Capital Thinking Update - April 18, 2011

    View Author 18 April 2011

    General Legislative

    The House and Senate will return from a two-week recess the week of May 2. 

    Budget, Appropriations


    • FY2011 Appropriations Cleared. After reaching a deal late April 8, averting a federal government shutdown by less than one hour, Congress cleared the final Continuing Resolution (CR) of FY2011 yesterday (House vote 260-167; Senate vote 81-19). The President signed the measure today. The CR will cut approximately $28 billion from FY2010 funding levels (in addition to the $12 billion cut in the last three stopgap bills) and fund the federal government through September 30, 2011. The final allocation for FY2011 is $1.05 trillion; approximately $40 billion less than FY2010 and $78.5 billion less than the President’s FY2011 budget request. Congress also held two separate votes yesterday on defunding Planned Parenthood and defunding the health care reform bill. As expected, these provisions passed in the House but failed in the Senate.
    • FY2012 Budget Proposal. House Budget Committee Chairman Paul Ryan (R-WI) released the Republican FY2012 Budget Resolution, “The Path to Prosperity,” on April 5. The proposal cuts over $6 trillion from the budget over 10 years. In addition to spending reductions, the proposal addresses entitlements and tax reform and significantly modifies Medicaid and Medicare. The proposal outlines a strategy to recede domestic discretionary spending below FY2008 levels and freeze it at that level for five years. The House adopted the measure today after disposing of five alternative budget plans.


    • President’s FY2012 Budget Release. On April 13, President Barack Obama presented his “Framework for Shared Prosperity and Shared Fiscal Responsibility,” a plan that would reduce the deficit by $4 trillion over 12 years through spending cuts and increased revenue through tax reform. He proposes to reduce discretionary spending and entitlement programs, such as Medicaid and Medicare, but does not suggest restructuring the programs. In addition to laying out his strategy to reduce the deficit, the President called on Congress to appoint 16 members to a bi-partisan panel led by Vice President Joe Biden with the goal a reaching a final agreement on a plan to reduce the deficit by the end of June.




    • Patent Reform. On April 14, the House Judiciary Committee approved its patent reform bill (H.R. 1249) by a 32-3 vote, which will shift the U.S. patent system to a “first inventor to file” standard. The panel accepted an amendment by Chairman Lamar Smith (R-TX) which narrowed the scope of the “prior use” defense against patent infringement claims by limiting it to “process” patents and by restricting its application to the United States. The panel also extended the timeline for inter partes review from nine to 12 months after service of a complaint.
    • For-profit Colleges. On April 13, 10 Republican Senators on the Health, Education, Labor and Pensions Committee sent a letter to Chairman Tom Harkin (D-IA) criticizing his investigation of for-profit colleges as “biased and unprofessional.”  Senator Harkin has held four hearings examining the abuse of taxpayer-funded federal student loan dollars by the for-profit industry and has tentatively scheduled another hearing next month. Republican Committee members warned in the letter that they will not participate in the hearing.
    • FY2011 Continuing Resolution. The compromise FY2011 spending bill passed on April 14 afforded nearly level funding for priority education programs, including Title I grants to school districts and special education grants to states. Additionally, the Department of Education secured maintaining the maximum Pell Grant award as part of the deal. However, over 40 Department programs were eliminated, and many others were significantly cut. Nearly all of the 65 policy riders proposed by House Republicans were removed as part of the final agreement, including a provision that would bar the Department from using any of its FY2011 funds to carry out the controversial gainful employment rules. Representative Alcee Hastings (D-FL) responded with an op-ed in Politico on April 14, 2011, explaining why the proposed rules will hurt disadvantaged students.
    • Upcoming Hearing. On Thursday, April 21, the House Education and the Workforce Committee will hold a field hearing in Columbia, Tennessee titled, “Reviving our Economy: The Role of Higher Education in Job growth and Development.” Witnesses will be announced.




    • Clean Energy Standard. In May, Senate Energy and Natural Resources Committee staff will begin reviewing the roughly 150 comments received on the CES White Paper offered by Chairman Jeff Bingaman (D-NM) and Ranking Member Lisa Murkowski (R-AK).
    • Oil Production/Safety. The House is expected to consider three bills, authored by Natural Resources Committee Chairman Doc Hastings (R-WA) and favorably reported from that Committee on April 13, to expand domestic oil and gas production in early May. One bill (H.R. 1229) was amended to include industry-supported provisions from the LEASE Act (H.R. 993) that would extend offshore leases in the Gulf of Mexico one year to accommodate permitting delays due to the offshore drilling moratoriums. All three bills are expected to pass the House. The Chairman is also expected to address industry safety issues once ongoing investigations into the Deepwater Horizon disaster conclude. The Senate Energy and Natural Resources Committee is likely to build upon a single comprehensive regulatory reform and oil spill response bill that had been favorably reported in the 111th Congress before the upcoming summer recess.


    • OCS Regulatory Expansion. The Bureau of Ocean Energy Management (BOEM) is considering expanding new oil and gas operating rules to subcontractors operating in the Outer Continental Shelf, not just the operators. BOEM Director Michael Bromwich has said, “Our regulations clearly, now, reach to operators and not to the various contractors and subcontractors that work with the operators. That dramatically limits the scope of our oversight in a way that makes me question whether there is a different and better way to do business.”
    • Oil Shale Plans. The Bureau of Land Management (BLM) has initiated a review and public scoping process of the Bush Administration’s 2008 commercial oil shale and tar sands plans. A Notice of Intent was recently issued to prepare a Programmatic Environmental Impact statement on the allocation of federal land resources in Colorado, Utah and Wyoming. Comments regarding potential resource issues are due May 16. BLM has also scheduled several public scoping meetings in these three states through early May.
    • Hydraulic Fracturing. In testimony before the Senate Environment and Public Works Committee, Environmental Protection Agency (EPA) Deputy Administrator Bob Perciasepe said that “using diesel fluids for hydraulic fracturing in shale … is subject to the Safe Drinking Water Act,” and the operators would be required to have a permit, indicating that not doing so would be in violation of that law. Meanwhile, Congressional oversight hearings continue in both the House and the Senate. House Natural Resources Committee Chairman Hastings has said he believes that state-level regulations have thus far worked.




    • Air Emissions. Chairman Whitfield (R-KY) of the House Energy and Commerce Committee, Subcommittee on Energy and Power, plans to introduce legislation to delay Environmental Protection Agency (EPA) rules regulating emissions from industrial boilers and power plants. The proposed legislation is unlikely to pass in the Senate.
    • Farms. On Tuesday, April 19, in Salinas, California, the House Oversight and Government Reform Committee intends to hold a Full Committee hearing examining EPA regulations on farmers.
    • Radiation from Japan Reaching U.S.  EPA Administrator Lisa Jackson testified recently before the Senate Committee on Environment and Public Works, Subcommittee on Clean Air and Nuclear Safety to discuss EPA’s role in monitoring radiation in the U.S. associated with the Fukushima Daiichi nuclear power plant emergency in Japan. EPA’s nationwide radiation monitoring system, RadNet, employs 124 air monitors across the U.S. and 40 deployable air monitors that can be sent to take readings anywhere in the U.S. or its territories. RadNet continuously monitors the nation’s air and regularly monitors drinking water, milk and precipitation for a variety of radiation types. In an effort to provide additional geographic coverage to areas in close proximity to the releases in Japan, EPA shipped eight deployable monitors to islands in the Pacific, including Guam and the Commonwealth of the Northern Mariana Islands, and the Western United States, including Hawaii, Idaho and Alaska. EPA has also accelerated its monitoring of precipitation, milk and drinking water in response to the radiation concerns. While the detections in air, precipitation and milk were expected, the levels detected have been far below levels of public-health concern. While EPA does not expect radiation from the damaged Japanese reactors to reach the U.S. at harmful levels, EPA will continue monitoring the air, milk, precipitation and drinking water for any changes.


    • Clean Alternative Fuels. EPA has issued a final rule streamlining the process by which manufacturers of clean alternative fuel conversion systems may demonstrate compliance with vehicle and engine emissions requirements. This action will affect companies that manufacture, assemble, sell, import or install alternative fuel conversions for light-duty vehicles, light-duty trucks, medium-duty passenger vehicles and heavy-duty vehicles and engines. EPA has revised criteria for gaining an exemption from the Clean Air Act prohibition against tampering for the conversion of vehicles and engines to operate on clean alternative fuels. The rule is effective as of April 8, 2011.
    • Gulf Coast Ecosystem Restoration Task Force. The Gulf Coast Ecosystem Restoration Task Force, which has been charged by President Obama with developing a restoration strategy for the Gulf of Mexico, recently announced the availability of a toll-free number for individuals who have questions or suggestions related to the mission of the task force. Under its charge, the task force must propose a Gulf Coast ecosystem restoration agenda by October 5, 2011. A series of listening sessions are being held throughout the Gulf Coast states for community members to provide individual input that will inform the development of the restoration strategy. The goal of the listening sessions is to obtain individual input on priority issues, existing impediments and key outcomes or actions for the restoration of the Gulf Coast ecosystem.

      Citizens from the five Gulf Coast states, which include Alabama, Florida, Louisiana, Mississippi and Texas, can call the state information call line at 1-855-427-9263 to receive additional information on task force meetings and other activities within their state. The state information call line staff includes representatives from the U.S. Army Corp of Engineers, EPA, Department of Interior and National Oceanic and Atmospheric Administration.
    • Re-Powering America’s Land. EPA is soliciting applications from states, tribes, regional governments and communities that are interested in the development of renewable energy on current and formerly contaminated properties. The opportunity is offered through EPA’s RE-Powering America’s Land initiative, which takes a multi-pronged approach to site cleanup and development of renewable energy production facilities on potentially contaminated land. Potentially contaminated lands include Superfund, brownfields, RCRA corrective action and former landfill or mining sites. Proposals are due to EPA by May 20, 2011.


    Financial Services


    • Budget Agreement Provides Regulatory Agencies with Increased Resources. The recently-approved FY2011 Continuing Resolution provides the Commodity Futures Trading Commission (CFTC) $202.7 million, an increase of $34 million above the FY2010 enacted level of $168.8 million. The increased funding will allow for additional staff to carry out new regulatory responsibilities and specifically provides $37.2 million for information technology activities, improving the CFTC’s abilities to conduct derivative market surveillance. The Securities and Exchange Commission (SEC) will receive $1.185 billion, an increase of $74 million above FY2010 levels.


    • CFTC and SEC Staffs to Host Public Roundtable Discussion on Dodd-Frank Implementation. The staffs of the CFTC and the SEC recently announced that they intend to hold a two-day joint public roundtable on May 2-3, to discuss the schedule for implementing final rules for swaps and security-based swaps under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The roundtable is expected to include panel discussions of (1) compliance dates for new rules for existing trading platforms and clearinghouses and the registration and compliance with rules for new platforms, such as swap and security-based swap execution facilities and data repositories for swaps and security-based swaps; (2) compliance dates for new requirements for dealers and major participants in swaps and security-based swaps; (3) implementation of clearing mandates; (4) compliance dates for financial entities such as hedge funds, asset managers, insurance companies and pension funds subject to a clearing mandate and other requirements; and (5) considerations with regard to non-financial end users.
    • SEC Considering Delay for Investment Adviser Registration. In a letter to the North American Securities Administrators Association, Inc. dated April 8, 2011, Robert E. Plaze, Associate Director of the SEC, announced that the Commission is considering providing investment advisers required to register with the SEC as a result of certain provisions of the Dodd-Frank Act with additional time to register and comply with the Investment Advisers Act of 1940 (Advisers Act). The Dodd-Frank Act repeals the private adviser exemption in the Advisers Act, which currently exempts advisers to private equity funds, venture capital funds, hedge funds and other private funds from registration. As a result, many private fund advisers formerly exempt from registration will now be required to register with the SEC unless they are able to rely upon another exemption from registration. Mr. Plaze’s letter states that while the SEC anticipates issuing final rules in advance of the July 21, 2011 effective date, he expects that the SEC will consider extending the date by which advisers must register and come into compliance until the first quarter of 2012.


    International, Defense, Homeland Security

    • Funding Defense Foreign Affairs. As part of the compromise over the FY2011 budget, significant cuts were made to the foreign affairs budget, though the Defense Department’s budget was left largely unchanged and actually gained some funds. Overall, the State Department and Foreign Operations budgets, which include a wide range of activity from U.S. Agency of International Development programs to the United States’ dues owed the United Nations, was cut $8.4 billion less than President Obama’s funding request for FY2011. As part of these cuts:
      • The Millennium Challenge Corporation FY2011 request was cut by $380 million;
      • The money provided to the United Nations and other international organizations was cut from $1.7 billion in FY2010 to $1.3 billion, with U.N. contributions alone being cut $304 million from the FY2011 request;
      • $100 million was cut from the International Clean Technology Fund and Asian Development Fund from FY2010 levels;
      • Economic Support Funds, one of the key vehicles for bilateral U.S. foreign assistance, was reduced to $8.4 billion, $1.9 billion less than the President’s FY2011 request.
      At least one key Obama Administration initiative was preserved and strengthened: global health and child survival programs will receive $7.8 billion in funding — $66 million more than in FY2010 and $850 million more than what the House of Representatives had originally proposed.

      Some programs, such as the Peace Corps and the United States Institute for Peace, survived proposals that their budgets be cut drastically. And, in a complex accounting maneuver, the $800 million Pakistan Counterinsurgency Fund, which was to be transferred from the Defense Department to the State Department, will remain at Defense so that it can escape further cuts but still be used by State. 

      By comparison, the Department of Defense gained a roughly $5 billion boost compared with FY2010, for a total of $513 billion. Military construction and veterans’ programs combined would also receive a $600 million increase, to $76.6 billion in FY2011. Importantly, one of the main reasons Defense was able to keep so much of its funding is that it engaged in a lengthy process last year to identify areas that could be cut and already redirected internal funding away from wasteful programs to more essential needs. As part of this effort, General Electric’s alternative engine for the F-35 – a costly item Members of Congress forced on the Pentagon – did not receive any funding in the FY2011 budget. Despite these gains, defense spending is expected to be cut substantially as part of the FY2012 budget process.

      Given these discrepancies, foreign policy analysts fear that the United States’ ability to exert its “soft power” will be undermined, as will ongoing efforts to rebalance U.S. foreign policy to rely on the less expensive tools of diplomacy and development, instead of costly military engagements, to achieve U.S. national security objectives.
    • Trade Developments. Discussions among Members of Congress and the Obama Administration continued this week on the sequencing and timing of Congressional consideration of the pending free trade agreements with Colombia, Panama and Korea, as well as the reauthorization of Trade Adjustment Assistance (TAA) and the renewal of the Generalized System of Preferences (GSP) and the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which expired earlier this year.  While lawmakers have not yet determined how to proceed, most expect that Congress will schedule trade votes on these issues by early summer.

      Last week, the House Ways and Means Committee concluded its series of three hearings on each of the pending free trade agreements with a hearing to examine the Korea-U.S. Free Trade Agreement (KORUS). Testifying at the hearing, Deputy United States Trade Representative (USTR) Demetrios Marantis urged Congress to act swiftly to approve the agreement. Marantis also announced that USTR has completed the draft implementing legislation for the agreement and has begun technical discussions with the Committee staff on how to proceed.  With a free trade agreement between the E.U. and Korea slated to take effect on July 1, 2011, U.S. businesses fear losing market share in Korea to their European competitors if Congress does not approve the agreement by that date.

      The U.S.-Panama Free Trade Agreement also moved closer to completion this week. On Wednesday, Panama’s National Assembly approved a tax information exchange agreement, which is the last hurdle that Panama must clear in order for USTR to submit the agreement to Congress for its approval. Panamanian President Ricardo Martinelli is scheduled to travel to Washington at the end of the month, when many expect that he and President Obama will announce plans for action on the agreement.

      Meanwhile, next Friday, April 22, marks the first in a series of deadlines by which Colombia must implement certain elements of a labor action plan the United States and Colombia agreed to earlier this month. By next week, Colombia must expand a government protection program for labor leaders and activists. Colombia’s commitment to the labor action plan will address the outstanding concerns of some Members of Congress and pave the way for its consideration by Congress.




    • Repeal of Enhanced Form 1099 Reporting Requirements. On April 14, President Obama signed the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (H.R. 4), which repeals the requirement from last year’s health care reform law that businesses submit a Form 1099 for payments made to a single vendor for goods and services that total more than $600 in a taxable year. In addition, the bill repeals a similar requirement from the Small Business Jobs Act of 2010 for persons who receive rental income. To offset repeal of these two provisions, the bill allows the government to “recapture” an increased amount of a health care tax credit when a taxpayer receives an overpayment.


    • Deficit Reduction Proposals. On April 13, President Obama offered a plan to raise $1 trillion in new tax revenues by ending the Bush-era tax cuts on high income earners and capping the value of deductions at 28 percent. Obama’s tax proposal is part of his overall plan to cut $4 trillion from the deficit over the next 12 years. Policymakers debated whether it is possible to generate $1 trillion dollars under the President’s plan, though many said it would be a difficult task even if it is feasible.

      The President’s plan contrasts with that of House Budget Committee Chairman Paul Ryan (R-WI), which would extend the Bush-era tax cuts for all income levels. Ryan’s plan would also consolidate the six individual tax brackets and set the top individual tax rate at 25 percent, as well as set the top corporate tax rate at 25 percent and eliminate tax loopholes for corporations.
    • Survey – U.S. Based Companies Have Higher Effective Tax Rates Than Foreign Companies. According to a PricewaterhouseCoopers survey commissioned by the Business Roundtable, the effective corporate tax rate of U.S.-based companies was around 27.7 percent – nearly 9 percentage points higher than those with foreign headquarters that were included in the survey. Further, the survey found the effective rate for U.S.- based companies was 5 percent higher than the rate for non-U.S. companies that are in the OECD and over 11 percentage points higher than the rate for non-OECD countries. The survey examined the overall tax rates (including deferred taxes) of 2000 of the world’s largest companies, according to the 2010 Forbes “Global 2000 list.” The list includes 536 U.S.-based companies and 1,464 foreign companies. In a separate study, “Cross-Country Comparisons of Corporate Income Taxes,” by Kevin S. Markle of Dartmouth College and Douglas A. Shackelford of the University of North Carolina, data showed that U.S.-based multinationals face the second highest effective tax rate of any other country in the study (Japan had the highest effective rate). Additionally, the study showed that the U.S. effective rate was 7 percentage points higher than the average current tax rates in 14 other countries included in the study.




    • Patent Reform. On April 14, the House Judiciary Committee approved patent reform legislation in the form of H.R. 1249, the America Invents Act, by a vote of 32-3. The bill is similar to legislation passed by the Senate in March. Like the Senate bill, H.R. 1249 implements a “first inventor to file” standard for patent approval, creates a post-grant review system to weed out bad patents and gives the Patent and Trademark Office (PTO) authority to set and keep fees it collects to address the backlog of patent applications. Key changes made to the bill as introduced include: (1) limiting the scope of the “prior use” defense to “process” patents and restricting its application to the U.S.; (2) sunsetting the PTO’s fee-setting authority; and (3) extending the timeline for inter partes review of post-grant patent validity from nine to 12 months. Senate Judiciary Committee Chairman Patrick Leahy (D-VT) hailed the House Committee’s actions saying that "patent reform is an important key to our economic recovery and will help America invent its way back to prosperity." Leahy also noted that "patent reform is supported by Democrats and Republicans alike, by the Obama Administration and by businesses, industries and manufacturers across the spectrum." 
    • Business Activity Tax Simplification Act. In the face of increased pressure on states and localities to raise tax revenue and in an attempt to clarify the ability for those jurisdictions to tax out-of-state entities conducting business – in particular online – within their borders, House Judiciary Subcommittee on Intellectual Property, Competition and the Internet Chairman Bob Goodlatte (R-VA) introduced H.R. 1439, the Business Activity Tax Simplification Act, on April 8. H.R. 1439 aims to update current laws governing when a multi-state business may owe state income taxes when conducting business in those jurisdictions. The bill expands protections in current law to include intangible property and services, as well as tangible personal property. Of particular importance, the bill establishes a “physical presence” test that requires an out-of-state company to have an actual physical presence in a state before the state can impose business activity taxes on the company. Upon introduction, Chairman Goodlatte stated that the bill will “ensure fairness, minimize litigation, and create the kind of legally certain and stable business climate that frees up funds for businesses of all sizes to make investments, expand interstate commerce, grow the economy and create new jobs. At the same time, this legislation will protect the ability of states to ensure that they are fairly compensated when they provide services to businesses that do have physical presences in the state.”
    • Privacy. On April 13, Representative Cliff Stearns (R-FL) introduced a new version of his online privacy legislation that would require companies to clearly communicate with consumers about how they use personal information. The bill would require companies to allow consumers to opt out of having their information sold or disclosed to a third party. It also would give the Federal Trade Commission (FTC) the authority to enforce the requirements of the bill. The bill is likely to be referred to the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade. Stearns introduced his bill a day after Senators John Kerry (D-MA) and John McCain (R-AZ) introduced their version of commercial privacy legislation, thereby increasing the likelihood that Congress may pass some form of new privacy law this year. Under the Kerry-McCain Consumer Privacy Bill of Rights, collectors of information must provide clear notice to individuals on the collection practices and the purpose for such collection. Additionally, the collector must provide the ability for an individual to opt-out of any information collection that is unauthorized by the Act and provide affirmative consent (opt-in) for the collection of “sensitive personally identifiable information.” Respecting companies existing relationships with customers and the ability to develop a relationship with a potential customers, the bill would require robust and clear notice to an individual of his or her ability to opt-out of the collection of information for the purpose of transferring it to third parties for behavioral advertising. It would also require collectors to provide individuals either the ability to access and correct their information or to request cessation of its use and distribution.
    • Spectrum. The House Energy and Commerce Subcommittee on Communications and Technology held the first of three spectrum hearings on April 12, focusing on reallocating the 700 MHz D block for a national public safety broadband network and incentive auctions. Still, Subcommittee leaders have yet to draft a spectrum bill. Some Energy and Commerce Committee Republicans are split with Senate Democrats on how such legislation should look. In a recent press interview, Federal Communications Commission (FCC) Chairman Julius Genachowski said he was hopeful spectrum auction legislation would pass this year. Auction proposals have been met with questions from broadcasters who are not unalterably opposed to voluntary incentive auctions, but want more information about how they will fare if spectrum is repurposed to mobile broadband. Genachowski told broadcasters at their show in Las Vegas last week that spectrum auctions are essential and that repacking, which will move certain broadcasters to different parts of the airwaves, is non-negotiable. Some broadcasters are concerned channel "realignment" will eliminate opportunities to offer mobile TV, 3-D and other advanced services just two years after the industry underwent a transition from analogue to digital stations. Still, Genachowski said in the interview that broadcasters were receptive to his message. "They were positive discussions focused on the practical aspects of incentive auctions. They understood and appreciated the importance of the spectrum challenges," he said.
    • Net Neutrality. On April 8, the House of Representatives passed H.J. Res. 37 – its Resolution of Disapproval of the FCC’s net neutrality rules (adopted under the Congressional Review Act). The resolution simply states: "That Congress disapproves the rule submitted by the Federal Communications Commission relating to the matter of preserving the open Internet and broadband industry practices (Report and Order FCC 10–201, adopted by the Commission on December 21, 2010), and such rule shall have no force or effect." It is anticipated that the resolution will face stiff opposition in the Senate, and President Obama has promised to veto any such resolution.
    • AT&T/T-Mobile Merger. The FCC opened a docket last Thursday to examine AT&T’s proposed acquisition of T-Mobile. FCC officials said the agency will review the merger in conjunction with the Justice Department, analyzing the impact on competition in the wireless market and whether the transaction is in the public interest. AT&T is expected to submit its filing with the FCC around April 21, 2011. In other merger news, the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights intends to hold a hearing on the proposed merger on May 11, 2011. Analysts predict that the deal may receive government approval, although FCC public interest review and the Department of Justice antitrust scrutiny will be significant. The House Judiciary Committee has indicated that it will hold a hearing in the near future.
    • Hearings. The following hearings have been scheduled:
      • May 11:  Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing titled, "The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?"
      • TBD:  House Judiciary Committee Review of the Proposed AT&T/T-Mobile Merger


    • Intercarrier Compensation/Universal Service. On April 27, the FCC will hold a workshop as part of the February 8 Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking seeking comment on proposals to fundamentally modernize the Commission’s intercarrier compensation (ICC) system and Universal Service Fund Reform (USF). The April 27 workshop will focus on practical and operational issues concerning the implementation of a Phase I of the Connect America Fund (CAF), including the capabilities and costs of various broadband technologies, how to balance competing priorities for use of limited funds in Phase I of the CAF and the Commission’s proposed use of a reverse auction for Phase I of the CAF.
    • FCC Open Meeting. The FCC adopted orders on data roaming and pole attachments at its recent meeting that furthered recommendations of the National Broadband Plan. With respect to the pole attachment order, the Commission determined that “the lack of timelines for access to poles, the resulting potential for delay in attaching broadband equipment to poles, and the absence of adequate mechanisms to resolve disputes creates uncertainty that deters investment in broadband networks.”  To address these concerns, the FCC set: (1) a maximum time of 148 days for utilities to allow pole attachments in the communications space; and (2) a maximum of 178 days for attachments of wireless antennas on pole tops. The Commission intended to provide utilities with a fair rate in exchange for these time requirements by setting a rate for telecommunications companies near or at the rate cable providers pay. ILECs not subject to the rate schedule will be able to file complaints with the FCC alleging unfair terms, rates or conditions, and wireless providers would be entitled to the same rate as telecommunication providers. The second order, requiring facilities-based providers of commercial mobile data services to offer data roaming arrangements on commercially reasonable terms and conditions, passed by party-line vote of 3-2. Commissioner McDowell argued that “(b)ecause data roaming is not a commercial mobile service, Section 332(c)(2) of the Act prohibits the Commission from subjecting the provision of data roaming to common carrier regulation.” Chairman Genachowski argued that “the framework we adopt leaves mobile service providers free to negotiate and determine, on an individualized case-by-case basis, the commercially reasonable terms of data roaming agreements. Under the law, this is the very opposite of common carriage.”