U.S. Appeals Court, D.C., denied EchoStar bid to overturn FCC order that denied its program access complaint against Comcast involving delivery of SportsNet regional programming in Philadelphia (CD Feb 6 p3). EchoStar had challenged FCC decision that Comcast didn’t have to provide network to DBS operator because program access rules applied only to satellite-delivered network. Court rejected EchoStar argument that use of terrestrial network was just effort to evade program access rule, calling Commission decision reasonable and supported by substantial evidence.
Spanish Bcstg. System (SBS) sued Clear Channel (CC) and Hispanic Bcstg. Corp. in U.S. Dist. Court, Miami, saying they had violated antitrust laws by interfering with SBS’s ability to raise capital, impugning its reputation and making acquisitions more difficult. SBS said their ultimate goal was to acquire SBS. Among charges: (1) CC CFO Randall Mays tried to convince underwriters to withdraw from SBS IPO. (2) CC and Hispanic tried to influence analysts not to cover SBS stock and tried to induce institutional investors not to buy it. (3) CC and Hispanic engaged in bidding wars for radio stations just to increase SBS acquisition costs and interfered with contracts. (4) CC induced Katz (owned by CC) to breach its contract as SBS’s national sales representative. (5) CC “parked” stations it owned with other companies to circumvent FCC ownership limits. (6) CC used market power in outdoor displays, advertising and venue promotion to benefit CC and Hispanic, harming SBS. SBS attorney in case is David Boies.
FCC is expected today (June 13) to take action on AT&T request that it apply unused e-rate funds to reduce universal service fund (USF) assessment on long distance carriers. Commission has scheduled vote on unused funds issue at agenda meeting, although it hasn’t indicated how vote will go. AT&T Vp Robert Quinn acknowledged that company had urged agency to take such action. He said AT&T first made proposal in March in response to FCC request for comment on what to do about $950 million in unused e-rate funds. Company stepped up its lobbying recently after Universal Service Administrative Co. (USAC) announced it would have to raise USF assessment to 8.77% of interstate revenue, up from 7.28%. Quinn said that would translate to further increase in 11.5% USF fee now charged to its customers to cover assessments. Customer fee is higher than percent paid by AT&T because of company’s continuing problem of declining revenue. Fee charged to AT&T is based on level of revenue 6 months earlier. By time AT&T makes contributions, its revenue is lower than that, meaning fees to customers have to be raised to get amount of money required. Quinn said AT&T also stepped up action because time had run out for action on waiver request to help ease revenue problem by letting AT&T base contributions on estimates of future revenue, rather than 6-month-old revenue. New assessments go into effect July 1. He said AT&T separately had asked FCC for longer term fix for declining revenue problem, such as basing contributions on number of lines rather than revenue. Quinn said problem appeared to be more acute for AT&T than some companies. Companies such as Verizon that are just entering long distance business have increasing revenue, he said. Some carriers have opposed AT&T’s initiative for fear it will muddy larger contribution reform issue. Meanwhile, FCC set 1 p.m. June 21 meeting to explore broader issue of whether to change USF contribution methodology. Agency late Wed. said it wanted “additional input from industry and other affected parties” on proposals to reform contribution system. Commission said it invited state members of Federal-State Joint Board on Universal Service to join in presiding over meeting.
“Spectrum is too important a resource for administrative distribution, all spectrum should be in the market: Privately owned, sold and leased,” Gerald Faulhaber told Technology Advisory Council (TAC) at FCC hq Wed. Faulhaber, prof. of public policy and management at Wharton School of U. of Pa., also was FCC chief economist 2 years ago. He reconciled view of economists and engineers on govt. spectrum policy, saying both groups disliked spectrum allocation by “administrative fiat” but had “diametrically opposed” solutions on policy. Economists view U.S. system of distributing spectrum as analogous to former Soviet Union system of planned economy, Faulhaber said: “Spectrum scarcity is artificial, induced by regulation.” Economists have called for spectrum auctions for decades, he said, citing testimony to FCC by economist Ronald Coase in 1959: “Finally in 1993, Congress decided to experiment with the first auctions.” But to date auctions “have distributed a very small portion of available spectrum, only 120 MHz,” he said. He called for auctions of all spectrum including that used by Dept. of Defense and public safety. “Governments usually buy their own units -- police cars, computers, etc. - - with tax dollars. Why should spectrum be different?” Faulhaber asked. He compared Part 15 unregulated spectrum with public park. “This is a place where anyone can play as long as they follow the rules. Governments build parks by buying land, or in the case of Part 15, they would buy spectrum for public use.” Turning to engineers, he said as group they were as frustrated economists except that “they critique the system based on new radio technologies.” Examples include ultra-wide band, which “trades power for bandwidth,” and software defined radio. “These new technologies suggest many users can use the same bandwidth, a ‘commons’ model vs. the ownership model preferred by economists.” Despite inertia of current system in which license holders have vested interest, Faulhaber proposed 2 models for spectrum in free market: (1) Ownership without interference. Others would be allowed to use spectrum but not interfere with owner’s “absolute use priority.” “This is the spectrum equivalent of an easement on land,” he said. Model would depend on agile radio devices that could check whether spectrum was free and “ask” permission to make transmission. Proposal raised many questions from TAC group on enforcement of noninterference. Disputes would move from FCC to courts, Faulhaber admitted, suggesting that special “spectrum courts” be established. Spectrum “property rights need to be spelled out in great detail,” he said. (2) Ownership with leasing. Owners of spectrum would be allowed to lease under variety of terms -- including in real time, the equivalent of “spot market,” Faulhaber said. In either scenario, moving all spectrum to markets in combination with dynamic allocation “would free up so much spectrum its cost essentially would be zero.” With exception of “prime” spectrum such as cellular-friendly and legacy applications such as broadcast, which still would have value, wide availability of nearly free spectrum “would be a de facto commons model,” he said. Next scheduled meeting of TAC is Sept. 18.
Cablevision filed initial response to antitrust lawsuit brought by Yankees & Sports Entertainment network (YES), asking federal judge to dismiss 8 of suit’s 10 claims. “Cablevision continues to believe the YES Network’s entire lawsuit is without merit,” spokesman said. Filing Mon. in U.S. Dist. Court, Manhattan, said YES had no standing on several of its claims it filed on behalf of local broadcasters, advertisers, others. Cablevision also said allegations of FCC violations “have no place in this action.” YES claimed, among other things, Cablevision had made demand for exclusivity that violated FCC’s ban on such agreements. Cablevision, which maintains it didn’t violate rule, said enforcement of Communications Act shouldn’t come through private actions in federal courts but through FCC itself as agency charged with enforcement. “It strains reason to suggest that Congress would give the FCC the express responsibility to create, implement and enforce the program carriage regulations if it simultaneously intended for the FCC to share that responsibility with the federal courts,” filing said. Cablevision said YES hadn’t filed complaint with FCC.
Controversial issues that appeared to be lurking behind scenes were kept there during Tues.-Wed. NAB board meetings in Washington as no new positions of any substance were taken. Radio issues had been expected to be dominant (CD June 7 p6), but only vote announced was to urge FCC “to rapidly move to permit the introduction” of AM and FM in- band, on-channel (IBOC) digital broadcasting. That came after Robert Struble, pres. of iBiquity Digital Radio, reported on IBOC progress.
Two state agencies that operate public TV stations filed joint emergency motion late Wed. at FCC for partial stay of lower 700 MHz band auction that’ set to start June 19. Central Wyo. College (CWC) and Idaho State Board of Education had argued in filings at Commission earlier this month that they were eligible to be exempt from bidding on licenses because they were seeking spectrum for noncommercial educational broadcasting. Both had filed short-form applications for auction but argued they were exempt as noncommercial educational licensees that would offer noncommercial, educational TV service. CWC and Idaho Board said they were seeking stay of auction of licenses in Idaho and Wyo. in which they were interested in bidding. While they “would not be opposed to an overall stay of the Auction 44 processes, they are not seeking such a stay, but rather seek only a limited stay,” emergency petition said. Both CWC and Idaho Board were listed as nonqualified bidders for auction in recent FCC public notice. Notice said short-form applications are subject to resolution of issues they have raised, including determination of whether applicants for those licenses are noncommercial educational broadcast stations. CWC and Idaho Board said if they didn’t receive answer from FCC by Fri., they planned to seek partial stay from U.S. Appeals Court, D.C.
FCC reconsidered its decision to investigate BellSouth tariff that sought increase in carrier charges to recover costs of implementing 1,000s-block number pooling (CD May 15 p10). In order issued late last week, Commission said supplemental material provided by BellSouth justified rate increases.
House Commerce Chmn. Tauzin (R-La.) wrote FCC Chmn. Powell June 11 to urge Commission to use triennial review to correct problems with unbundling rules identified by U.S. Appeals Court, D.C., in recent ruling (CD May 28 p1). “I hope that, in the triennial review, the Commission closely scrutinizes the prices that ILECs are compelled by regulatory fiat to charge subscribers before the Commission determines whether market conditions dictate that competitive local exchange carriers (CLECs) need unbundled access to ILEC facilities,” letter said. Tauzin said FCC shouldn’t apply national rules for unbundled network elements (UNEs). “Uniform, national rules do not accurately reflect the state of competition and the unique economic characteristics of individual markets,” letter said. Unbundling rules also prevent CLECs from investing in their own facilities, it said. “Removing either an ILEC’s or CLEC’s incentive to invest in its own facilities reduces the likelihood that our markets will experience facilities-based competition,” letter said. “Removing both an ILEC’s and a CLEC’s incentive to invest in new facilities virtually eliminates the possibility of achieving true facilities-based competition and increases the likelihood that any competition would be of the ‘wholly artificial’ type feared by the D.C. Circuit.” Tauzin said rules should create incentive to invest, otherwise “I fear that the Commission will be perpetuating a policy that has limited broadband deployment and deprived consumers of the type of meaningful competition that only facilities-based carriers can provide,” letter said.
FCC made mistake in considering must-carry complaint by Paxson and should vacate order that requires carriage of station, DirecTV said in reply comments. Must-carry dispute doesn’t fall within one of enumerated categories of mandatory carriage disputes over which Commission has been granted jurisdiction, DirecTV said.