Communications Law Bulletin, November 2006

The Month In Brief

November was an eventful month for our industry. On November 16, the U.S. Senate confirmed Kevin Martin for another five-year term as Chairman of the Federal Communications Commission ("FCC" or "Commission"). More recently, Chairman Martin advised members of the House and Senate Commerce Committees that the Commission was unable to reach a decision on the pending AT&T-BellSouth merger, and that he had asked the FCC General Counsel to permit Commissioner McDowell, who had recused himself, to take part in the vote. Also, on Capitol Hill, the net neutrality issue made an apparent comeback.

These and other developments are covered in this issue of our Bulletin, along with our usual list of deadlines for your calendar.

FCC deliberations continued in November over the pending merger between AT&T and BellSouth, a question that has been before the Commission since March of this year. The merger was scheduled for a vote at the Commission’s October 12 open meeting, which was rescheduled for October 13 and then, after a new comment period requested by Commissioners Copps and Adelstein, for November 3. That meeting date, too, came and went without a vote on the merger, and since that time it has become clear that with Commissioner McDowell recusing himself because of his past work for Comptel, a 2-2 deadlock could not be resolved.

On December 1, 2006, Chairman Martin sent a letter to leading members of the House and Senate Commerce Committees, advising them that he would ask FCC General Counsel Sam Feder to permit Republican Commissioner McDowell to vote on the merger. McDowell has not so far been involved in the proceedings and might not be ready to vote on the merger before the New Year, when Democrats will take control of both houses of Congress.

The Democratic take-over of Congress (see article on Legislative Developments in this Bulletin) has breathed some new life into the issue of net neutrality. Although still deeply controversial, the issue will now likely remain on the Congressional agenda given the support for the legislation by some of the Democrats taking over key committee chairs. Specifically, Senator Inouye (the incoming chair of the Senate Commerce Committee), Representative John Conyers (the incoming chair of the House Judiciary Committee), and Representative Ed Markey (the incoming chair of the House Internet and Technology Subcommittee) all co-sponsored legislation or drafted net neutrality provisions this past year, but their new committee positions give some added push to net neutrality efforts.

At the FCC, a Notice of Inquiry ("NOI") on net neutrality is reportedly now circulating in draft form to the commissioners’ offices. This NOI was originally paired with the AT&T/BellSouth merger item, but has now been separated from the merger vote after the multiple delays in that vote.

At the state level, a Texas Public Utilities Commission ("PUC") staff report has tentatively concluded that the state need not legislate net neutrality, in light of Congressional and FCC examination of the subject. The report also cast doubt upon whether the state has the authority to assert jurisdiction over the issue. If the legislature nonetheless determines to take some action with respect to net neutrality, the staff report suggests incorporation of the FCC’s four policy principles regarding network neutrality. In Michigan, meanwhile, net neutrality proponents are advocating net neutrality conditions in state video franchise legislation, while opponents argue that states do not have the authority to regulate interstate broadband information services.

Meanwhile, net neutrality is also gaining interest overseas. For example, in mid-November the Japanese government established a panel to discuss net neutrality. This panel will seek input from Internet companies as well as telephone operations and television networks, with the aim of releasing a final report on the issue by mid-2007.

A private equity group led by Thomas H. Lee Partners LP and Bain Capital LLC has agreed to buy Clear Channel Communications Inc. ("Clear Channel") for a total of $26.7 billion, comprising $18.7 billion ($37.60 a share) and the assumption of around $8 billion in debt. Clear Channel owns more than 1,150 radio stations across the country, as well as billboards and other outdoor advertising through a publicly traded subsidiary. After the deal is consummated, each of Thomas H. Lee Partners LP and Bain Capital LLC will own one-third of the company, and the remaining one-third will be owned by several banks and the Mays family, who currently own approximately 7% of Clear Channel and manage the company.

Private equity has had growing interest in the radio industry, despite sluggish advertising revenue and other challenges, such as strong competition from satellite radio, iPods and other new media. Some observers believe that the radio business, with its regular cash flow and the potential to use new technologies to build revenue, is undervalued by Wall Street. As for Clear Channel, whose stock has steadily declined since it hit a high of almost $100 per share in 2000, the buyout probably is the best deal that it could secure.

In addition, Clear Channel announced that it would sell 448 of its radio stations in small and mid-size markets, and all of its 42 television stations.

FCC Seeks Comment On Migratory Birds Colliding With Communications Towers
The FCC is taking further steps to reduce the number of migratory bird collisions with communications towers by releasing a Notice of Proposed Rulemaking ("NPRM") that will build on the record that was previously developed relating to this issue in an August 2003 Notice of Inquiry. The FCC seeks comment on certain legal, substantive, and procedural issues regarding possible measures to reduce migratory bird collisions. The outcome of this proceeding could have a significant effect on tower siting regulations that apply to new and existing towers.

Specifically, the NPRM seeks comment on its tentative conclusion that the National Environmental Policy Act authorizes the FCC to adopt regulations regarding migratory bird collisions with communications towers and questions whether it has any regulatory authority under the Migratory Bird Treaty Act. The NPRM also asks whether the scientific evidence relating to such collisions sufficiently demonstrates that communications towers have a negative impact on migratory birds. Further, the NPRM tentatively concludes that medium intensity white strobe lights on towers are more preferable than red obstruction lights. In addition, the NPRM seeks comment on various tower characteristics, such as height, location, guy wires, and collocation of antennas and their effect on migratory bird collisions. The FCC also questions whether it should require tower applicants to prepare environmental assessments concerning their effect on migratory birds.

Comments and reply comments in response to the NPRM are due January 22, 2007, and February 20, 2007, respectively.

FCC Concludes That Airports Cannot Regulate Wi-Fi Antennas
The FCC has resolved a dispute between the Massachusetts Port Authority ("Massport") and Continental Airlines regarding a Wi-Fi antenna located at Boston’s Logan Airport. Although the FCC’s decision addresses a specific controversy, it has broader implications concerning the FCC’s authority over over-the-air-reception devices ("OTARDs").

Massport had ordered Continental to remove a Wi-Fi antenna in a closet in the airline’s frequent flyer lodge on the basis of guarding air safety. Massport has the only other Wi-Fi system at Logan Airport that is available to the public for a fee. The FCC concluded that Massport was precluded from ordering Continental to remove the antenna under the FCC’s OTARD rules. The FCC, however, stated that it would guard air safety to the extent that Wi-Fi causes harmful interference.

The FCC’s decision affirms the right of consumers and businesses to install and use unlicensed Wi-Fi devices under the FCC’s OTARD rules without first seeking approval from landlords, regardless of whether the landlord may have an exclusive service arrangement with one service provider.

Cyren Call Public Safety Proposal Left To Congress
The FCC dismissed a proposal by Cyren Call to reallocate spectrum in the 700 MHz band to create a 30 MHz national public safety broadband network. The FCC initially had sought comment on the proposal, but then only days later dismissed it without prejudice. According to the FCC, it had no authority to take action on the proposal because Congress had mandated that the spectrum be auctioned by late January 2008.

Accordingly, Cyren Call must seek Congressional action authorizing the reallocation of the 700 MHz spectrum before the FCC will consider the proposal. Although the FCC surprisingly dismissed the proposal before the conclusion of the comment cycle, the FCC is leaving the docket open. The statutory deadline for the 700 MHz auction requires Cyren Call to act quickly to gain Congressional support for its proposal. Verizon Wireless also has been urging the FCC to hold the auction in mid-2007, potentially further lessening the available time for Cyren Call to lobby Congress.

In related matters, a draft NPRM is circulating at the FCC to consider licensing 12 MHz of the 700 MHz band for a national public safety broadband network. In contrast to Cyren Call’s proposal, the FCC is proposing to use half of the 24 MHz of 700 MHz spectrum already allocated for public safety uses.

Legislative Developments

With the Democrats’ election sweep of both the Senate and the House of Representatives, analysts and observers widely agree that the prospects for passage of major communications reform legislation during either the Congressional lame duck session or the next session are slim to none. The Democratic election victory is predicted to lead to greater Congressional emphasis on hearings and oversight, rather than on enactment of any major communications legislation.

The new Democratic-controlled Congress, however, may pursue legislative initiatives on discrete communications issues on which there is broad bipartisan support, such as pretexting, consumer privacy and protection, digital TV transition, and broadband deployment. Although the new Congress could revive video franchising legislation, lobbyists for the Bell companies have indicated that they are unlikely to pursue such legislation. Some analysts also predict that net neutrality legislation will pass the House, but will have greater difficulty in obtaining the necessary 60 votes to avoid a filibuster in the Senate.

In a post-election press conference, Rep. John Dingell (D-Mich.), the incoming House Commerce Committee chairman, indicated that he would focus on telecommunications and media ownership and consolidation, net neutrality, universal service fund, and the fairness of spectrum allocations, particularly for public safety services. On the other hand, Sen. Daniel Inouye (D-Hawaii), the incoming Senate Commerce Committee chairman, is not expected to pursue any major or immediate changes in his committee’s agenda because of his close relationship and bipartisan power-sharing arrangement with the outgoing chairman, Sen. Ted Stevens (R-Alaska.).

In a decision announced at the FCC’s November 3 open meeting and released on November 7, the FCC classified broadband over power line ("BPL")-enabled Internet access service as an information service under the Communications Act ("Act"). The FCC found that, while the underlying transmission component of BPL-enabled Internet access service ("BPL IAS") constitutes "telecommunications" under the Act, the provision of that transmission as part of an integrated BPL IAS offering is an "information service," rather than a "telecommunications service," because "it is part and parcel of" the Internet access service’s "information service capabilities." The end user of the BPL IAS "expects to receive . . . a finished, functionally integrated service . . . rather than . . . two distinct services - Internet access service and a distinct transmission service." Accordingly, a facilities-based provider of BPL IAS is not required to offer the transmission component separately as a telecommunications service, regardless of whether the provider is a common carrier, but it could choose to do so.

This decision grants BPL IAS the same deregulatory treatment afforded to cable modem and wireline broadband IAS. The FCC noted that this "minimal regulatory environment" for BPL IAS would promote its goals of "ubiquitous availability of broadband to all Americans" and "developing a consistent regulatory framework across broadband platforms by regulating like services in a similar manner." The FCC mentioned in a footnote that it was not deciding the issue "of how to classify BPL itself or other Internet-based services that electric utilities may offer." The FCC also noted that it disagreed with "any suggestion that our decision here will adversely affect law enforcement’s ability to conduct surveillance on users of BPL service," nor will it "affect the government’s implementation or enforcement of the . . . USA PATRIOT Act." The FCC also said that some issues raised by commenters, such as interference and pole attachment access, "are outside the scope of this proceeding" and would be better addressed in other dockets.

The order was approved on a 4-0 vote, with Commissioner McDowell not participating, apparently on account of CompTel’s filing of comments on the issue. Commissioners Copps and Adelstein expressed some misgivings about the FCC’s approach, but they both concurred in the decision, noting that it was in line with previous decisions about the regulatory treatment of cable modem and wireline broadband IAS. Commissioner Adelstein expressed his appreciation for the other Commissioners’ willingness to work with him "to ensure that this order does not necessarily limit states’ ability to address important issues related to the oversight of BPL."

The industry applauded the decision as encouraging the deployment of broadband access in rural and underserved areas and facilitating competition in IAS. Analysts agreed that the decision will spur investments and BPL IAS rollouts. Brett Kilbourne, regulatory director of the United Power Line Council, noted that regulatory clarity from states is also needed. Although Commissioner Copps noted in his concurring statement that the FCC’s decision did not provide certainty on "difficult questions" relating to pole attachment and cross-subsidization issues, an industry source stated that cross-subsidization issues raised by BPL IAS would be exclusively in the states’ jurisdiction. Michigan PSC Commissioner Laura Chappelle also said that she does not envision the FCC addressing BPL pole attachment issues either. One pole attachment dispute viewed as a BPL industry test case was settled on November 21, with BPL provider Current Communications agreeing to obtain permits before installing BPL equipment on AT&T poles. So far, BPL deployments are largely pilot projects. One analyst’s report indicates that about 100 commercial BPL trials are under way worldwide, with about one-third of those in the U.S.

California Governor Schwarzenegger Signs an Executive Order to Encourage Development of Broadband Networks in the State
On October 27, Governor Schwarzenegger signed Executive Order S‑21‑06, a law designed to make California the "leader" in the telecommunications revolution. The Executive Order will clear government red tape for building broadband networks and ensure all government agencies are using the best available communications technologies. To achieve these goals, the Executive Order created the Broadband Task Force, which will consist of an odd number of representatives (between 11 and 19) from government entities with a role in broadband infrastructure deployment, the private sector (including telecommunications, technology, and investment companies), and non-profit organizations. The Executive Order requires the Task Force to prepare a preliminary report within ninety days, identifying administrative actions that will result in the immediate promotion of broadband usage and access in the state. Within one year, the Task Force must prepare a comprehensive report containing specific recommendations regarding opportunities for and elimination of barriers to broadband access and adoption.

The Business, Transportation, and Housing ("BTH") agency will be responsible for coordinating implementation of the Task Force’s recommendations. In addition, the BHT will lead a statewide effort to streamline right-of-way permitting by state agencies (local governments are not covered by the Executive Order) and develop best practices for resolving rights-of-way disputes with state agencies, as well as to manage the process of collecting data to develop the metrics for measuring broadband usage and benefits.

Finally, state agencies will "lead by example" and adopt a number of broadband-based technologies, including the use of webcasting and streaming video by state agencies, installation of wireless Internet access in the state buildings most used by the public, including the Capitol building, and the deployment of VoIP in state agencies that elect to use it.

CalTel Urges the CPUC to Review Its Regulation of Incumbent Wholesale Services
CalTel, on behalf of its competitive local exchange carrier membership, has asked the California Public Utilities Commission ("CPUC") to conduct a comprehensive review of its regulation of the incumbent local exchange carrier’s wholesale services. Earlier this year, the CPUC eliminated most regulation of the incumbent’s retail rates but did not consider wholesale rate regulation. CalTel argues that the lack of competition for wholesale services, especially in the rural areas of the state, is having an impact on retail competition. Furthermore, this impact is exacerbated by relaxed retail regulation and changes to the incumbents’ obligations to offer Unbundled Network Elements ("UNEs") pursuant to the FCC’s Triennial Review orders. CalTel has urged the CPUC to require the incumbents to deal with their competitors, the CLECs, on a fair and non-discriminatory basis.

CPUC Adopts Further Procedures to Implement its Consumer Protection Initiative
As part of its ongoing Consumer Protection Initiative, the CPUC has adopted specific procedures for resolving disputes about staff requests to carriers for information made outside of a formal proceeding. While the Commission and its staff have broad authority to obtain information from regulated companies, the authority is not without limits and disputes often arise, particularly with respect to requests made outside of formal proceedings where their scope and reasonableness could be reviewed by an assigned administrative law judge. The recently adopted Consumer Protection Initiative, however, requires staff to obtain information about consumer complaints, including the number and type of complaints received and the carrier’s response on an on-going basis for monitoring purposes. Because these information requests will be outside of formal proceedings, disputes were subject to ad hoc review, if any. The new disputes resolution procedures will require the Division Directors to supervise staff data requests to insure that they are for proper purposes and not duplicative. Carriers must review the requests and promptly respond with any concerns. Any disputes will be resolved through meet and confer opportunities, with escalated review by Division Directors and the Commission’s General Counsel, if necessary to finally resolve a dispute. The new procedures were effective on December 1.

Parties Appeal the Illinois Commerce Commission Decision to Deregulate Residential Rates in Chicago
As previously reported in the September Communications Law Bulletin, the Illinois Commerce Commission ("ICC") voted in late August to deregulate virtually all of AT&T Illinois’s residential rates. This decision excluded three "safe harbor" local exchange services, the Flat Rate Package, the Enhanced Flat Rate Package, and the Residence Saver Pack Unlimited, which the ICC determined were not competitive and required continuing regulation. The decision was strongly criticized at the time by consumer groups and now has been appealed by both AT&T Illinois and the Illinois Attorney General. AT&T alleges that the ICC’s decision to exclude the three safe harbor services was unlawful because, in AT&T’s view, competition exists for these services. The Illinois Attorney General argues that there was no evidence of competition for those services that the ICC decided to deregulate and, further, the ICC failed to consider the impact of a federal court ruling upholding federal preemption of an Illinois law requiring the continued availability of the switching UNE. The Illinois AG has appealed the decision to the state’s First Appellate District, while AT&T has appealed to the Fourth Appellate District.

Auction Tip: Long Form Submissions

The FCC granted three waivers of the long form application deadline in connection with the recently concluded Advanced Wireless Service auction because some carriers’ long form applications were mistakenly considered "saved" rather than "submitted." Without the waiver, such applications would have been dismissed under the FCC’s rules. In two cases, the carriers had submitted their applications prior to the long form filing deadline via the FCC’s Universal Licensing System ("ULS"), but subsequently went back into ULS to print a copy of the application. They exited the system without resubmitting their applications. A third carrier also had submitted its long form application prior to the deadline, but was unable to determine how its application reverted to "saved" status. The FCC granted the carriers a waiver so that their applications could be accepted for filing, in part because the carriers provided evidence that their original submissions were filed prior to the deadline.

Based upon the waivers discussed above, carriers participating in FCC auctions should adhere to the following tips when submitting their short form or long form applications:

• Ensure that an application is filed prior to the deadline and print a hardcopy of the filing that shows the date and time it was submitted.

• If an applicant reenters a previously submitted application prior to the filing deadline, resubmit the application even if no changes were made to the filing itself.

• Ensure that a filed application is appropriately designated as "submitted" (rather than simply "saved") in ULS.

Note: Although we try to ensure that the dates listed below are accurate as of the day this edition goes to press, please be aware that these deadlines are subject to frequent change. If there is a proceeding in which you are particularly interested, we suggest that you confirm the applicable deadline. In addition, although we try to list deadlines and proceedings of general interest, the list below does not contain all proceedings in which you may be interested.