Qwest is providing in-region interLATA services in violation of Sec. 271 of Telecom Act, AT&T charged in May 1 letter to FCC. AT&T said information was apparent in auditor’s report that Qwest filed under conditions of Qwest-U S West merger: “The auditor’s report finds that in-region private line services for 266 customers were billed and branded as Qwest services” with revenue in excess of $2.2 million for 8 months. AT&T said Qwest’s defense -- that it didn’t transport that traffic itself -- wasn’t sufficient because FCC had held that offering 3rd party long distance service under Bell company brand was considered part of prohibited provision of service. AT&T also complained that report was “incomplete” because certain contracts weren’t made available to auditors, including Qwest’s teaming agreements with other carriers to provide long distance service to federal agencies. Qwest has acknowledged it offers long distance services to federal agencies in conjunction with Touch America, AT&T said. “Although these contracts raise obvious and significant Section 271 concerns, there is no mention of them in the auditor’s report.” FCC should “act promptly to impose appropriate sanctions on Qwest,” AT&T said. Letter went to Dorothy Attwood, chief of Common Carrier Bureau, and David Solomon, chief of Enforcement Bureau.

Bill for tenfold increase in penalties FCC can levy was to be introduced as soon as last night by House Telecom Subcommittee Chmn. Upton (R-Mich.), his spokesman told us. Upton offered similar measure as amendment to Bell company data deregulation bill (HR-1542), but withdrew it. At Subcommittee markup of HR- 1542, other members told Upton his idea would be popular and he should consider introducing it on its own, rather than as part of controversial larger bill. Amendment would have increased FCC’s fine limit to $1 million per violation from $100,000, capped at $10 million, up from $1 million. It also would have doubled those fines for repeat offenders and given FCC additional cease-and- desist authority.

FCC is attempting to decide spectrum-sharing plan for nongeostationary satellite orbit (NGSO) and fixed satellite service (FSS) and to determine intraservice rules for new services. Commission in notice of proposed rulemaking Thurs. said new rules were expected to promote competition between existing satellite and terrestrial services through opportunities for new entrants, quicker licensing process, incentives for faster rollout of services using state-of-the-art technology. As expected (CD May 3 p3), FCC said it would license all 5 companies with NGSO FSS applications -- Boeing, Denali, Hughes, Skybridge, Teledesic and Virtual GEO -- to provide high-speed Internet, online access, data, video and telephony services in Ku-band. Hughes has filed 2 applications for licenses and spectrum. Comments are due by June 18, reply comments July 19.

FCC should reconsider its tentative decision that cable doesn’t have to carry all channels multicast by DTV station, 15 members of Congress said in letter to Commission. Letter said must-carry decision would have disproportionate impact on Hispanic and smaller stations not affiliated with major networks: “These emerging network and independent broadcasters are vital to the diversity of programming and digital television.” Letter also said Congress “may need additional time to fully contemplate the intent of the statute and consider input from the broadcast television and cable industries.” It was signed by Reps. Baca (D- Cal.), Brown (D-Fla.), Deutsch (D-Fla.), Foley (R-Fla.), Frost (D- Tex.), Hilliard (D-Ala.), Hutchinson (R-Ark.), Meek (D-Fla.), Ortiz (D-Tex.), Reyes (D-Tex.), Ros-Lehtinen (R-Fla.), Serrano (D- N.Y.), Shaw (R-Fla.), Stearns (R-Fla.), Wexler (D-Fla.).

FCC Mass Media Bureau’s controversial policy of “flagging” or deliberately delaying action on some license transfer applications still is going on under Chmn. Powell, FCC Comr. Furchtgott-Roth told reporters Thurs. Practice, which surfaced under then-Chmn. William Kennard, involved holding back certain transfers, often related to mergers or acquisitions, because they would result in increased market concentration. Furchtgott-Roth has been critical of flagging in past, saying it gives bureau too much power that should be exercised by full Commission. He told reporters Thurs. that bureau personnel confirmed they still were flagging transfers. “It may not be illegal but it definitely isn’t right,” he said, because it treats some applications differently from others. There are thousands of license transfers and most are treated quickly and routinely, Furchtgott-Roth said. However, in previous administration, some were held up for months, he said. They would be put out for public comment but then not acted upon. When asked whether bureau was doing this under orders from Powell, Furchtgott-Roth said such action had to involve “tacit approval by someone higher up.” Furchtgott-Roth also said: (1) He expects Congress to approve new FCC commissioners by Memorial Day or, at latest, before July 4th recess. He plans to leave to join think tank as soon as new commissioners take their seats. He hasn’t said which think tank. (2) Proposal for FCC action on News Corp.- Chris-Craft merger is expected to be circulated on 8th floor next week. Commissioners haven’t voted on issue yet.

FCC released further modifications in existing narrowband PCS rules. Under order adopted April 19, FCC will: (1) Channelize and license 1 MHz of narrowband PCS spectrum that has been held in reserve. (2) Rechannelize 712.5 kHz of previously channelized spectrum for which licenses haven’t been auctioned. (3) Adopt narrowband PCS channel band plan that includes both nationwide and Major Trading Area (MTA) licenses. FCC said new rules resolve remaining issues in preparation for auctioning licenses for remaining narrowband PCS spectrum in near future. Commission in 1993 allocated 3 MHz spectrum for narrowband PCS with only 2 MHz divided into specific channels and made available for licensing. Commission said licensing 1 MHz reserve spectrum would serve public interest “by facilitating competition, opening market to new entrants and allowing existing narrowband PCS licensees to expand their systems through access to additional spectrum.” Reserve spectrum also will help narrowband PCS licensees remain competitive with other CMRS providers, FCC said.

S.C. PUC petitioned FCC requesting delegated authority to implement number conservation measures to: (1) Implement mandatory thousand-block number pooling for number plan areas (NPAs) in Charleston- N. Charleston and Columbia metropolitan statistical areas (MSAs). (2) Order sequential number assignments to minimize thousand-block contamination. (3) Implement NXX code rationing procedures following area code relief to prevent rush of demand for codes. (4) Reclaim unused or minimally contaminated thousand-blocks. Commission in 1998 Pennsylvania Number Order delegated authority to state PUCs for number rationing in “jeopardy situations” and encouraged state commissions to seek further limited delegations of authority for number conservation. FCC Common Carrier Bureau established pleading cycle on S.C. petition, with comments due June 1, replies June 22.

Hughes Electronics Chmn. Michael Smith steadfastly declined comment Wed. on possible merger of Hughes with News Corp.’s Sky Global Networks, deferring to parent General Motors (GM) board that earlier authorized negotiations to continue. Smith, speaking at SG Cowen Securities conference in N.Y., stuck with statements in GM news release and focused on highlighting Hughes’ DirecTV, Hughes Network Systems and PanAmSat units. Negotiations are expected to continue for several weeks with need to resolve tax and governance issues. GM has wanted deal to be tax-free and Smith has bridled at ceding day-to-day management of Hughes to News Corp.

Verizon Wireless in filing at FCC balked at request by New ICO (CD April 4 p1) seeking flexibility to offer terrestrial mobile services using mobile satellite service (MSS) spectrum. New ICO sent letter to FCC Chmn. Powell last month suggesting that it would have to fold unless it received approval for new spectrum from domestic and international regulators. Verizon said request would violate Sec. 309(j) of Communications Act, which requires that spectrum used to provide commercial terrestrial services be auctioned. “New ICO received its MSS licenses for free,” Verizon said: “Given the enormous sums that Verizon Wireless and other mobile operators have paid for licenses, this would yield a tremendous windfall to New ICO and confer on them an unfair competitive advantage.” Verizon said New ICO’s suggestion that “MSS is no longer viable” should mean that spectrum be reallocated for advanced mobile services. Carrier said 1990-2025 MHz and 2165-2200 MHz have been identified internationally for 3G services. “Given the difficulty that the Commission is having in identifying spectrum for 3G, it should not overlook this obvious opportunity,” Verizon Wireless wrote. On other 3G issues, Verizon cited “flawed assumptions” in recent FCC report on use of 2.5 GHz band for advanced wireless services such as 3G. It said band segmentation was possible without harming Multichannel Multipoint Distribution Service (MMDS). “Importantly, MDS operators have no long-term ownership rights to leased ITFS [Instructional TV Fixed Service] spectrum,” carrier said. “Thus, a reallocation of some ITFS spectrum would not undermine their spectrum rights. Moreover, if MDS operators believe that they need additional spectrum to deploy broadband fixed services, they can bid in the auction.”

New Skies said profit increased 38% to $8 million on revenue of $51.2 million in first quarter, up from $37 million in same 2000 period. Company said improved performance was result of increase of fill rates for satellites to 64% while maintaining transponder yields, resulting in significant growth. New Skies said its position was “significantly strengthened” when FCC granted it full authority to serve U.S. market. CEO Robert Ross said company had reached goal of expanding customer base and service offerings through “integration of terrestrial facilities working in conjunction with our satellite fleet.”