Patton Boggs TechComm Industry Update - November 1, 2012

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    FCC Incentive Auction Proceeding Launched

    On Friday, October 26, the FCC hosted a workshop for broadcasters to learn more about the FCC’s recently released incentive auction Notice of Proposed Rulemaking (NPRM). The workshop provided information about issues raised in the NPRM, including proposed auction designs, the mechanics of participation, and station eligibility. It also focused on issues of interest to broadcasters that may choose not to participate, including proposed band plans and possible approaches to repacking. According to the NPRM, the incentive auction will consist of three major components:

    1. a reverse auction in which broadcast television licensees may submit bids to voluntarily relinquish spectrum usage rights in exchange for payments;
    2. a reorganization or “repacking” of the broadcast television bands in order to free up a portion of the UHF band for wireless use; and
    3. a forward auction of initial licenses for flexible use of the newly available spectrum.

    The FCC seeks public comment on the NPRM. The Chairman seeks to issue a final order in 2013, and hold the auction in 2014. Comments are due December 21, 2012, and Reply Comments are due February 19, 2013.

    Download the NPRM [PDF].

    Broadcasters File Brief in Aereo Appeal

    A group of associations representing broadcasters filed an Amicus Brief supporting an appeal before the U.S. Court of Appeals for the Second Circuit. Appellants asked the Second Circuit to overturn a district court decision not to issue a preliminary injunction that would have prevented Aereo from retransmitting the Appellant’s broadcast program over the Aereo network while the program is in progress. Aereo has developed a technology that records broadcast television signals using a network of small antennas and then sells a service to consumers that can receive these recorded broadcast signals over the Internet. Aereo does not have the broadcasters’ consent and does not pay any royalty fee to compensate the broadcasters for retransmitting their signal over the Internet.

    Broadcasters argued that Aereo’s retransmission of broadcasters’ signal “irreparably harms broadcasters by undermining their two most important sources of revenue: advertising and retransmission consent fees,” as well as “undermines contractual arrangements by which broadcasters negotiate and pay to be the ‘first run’ outlet for many popular programs and otherwise threatens the sustainability of broadcasters’ investment in high-quality local and national programming.” They urged the court to conclude that Aereo has violated copyright laws by publically performing the broadcast content without permission.

    FCC Opens Proceeding on Limits on Mobile Spectrum Holdings

    The FCC released an NRPM seeking comment on how much wireless spectrum a single company can hold. The agency asks interested parties whether it should apply a case-by-case analysis to transactions and auctions or whether to adopt a different approach, such as creating a bright line “spectrum cap.” The FCC further seeks comment on which spectrum bands should be included in these evaluations and other implementation issues. Comments are due by November 23, 2012 and reply comments are due by December 24, 2012.

    T-Mobile and MetroPCS to Merge

    Deutsche Telekom and MetroPCS Communications have reached an agreement to combine T-Mobile USA and MetroPCS. The resulting company will retain the T-Mobile name, but will operate T-Mobile and MetroPCS as separate customer units. According to the press release: “This transaction will create the leading value carrier in the U.S. wireless marketplace, which will deliver an enhanced customer experience through a wider selection of affordable products and services, deeper network coverage and a clear-cut technology path to one common LTE network.” The transaction is expected to close in the first half of 2013, subject to approval by MetroPCS shareholders, regulatory approvals, and other customary closing conditions. Petitions to Deny the request for FCC approval of the transaction are due by November 26, 2012. Oppositions are due by December 6, 2012 and replies are due by December 17, 2012.

    Softbank to Acquire Sprint

    SoftBank, a Japanese carrier, has reached a deal with Sprint to acquire approximately 70 percent of the U.S. wireless carrier. As part of the deal, $12.1 billion will be distributed to existing Sprint stockholders and $8.0 billion will be invested in Sprint to strengthen its balance sheet. The companies expect the deal to close in mid-2013, subject to approval by Sprint stockholders, regulatory approvals, and the satisfaction or waiver of other closing conditions.

    FCC Proposes Reform of Rules and Policies on Foreign Carrier Entry

    The FCC adopted an NPRM to change the criteria under which it considers applications by foreign telecommunications carriers or their affiliates that seek entry into the U.S. market for international telecommunications services. The proposal would eliminate, or in the alternative, simplify the effective competitive opportunities (ECO) test that applies to FCC review of Section 214 applications to serve the U.S. market. Developments since 1995, including the decision to replace the ECO test for applicants from World Trade Organization (WTO) Member countries, justify considering whether there is a reason to apply all of the ECO test requirements absent complaints or evidence of anti-competitive conduct on routes between the U.S. and countries that are not WTO members. The FCC will re-examine the current ECO test requirements as it applies to Commission review of Section 214 applications, cable landing license applications and foreign carrier affiliation notifications. Comments and reply comments are due 30 days and 50 days, respectively, after publication of the NPRM in the Federal Register.

    U.S. Court of Appeals Upholds FCC Policy of Permitting Security Interests in License Sale Proceeds

    Since lenders cannot take a security interest in an FCC license because it would be possible for the lender to acquire the license without FCC consent, the common practice is to take a security interest in the proceeds of the sale of an FCC license. In the Tracy Broadcasting Corporation bankruptcy proceeding, a District Court based on its reading of the Bankruptcy Code concluded that a security interest in the proceeds of the sale of a broadcast station license that was not entered into until after the licensee declared bankruptcy was not enforceable. The U.S. Court of Appeals overturned the District Court and stated that the lender’s security interest was in the economic value of the license, including the proceeds of the sale of the license. It concluded that those rights vested before the licensee filed for bankruptcy and could not be discharged.

    FCC Seeks Comment on Seven TCPA Petitions

    The FCC seeks comment on several requests for clarification or declaratory ruling regarding the application of the Telephone Consumer Protection Act to autodialed and prerecorded message calls, text messages, or faxes. For example, questions are raised about whether predictive dialers that are not used for telemarketing purposes and do not have the current ability to generate and dial random or sequential numbers are “automatic telephone dialing systems,” and whether the TCPA applies to users of Internet-to-phone text messaging technology and similar technologies involving the storage and automatic dialing of wireless telephone numbers. Comments on three of the petitions are due by November 15, 2012 (with reply comments due by November 30), and comments on the remainder of the petitions are due November 23, 2012 (with reply comments due by December 10, 2012).

    Additional Comments Sought on the Video Service Relay Program

    The FCC seeks further comment on proposals to reform the structure of the video relay services (VRS) program and on proposed compensation rates. CSDVRS, LLC (a VRS provider) proposed that VRS access technologies be migrated to a standard, software based VRS access technology that could be used on commonly available off-the-shelf hardware. CSDVRS also proposed changes to industry structure that would in effect “separate the video communication service component of VRS from the ASL relay CA service component by providing the functions of the former from an enhanced database.” The FCC further seeks comment on the Fund Administrator’s proposed rate structure, proposed rates and cost calculations. Comments are due by November 14, 2012, and reply comments are due by November 29, 2012.

    Wireline Competition Bureau Conducting a Virtual Workshop on Connect America Phase II Cost Model

    The FCC’s Wireline Competition Bureau has commenced a virtual workshop to inform the development and adoption of a forward-looking cost model through which the agency will provide Connect America Phase II universal support. Participants may share information and ideas with Bureau staff in near real-time by posting comments through various subject-matter-specific online discussion forums that are hosted on the FCC’s website. Posts also will be placed in the relevant FCC dockets. Comments must be posted by November 19, 2012.

    Proposed Amendment to the Electronic Communications Privacy Act

    The Senate Judiciary Committee adopted an amendment from Chairman Patrick Leahy (D-VT) to the Electronic Communications Privacy Act (ECPA). The 1986 law sets forth standards governing law enforcement access to electronic communications. Chairman Leahy’s amendment would require that, except for emergencies, the federal government must obtain a probable cause warrant in order to obtain e-mail, texts, or other electronic communications, including documents stored “in the cloud.” The amendment would help bring Fourth Amendment safeguards into the digital age. Under current law, the government can often access individuals’ e-mails and documents stored “in the cloud” by issuing a subpoena to the Internet service provider.

    Leahy’s measure also would amend the Video Privacy Protection Act (VPPA) to allow companies to obtain one-time consent from a customer to share user viewing histories on an ongoing basis and that consent may be secured via the Internet. This disclosure provision would allow companies to link users and products. Currently, users of social networking services must take an affirmative action, such as liking or sharing on Facebook, in order to associate themselves with a product. The VPPA portion of the bill is a variation of what was previously passed by the House of Representatives. Although the amendment was adopted as a substitute, it was not reported out of committee. The Judiciary Committee is expected to mark up the bill during the lame-duck session in November.

    FCC Creates Public Safety Answering Point (PSAP) Do-Not-Call Registry

    The FCC voted to create a do-not-call registry of PSAP telephone numbers and prohibit an operator of automatic dialing or robocall equipment from calling or texting a telephone number on this list, other than for emergency purposes. The agency staff is working through the operational details of the registry and will release a Public Notice when that process is complete. The effective date of these changes has yet to be determined, but it will be no sooner than six months after the release of that Public Notice.

    FCC Adopts Wireless Communications Service (WCS) Technical Rule Settlement Proposal

    In order to resolve challenges to the FCC’s WCS technical rules that were adopted in 2010, a recent FCC order adopted the joint technical proposal of AT&T and SiriusXM and made other rule changes. 20 MHz of the available 30 MHz WCS spectrum is now available for mobile broadband services. The remaining 10 MHz is available for fixed broadband services and will act as an interference buffer between mobile WCS operations and the adjacent spectrum used for SDARS. The technical rule changes will facilitate the deployment and co-existence of WCS and SDARS operations, provide a mechanism for resolving harmful interference on roadways, clarify when notice and coordination of WCS operations is required, and extend the WCS construction deadlines.

    All-Digital Cable Systems Allowed to Encrypt Basic TV Service

    The FCC has lifted the restriction on encrypting the basic service tier on all-digital cable television systems. According to the agency, this change will allow operators to enable and disable service remotely, reduce theft of cable service, and provide regulatory parity between cable operators and satellite providers. Cable operators that choose to encrypt basic service must comply with consumer protection measures, including providing notice and offering free set-top boxes or CableCARDs to certain subscribers for a limited time. In addition, Comcast, Time Warner Cable, Cox, Charter, Cablevision, and Bright House have committed to a process that will provide basic service tier access to certain third party devices that would other otherwise be useless once the basic service tier is encrypted.

    FTC Holds Robocall Summit

    On Thursday, October 18, 2012, the Federal Trade Commission (FTC) hosted a summit on stopping illegal robocalls. Industry and government leaders discussed at length the state of the industry, the current legal landscape, and technical issues such as caller-ID spoofing, data mining, and call-blocking technology.

    The summit culminated with the announcement of the FTC Robocall Challenge – a contest for the best new solution to block illegal robocalls on landlines and mobile phones. Individuals, groups, and organizations are encouraged to submit new proposed technical solutions or functional solutions and proofs of concept to the agency by January 17, 2013. Proposals will be judged on whether they work, are they easy to use, and what it will take to roll them out. Individuals, teams or small organizations with fewer than 10 people are eligible to win a $50,000 prize. Organizations with more than 10 employees are also encouraged to participate, but are not eligible for the cash prize. The FTC plans to announce the results in April 2013.

    FCC Reminds ETCs That They Must Recertify Before Year End

    The FCC recently reminded Eligible Telecommunications Carriers (ETCs) and state agencies that they must re-certify the eligibility of the base of their subscribers as of June 1, 2012 and must complete the re-certification process by December 31, 2012. Each ETC must report the results of its re-certification process to the FCC and the Universal Service Administrative Company (USAC) by January 31, 2013. Where state agencies perform re-certification, the agencies must provide notice to each ETC so that the ETC can initiate all de-enrollments by December 31, 2012 and file its annual recertification report by January 31, 2013. The FCC also provided guidance on compliance with the one-per-household rule, and how states can opt-out of the National Lifeline Accountability Database.

    Comments Sought on Lifeline Annual Recertification Rule

    The FCC seeks comment on whether carriers that receive Lifeline universal support must recertify the eligibility of their Lifeline subscribers once per calendar year or every twelve months. The issue was raised in a Petition for Clarification filed by General Communication, Inc. (GCI), in which the company argued that the “annual” recertification requirement in FCC Rule 54.410(f) should be interpreted as requiring recertification once per calendar year. GCI also claimed that interpreting the provision as requiring recertification every 12 months imposes unnecessary and unjustified costs without any corresponding public benefit. Comments are due by November 23, 2012, and reply comments are due by December 10, 2012.

    Liberty Media Seeks Consent to Acquire Control of Sirius XM Radio

    Liberty Media has filed applications with the FCC for regulatory approval for the company to take control of Sirius XM Radio. Through various stock purchases and the conversion of its preferred stock, and upon approval of the transaction by the FCC, Liberty Media will own more than 50 percent of Sirius’ common stock. Petitions to Deny were due by November 1, 2012, oppositions are due November 13, 2012, and replies are due by November 20, 2012.

    CTIA Releases Whitepaper on Cybersecurity

    CTIA-The Wireless Association® released a white paper on cybersecurity in which the association stressed the need for sharing of “cyberthreat information among industry players and between industry and government.” More broadly, the paper provides:

    1. a brief overview of the cybersecurity landscape of the mobile communications industry;
    2. the extent of its interdependence in responding to an environment of rapidly changing threats,
    3. a summary of the many cybersecurity features and solutions at work today, and
    4. a sampling of the many advanced protections available for device users.

    FCC Approves E-Rate Eligible Services List for FY 2013

    The FCC released the approved E-Rate eligible services list (ESL) for funding year (FY) 2013, which will start July 1, 2013, and indicated that the window for filing FY 2013 applications for E-Rate support should open no earlier than November 26, 2012. The FCC did not make major modifications to the ESL, but it did consolidate all Priority One services into a single list to reduce regulatory and administrative burdens on applicants. Thus applicants are no longer expected to separate service requests into telecommunications services, telecommunications or Internet services. In approving the ESL, the FCC did not take action on the issue of bundling of ineligible equipment with eligible services.

    Update on Mobility Fund Phase I Auction

    The FCC announced the results of the Mobility Fund Phase I auction in which nearly $300 million in funding will be distributed to help close gaps in mobile coverage in the U.S. The funding will cover deployment of 3G and 4G service in 31 states. Winning bidders, which include T-Mobile and U.S. Cellular, must complete their projects within three years and allow other carriers to roam on their networks. Each winning bidder must submit a completed long-form application by November 5, 2012.

    Court Denies Stay in Viewability Appeal

    The U.S. Court of Appeals for the D.C. Circuit denied a request to stay the FCC’s Viewability Order pending judicial review, stating that the petitioners did not meet the stringent requirements for issuing a stay. The Order allows the FCC’s “viewability” rules to sunset – these rules require cable systems that offer both analog and digital service to carry digital must-carry signals in analog format. Must-carry broadcasters argued that they will lose viewership and audience share if the Order takes effect, and that declining viewership will cause them to lose advertising revenue. Broadcasters further claimed that absent a stay they will have to eliminate or reduce programming, which will disproportionately harm low income and minority viewers.

    Ban on Certain Exclusive Programming Contracts Expires; FCC Seeks Further Comments

    The FCC did not extend its general ban on cable operators entering into exclusive contracts with cable-affiliated programming vendors that deliver programming via satellite. Instead, the FCC will generally review these agreements on a case-by-case basis, except that the agency created a rebuttable presumption that an exclusive contract involving a satellite-delivered, cable-affiliated Regional Sports Network (RSN) has the “purpose and effect” of “significantly hindering or preventing” a complainant from providing satellite-delivered programming. The FCC also sought comment on related program access issues, including whether to establish a number of additional rebuttable presumptions. Comments are due by November 30, 2012 and reply comments are due by December 17, 2012.

    FCC Seeks Comment on LightSquared Request for Relief

    The FCC seeks comment on a request from LightSquared that the agency declare that build-out requirements adopted in a prior order do not apply until the status of LightSquared’s authorizations have been resolved. These conditions include that LightSquared provide terrestrial mobile broadband coverage to at least 100 million people by the end of this year. The FCC proposed in February 2012 to either suspend indefinitely or revoke all of LightSquared’s Ancillary Terrestrial Component (ATC) authorizations, but the proposal is still pending before the Commission. Petitions to Deny and other comments on LightSquared’s request are due by November 9, 2012. Oppositions are due by November 19, 2012, and replies are due by November 28, 2012.

    FirstNet Seeks Comment on Public Safety Broadband Network

    The National Telecommunications & Information Administration (NTIA) released a Notice of Inquiry on behalf of the First Responder Network Authority (FirstNet) seeking public comment on a network architecture presentation made at the September 25 FirstNet Board meeting. Comment also is sought on network design, business plan considerations and applications for public safety. The presentation made by FirstNet Board member Craig Farrill outlined a possible framework for designing the public safety network architecture in a manner that leverages existing resources and infrastructure as contemplated by the Middle Class Tax Relief and Job Creation Act. The presentation explores three options, but appears to favor creating a diverse nationwide network with multiple wireless networks and systems. Comments were due November 1, 2012.

    FCC Initiates Comprehensive Satellite Licensing and Operational Rule Review

    For the first time since 1996, the FCC is undertaking a comprehensive review of its satellite licensing and operational rules. The rule review will eliminate unnecessary rules, update the rules to reflect technological advances, and streamline the licensing process.

    The proposed rule changes include:

    • A change in the regulatory approach for licensing from “tell us how you built it” to “tell us how you avoid interference with your neighbors”;
    • Elimination of unnecessary filing requirements;
    • Expansion of the number of earth station applications that are eligible for routine and streamlined processing;
    • Revising the information collected on space and earth station applications to reflect evolving technology;
    • Providing additional methodologies for use by earth station applicants to verify antenna performance;
    • Reinforcing emergency contact reporting requirements, consolidating annual reporting requirements, and removing unnecessary reporting rules; and
    • Simplifying and clarifying space station milestone requirements.

    Comments and reply comments are due 45 days and 75 days, respectfully, after publication of the NPRM in the Federal Register.

    FCC Announces Planned mHealth Task Force Report Implementation Steps

    The FCC announced plans to act on recommendations from a mHealth Task Force Report. The independent Task Force released its recommendations to the FCC, other federal agencies and to industry, with the goal of making mHealth a routine medical best practice by 2017. Among the specific actions that FCC Chairman Genachowski committed to taking include renewing the search for a permanent FCC Health Care Director. He also indicated that the FCC would consider an Order to comprehensively reform and modernize the Rural Health Care Program and an Order to streamline the FCC’s experimental licensing rules to promote and encourage the creation of wireless health device “test beds.” The Commission will also develop and execute a health care stakeholder outreach plan to promote greater collaboration between the FCC and the health care sector.

    Internet Radio Fairness Act Introduced in House and Senate

    Congressmen Jason Chaffetz (R-UT) and Jared Polis (D-OR) and Senator Ron Wyden (D-OR) introduced the Internet Radio Fairness Act (HR 6480; S. 3609) in the House and Senate. The bill seeks to apply the same method for establishing royalty rates for Internet radio as is currently applied to cable and satellite radio. According to Senator Wyden, the current method used to set royalty rates for Internet Radio has “led to webcasters paying five times the amount of royalty rates – as a percentage of revenue – as other digital music broadcasters like satellite and cable.”

    Legislation Introduced to Prevent FCC Reforms to Rural Subsidy Formula

    Representative Jeffrey Landry (R-LA) introduced legislation, the Restore Effective Statistics to the Calculation of USF Expenditures Act of 2012 (RESCUE Act), to prevent the FCC from decreasing payments to rural telecommunications companies. Specifically, the bill seeks to end the FCC’s use of statistical caps in determining universal service support as part of the FCC’s 750-page order reforming the Universal Service Fund (USF). The RESCUE Act would also mandate that an alternative methodology for funding be created within 120 days. Though the bill has support from the National Telecommunications Cooperative Association, it currently has no cosponsors. It is unlikely Rep. Landry’s bill will receive consideration this year. However, the FCC’s order to reform the USF is being challenged in court by 29 petitioners and is expected to be heard in the coming months.