and Sen. Feingold (D-Wis.), Reps. Shays (R-Conn.) and Meehan (D-Mass.), and the electioneering communications authors, Sens. Snowe (R-Me.) and Jeffords (I- Vt.) -- to provide U.S. courts with bright line test to ensure law wasn’t overturned on First Amendment grounds. Hanging over FEC hearing, however, was very real possibility that BCRA rulemakings would in part or in whole be rendered moot by courts. FEC is expected to approve final rules on electioneering communications by Sept. 26.

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.

When Media Bureau Chief Kenneth Ferree first announced that Commission would try using abstract study methodologies to examine cable company consolidation, he said there was possibility study (CD Nov 8 p3) would be found useless and FCC would “throw it out the window.” Despite Commission’s admission that study contained computational errors -- which it said have since been corrected -- and abundance of criticism, even from sworn enemies in telecom industry, FCC insists study has some merit. How much merit it should be given, however, when Commission makes determinations about cable concentration continues to be subject of debate. Staff members we spoke with said privately that study, Horizontal Concentration in the Cable Television Industry: An Experimental Analysis, would be given little weight, if only because it was merely one piece of evidence in proceeding on cable ownership limits.

Legg Mason said in research note Wed. that while govt. won in 70% of cases before U.S. Supreme Court, there were some vulnerabilities in govt.’s legal argument in NextWave case that “could tip the balance in NextWave’s favor.” Firm also said it appeared unlikely that winners of Jan. 2001 NextWave re-auction ultimately would have to pay for spectrum at total $16 billion set in that bidding. Pending high court review, FCC has refunded all but 15% of deposits paid by winning bidders, who would be required to pay full amount they bid on spectrum if court reversed U.S. Appeals Court, D.C., decision that had ruled against Commission’s cancellation of NextWave licenses for missed payment. Meanwhile, Wall St. Journal editorial Wed. took FCC to task over “ongoing NextWave spectrum fiasco,” arguing Commission decision to not release re-auction winners from their bid obligations “is paying havoc with an industry already in chaos.” Editorial said Verizon Wireless had $8.7 billion liability, “money it can’t effectively touch because of the 10-day future payment obligation.” It said FCC booked $4.8 billion that NextWave bid on those PCS licenses in federal budget in 1997 and then booked $16 billion from 2001 re- auction, as well, minus money lost from NextWave. “Chairman Michael Powell keeps promising a telecom revival, but this FCC money-grubbing doesn’t help,” editorial said. “The re- auction is tying up much-needed investment capital.” Journal referred to recent study by American Enterprise Institute economist Gregory Sidak that concluded that if released, $16 billion in NextWave re-auction overhang would increase gross domestic product by $19-$52 billion. Separately, Legg Mason cited mounting pressure for FCC to remove $16 billion re- auction overhang. CTIA and group of economists have urged FCC to cancel auction or allow winning bidders to opt out of obligations, citing drag on carrier finances. “Although the FCC may not act until after the Supreme Court decision, we believe that the FCC will find it increasingly difficult to stand by an abstract commitment to the integrity of the auction process in the face of mounting claims that such a position stands in the way of contributing to economic recovery,” Legg Mason said. Analyst report said it believed re-auction winners ultimately wouldn’t be compelled to pay prices set in bidding. Among vulnerabilities in arguments in case govt. has laid out to Supreme Court, Legg Mason cited: (1) Congress has carved out exceptions for other govt. actions taken to promote regulatory objectives, but not for spectrum auctions. (2) Justices may follow reasoning of D.C. Circuit, which focused on Sec. 525 of U.S. Bankruptcy Code, which stipulates federal agency can’t cancel license solely for nonpayment of debt dischargeable in bankruptcy. “It’s difficult to argue that the FCC cancelled the license for a reason other than solely because of NextWave’s failure to pay a dischargeable debt.” (3) High court could conclude that FCC created tension between Communications Act and bankruptcy law “by permitting the C-block auction winners to pay off unguaranteed debts in installments over 10 years.” However, report said that among factors that weighed in govt.’s favor in Supreme Court case was strong argument that D.C. Circuit’s decision placed Sec. 525 in conflict with Communications Act provision directing FCC to allocate spectrum by auction. Sidak study, set for Mon. release, is expected to say economic stimulus of releasing carriers from re-auction would free $12-$38 billion by end of 2005, date by which NextWave- related litigation is expected to play out if FCC wins at Supreme Court because of outstanding issues that would be taken up at D.C. Circuit.

ASPEN -- New technologies and services such as Wi-Fi and Voice-over-IP (VoIP) should be sheltered from burdensome regulation in their infancies, with regulators perhaps even acting proactively to promote their growth and spur competition with incumbent industries, FCC and Commerce Dept. officials said here Mon. Speaking at Aspen Summit organized by Progress & Freedom Foundation, FCC Comrs. Kathleen Abernathy and Kevin Martin, along with NTIA Dir. Nancy Victory, agreed on need for what Abernathy called new services doctrine, and even drew some support from industry representatives who would find themselves at regulatory disadvantage in such model.

Wireless experts and policymakers urged wireless ISPs (WISPs) Mon. to reach voluntary agreements in areas such as interference standards to stave off new regulations and vie for new spectrum. “The Federal Communications Commission isn’t really interested in setting protocol or etiquette standards,” said Alan Scrime, chief of FCC Office of Engineering & Technology’s Policy & Rules Div., at WISP.X conference in Washington. “It’s interested in providing the environmental enablers that will allow an industry like yours to set its own standards so that it can grow.” Participants at opening of 2-day conference were told by panelists to focus on industry protocols and standards to fend off need for additional spectrum regulations. But experts also focused on what could be additional regulatory obligations in offing, including potential expansion of pool of contributors to universal service fund.

President Bush touted deployment of broadband as vital for economic recovery during economic forum in Waco, Tex. Bush’s comments on broadband were brief and made half-way through his address at closing session of forum, but several telecom companies and associations reacted to news with various interpretations. “In order to make sure the economy grows, we must bring the promise of broadband technology to millions of Americans,” Bush said. He emphasized that broadband shouldn’t be taxed and that technology would keep America on “cutting edge of innovation.” “If you want something to be used more, you don’t tax it,” he said. “The Federal Communications Commission is focusing on policies to encourage high-speed Internet service for every home and every business in America.” Industry is still waiting for comprehensive broadband policy to come from administration. In fact, Sen. Lieberman (D-Conn.) has introduced legislation that would compel administration to develop policy.

With FCC deciding that cable service and cable modem service are mutually exclusive, only way to preserve and protect local authority is for Commission to recognize that cable modem service has no special privileges and is subject to local laws and regulations governing use of rights-of-way (ROW), coalition of local govts. and organizations said. In reply comments to agency’s cable modem inquiry, Alliance of Local Organizations Against Preemption (ALOAP) contended there was no basis in fact or law for rejection of local franchising authority over cable modem services. Local govts. had right and responsibility to protect public interest by imposing conditions and obtaining compensation for ROW use, coalition said, and localities also had right to regulate business service. To justify any attempt to preempt local authority Commission had to show preemption would advance federal policy goals, ALOAP said: “By the Commission’s own admission, deployment of cable modem service is well advanced.” So fundamental issue isn’t deployment, but demand for broadband, it said. Moreover, Communications Act offers no authority for preemption, ALOAP said, and actually affirms local authority over cable modem service. Coalition said 5th U.S. Appeals Court, New Orleans, had ruled while reviewing “closely analogous” case of FCC’s Open Video System (OVS) rules that agency couldn’t preclude local franchising of OVS operators. It said industry commentators hadn’t provided any “actual” evidence that franchise fees on cable modem service exceeded local govt. costs. “Local governments expend enormous sums on acquiring, improving and maintaining the public rights-of-way every year,” coalition said. As for question of repayment of past franchise fees, ALOAP said Commission should leave it to state and local law because Title I didn’t grant FCC authority over cable modem franchise fees.

FCC approved order that within 5 years will lift requirement that cellular carriers continue to provide analog service, as long as hearing aid devices are compatible with digital networks by then. FCC Comr. Copps dissented in part, citing concerns over issues such as current lack of hearing assistance technology that worked with digital networks. “The majority finds that the analog standard is no longer ‘necessary’ even though compatible services are not yet available,” he said of item, which was part of Commission biennial review proceeding. Comr. Martin voted for order, but voiced concern that it didn’t discuss meaning of term “necessary” as covered under FCC’s biennial review obligations. FCC said point of its order was to eliminate certain requirements for cellular carriers that no longer were necessary because they dated back to duopoly era of cellphone service when it started in 1980s. Other changes in order involve elimination of cellular channelization provisions, removal of manufacturing requirements on electronic serial numbers and rules on cellular antitrafficking.

Nextel, public safety groups and coalition of private wireless licensees submitted revised spectrum swap plan to FCC Wed. to alleviate public safety interference at 800 MHz. Revamped proposal came after Commission last month granted additional time for parties to craft solutions in reply comments on rulemaking adopted earlier this year. Unlike original White Paper that Nextel submitted to FCC in Nov. on interference solutions, compromise plan explicitly provides replacement spectrum for private wireless operators. Another difference is that original Nextel plan would have provided carrier with 10 MHz in mobile satellite service band at 2.1 GHz in exchange for spectrum it was giving up elsewhere to reconfigure 700, 800 and 900 MHz bands. Latest plan instead would take that replacement spectrum from 5 MHz of unlicensed PCS spectrum at 1.9 GHz and another 5 MHz of reserve MSS spectrum, Nextel Senior Vp-Chief Regulatory Officer Robert Foosaner said in conference call with investors Wed.