Comcast Appeals FCC's Refusal of Its CableCARD Waiver; State Video Franchising Reform Proceeds in Louisiana and Tennessee; Verizon Meets Resistance in Manhattan

Comcast Appeals CableCard

In mid-May, Comcast lost its D.C. Circuit appeal of the FCC's 2007 ruling refusing to waive CableCARD rules on certain of Comcast's cable set-top boxes. The FCC's CableCARD rules require that cable companies like Comcast separate the security and navigation functions in the set-top boxes they lease or sell to customers. In its 2005 CableCARD order, the FCC ruled that set-top boxes with "advanced services" do not qualify for waiver. The court found that the FCC was entitled to substantial deference on its finding that Comcast's purportedly "low-cost" set-top boxes were nonetheless "advanced" and not eligible for the waiver.

The D.C. Circuit, in denying the appeal, stated that Comcast could not base its case on alleged discriminatory or inconsistent applications of the waiver rules by the FCC Media Bureau. Rather, Comcast should have sought review of the Media Bureau's waiver decisions at the FCC commissioner level, because unchallenged bureau-level decisions cannot be considered FCC precedent. Comcast has not stated whether it will pursue this matter further.

State Video Competition Developments

In state video competition developments, two more states joined the many others that have shifted video franchising authority to the state level. In mid-May, Tennessee's governor signed a bill shifting video franchising from municipalities to the Tennessee Regulatory Authority ("TRA"). The bill allows the TRA 45 days to act on state-franchise applications from large telephone or cable companies or incumbent cable companies, but allows 180 days for all other applicants. The bill becomes effective July 1, 2008.

In mid-May, Louisiana made progress in its own video franchise reform efforts when the stateSenate passed a bill to transfer video franchising authority from municipalities to the Secretary of State. Under the legislation, the Secretary of State would have 30 days to act on applications from any kind of applicant. While ultimate franchising authority would remain at the state level, a new entrant would be required to file copies of its state-franchise application with each municipality within its proposed service area on the same day it files the application with the state.

New York Consumer Groups Seek Delay of Verizon Video Franchise

Consumer groups and elected officials in New York City joined forces to seek delay of a May 27 vote on a 12-year statewide video franchise sought by Verizon for its FiOS services. Opponents of the franchise caution that too few public interest obligations have been imposed on Verizon, and want further public comment on public access channel and consumer protection provisions.

Wireless Developments

FCC Starts Rulemaking to Reauction 700 MHz D Block License

The FCC at its May open meeting unanimously adopted a further notice of proposed rulemaking ("FNPRM") seeking comment on how to reauction the 700 MHz D Block license that was not acquired in the recent Auction No. 73. The FNPRM seeks comment on a wide range of issues, including whether the proposed public/private partnership should be retained and overhauled, and draws no tentative conclusions.

The FCC hopes to maximize the public safety and commercial benefits of the D Block by providing potential bidders additional certainty regarding the opportunities and obligations associated with the license. The FNPRM asks whether in the first instance it should maintain the public/private partnership in which the D Block licensee would help construct a nationwide, interoperable public safety broadband network. It questions what rules and policies that govern the partnership should be modified as well as the technical requirements of the shared public/private network. The FNPRM also seeks comment on whether the D Block should be allocated to one or several licensees and whether that allocation should be based upon geography, population, or some other factor. The FNPRM also asks whether the D Block should be auctioned and licensed solely for commercial use and, if so, how a public safety broadband network would be constructed in the partnership's absence.

The FCC intends to form a technical advisory committee and hold an en banc hearing this summer regarding the D Block. Comments and replies regarding the FNPRM are due June 30 and July 14, respectively. The FCC then intends to release another notice of proposed rulemaking seeking comment on more specific proposed rules.

Auction of Leftover PCS and AWS Licenses Scheduled

The FCC has scheduled August 13, 2008, for the start of Auction No. 78 in which 55 broadband personal communications service ("PCS") and advanced wireless service ("AWS") licenses will be available. The licenses consist of 35 AWS licenses and 20 PCS licenses that were not purchased at prior auctions or were returned to the FCC. The FCC also established the procedures for the auction, which generally comport with the procedures followed in previous auctions, including imposing eligibility restrictions on some of the PCS licenses. Specifically, nine of the PCS licenses will be available only to entrepreneurs in closed bidding.

Court Upholds FCC Rebanding Mandate that Sprint Nextel Vacate Frequencies by June 26

Sprint Nextel suffered a blow by the United States Court of Appeals for the D.C. Circuit when that court upheld an FCC order confirming that the carrier must vacate its spectrum by June 26, 2008, even though the spectrum to which it is supposed to move is not yet clear.

Significant delays have occurred in the 800 MHz rebanding process that is intended to reduce interference to public safety operations. In fact, many public safety entities will not be able to vacate until 2009 or 2010 the spectrum to which Sprint Nextel is supposed to move. The FCC, however, issued an order in September 2007 stating that Sprint Nextel still had to vacate its spectrum even if the public safety spectrum to which it is supposed to relocate is unavailable.

Sprint Nextel appealed, but the court affirmed the FCC's decision. According to the court, Sprint Nextel did not adequately raise various arguments before the FCC and thus did not preserve them for appeal. The only issue that was preserved was whether the FCC "unreasonably changed the rebanding process from a synchronized spectrum swap to an asynchronous exchange." The court concluded that the FCC did not act arbitrarily or capriciously and that there was never a synchronized spectrum swap planned. Rather, the FCC had always required Sprint Nextel to vacate the spectrum by June 26, 2008, regardless of whether it had spectrum to which it could relocate.

Sprint Nextel has sought a waiver from the FCC so that it can remain on some of its existing spectrum until the public safety licensees are ready to vacate their own spectrum; however, the FCC has not yet acted on the request.

Rural Group Petitions to Prohibit Exclusive Deals Between Carriers and Handset Manufacturers

The Rural Cellular Association ("RCA") petitioned the FCC for a rulemaking to prohibit exclusive distribution contracts between wireless carriers and manufacturers of wireless handsets. According to RCA, the five largest U.S. carriers enter into such arrangements to exert "monopolistic control over the sale price of a particular handset and absolute control over the market availability of a particular handset" while smaller rural carriers often are able only to obtain basic, low-end handsets. RCA further argues that the lack of competitive handset suppliers prevents many consumers from obtaining premium equipment at reasonable prices because they reside in rural areas where the sole carrier that may offer a popular, exclusive handset does not operate. CTIA – The Wireless Association disagreed with RCA, however, noting that "consumers have an incredible array of wireless devices from which to choose" and that "consumers can purchase handsets from a number of sources."

FCC to Hold En Banc Hearing on Early Termination Fees

The FCC has announced that it will hold an en banc hearing on wireless carriers' practice of charging early termination fees ("ETFs") when subscribers terminate their contracts prior to the end of their terms. Although wireless carriers and consumer groups have held ongoing discussions regarding ETFs, Chairman Martin recently acknowledged that they have been unable to reach a compromise on formal rules to govern ETFs. The en banc hearing will be held June 12 directly after the FCC's monthly open meeting.

First DTV Test Market Chosen; Media Ownership Rules Under Attack; Congress Calls on FCC to Probe Television Appearances of Military Analysts

First DTV Test Market Chosen; Early Cutoff Begins Fall 2008

Wilmington, North Carolina, was selected as the country's first (and possibly only) digital television ("DTV") transition test market. Several of the city's commercial broadcast stations will terminate analog signals on September 8, 2008, leaving viewers in the market with only digital signals. Wilmington's PBS affiliate, however, is not participating in the test due to public safety and technical concerns. Local cable operators, including Time Warner Cable, will participate in the test by configuring cable head-ends to receive digital-only broadcasts. Wilmington was chosen in part based on its high density of pay-TV subscribers (93%) who do not rely on over-the-air broadcasts, as well as the fact that nearly all local stations have completed construction of digital broadcasting facilities. Wilmington area retailers have reported dramatic increases in sales of DTV converter boxes since the announcement was made.

The FCC had selected nine other cities, including Santa Barbara, California, and Madison, Wisconsin, as potential test markets because of their early completion of digital broadcast facilities through the market. Those other markets either were removed from consideration or opted out themselves. Some of the cities that declined to participate cited concerns that cutting off analog broadcasting this year, rather than February 17, 2009 (the national cutoff date), would confuse consumers who have been seeing public service announcements on the national cutoff date as part of the FCC's DTV consumer education initiative.

Senate Passes Resolution Revoking FCC's Media Ownership Rules, but Faces Veto

President Bush has promised to veto a Senate resolution overturning the FCC's media ownership rules. The White House defended the FCC's newly relaxed media ownership rules, which it says "further[] the public interest by providing greater financial flexibility to newspaper and broadcast outlets struggling to survive in today's intensely competitive media environment." FCC Commissioners Copps and Adelstein, who voted against the media ownership rules when the FCC enacted them, applauded the Senate's efforts to defeat the rules through legislative means.

House Democrats Seek FCC Probe of Networks' Use of Military Analysts

Two prominent Democratic lawmakers wrote a letter to the FCC in early May asking it to probe many television networks' practice of using military analysts. House Commerce Committee Chairman John Dingell (D-Michigan) and Representative Rosa DeLauro (D-Connecticut) want the FCC to investigate whether networks properly disclose military analysts' ties with the U.S. Department of Defense and/or private defense contractors.

Section 507 of the Communications Act, 47 U.S.C. § 508, requires anyone who provides money or other consideration to another in exchange for speaking about a particular issue during a broadcast to disclose that fact to the television station in advance of the broadcast. The television station must, in turn, broadcast a sponsorship identification announcement as required by Section 317 of the Communications Act.

The House probe began after an April 20 New York Times article about 75 retired military personnel who have appeared as analysts on several cable and broadcast shows. The letter to the FCC stated that it appears that these analysts received special access to current senior military leaders and as a result were "indirectly paid for fostering the Pentagon's views." After the letter was sent, the Pentagon reported that it had suspended programs involving military analysts and is investigating whether such programs comply with applicable laws.

Happenings on the Hill

  • Sen. Stevens Seeks Phantom Traffic Solution. Sen. Ted Stevens (R-Alaska), whose constituents include rural telephone companies, proposed a bill in late April requiring voice providers to ensure that calls have sufficient billing information. Rural phone carriers in particular incur losses by terminating untraceable phone traffic. If passed, the bill mandates the FCC to take action to resolve phantom traffic within 12 months, including ordering studies of carriers' technological and equipment limitations, current signaling standards, and implementation costs. Although phantom traffic solutions are already under consideration as part of the FCC's intercarrier compensation reform efforts, that proceeding has been open for the past several years with no end in sight.

  • Senate Passes Resolution Disapproving FCC Media Ownership Rules. In mid-May, the Senate passed Senate Joint Res. 28, a resolution to overturn the FCC's recently relaxed media ownership rules. President Bush has promised to veto the measure. For more information, see "Senate Passes Resolution Revoking FCC's Media Ownership Rules," above.

  • Rep. Barton Seeks Legislative Solution to USF Reform. In late April, Representative Joe Barton (R-Texas) introduced legislation aimed at reforming the Universal Service Support system, an effort already underway at the FCC. The bill would cap the entire USF fund at the amount of support collected in the previous year and would use "reverse auctions" to allocate support from the high-cost funds. Reverse auction winners would be granted carrier of last resort ("COLR") status. The FCC would hold periodic reverse auctions thereafter, with auction reverse prices limited to no higher than the previous winning bid for each service area. Critics of the bill argue, among other things, that it does not provide adequate incentives for broadband deployment because it allows for only one ETC per service area to get USF support.

  • Sen. Nelson Seeks Broader Disclosure Rules for Prepaid Calling Cards. Under a bill introduced by Sen. Nelson (D-Florida), prepaid calling card service providers would be required to disclose rates and fees at the point of sale and honor the cards until at least a year from first use. The Federal Trade Commission would be charged with overseeing prepaid calling card providers. While many states regulate calling card providers, Sen. Nelson's bill would initiate federal oversight and impose consistent national consumer protection standards.

  • Other Developments. Congress also introduced bills on net neutrality (H.R. 5994, "Internet Freedom and Nondiscrimation Act of 2008") and VoIP service (S. 28, "IP-Enabled Voice Communications and Public Safety Act of 2007"), discussed in greater depth in separate articles in this month's Bulletin.

--------------------------------------------------------------------------------

Practice Tip: Enhanced CORES Security Measures Effective May 20, 2008

Security features applicable to new FCC Registration Number ("FRN") passwords and reset passwords became effective on May 20. The new features include:

  • New passwords must contain at least six characters and at least three of the following four character types:

  • Numeric

  • Upper case letters

  • Lower case letters

  • Special characters (i.e., !, #, $, *, etc).

  • New passwords cannot be identical to the previous four (4) passwords.

  • Registrants using the FCC's Commission Registration System ("CORES") Update module cannot save any changes unless their password complies with the above requirements; if their existing password does not comply, then they will have to update their password.

  • The CORES auto-password assignment method provides for strong temporary and assigned passwords. New auto-assigned passwords contain eight randomly generated alphanumeric characters, including both upper- and lower- case letters.

  • Individual registrants viewing the Registration Update or New Registration confirmation screens can view only the last four digits of their SSN.

There is also a new lockout feature. After five unsuccessful login attempts, the user's account is locked for 15 minutes. A warning is issued informing the user of the number of invalid login attempts before a lockout occurs. Once the account is locked, the user may: wait 15 minutes for the lock to expire; call the Help Center to reset the password: 877-480-3201, option 1 (Mon.-Fri. 8 a.m.-6 p.m. ET); or reset the password at http://esupport.fcc.gov/password.htm in order to unlock the account.

--------------------------------------------------------------------------------

New Net Neutrality Legislation Introduced, but Action Seems Unlikely This Year

In early May, House Judiciary Committee Chairman John Conyers (D-Michigan) and co-sponsor Rep. Zoe Lofgren (D-California) introduced a new antitrust- based net neutrality bill that would affirmatively require operators to ensure equal treatment of all content, applications, and services. The Internet Freedom and Nondiscrimination Act (HR 5994) would amend the Clayton Act to prohibit discrimination, while permitting providers to use non-discriminatory traffic management practices. (This bill thus goes much further than the earlier-introduced Markey-Pickering bill.) The Conyers-Lofgren bill would also (a) require providers to permit customers to attach nonharmful devices to the network, (b) require providers to clearly disclose any service limitations, and (c) prohibit providers from charging additional fees for prioritization or quality of service enhancements. The bill, however, would permit providers to (x) give priority to emergency communications, (y) prevent violations of law or comply with court orders, and (z) offer consumer protection services such as parental controls.

Meanwhile, evidencing the overlapping jurisdiction on this issue, the House Telecommunications and Internet Subcommittee (of the House Energy and Commerce Committee) held a hearing on the Markey -Pickering bill (HR 5353), which would require the FCC to assess whether broadband network providers' traffic management practices are non-discriminatory. At this hearing, most Republicans, and even a few Democrats, strongly urged that no legislative action is necessary at this time, raising concerns that an FCC investigation could lead to regulation. Some opponents argued that such regulation could hinder legitimate traffic management practices and the ability of providers to block access to things like pirated versions of copyrighted materials and child pornography. Commerce Committee Chairman John Dingell (D-Michigan), however, stated that he wants to ensure that network management practices are transparent and non-discriminatory and that the FCC has sufficient authority to protect consumers against discriminatory practices.

Given the lack of consensus regarding such legislation, a common view in Washington is that network neutrality legislation is unlikely to be passed this term.

Finally, across the northern border, there have been two net neutrality- related developments. First, a net neutrality bill was introduced at the end of May in the Canadian House of Commons (by a member of the minority New Democratic Party). This bill would prohibit discriminatory treatment of content based upon its source, ownership, or destination, but would permit reasonable network management practices. Operators would also be required to disclose these network management practices to customers.

Second, the Canadian Radio-television and Telecommunications Commission ("CRTC") has launched an investigation of alleged "throttling" of wholesale DSL traffic by Bell Canada. The Canadian Association of Internet Providers ("CAIP") had requested an immediate order directing Bell Canada to cease and desist from its traffic management practices. Although the CRTC did not grant this request, it found that CAIP had raised a significant issue. Accordingly, the CRTC has now ordered Bell Canada to provide detailed data regarding network congestion and the degree to which it is caused by peer-to-peer ("P2P") traffic, the necessity of its traffic management/traffic shaping practices, alternative approaches it considered and rejected, and other issues. The CRTC also directed CAIP to document its claims and data. The pleading cycle in this proceeding will close by the end of June, and the CRTC has stated that it intends to issue a decision within 90 days after the record closes.

Upcoming Deadlines for Your Calendar

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.

June 6, 2008, Reply comments due on annual regulatory fee NPRM.

June 9, 2008, Reply comments due on Vermont Tel petition seeking clarification of interconnection rights of VoIP providers.

June 10, 2008, Auction No. 78 (AWS and broadband PCS) seminar.

June 11, 2008, Reply comments due on broadcast localism NPRM.

June 19, 2008, Short-form applications due in Auction No. 78 (AWS and broadband PCS) .

June 19, 2008, DTV Consumer Education Workshop on converter boxes.

June 20, 2008, Comments due on 700 MHz FNPRM.

June 27, 2008, Comments due on DTV consumer education initiative NPRM.

June 30, 2008, Comments due on NOI on fraudulent 911 calls from non-service initialized ("NSI") handsets.

June 30, 2008, Comments due on diversification of broadcast ownership.

July 7, 2008, Comments due on BRS/EBS FNPRM.

July 7, 2008, Reply comments due on 700 MHz FNPRM.

July 14, 2008, Effective date of rules prohibiting exclusive telecom services in residential multiple tenant environments ("MTEs").

July 14, 2008, Reply comments due on DTV consumer education initiative NPRM.

July 14, 2008, Reply comments due on diversification of broadcast ownership.

July 17, 2008, Upfront payments due in Auction No. 78 (AWS and broadband PCS) .

July 29, 2008, Reply comments due on NOI on fraudulent 911 calls from NSI handsets.

July 31, 2008, Annual traffic and revenue reports due for all international carriers.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved