The Washington Post reported yesterday that President-elect Barack Obama could name Julius Genachowski chairman of the FCC as early as today. President-elect Obama is expected to announce members of his team who will lead his “Innovation Agenda”, including FCC Chairman, his Chief Technology Officer, Federal Trade Commission Chairman and Assistant Secretary of the National Telecommunications and Information Administration. Genachowski was reportedly being considered for both the CTO position and FCC Chairman. According to the Post, Genachowski prefers the FCC Chairman position because he wants more policy-making authority.
As we reported in our TechComm Election piece, President-elect Obama has a clear vision for technology and broadband infrastructure development, which will likely be supported by the new Congress and the FCC.
Broadband Component of Economic Stimulus Plan Takes Shape
Congressional aides are shaping a list of broadband initiatives to include in the economic stimulus legislation slated for January. The broadband technology and infrastructure provisions could range from tax incentives to federal subsidies. All initiatives will be drafted with the goal of extending the nation’s broadband Internet network — wired and wireless — into unserved areas. Democrats plan to introduce the economic stimulus bill during the first week of the 111th Congress, which convenes at noon on January 6.
Heartened by the pro-technology lean of President-elect Barack Obama and his top advisors, industry representatives and Washington-based digital rights groups have intensified lobbying efforts for broadband incentives. Stakeholders are trying to advance the best strategies for extending the Internet’s reach in a way that creates the most jobs and has the most positive impact on the economy.
This week, Free Press, a nonprofit organization, released a $44 billion broadband proposal. Free Press’s position is that any high-speed Internet networks constructed with or supported by broadband stimulus funding must incorporate open, competitive platforms. Free Press proposes the following:
15 billion grant program for rural broadband investment. The fund would support projects providing a minimum of 5 Mbps symmetrical service, with priority to projects delivering speeds in excess of 50 Mbps.
A $5 billion Universal Service Mobility Fund to deploy mobile voice and data services in rural areas and along highways.
Accelerated depreciation of capital investments in broadband projects, targeting incentives to projects that deliver 100 Mbps symmetrical service ($1.5 billion).
Higher tax incentives to companies that deploy fiber-optic networks that are open to multiple competitors ($5 billion).
Stimulus funds to extend universal service programs for low-income Americans to support broadband ($1.2 billion).
Funds to modernize the E-rate program to connect children at home by supplying them with computers and lowering the monthly cost of Internet access ($3 billion).
Funding to provide technology training to senior citizens and families with children ($150 million).
Other incentives proposed by Free Press include paying interest on corporate bonds issued for broadband investment ($10 billion); tax credits for deploying high-capacity technology and backhaul networks in underserved rural areas ($1.5 billion); and a one-time, $200 million grant to help construct a nationwide public safety broadband network.
In addition to the Free Press proposal, industry associations have advanced interesting proposals:
The Telecommunications Industry Association (TIA), a trade association for the information and communications technology industry, has proposed targeted incentives to stimulate investment across all broadband platforms, including wireless and fixed broadband. TIA recommends including new tiers of tax incentives for four critical and complementary components of a ubiquitous broadband infrastructure: fixed broadband, wireless broadband, satellite broadband and broadband core and backbone transport.
TIA also suggests a direct grant program and urges lawmakers to consider a $25 billion grant program for deployment of broadband infrastructure in unserved areas.
TIA encourages members of Congress to consider stimulus for broadband demand through measures such as: vouchers for low-income Americans (including both adults and students) so that they may purchase laptops, mobile handsets and other computing devices; a tax credit for small- and medium-sized businesses that purchase/upgrade PCs, laptops, mobile handsets, broadband equipment, services, and software; and allowing consumers eligible for the Universal Service Fund’s Lifeline and Link-Up program to use discounts for broadband services and devices as well as telephony.
The Communications Workers of America (CWA) wants to see the economic stimulus bill begin where lawmakers left off before the election — by funding a national initiative to “map” the availability of Internet access across the country. A mapping bill was signed by President Bush, PL 110-385, in October 2008 but did not authorize new funding for the initiative’s estimated $335 million cost. That cost would have to be covered by the Commerce Department’s existing budget. “Since good data is the foundation of effective policy to target limited resources, the broadband stimulus package should include authorization and funding for this legislation,” said the CWA recently said in a statement.
The CWA is proposing a $5 billion broadband investment, which, by its count, would produce 97,500 direct jobs and 2.5 million total jobs in the near term. CWA also supports a direct grant program for rural broadband deployments.
Although the cable industry has not published a proposal yet, the industry is expected to urge the government to target unserved areas and to permit market forces to continue in areas with two or more broadband services, Stifel Nicolaus reported this week.
In his December 6th radio and Web address, President-elect Obama focused on infrastructure and outlined five areas he would like to see addressed by Congress in an economic stimulus bill, including broadband access to more parts of the country. House Speaker Nancy Pelosi echoed Obama’s commitment to broadband deployment in a December 15th news conference when she noted that the economic recovery package is “not a 1930s public works project. This is a broadband, modern grid -- modernization of the grid initiative for the future.”
FCC Releases Open Meeting Agenda and Then Cancels Meeting; Legislative Action May Have Derailed Several Proposed Actions
The FCC released its agenda for its upcoming December 18th Open Meeting and then released a second notice canceling the meeting, but announcing that items on the agenda will remain on circulation for Commissioner voting. As we reported last week, the FCC planned to tackle several major issues including final technical rules for SDARs and WCS licensees to coexist in the 2305-2360 MHz band, how to deal with “competing applications” that were filed against WCS licensees at renewal time, service rules for the AWS-3 band (2155-2180 MHz), and revised E911 location accuracy rules.
On December 12th, Senator Rockefeller, D-WV, and Representative Henry Waxman, D-CA, sent a letter to Chairman Martin stating DTV is the “most important challenge” for the FCC before inauguration and with transition readiness questions being raised, “it would be counterproductive for the FCC to consider unrelated items, especially complex and controversial items that the new Congress and new Administration will have an interest in reviewing.” The letter concludes: “We strongly urge you to concentrate the Commission’s attention and resources only on matters that require action under the law and efforts to smooth the transition to digital television.”
Efforts to derail the Open Meeting seem to have focused on AWS-3. In addition to industry opposition to the Chairman’s proposed AWS-3 rules, Commerce Secretary Gutierrez sent a letter to Chairman Martin stating the White House did not support the Chairman’s plan. “The administration believes that the (airwaves) should be auctioned without price or product mandate,” said Mr. Gutierrez. “The history of FCC spectrum auctions has shown that the potential for problems increases in instances where licensing is overly prescriptive or designed around unproven business models.”
Chairman Martin’s AWS-3 plan involves auctioning some of the spectrum for a new, national wireless broadband service in 2009. The auction winner would be awarded a license with the requirement that it offer free wireless Internet access across the country within a few years using part of the spectrum won during the auction. The licensee would have the option of using the rest of the auctioned spectrum to offer a higher speed, fee-based broadband Internet access. Chairman Martin’s proposal is very similar to the plan proposed by M2Z and its backers, Kleiner Perkins Caufield & Byers.
FCC Spokesman Robert Kenny states the FCC is reviewing the Secretary’s letter and “it seems very similar to what (the Commerce Department) had put forth recently. We agree that market forces should help drive competition but we also believe that providing free basic broadband to consumers is a good thing.”
Google Seeks To Use Edge-Cache Servers; Accused of Abandoning Net Neutrality
A recent Wall Street Journal article reports that Google has abandoned its support of network neutrality in favor of a policy that allows sites like YouTube to be faster than the competition. The article claims Google has approached major internet service providers “with a proposal to create a fast lane for its own content.” But Google asserts that it remains committed to network neutrality.
The controversy is over a Google project known as OpenEdge -- a plan to put Google’s own edge-cache servers directly inside ISP networks, thereby increasing speeds for downloading YouTube videos. Edge servers reduce the need for ISPs to handle traffic outside their networks, one of the primary bottlenecks for Internet speed. Services like Akamai, Limelight and other CDNs are a common, if expensive, way for larger sites to ensure that their data is transmitted faster. Google says this does not undermine net neutrality.
Rick Whitt of Google said in response to the Wall Street Journal article: “Broadband providers should have the flexibility to employ network upgrades, such as edge caching. However, they shouldn’t be able to leverage their unilateral control over consumers’ broadband connections to hamper user choice, competition, and innovation. Our commitment to that principle of net neutrality remains as strong as ever.”
In August 2005, the FCC fell short of codifying network neutrality and instead crafted four “guiding principles.” The measure resulted in leaving the FCC’s power to enforce network neutrality subject to interpretation. In addition, national phone companies including AT&T and Verizon have announced that they intend to create new fast lanes on the Internet -- and would charge content companies a fee to use it.
Lawrence Lessig, an Internet law professor at Stanford University and proponent of network neutrality, recently stated at a conference that content providers should be able to pay for faster service. Lessig has been mentioned as a candidate to head the FCC.
Google has offered to “co-locate” its edge-cache servers within a broadband provider’s facilities, which would reduce the provider’s bandwidth costs since the same video wouldn’t have to be transmitted multiple times. Defenders of Google’s plan argue that the company is doing nothing different than what Akamai does. But Akamai has no content of its own and therefore it is always in Akamai’s best interest to ensure that its traffic is treated the same. Google has its own content, as does Microsoft, Amazon, Yahoo and others, all of which have entered into their own arrangements with ISPs to speed up their content through edge servers.
DTV Coupon Program May Exhaust Funding
A federal coupon program intended to assist analog television owners in transitioning to digital television may run out of funding prior to the Feb. 17 digital conversion deadline. Unexpectedly high demand, combined with the sluggish economy, pushed requests beyond the Commerce Department’s highest estimates, CongressDaily reported. The $40 coupons can be used to purchase analog-to-digital converters that enable sets with over-the-air reception to function after broadcasters shift to digital transmissions. Existing funding can accommodate the mailing of over 50 million vouchers. Based upon current projections for demand, the number of vouchers would have to be adjusted upward.
Commerce is now scrambling to dip into $20 million that Congress set aside to bolster administrative costs for the $1.5 billion initiative to ensure that more coupons can be sent to consumers who request them. But that may not be enough to avoid a fiasco in January, when coupon processing could slow to a crawl as Commerce gauges redemption levels.
The apparent shortfall is the latest concern regarding the switchover, which has lawmakers and regulators increasingly worried, as the deadline approaches, that the most at-risk constituencies are in danger of losing reception, including the elderly, disabled, indigent and those living in rural areas. On Wednesday, the Commerce Department announced that 39.9 million coupons have been requested, including 1.4 million in the past week. At that rate, the department would reach its 50.5 million voucher limit in early February or even January, stranding millions of people who waited until the last minute. Beginning the week of December 15th, Commerce will begin holding applications in abeyance for at least a week as it assesses whether it has the money to process them.
Billing Revolution Joins the Mobile Billing Payment Platform
Billing Revolution recently announced a new mobile, billing checkout tool that is compatible with the iPhone, Blackberry and Android platforms to handle direct-to-consumer, credit card-based transactions. Many companies, such as PayPal, Obopay, TextPayMe and Secure Wireless Transfers, offer mobile, web or text-based payment services but carriers are reluctant to open their systems to third parties because they are not included in the revenue stream. Billing Revolution’s billing tools support credit card payment for digital and physical goods and services. Vendors are able to charge customers directly for purchases and if a consumer has an account, they can make purchases with one click. The billing platform also supports advertising, another revenue stream for carriers.
Mobile direct customer billing has been slow to gain traction because of a lack of Internet-friendly mobile devices and customer reluctance to use mobile devices for payments because of security concerns. With the launch of next generation mobile networks and mobile devices, this is beginning to change. Billing Revolutions’ transaction fees are higher than other options and may price-out some retailers, but they are less than the billing arrangements currently offered by some carriers (3.5% plus 50 cents per purchase for most transactions and mature-content fees of 7.5% plus 50 cents per purchase). Billing Revolution has entered into billing arrangements with Yahoo, PlayPhone and Ascendo, a smartphone application distributor, but is still working on developing deals with Apple, Google and other distributors that may be the key to its success. Billing Revolution is starting to see greater demand for its services as customers begin to more frequently use their mobile devices for credit card purchases.
Police Track SIM Cards to Locate Mumbai Attack Participants
Tauseef Rehman, a native of Calcutta, and Mukhtar Ahmed, from the Indian state of Jammu and Kashmir, have been charged by police with fraud and conspiracy for using a fake identity card to purchase subscriber identity module (SIM) cards, which were used by the Mumbai terrorists to make calls during their attacks. Mr. Rehman used a dead relative’s photo ID to purchase the SIM cards that he then activated and sold or gave to Mr. Ahmed. Police recovered seven cellphones, three Global Positioning System handsets and one satellite phone, which they believed were used by the terrorists during the attacks. The SIM cards used during the attacks were traced by police to Mr. Rehman and he was forced to call Mr. Ahmed and ask him for his location. Police were then able to find Mr. Ahmed and arrest him.
Reconsideration Sought of the FCC’s Spectrum Screen in the Sprint – Clearwire Merger and Enforcement of “Open Network” Commitments
Public Interest Spectrum Coalition (PISC), through Media Access Project, has filed a Petition for Reconsideration of two aspects of the FCC’s decision to approve the Sprint-Nextel Corporation (Sprint) and Clearwire Corporation (Clearwire) merger. As we previously reported, the FCC unanimously approved the $14.5 billion merger of Sprint and Clearwire to create the new Clearwire. PISC supports the FCC conclusion, but seeks reconsideration of the FCC’s decision to include BRS spectrum in the spectrum screen because it does little to prevent consolidation of the wireless industry and effectively increases the spectrum to which carriers like AT&T and Verizon can acquire access. PISC also requests the FCC to impose a condition on new Clearwire to ensure that new Clearwire follows through on its contractual commitment to build-out and operate an open network. The FCC has not yet established comment deadlines for this petition.
Congressional Probe of FCC Finds “Abuse of Power”
The House Energy and Commerce Committee, following a yearlong investigation, released a report this week that accused FCC Chairman Kevin Martin of manipulating and withholding data and information from fellow Commissioners, managing the Commission in a “heavy-handed, opaque” manner, and failing to carry out key responsibilities. The investigation led to a request for records and the FCC’s production of 95 boxes of documents, 73 interviews of current and former FCC employees and e-mails from FCC employees and contractors.
“Our investigation confirmed a number of troubling allegations raised by individuals in and outside the FCC,” said Bart Stupak, D-MI, chairman of the Oversight and Investigations Subcommittee of the House Energy and Commerce Committee. “It is my hope that this report will serve as a roadmap for a fair, open and efficient FCC under new leadership in the next administration.”
Dingell noted that “the findings suggest that, in recent years, the FCC has operated in a dysfunctional manner and Commission business has suffered as a result. The report, titled “Deception and Distrust: The Federal Communications Commission Under Chairman Kevin J. Martin,” took Martin to task for failing to supply long-requested documents regarding the Telecommunication Relay Services Fund. The report noted that the “Chairman’s office appears to have ignored evidence that the ratepayers have been overcharged, while the companies providing Telecommunications Relay Service have been overcompensated, potentially by as much as $100 million per year.”
In addition, the report challenged Chairman Martin’s reversal of the conclusions of the First A La Carte Report on cable and satellite television service because he reached his decision without seeking further public comment or conducting more studies, thus giving “the impression that the issue was not handled openly and fairly.”
In another instance, the report called Chairman Martin’s suppression of a report by Subcommittee 1B of the Network Reliability and Interoperability Council VII, which studied improvements to emergency and Enhanced-911 services, “contemptuous of the extensive effort put into the study by 40 senior telecommunications industry experts.”
The report also highlighted alleged policy abuses by Homeland Security Bureau Chief Derek Poarch. “Mr. Poarch reportedly scoffed at advice from FCC staff that he was violating travel recommendations,” the report said. The report cited Poarch’s practices of using non-contract air carriers without justification, renting premium-class vehicles at taxpayers’ expense, receiving a per diem for non-work days and reimbursement for travel to his personal residence in North Carolina. Poarch’s actions warrant further investigation, the report found, adding that the matter should be referred to an Inspector General from another agency.
The report addressed the fitness of Inspector General, Kent Nilsson, noting that he violated federal procurement regulations while hiring outside contractors and overseeing contracts, violated federal personnel hiring regulations, demonstrated incompetence in overseeing audits and created a hostile work environment. As a result, the report recommends that the Inspector General at the FCC and at other independent agencies should not be appointed by the head of the agencies. Rather, the report urges the chairman and ranking member of the House Energy and Commerce Committee to introduce legislation to amend the Inspector General Act to provide that the FCC’s Inspector General be appointed by the President with the consent of the Senate.
Coalition Pushes Broadband Agenda
A coalition of consumer groups, along with companies such as Amazon.com, eBay, and Google, recently urged President-elect Obama’s transition team to ensure that his administration keep the Internet “fast, open and accessible to all Americans.”
A letter to transition co-chairmen John Podesta and Valerie Jarrett from the Open Internet Coalition recommends the appointment of an FCC chairman who supports strong enforcement and promotion of open Internet principles and the naming of FTC and Justice Department leaders who understand the importance of competition and consumer protection. The coalition suggested that the nations first CTO and the U.S. Trade Representative should promote open Internet policies. The group also pressed for network neutrality legislation.
AT&T Releases New Tool to Track Fleet Vehicles
AT&T Mobility and TeleNav entered into a revenue-sharing agreement and announced a new tool for businesses to track and manage their fleet vehicles. TeleNav’s Vehicle Tracker GPS-enabled device is now available through AT&T Mobility. The device allows customers to use AT&T’s wireless network to monitor and manage fleet operations using a web-based interface. Companies are able to view the location of each vehicle and to track each vehicle’s mileage, speed, time stopped, if the engine is on or off, and if the doors are open or closed. The advantage of the open-system TeleNav interface software is that it works with a variety of wireless devices. Its competitors cannot boast the same functionality – competing systems require the purchase of specific software and hardware. TeleNav reports that it offers a similar product to Sprint Nextel customers, which has been widely adopted.
ViaSat Plans 2011 U.S. Broadband Satellite Launch
ViaSat-1, a broadband Internet satellite intended to serve the U.S., should be launched in the first half of 2011. Once operational, the satellite will have a throughput of 100Gbps, capable of providing 2Mbps service to about 2 million subscribers. ViaSat currently leases satellite space on commercial satellites in order to provide broadband service to fixed and mobile locations, such as ships and aircraft. A similar service is planned by Eutelsat in Europe with a high capacity broadband satellite scheduled for launch in 2010.
New House, Senate Committee Appointments
Speaker Nancy Pelosi recently announced new committee appointments. The Democratic Committee nominated and the full Democratic Caucus approved the appointment of Rep. Edolphus Tower, D-NY, to Chair the Oversight and Government Reform Committee. The following committee member appointments were made:
House Ways and Means Committee
Rep. Danny Davis, D-IL
Rep. Bob Etheridge, D-NC
Rep. Raul Grijalva, D-AZ
Rep. Brian Higgins, D-NY
Rep. John Yarmuth, D-KY
House Energy and Commerce Committee
Rep. Donna Christensen, D-VI
Rep. Kath Castor, D-FL
Rep. John Sarbanes, D-MD
Rep. Chris Murphy, D-CT
Rep. Zach Space, D-OH
Rep.. Jerry McNerney, D-CA
Rep. Betty Sutton, D-OH
Rep. Bruce Braley, D-IA
House Appropriations Committee
Rep. Lincoln Davis, D-TN
Rep. John Salazar, D-CO
On the Senate side, Senate Majority Leader recently made certain committee appointments official, although they will likely not be confirmed by the Democratic Steering Committee until the new Congress convenes next month.
Sen. John (Jay) Rockefeller, D-WV, will become chairman of the Senate Commerce Committee while Sen. Dianne Feinstein, D-CA, will replace him as chairwoman of the Intelligence Committee.
Feinstein will be the first woman to chair the Intelligence Committee. Sen. Charles Schumer, D-NY, will replace her as chairman of the Senate Rules Committee.
Other new chairmen include Sen. John Kerry, D-MA, who will become Foreign Relations chairman (a former Biden post), and Sen. Mary Landrieu, D-LA, who succeeds Kerry as chairperson of the Small Business Committee.
The previously announced switch of Sen. Daniel Inouye, D-HI, for Sen. Robert Byrd, D-WW, as chairman of the Appropriations Committee and reappointment of Sen. Joseph Lieberman, D-CT, as chairman of the Homeland Security Committee also made Reid’s list.
In May 2008, the Commission adopted an interim, emergency cap on total annual USF support for competitive eligible telecommunications carriers (ETCs) at the annualized level of support that they were eligible to receive for each state during March 2008. The interim, emergency cap became effective on August 1, 2008. The Universal Service Administrative Company (USAC) has now posted the capped amounts for each competitive ETC on its website. The FCC asks competitive ETCs to review this information and file corrections to USAC by December 31st.
FCC Merges Rural Health Care Pilot Program Projects
The Wireline Competition Bureau on December 5th granted a request from two Rural Health Care Pilot Program participants, As One Together for Health (ATH) and the University of Mississippi Medical Center (UMC), to merge and designate UMC as the successor of ATH.
The FCC has selected ATH to build a Mississippi statewide broadband network linking more than 200 health care facilities with an award of $1,912,964. UMC, meanwhile, intended to use its award of $3,918,319 to upgrade an existing Mississippi broadband network and extend it to more than 50 additional health care facilities.
The Bureau granted the merger because ATH’s lead participant, the Mississippi Division of Medicaid, said it lacked the expertise and resources to manage the project. In merging the two projects, the Bureau also merges the total funding of both projects to $5,831,283. The Bureau found this to be an efficient use of resources, since ATH and UMC identified approximately 25 of the same facilities that they individually intended to connect to their networks.
In a separate order issued the same day, the Bureau granted another merger request, this time from Holzer Consolidated Health Systems (Holzer) and Southern Ohio Care Network (SOHCN). Holzer cited budget restrictions as the reason for its failure to proceed with the project. As a result, the Bureau granted the participants’ request to merge and combined Holzer’s award of 1,836,00 and SOHCN’s award of 13,929,417. Holzer proposes to replace its current T1-based backbone with a dedicated high-speed broadband fiber optic network among eight health care providers in Southern Ohio’s Appalachian region. SOHCN proposes to build or purchase a fiber optic network connecting 24 heath care facilities in south-central and southeastern Ohio.
FCC OIG Releases Schools and Libraries Fund Audit Statistics
On December 12th, the FCC Office of Inspector General released a report entitled “The Schools and Libraries Program Initial Statistical Analysis of Data from the 2007/2008 Compliances Attestation Examinations” is based on information collected from 260 audits of Universal Service Fund Schools and Libraries E-rate Program beneficiaries. The audits were conducted to determine if E-rate Program beneficiaries were receiving funds in accordance with the FCC’s directives and to obtain erroneous payment information required by the Improper Payments Information Act of 2002 (IPIA). As defined by the Office of Management and Budget under the IPIA, an erroneous payment is “any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements.” If the FCC is unable to determine if a payment was proper, then the IPIA requires that the payment be reported as erroneous. Under IPIA standards, a program is at risk if the erroneous payment rate exceeds 2.5% and the amount of erroneous payments is greater than $10 million. The OIG concluded in the report that the Schools and Libraries E-rate Program is at risk since the erroneous payment rate for 2008 is estimated to be 13.8% compared with 12.9% for 2007. The total amount of erroneous payments for 2008 is estimated at $232.7 million, an increase from $210 million for 2007.
FCC Seeks Comment on CenturyTel – Embarq Merger
The FCC is seeking comment on CenturyTel’s acquisition of Embarq. As we previously reported, the merger of the two companies will create the larget public incumbent local exchange carrier (ILEC) in the United States in a deal worth approximately $11.6 billion. Embarq owns subsidiaries that operate as ILECs in 18 states and provides local exchange services over nearly 5.9 million telephone access lines and broadband service to 1.4 million subscribers. CenturyTel operates in 25 states and provides local exchange services over roughly two million telephone access lines and high-speed Internet connections to approximately 630,000 subscribers. Cajun Acquisition Company (CAC) is a direct wholly-owned subsidiary of CenturyTel created to facilitate the merger transaction. In October 2008, Embarq, CenturyTel, and CAC entered into an Agreement and Plan of Merger whereby Embarq will become a direct, wholly-owned subsidiary of CenturyTel. Comments and petitions to deny are due January 8, 2009 and replies and oppositions are due January 23, 2009.
Centennial Plans to Merge with AT&T
Centennial Communications Corp. (Centennial) and AT&T Inc. (AT&T) seek FCC approval for a merger that would make Centennial a wholly-owned subsidiary of AT&T. Each share of Centennial common stock would be redeemed for $8.50 in cash. Centennial is a regional wireless and broadband telecommunications service provider, providing wireless telephone services to approximately 660,000 retail customers in small cities and rural areas in parts of Indiana, Michigan, Ohio, Louisiana, Mississippi and Texas, covering a population of approximately 9 million. Centennial also provides wireless service to about 440,000 customers in Puerto Rico and the U.S. Virgin Islands. In Puerto Rico, Centennial is a fully-integrated service provider offering fiber broadband services to businesses and some residential customers.
AT&T and Centennial assert that the transaction serves the public interest by enhancing telecommunications services in rural areas and small cities that are served by Centennial, reducing costs, and enhancing Centennial’s disaster preparedness. Petitions to deny the transfer of control applications are due January 15, 2009. Oppositions are due January 26, 2009 and replies are due February 2, 2009.
Jane Mago Promoted to EVP at NAB
NAB recently announced that Jane Mago has been promoted to EVP/Legal and Regulatory Affairs and General Counsel. Marsha MacBride is stepping down but will continue to work with NAB as a strategic adviser. Mago was MacBride’s Deputy. After 26 years at the FCC, Mago joined NAB in September 2004. While at the FCC, Mago was an advisor to Commissioners Anne Jones, Rachel Chong, and Michael Powell before he was FCC Chairman. She also was an FCC Assistant General Counsel for Trial and Enforcement.
Broadcasters Push FCC to Adopt Increased HD Radio Power Levels
NAB recently filed comments in support of a proposal filed earlier this year to raise HD radio station power levels to up to 10% of the station’s analog power, a significant increase from the current 1% power level. NAB argues that HD radio power levels were originally set artificially low to minimize interference concerns, but there have been “virtually no reports” of harmful interference from HD radio broadcasts. NAB states that the power level increase will help extend the coverage and reliability of HD radio broadcasts. Increased power levels means HD radio reception will improve in vehicles, buildings, and wireless devices, including mobile telephones. The power increase is appropriate now, according to NAB, because 85% of stations have not yet constructed HD radio facilities and will be able to do so more easily if power levels are higher resulting in its need for fewer digital facilities to serve a geographical area.
Tribune Files Chapter 11 But Continues Media Operations
With close to $13 billion in debt and only $8 million in assets, Tribune filed for Chapter 11 bankruptcy protection. The company has pledged to continue operating its media operations, including television stations, a radio station, newspapers and interactive properties, without interruption and states it has enough cash on hand to do so. Not included in the bankruptcy filing are the Chicago Cubs and Wrigley Field. Tribune attributes its financial difficulties to a challenging credit market and declining revenue. Tribune’s Chairman/CEO Sam Zell states that “restructuring will bring the level of our debt in line with current economic realities, and will take pressure off our operations, so we can continue to work toward our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and plays a vital role in the communities we serve. This restructuring focuses on our debt, not on our operations.” Much of Tribune’s debt was incurred in 2007 when Zell took the company private. For the third quarter, Tribune reported newspaper revenues fell 13.1% to $653.6 million and advertising revenues were down 19%; television revenues fell 8.3% to $164.4 million; and radio/entertainment revenues were up 1% to $118.9 million. There also was a net loss from continuing operations of $124 million, compared to a profit of $84 million a year earlier.
Nielsen v. Arbitron: The Battle of the Ratings Giants
With Nielsen’s return to the radio ratings business, it is again in direct competition with Arbitron. Harker Research conducted a survey during the week of December 1st asking radio media buyers to rate and compare Nielsen’s and Arbitron’s services. The survey asked about the professionalism of each company, the credibility of each company’s rating services, and which company’s services the buyer would choose if each company offered both radio and television ratings services in the same market. According to Harker, buyers more frequently selected Nielsen as their preferred ratings company.
Public Media Debuts iPhone Application
The “Public Radio Tuner”, a new iPhone application, released by American Public Media permits users to find and play public-radio streams from the Internet. Clear Channel, Jacobs Media and Greater Media offer similar iPhone radio tuner applications. The Public Radio Tuner includes the streams of more than 150 “pubcasters” and is available at the iTunes App Store.
$99 iPhone at Wal-Mart?
Rumors continue to circulate that Apple and Wal-Mart are nearing a deal to sell a 4-GB iPhone for $99. Industry analysts report that this would be a step away from Apple’s premium-brand strategy and suggest a $149 iPhone is more likely, although such a model runs the risk of stealing sales from the $200 8 GB iPhone and the $300 16GB iPhone. Apple CEO Steve Jobs states that the company is satisfied with one mobile phone hardware platform, which is leading to industry speculation that the company will offer a cheaper iPhone with less memory in order to enter other wireless device market segments. Needham & Co. reports iPhone has captured 16% of the smartphone market.
Android Mobile Device Platform is Supported by Sony Ericsson, Vodafone
Last week the Open Handset Alliance was joined by Sony Ericsson, Vodafone and ARM Holdings all of which support the Android mobile device platform, developed by Google, which is now deployed in T-Mobile’s G1 device. Sony Ericsson plans to release a device in mid-2009 that uses Android. Android services are competing head to head with Apple’s iPhone.
Members of the Open Handset Alliance are committed to developing applications and service for mobile phones and handsets using the Android platform or an Android-compatible mobile device. New members also include Taiwan’s Asustek Computer, Toshiba and Garmin, which increases the total number of companies in the Open Handset Alliance to 47.
Layoffs to Increase in 2009
Alvarion and Neustar are the two most recent companies to announce layoffs. Alvarion, a WiMAX vendor, announced there will be an 11% reduction in its global 1,000 person workforce. Management salaries also will be reduced but no details were provided. Alvarion estimates the combined savings will be approximately $15 million annually. No equipment orders have been cancelled yet, according to Alvarion, but it expects sales to slow in the upcoming year.
NeuStar expects to cut as many as 110 positions from its workforce in order to reduce costs for its mobile instant-messaging business. It reports that the reduction in employees will be completed by mid-2009 and it expects to realize a 35%-45% cost savings in its total next-generation messaging expenses. NeuStar anticipates taking a restructuring charge of $2.2 million to $2.5 million in the fourth quarter of 2008 to cover the costs associated with severance, lease costs and related expenses.
Other staff reductions have been announced at AirIQ, AT&T, and Alcatel-Lucent. AirIQ announced a 36% layoff of its workforce, and AT&T announced 12,000 job cuts but none in its wireless division. Alcatel-Lucent also announced it will be eliminating 1,000 management and 5,000 contract jobs. To reduce expenses, Motorola is freezing pension plans and some salaries, will no longer contribute to employees’ 401(k) plans, and its co-CEOs are taking a 25% cut in base salary.
Motorola Debt Considered “Junk”
Standard & Poor’s lowered its long-term corporate credit rating on Motorola debt to “junk (bond) territory,” according to the Wall Street Journal. S&P’s rating change was to “BB+” from “BBB.” Moody’s Investor Services warned last week that it, too, may cut its credit rating on Motorola. “The current rating action reflects continual operational challenges in the mobile devices unit (at Motorola), which are not likely to be reversed over the immediate term, leading to depressed profitability,” wrote S&P analyst Bruce Hyman. The move may make it more difficult for Motorola to raise debt in a credit-strapped economy while it attempts to revive its mobile devices business. S&P also said it is forecasting a 10% drop in mobile-phone sales in 2009 over 2008.
Wireless Debt Slips to Junk Status
Sprint Nextel’s unsecured debt rating was recently reduced to non-investment grade or junk by Moody’s Investor Service. Sprint Nextel’s debt rating was moved from Ba2 to Baa3 and its corporate family rating is now Ba1. Moody’s outlook for Sprint Nextel is negative but it upgraded Sprint Nextel’s senior unsecured revolving credit facility to Baa2. Moody stated that the downgrade results from Sprint Nextel’s “significantly weakened market position among the national wireless carriers and its continuing challenges in turning around its wireless operations amid intense competition and weak economic conditions.” Sprint Nextel’s stock dropped more than 11% and it is struggling with financial losses and churn.
Federal Appeals Court Narrows Scope of Secrecy Surrounding Patriot Act Searches of Phone, E-Mail Communications
A federal appeals court on December 15th narrowed the scope of when telecommunications companies must keep certain FBI search-warrant requests secret.
The appeal filed by the American Civil Liberties Union (ACLU) focused on counter-terrorism statutes and the USA Patriot Act, which permits the FBI to obtain information concerning consumer telephone and e-mail communications without a warrant under a national security letter (NSL). In 2005 alone, 40,000 NSLs were sent to carriers. NSLs routinely demanded phone numbers dialed or received, and outgoing and incoming e-mail addresses of individuals. The law forbids companies to alert customers that the FBI has sought such information. The ACLU sought to limit the rule and provide carriers with the ability to challenge the NSLs. The ACLU also challenged the secrecy rule on First Amendment grounds, saying it violated telecommunication companies’ rights.
Ruling on a challenge to the gag order provision of the USA Patriot Act, the Second U.S. Circuit Court of Appeals unanimously concluded that a carrier must keep the order secret only if the FBI certifies that the NSL’s disclosure “may result in an enumerated harm that is related to an authorized investigation to protect against international terrorism or clandestine intelligence activities.”
That language dramatically limits the parameters of when a gag order is automatically required. Prior to the court’s ruling, secrecy was required for NSLs related to any criminal investigation implicating a diplomat or that involve danger to the life or physical safety of any person.
Meetings and Events
January 5, 2009
- Reforming the Federal Communications Commission, National Press Club, Washington, DC
January 20, 2009
- Inauguration Day
January 26, 2009
- Antitrust Law for the New Administration, Silicon Flatirons, Boulder, CO
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
May 16-20, 2009
- Institute for Regulatory Law & Economics, The Aspen Institute, Aspen, CO
January 6, 2009
- 111th Congress begins
FCC Rulemakings / Deadlines
December 19, 2008
- Comment Deadline (extended): Six Nominations Sought for USAC Board
December 22, 2008
- Reply Comment Deadline: Rural Telecommunications Group, Inc. Seeks Rulemaking to Impose ‘Spectrum Cap’ on Wireless Operators
- Reply Comment Deadline (extended): 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 26, 2008
- Reply Comment Deadline: Petition for Reconsideration of ‘High Definition’ Exemption for Small Cable Operators Carrying Broadcast TV Stations after the Transition to Digital TV
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 5, 2009
- Comment Deadline: Tri-County Telephone Seeks Waiver to Offer Transmission Component of Broadband Internet Access on Detariffed Common Carrier Basis
January 8, 2009
- Comment/Petition to Deny Deadline: CenturyTel’s Acquisition of Embarq
January 12, 2009
- Comment Deadline: Revised Rules to Verify AM Directional Antenna Performance, Proposed Rules for Tower Construction Near AM Stations
- Reply Comment Deadline: Request for Increased Operating Power for FM Digital Audio Broadcasting (DAB)
- Reply Comment Deadline: Iridium-GHQ Acquisition under FCC Review
January 15, 2009
- Petition to Deny Deadline: AT&T, Inc. and Centennial Communications Corp. Transfer of Control of Licenses, Leases and Other FCC Authorizations
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’
- Third Round Deadline: Iridium-GHQ Acquisition under FCC Review
- Reply Comment Deadline: Tri-County Telephone Seeks Waiver to Offer Transmission Component of Broadband Internet Access on Detariffed Common Carrier Basis
January 23, 2009
- Reply Comment/Opposition Deadline: CenturyTel’s Acquisition of Embarq under FCC Review
January 23, 2009
- Opposition Deadline: AT&T, Inc. and Centennial Communications Corp. Transfer of Control of Licenses, Leases and Other FCC Authorizations
January 26, 2009
- Opposition Deadline: AT&T, Inc. and Centennial Communications Corp. Transfer of Control of Licenses, Leases and Other FCC Authorizations
February 2, 2009
- Comment Deadline: Rural Cellular Association Seeks Rulemaking to Prohibit Exclusivity Arrangements between Wireless Carriers and Handset Manufacturers
- Reply Deadline: AT&T, Inc. and Centennial Communications Corp. Transfer of Control of Licenses, Leases and Other FCC Authorizations
February 6, 2009
- 911 and E911 Network Redundancy, Resiliency, Reliability Reports Due
February 11, 2009
- Reply Comment Deadline: Revised Rules to Verify AM Directional Antenna Performance, Proposed Rules for Tower Construction Near AM Stations
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 5, 2009
- Deadline for Action on Virgin Mobile’s Request for Forbearance from ETC Facilities Ownership Rules
March 31, 2009
- Deadline: Interconnected VoIP Providers to Transmit ‘Nomadic’ 711 Calls to Relay Providers
- Deadline: TRS Provider Delivery of 711 Calls to PSAPs
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
March 10, 2009
- Regional Public Safety Planning Committee Meeting for Region 19 in Kennebunkport, Maine regarding 700 MHz