Patton Boggs TechComm Industry Update - Week of December 8, 2008

    8 December 2008

    FCC Announces Tentative Open Meeting Agenda; USF/Intercarrier Compensation Missing

    The FCC released a tentative agenda for its December 18th Open Meeting. Most notably, the FCC plans to issue orders containing the final technical rules for SDARs and WCS licensees to coexist in the 2305-2360 MHz band, and addressing how to deal with “competing applications” that were filed against WCS licensees at renewal time. The FCC also plans to establish service rules for the AWS-3 band (2155-2180 MHz), modify its broadcast program carriage rules, propose new DTV translator service for analog loss areas, issue a Notice of Apparent Liability against several companies for apparently violating the FCC’s DTV consumer education requirements, and revise its E911 location accuracy rules. The FCC will release its final agenda one week before the Open Meeting.

    Noticeably absent from the tentative agenda is the FCC’s USF/Intercarrier Compensation reform item. Chairman Kevin Martin recently commented that the Commission likely will not take up this issue by its December 18th meeting or even by the end of the year. Martin noted that the comment cycle for the further notice (comments were due November 26, 2008, and reply comments were due December 3, 2008) issued at the FCC’s last open meeting make it difficult for the FCC to complete its review by year end. USF/Intercarrier Compensation reform will likely be the biggest regulatory challenge facing the new Commission in the coming year, Martin added.

    New Clearwire Offers “Clear” WiMAX

    Clearwire’s merger with Sprint Nextel has officially closed and WiMAX service will be offered by both companies under the brand name “Clear.” Sprint’s recently launched Xohm WiMAX service will be rebranded as Clear. As previously reported, the new Clearwire investors include Comcast, Intel Capital, Time Warner Cable, Google, and Bright House Networks. At closing, they provided direct and indirect investments in Clearwire of $3 billion in new capital. Clearwire is expecting an additional $10 million investment from Trilogy Equity Partners.

    Clearwire’s officers will include Benjamin Wolff, Clearwire’s current chief executive officer; Perry Satterlee, Clearwire’s current chief operating officer; Barry West, Sprint Nextel’s current chief technology officer who will be president and chief architect of Clearwire; and Atish Gude, senior vice president of Sprint’s Xohm unit, who will be senior vice president and chief management officer of Clearwire.

    As previously reported, Clearwire’s and Sprint’s combined 2.4 GHz spectrum holdings will, according to Clearwire, provide new Clearwire with “100 MHz or more of optimal 4G spectrum in most markets across the U.S.” Initial average download speeds are estimated at 2 to 4 Mbps with peak rates considerably higher. Clearwire’s Chairman, Craig McCaw, said, “It is a chance to do something right the first time, with simplicity and incredible efficiencies. We are building a wireless broadband network that will stand the test of both time and competition. This is far and away the most exciting opportunity in wireless I have seen since the beginning of cellular in 1983."

    CTIA Seeks Reconsideration of Globalstar’s ATC Modification

    CTIA has filed with the FCC a petition for reconsideration of its order granting, in part, Globalstar’s request to modify its ancillary terrestrial component (ATC) authority. As we previously reported, the FCC granted Globalstar’s request to modify its ATC authority to permit the use of a WiMAX air interface protocol and provided Globalstar interim-only waivers of several of its gating requirements for a Mobile Satellite Service (MSS)/ATC system. CTIA claims that the FCC unjustly enriched Globalstar by granting Globalstar a waiver of the FCC’s "gating criteria" to provide MSS/ATC service, effectively converting Globalstar’s MSS spectrum to terrestrial broadband service. In doing so, CTIA argues that the FCC violated Section 309(j) of the Communications Act which requires the use of auctions to issue new licenses. CTIA also argues that the lease between Globalstar and Open Range violates the FCC’s Secondary Markets rules because Globalstar and Open Range did not properly disclose the lease to the FCC. CTIA requests that the FCC reverse its decision to allow Globalstar to modify its ATC authority.

    Application Window for FY2009 E-Rate Program Opened Last Week

    The FY2009 (fiscal year 2009-2010) application filing window for E-rate applications for schools and libraries opened at noon eastern standard time (EST) on December 2, 2008, and will close at 11:59 p.m. EST on Thursday, February 12, 2009. The filing window will be open for 73 days.

    Service providers interested in serving E-rate applicants and satisfying the needs specified on Form 470 applications must respond with bids to provide service on Form 471. E-rate applicants must not make decisions on competing bids for a period of 28 days after their Form 470 application is posted. For this reason, the absolute deadline for E-rate applicants to submit their Form 470 requesting service is Friday, January 16, 2009.

    Traditionally, a high percentage of Form 471 applications containing bids from service providers to provide E-rate services arrive at USAC during the final week that the window is open.

    USAC urges applicants to file online because the system notifies applicants of possible errors and allows for corrections to be made. USAC also urges E-rate applicants to file their Form 470 applications requesting service early so that:

    • USAC has an opportunity to review the forms and make corrections if necessary;

    • Applicants may re-file their forms if an error cannot be corrected; and

    • USAC has an applicant's information and can start reviewing the application.

    High-Cost Program at Risk, FCC OIG Reports

    A new analysis released by the FCC’s Office of Inspector General (OIG) reveals that the high-cost support mechanism of the Universal Service Fund (USF) is “at risk” because nearly a quarter of all payments in fiscal year 2006 were erroneous. The findings are a result of OIG’s analyses of 384 audits of USF high-cost program beneficiaries. The Improper Payments Information Act of 2002 (IPIA) extended the reach of federal erroneous payment reporting requirements to include USF Programs. OIG investigations have been increasing at a rate of more then 35 percent a year.

    The OIG report estimates erroneous payments from the high-cost fund of $970.3 million in fiscal year 2006 and concludes that the program’s erroneous payment rate was an estimated 23.3 percent, with a margin of error of 2.3 percent at the 90 percent confidence level. The overpayment rate was 22.8%, with the same margin of error and confidence level, meaning that 98.2 percent of those erroneous payments were overpayments, the OIG said. Under the IPIA, a program is considered “at risk” if its erroneous payment rate exceeds 2.5 percent and the amount of erroneous payments tops $10 million.

    The OIG cited the primary causes of erroneous payments as inadequate documentation (25.3%), inadequate auditee processes and/or policies and procedures (24.6%), weak internal controls (12.4%), disregarded FCC rules (10.1%), failure to review/monitor work submitted by consultant/agent (9.5%), and inadequate systems for collecting, reporting, and/or monitoring data (7.5%). Only .9 percent of erroneous payments were attributed to USAC error. The data are preliminary and results are based on data from the “compliance/attestation audits” of the high-cost program, the OIG said. The OIG said it planned to “refresh” the assessment data after it receives final reports and data, which should be available in December.

    FCC Releases FY 2009 Eligible Services List for E-Rate Program With No Changes

    On November 21st, the FCC released the Eligible Services List (ESL) for Funding Year 2009 for the schools and libraries, E-rate Universal Service Support mechanism. On July 31, 2008, the Commission sought public comment on the ESL proposed by the Universal Service Fund’s administrator, the Universal Service Administrative Company (USAC). The FCC declined to adopt any of the changes to the ESL proposed by USAC. As such, the funding year 2009 ESL is the same as the funding year 2008 ESL. For more information, on the FY 2009 Eligible Services List, visit USAC's Web site at: http://www.usac.org/sl/.

    Missouri Rural Telehealth Network Seeks Bidders

    The Missouri Telehealth Network posted a request for proposal on the Universal Service Administrative Company web site to build and deploy a telehealth network. The network will create a 2 Gbps statewide dedicated telehealth backbone, enabling new telemedicine services including those requiring high-definition video streaming. The network will also add about 32 facilities in Missouri to an existing network of approximately 127 facilities, and connect the network to Internet2. Maximum federal support for the project is set at $2,374,605. The allowable contract date is 12/23/08.

    FCC Inspector General’s Report Shows Uptick in USF Audits

    A new report from the FCC Office of Inspector General (OIG) notes that the office intends to triple its auditing staff and increase its field presence by 200 percent as it prepares to conduct a third round of audits of Universal Service Fund (USF) recipients.

    An initial statistical analysis of improper payments by OIG determined that the Schools and Libraries, or the E-Rate program, and the High Cost program will exceed the thresholds set by the Improper Payment Information Act for at risk programs. That conclusion led OIG to call for a third round of audits. This time, beneficiaries of all four USF support programs and USF contributors will be included in the audits. USAC is in the process of determining whether those audits require recovery of USF funds, but has identified at least 24 High Cost support recipients and 10 E-Rate program beneficiaries for potential recoveries.

    Due to the increased staffing and focus on audits, we recommend that clients contact us about how best to prepare for a potential audit and what safeguards may be taken to avoid recovery of disbursed USF payments.

     

    Deadline Extended: Six Nominations Sought for USAC Board

    The FCC has requested nominations for six positions on the Board of Directors of the Universal Service Administrative Company (USAC), the private not-for-profit corporation serving as the permanent administrator of all federal universal service support programs. The terms of those currently holding these positions will expire on December 31, 2008. Under FCC rules, only members of the industry or group that a board member will represent may submit a nomination for that position. Nominations were originally requested by December 1, 2008. On December 3, 2008 the FCC extended that deadline to December 19, 2008.

    The FCC’s Wireless Back-Up Power Rule Sent Back to Drawing Board

    The FCC’s wireless back-up power reporting rules were rejected by the Office of Management and Budget (OMB), which paves the way for the U.S. Court of Appeals for the D.C. Circuit to strike down all of the FCC’s wireless back-up rules as exceeding the FCC’s authority. The Court issued a stay of the rules back in February and said it would make its decision on the rules after OMB completed its review process. OMB rejected the rules because the FCC violated the Paperwork Reduction Act by not seeking public comment on the rules or reviewing those comments before adoption, and the FCC did not adequately justify why the reporting requirements are needed. The ruling indicates that OMB will not automatically approve FCC data collections.

    On December 4, 2008, the FCC filed a letter with the D.C. Circuit Court noting OMB’s disapproval, and the FCC’s intent not to try to override OMB. The FCC stated that it will release a Notice of Proposed Rulemaking with the goal of adopting revised rules that take into consideration issues raised by wireless carriers.

    The back-up power rules were adopted in response to Hurricane Katrina. The rules require wireless carriers to identify, in 6 months, which assets comply with the FCC’s new back-up power requirements, and which assets are exempt for safety reasons. Carriers then have 12 months to come into compliance with the back-up power rules or to file a compliance plan with the FCC. The FCC estimated the per carrier cost of compliance to be approximately $312,600. Carriers argue this number is far too low. Carriers also argue that the rules will reduce the resources available to quickly restore network operations and provide communications services to consumers and first responders in emergency situations.

     

    FCC Extends Comment Deadline on RCA’s Request for Relief from Handset Exclusivity Arrangements

    The FCC has extended the comment deadline on the Rural Cellular Association’s (RCA) petition for rulemaking on handset exclusivity arrangements. As we previously reported, the FCC seeks comment on a petition filed by the RCA asking for a rulemaking to examine the anticompetitive effects of exclusive arrangements between commercial wireless carriers and handset manufacturers. RCA asks the Commission to prohibit such arrangements because they prevent rural consumers from having technological choice and therefore deepens the digital divide between urban and rural Americans. Comments on RCA’s petition are now due February 2, 2009, and reply comments are due February 20, 2009.

    Internet-based TRS Providers Must Provide 10-Digit Dialing By December 31, 2008

    The Commission’s amended Telecommunications Relay Services (TRS) rules, which became effective on November 24, 2008, must be implemented by December 31, 2008. The FCC’s amended rules require 10-digit dialing for Internet-based TRS. Users of Internet-based TRS will be assigned 10-digital telephone numbers connected to the North American Numbering Plan. The FCC hopes this measure will increase the functional equivalency of TRS across platforms. Providers of Internet-based TRS must provide ten-digit dialing no later than December 31, 2008.

     

    Telecom Issues May Surface Early in New Congress

    Congress may move quickly on net neutrality, broadband and other telecommunications issues next year, speakers at a Pike & Fischer conference recently predicted. Changes in the House and Senate Commerce Committee leaders could signal increased telecommunications activity in Congress, said Greg Rohde, president of e-Copernicus and a former Clinton administration official.

    Another conference speaker, former Democratic FCC Commissioner Gloria Tristani, said President-elect Barack Obama’s focus on deploying broadband may be included in the economic stimulus package that Congress takes up early next year.

    Given the congressional focus on the economy, Rohde said, “we need to ask what the role of telecom policy should be in an era of budget cutting,” noting that today’s spectrum policy is a result of Congress viewing auctions as a revenue generating tactic.

    Rohde also noted the important role of incoming Senate Commerce Committee Chairman Jay Rockefeller, D-WV, who will replace Daniel Inouye, D-HI. Rockefeller’s committee will confirm appointees, including the new FCC chairman.

    On the House side, newly elected Energy and Commerce Committee Chairman Henry Waxman, D-CA, an ally of House Speaker Nancy Pelosi, may revive the Speaker’s “innovation agenda” that called for greater broadband deployment, Rohde noted. Waxman, however, may be less focused on telecom than his predecessor Chairman John Dingell, D-MI, giving the Telecom Subcommittee Chairman a greater opportunity to steer legislation.

    Oversight Role of House Energy and Commerce Committee To Grow

    Under the leadership of Rep. Henry Waxman, D-CA, the House Energy and Commerce Committee is expected to increase emphasis on government accountability and pursue a transparency agenda, CongressDaily recently reported. The news organization noted that Waxman may continue the investigation into the FCC that the panel initiated in January under outgoing Chairman John Dingell, D-MI.

    Waxman's California connection also means strong ties to the high-tech sector. Some worry that since his district includes parts of Hollywood and Beverly Hills, he may favor movie studios and record labels that want Congress to pass stronger intellectual property protection laws.

    Waxman recently introduced legislation, the Universal Roaming Act of 2008, to require telecom recipients of rural universal-service funds to provide automatic roaming on just and reasonable terms to wireless carriers. He also was instrumental in the passage of legislation to permit all mobile phone operators the ability to provide service in the Washington, D.C., metro. GSM carriers had been locked out previously under a subway contract with Verizon Wireless that allowed CDMA roaming to Sprint Nextel customers.

    Waxman’s oversight committee also investigated the relationship between Cyren Call Communications Corp. and the Public Safety Spectrum Trust Corporation in advance of the 700 MHz auction that failed to attract a bidder for the national D-Block public safety/commercial license. The committee did not issue findings, but an FCC probe cleared major stakeholders of any wrongdoing.

     

    Powell Joins President-elect’s Transition Team for FCC

    Former FCC Chairman Michael Powell has joined the President-elect’s transition team for the FCC as an advisor. Powell is the latest telecom luminary to join the transition team. Susan Crawford and Kevin Werbach, professors at the University of Michigan and the University of Pennsylvania, respectively, are heading up the FCC review. They sit on the advisory board of Public Knowledge, best known for advocating unregulated access to Internet content and less-restrictive copyright laws.

    Crawford and Werbach report to Tom Wheeler, an early supporter of President-elect Barack Obama, key fundraiser and lobbyist. Wheeler is on leave as managing director at the venture capital firm Core Capital Partners and has served as head of cable and wireless industry associations.

     

    GAO Report Focuses on High-Tech Questions For Political Appointees

    A new Government Accountability Office report on management challenges for new political appointees facing Senate confirmation includes technology-related questions:

    1) Based on your experience, please explain the role technology should play in your agency to support mission needs. What measures would you implement to show the effect technology has in meeting these needs?

    2) How would you determine whether your agency has in place the key information management processes and tools required by law, including well-defined enterprise architecture, an investment control process, and computer security plans? What role do you envision you would play in managing or providing oversight over these processes and tools? How would you go about implementing or improving these processes and tools?

    3) Based on your experience, how would you go about assessing your core mission and business processes to identify opportunities for reengineering and for the enhanced use of technology? What challenges do you believe your agency may face in reengineering your processes and using technology? In using e-government? In hiring and retaining qualified IT professionals?

    4) Every year, the Office of Management and Budget and agencies identify IT projects totaling billions of dollars as being poorly planned and poorly performing. Despite agencies' efforts to address management weaknesses, the numbers remain high. What do you believe are key practices for effective IT project planning, management, and oversight?

     

    President Signs Law To Shield Children from Indecent Programming

    The President signed the Child Safe Viewing Act on December 2nd, paving the way for the FCC to study "advanced blocking technologies" so that parents may improve their ability to shield their children “from any indecent or objectionable video or audio programming, as determined by such parent, that is transmitted through the use of wire, wireless, or radio communication."

    Under the Act, the FCC must issue a notice of inquiry within 90 days from the date of the law’s enactment and must provide a report to Congress within 270 days. The FCC notice of inquiry is noteworthy because Congress directed the FCC to consider blocking technologies "across a wide variety of distribution platforms, including wired, wireless, and Internet platforms" and "across a wide variety of devices capable of transmitting or receiving video or audio programming, including television sets, DVD players, VCRs, cable set-top boxes, satellite receivers, and wireless devices."

     

    Holiday Handset Sales May Be Merry

    With lowered expectations, U.S. handset sales for the fourth quarter may prove to be better than expected. Analysts report that while it is difficult to get customers into stores, heavy marketing and attractive promotions for high-end data devices are helping sales and changing traditional handset categories. Analysts believe that the old low-, mid- and high-tier handset categories are less meaningful because consumers are buying more sophisticated devices due to large subsidies. Free handsets also are moving but handsets in the middle range are struggling.

    Analysts speculate that the new categories may be free, not free, needs data plan, and smartphone or large screen. Going forward, carriers will be faced with the challenge of convincing consumers of the continued value of mid-level or not free handsets when they could purchase a high-end handset with more and improved data options for decreasing sums of money.


    NARUC Plans to Promote National Wireless Standards with Congress and the FCC

    Restructuring continues at Telecom Italia as it looks for assets to sell in order to reduce its heavy debt, estimated to be as much as $47 billion. Its stock has fallen in value by 50 percent and it just announced plans to cut another 4,000 jobs. Asset sales of up to $3.8 billion in non-core assets are expected since it has decided to focus on its Italian and Brazilian assets.

    This is the second announced job reduction this year after announcing the elimination of 5,000 jobs back in June. Earlier this year, Telecom Italia sold its internet business to France for $1 billion and is now considering selling its European broadband business, its wholesale telecommunications business and its interest in a Cuban telecommunications carrier in order to raise additional funds. If its restructuring plans are successful, Telecom Italia executives expect revenues to be flat next year with moderate gains in the following years.

    INDUSTRY CALENDAR

    Meetings and Events

    December 11, 2008

    • Summit on Lessons Learned: Hurricane Season 2008, FCC 9:00am - 1:00pm

    • Family Online Safety Institute & the Internet Industry Conference, December 11, 2008, The Newseum, 555 Pennsylvania Ave. N.W., (6th Street, Freedom Forum Enrance) 8th Floor, Washington, DC

    February 8-9, 2009

    • The Digital Broadband Migration: Imagining the Internet’s Future, Silicon Flatirons, Boulder, CO

    March 19, 2009

    • Evaluating Software Patents, Silicon Flatirons, Boulder, CO

    Congressional Hearings

    January 6, 2009

    • 111th Congress begins

    FCC Rulemakings / Deadlines

    December 8, 2008

    • Comment Deadline: ACS of Alaska Seeks to Convert from Rate-of-Return to Price Cap Regulation

    • Reply Deadline: Verizon Wireless, AT&T to Exchange Wireless Licenses in Eight States to Meet Merger Obligations

    December 9, 2008

    • Reply Comment Deadline: Inquiry Regarding “Hybrid” Satellite-Terrestrial Radio Reception Devices

    December 10, 2008

    • Comment Deadline: Reclassifying a CLEC as an ILEC: The Case of South Slope Cooperative Telephone Company

    December 12, 2008

    • FCC Deadline: Qwest's Request for Forbearance from ARMIS Reporting Requirements

    • Comment Deadline: Proposed DOJ Consent Decrees for the Acquisition of Alltel by Verizon Wireless (consent decrees)

    • Comment Deadline: NTIA Seeks Nominations for Online Safety and Technology Working Group

    • Comment Deadline: USTR Seeks Comments for Annual Review of Telecommunications Trade Agreements

    December 15, 2008

    • Reply Comment Deadline: FCC Lifts ARMIS Reporting Requirements for Incumbent Carriers, Proposes Industry-Wide Reporting of Public Safety and Broadband Data

    • Reply Comment Deadline: Inquiry to Further Strengthen the Administration, Management and Oversight of the USF

    • Comment Deadline: NTIA Seeks Rulemaking on 1090 MHz Use for Runway ID and Collision Avoidance

    December 22, 2008

    • Reply Comment Deadline: Rural Telecommunications Group, Inc. Seeks Rulemaking to Impose 'Spectrum Cap' on Wireless Operators

    • Reply Comment Deadline: FCC Acts on 2002 Court Remand of ISP-Bound Traffic Rules; Seeks Further Comments on Proposed Revisions to Universal Service and Intercarrier Compensation Rules

    December 23, 2008

    • Reply Comment Deadline: ACS of Alaska Seeks to Convert from Rate-of-Return to Price Cap Regulation

    December 29, 2008

    • Comment Deadline: Iridium-GHQ Acquisition under FCC Review

    December 30, 2008

    • Reply Comment Deadline: NTIA Seeks Rulemaking on 1090 MHz Use for Runway ID and Collision Avoidance

    December 31, 2008

    • Reply Comment Deadline: Reclassifying a CLEC as an ILEC: The Case of South Slope Cooperative Telephone Company

    January 12, 2009

    • Reply Comment Deadline: Request for Increased Operating Power for FM Digital Audio Broadcasting (DAB)

    • Reply Comment Deadline: Iridium-GHQ Acquisition under FCC Review

    January 16, 2009

    • Reply Comment Deadline: USTR Seeks Comments for Annual Review of Telecommunications Trade Agreements

    January 17, 2009

    • FCC Deadline: Embarq’s Request for Forbearance form Contract Tariff Filing Requirements

    January 21, 2009

    • FCC Deadline: Feature Group IP's Request for Forbearance from Application of Access Charges to ‘Voice-Embedded Internet’

    • Reply Deadline: Iridium-GHQ Acquisition under FCC Review

    February 2, 2009

    • Comment Deadline: Rural Cellular Association Seeks Rulemaking to Prohibit Exclusivity Arrangements between Wireless Carriers and Handset Manufacturers

    February 6, 2009

    • 911 and E911 Network Redundancy, Resiliency, Reliability Reports Due

    February 20, 2009

    • Comment Deadline: Rural Cellular Association Seeks Rulemaking to Prohibit Exclusivity Arrangements between Wireless Carriers and Handset Manufacturers

    February 24, 2009

    • Deadline for Action on Verizon's Request for Forbearance from Recordkeeping and Reporting Requirements

    March 31, 2009

    • Deadline: Interconnected VoIP Providers to Transmit 'Nomadic' 711 Calls to Relay Providers

    • Deadline: TRS Provider Delivery of 711 Calls to PSAPs

    Public Safety

    December 9, 2008

    • Regional Public Safety Planning Committee Meeting for Region 19 in Putney, Vermont regarding 700 MHz

    December 15, 2008

    • Regional Public Safety Planning Committee Meeting for Region 16 in Topeka, Kansas regarding 700 MHz

    January 14, 2009

    • Regional Public Safety Planning Committee Meeting for Region 7 in Centennial, Colorado regarding 700 MHz

    January 15, 2009

    • Regional Public Safety Planning Committee Meeting for Region 38 in Chamberlain, South Dakota regarding 700 MHz

    • Deadline to post FCC Form 470 for the E-Rate Program on USAC’s website, meet the 28-day posting requirement for the competitive bidding process, and submit a complete Form 471 by the filing window closing date.

    February 12, 2009

    • The FY2009 FCC Form 471 for the Universal Service Fund’s E-Rate Program filing window will close at 11:59 pm ET. For the Form 471 to be considered as filed within the filing window, it must be submitted online, received by USAC, or postmarked no later than the filing window closing date.

    March 10, 2009

    • Regional Public Safety Planning Committee Meeting for Region 19 in Kennebunkport, Maine regarding 700 MHz