LAS VEGAS -- Digital rights management (DRM) market is expected to exceed $1 billion by 2006, according to IDC, but survey of exhibitors at the NAB show in Las Vegas last week suggested full end-to-end solutions remained elusive. Many companies -- Blue Order, eMotion, ManagedStorage and Artesia Technologies, to name few -- offered front-end digital asset management (DAM) -- systems that authenticate and permit access to stored data. Vendors proposing solutions that involved asset protection, such as watermarking or encryption, were harder to find, with notable absentees including Contentguard, Digimarc, InterTrust, Macrovision. Despite their absences, vendors said some of levels of protection being sought by studios such as Disney and News Corp. didn’t exist as off-the-shelf solutions.
FCC denied TRW petition for clarification and reconsideration of grant of license to U.S. LEO Services for operation of Iridium handheld earth terminals. When it filed petition, TRW was one of 4 companies licensed to operate in adjacent 1600-1621.35 MHz band. Commission denied petition because it said U.S. Leo Iridium handsets exceeded interference limits established by European Telecommunication Standards Institute (ETSI).
Potential impact on competitive local exchange carriers (CLECs) from several FCC proceedings is “just as big” as what competitive carriers face under Tauzin-Dingell data deregulation bill (HR-1542), CompTel Pres. Russell Frisby said Fri. Significant difference between outcomes of FCC and congressional actions on broadband-related issues is that only 3 votes are needed at Commission to change competitive landscape, Frisby said at Competitive Broadband Working Group press lunch in Washington. Frisby, ALTS Pres. John Windhausen and telecom attorney Marc Snyder briefed reporters on concerns of CLEC industry in FCC dockets involving: (1) Notice of Proposed Rulemaking (NPRM) on dominant vs. nondominant status of ILEC broadband services. (2) NPRM on whether to define broadband as information or telecom service. (3) Triennial review of unbundled network element platform (UNE-P) requirements. (4) Notice of Inquiry that tentatively determined cable modem service was an interstate information service under FCC jurisdiction. Windhausen said FCC’s proposed actions in those areas were tantamount to overriding will of Congress since agency could alter rules that would be contrary to competitive provisions of the 1996 Telecom Act: “I don’t think they realize the consequences for us.” Snyder said FCC didn’t appear to be looking at those provisions, particularly in its UNE-P docket, which he described as “stealth proceeding.” Frisby said working group would seek congressional assistance in protecting CLEC industry and promoting broadband competition, but wouldn’t elaborate: “There’s more to come.”
Wireless industry is mulling options now that FCC Wireless Bureau decision has turned down CTIA request to delay 700 MHz auction set for June 19 (CD April 11 p1). Several sources said that because decision was by bureau, rather than FCC, door was left open for review by full Commission. Efforts on Capitol Hill to delay bid start date -- already under way before bureau decision -- also are expected to accelerate this week. “CTIA believes that the FCC was a little quick on the draw in their response and may have not looked at all the benefits that could be derived from a moderate delay of the auction,” said CTIA Vp-Govt. Relations Steve Berry: “We hope that the full Commission will have a much broader scope in its review.” Berry said CTIA hadn’t made any decision on whether to seek full FCC review of its request to delay start date, but said group was evaluating alternatives. Even before bureau decision last week to keep date, efforts were under way to have letters sent to FCC from key Senate and House appropriators and Commerce Committee members. One industry source said hope was that House Commerce Committee Chmn. Tauzin (R-La.) would lead Republicans in urging FCC to delay auction and that Rep. Dingell (D-Mich.) also would back delay. As early as end of this week, legislation is expected to be drafted that would delay auction, source said. White House Office of Management & Budget apparently is monitoring plan to retain auction date in light of language in Administration’s budget proposal that would push back dates of 700 MHz bidding, source said. Budget blueprint indicated that if upper band auction were moved to 2004 from 2001 and Ch. 52-59 bidding to 2006 from 2002, budget offset of $2.6 billion for fiscal 2002 would be realized. Before bureau decision, some Senate offices were close to including report language on fiscal 2003 budget that would direct FCC to delay auction date. Some in wireless industry also hope that NTIA might weigh in on auction timing with letter that would underscore language in Administration’s budget proposal, source said. Cingular Wireless last week had submitted ex parte filing to back CTIA request for delay, saying FCC had started proceeding to examine ways to eliminate interference for public safety users at 800 MHz. Cingular said one possibility would be to relocate existing 800 MHz public safety operations to 700 MHz to resolve interference, move that could finance relocation through auctioning vacated 800 MHz spectrum. “Delay of the 700 MHz auction is warranted to allow these issues to be fully addressed in the pending public safety rulemaking,” Cingular said. One industry source said Wireless Bureau letter to CTIA last week denying request for delay might have “raised bar” for signals FCC would need to receive from Hill to push back date of upper band auction for 6th time. FCC Wireless Bureau Chief Thomas Sugrue said bureau had adopted reserve price of $2.6 billion for upper band, meaning that if bidding didn’t reach that level, licenses wouldn’t be awarded.
Standard & Poor’s placed ratings of WorldCom on CreditWatch with “negative implications” Fri., citing “heightened concerns regarding the long distance industry and the company’s ability to deliver its balance sheet near- term.” Standard & Poor’s said it projects revenue growth in long distance voice and data business will continue to be depressed this year as result of economy and wireless and e- mail substitution. S&P also noted that RBOC competition is expected to increase as FCC grants more Sec. 271 approvals. “Longer term, the competitive market position of pure long distance carriers is uncertain, as is the potential for consolidation with diversified telecommunications service providers,” S&P said. Ratings agency said that last year, WorldCom’s net debt to earnings before interest taxes depreciation and amortization on non-lease-adjusted basis was high at ratio of 2.9.
AOL Time Warner told FCC that recent decision by U.S. Appeals Court, D.C., in Fox v. FCC required Commission to presume that cable program access rules should sunset in Oct.: “Congress intended for the restrictions on exclusive programming arrangements to sunset absent solid proof of their ‘necessity’ to preserve and protect competition and diversity.” Comments came from AOL TW lawyer Arthur Harding in letter to Commission earlier this month. Harding said D.C. Circuit’s findings “created an affirmative obligation on the Commission to justify retention” of national TV ownership cap and cable-TV broadcast cross-ownership restrictions. Harding said sunset of rules should be prevailing presumption and burden of proof rested with those advocating retention. FCC is weighing whether to allow rules against exclusive programming contracts for vertically integrated cable programmers to expire. Consumers Union and Consumer Federation of America, in ex parte filing following day, touched on issue. They told Media Bureau Chief Kenneth Ferree and other FCC officials that cable industry’s denials of monopsony leverage over programming “always rely on erroneous assertions about competition from satellite at the point of sale.” CU contended satellite wasn’t yet truly competitive with cable. NCTA told FCC that Congress never intended 1992 exclusivity ban to be lifetime guarantee of access and that it was “a relic of a bygone chapter” in cable regulation history.
Northpoint has no clue on what FCC will rule Thurs. at agenda meeting on future of terrestrial broadband service that uses satellite spectrum, CEO Sophia Collier told us Fri. “The FCC has clammed up,” she said: “It’s very difficult to get information.” However, industry buzz continues to suggest FCC will make compromise decision that will include some kind of conditioned license with auction that Northpoint steadfastly has opposed. Collier said: “Regulators think they do well when both sides are unhappy, but they should look at win-win solutions rather than lose-lose.” She said Northpoint wasn’t sure what it would do “if the decision goes against us.” She said company would explore option of asking FCC for reconsideration, or appealing to U.S. Appeals Court, D.C.
Verizon formally asked Md. PSC to endorse Sec. 271 interLATA long distance entry bid to FCC. Verizon told PSC case record showed it had “obviously and irreversibly” opened its local markets to competition. It said it had met all 14 points on Sec. 271 checklist. It said state’s 60 active CLECs were serving 466,000 local lines (11% share) through 580 colocation arrangements that gave CLECs access to 84% of Verizon’s local lines. It said it exchanged 17.5 billion traffic min. with Md. CLECs in 2001. Verizon has received long distance authority for N.Y., Mass., Pa., Conn., R.I., has long distance applications pending at FCC for Vt., N.J. and Me., and pending request with Va. regulators for that state’s support.
FCC Media Bureau approval of TV channel moves by Paxson and Hour of Harvest Inc. (HOH) would “fly in the face of well- established communications policy and standards,” MSTV said in petition to Commission. Group was referring to bids by broadcasters on Ch. 60-69 to move to lower channels, clearing spectrum for other uses but requiring waivers of FCC interference rules. Media Bureau rejected first proposals by Paxson and HOH, but suggested they refile with specified modifications. Bureau action “implies” that modifications would mean applications could be approved, MSTV said, but waivers still would be “of unprecedented magnitude. It said Bureau “threatens” to change FCC interference standards without use of formal rulemaking and “without the requisite opportunity for public notice and comment.” MSTV said Paxson proposal alone would require short- spacing of 17 stations and would affect land mobile operations. Bureau indicated FCC “may be on the brink of transgressing the allotment principles the Commission, Congress and the court have long upheld,” MSTV said. It said all but one of applications would result in short spacing to more than one existing station: “The policy implied in the letter would, if adopted, drive a Mack truck through 50 years of national communications policy… without any public participation.” Policy would “degrade the public’s existing analog and future digital television service,” MSTV said.
Despite 3G bid prices in Germany that spiraled to $46.1 billion in 2000, Matthias Kurth, pres. of Germany’s Regulatory Authority for Telecom Posts, defended auctions Thurs. as tool for distributing spectrum. He addressed Transatlantic Telecom Trade Seminar in Washington on European marketplace, sponsored by Commerce Dept., CompTel, European Competitive Telecom Assn. (ECTA), TIA. “I still believe the auction system is good, even if people overbid,” Kurth said in luncheon speech shortly before meeting with FCC Chmn. Powell: “I can’t help that.” Of high bid prices for licenses, which were highest in European 3G auction, he said: “It was surprising even to us.” Auctions still are better alternative than traditional European “beauty contest” method in which licensees were judged on merit-based factors rather than bids. “It’s a question of timing,” Kurth said, noting that at time of 3G auction, telecom market was at peak of its cycle. If bidding were held in today’s depressed economic environment, “I'm pretty sure we wouldn’t get the same results,” he said. Kurth said that in aftermath of auction, Germany had allowed operators to explore alternative solutions such as network sharing to help defray costs and keep rollout of services on track. He said another issue German regulators were beginning to encounter in wireless industry was calls by competitors to step up regulation of sector. In some cases, competitors argue that individual wireless networks in themselves embody monopolies and should be regulated as such based on factors such as prices to terminate calls. But Kurth said he advocated light touch in such areas. “We always step back when we have a feeling that the market is competitive,” he said. But he added: “We have a lot of forces who want to push us in this [other] direction and it’s a very crucial debate.” As for broadband access, Kurth said that as in U.S., regulators in Europe were struggling with how to ensure that incumbents provided network access to competitors for starting services. He said Deutsche Telekom recently lowered DSL prices for residential customers in what was seen as step closer to creating “mass market” for DSL services. In separate speech Thurs., ECTA Pres. Phil Evins said factors such as diminished availability of venture capital were pointing to another wave of company consolidations in Europe. He cited $8 billion merger last month of Sweden’s Telia and Finland’s Sonera. Trend of former national monopolies’ pairing up across border will continue, Evins said. Europe is likely to end up with 5 or 6 former national monopolies after consolidations are completed, he said: “There is still a lot of consolidation. There is still a lot of fallout.”