FCC declared Thurs. that cable modem service interstate was “information service” and said Internet delivered over cable wasn’t subject to common carrier regulation that required unbundling or -- in cable parlance -- “open” or “forced” access. Ruling marked critical turn for cable, which has become country’s No. 1 provider of high-speed Internet access and feared that it would become subject to access requirements and vulnerable to new fees and taxes imposed by states and municipalities. In addition to declaratory ruling, which was passed in 3-1 vote, Commission issued Notice of Proposed Rulemaking (NPRM) to measure regulatory treatment of cable modem service against that of DSL. FCC last month made tentative conclusion that wireline- delivered broadband, too, was information service (CD Feb 15 p1). NPRM will examine which govt. agencies, if any -- FCC, state or local franchising authorities (LFAs) -- have power to regulate cable modem service and invited comment on whether, “in light of marketplace developments, it is necessary or appropriate at this time” to require multiple ISP access. Marjorie Green, assoc. chief of Cable Bureau, said in her presentation that some cable companies had begun offering multiple ISPs to customers on their own.
Citing tight capital markets, Dobson Communications CEO Everett Dobson told FCC Chmn. Powell Thurs. that Commission, by continuing to hold down payments for NextWave re-auction without interest, was “doing substantial and immediate harm to the public interest.” Dobson subsidiary DCC PCS had made $546 million in winning bids for 14 licenses in Jan. 2001 re- auction, results of which were overturned when U.S. Appeals Court, D.C., reversing FCC decision to cancel NextWave licenses for missed payment. Verizon Wireless last week also asked FCC again to “promptly” refund its entire $1.7 billion deposit from re-auction. U.S. Supreme Court agreed last week to hear oral argument in FCC’s appeal of D.C. Circuit ruling. Earlier this year, 12 winning bidders in re-auction, including Verizon and Dobson, had asked FCC for immediate refund of $3.1 billion in down payments after settlement agreement on licenses expired Dec. 31 when Congress failed to approve pact. While Verizon has sought full return of its down payment, Dobson said it believed both FCC and re-auction winners’ interests could be protected “by promptly refunding” all but 15% of each applicant’s down payments. “The Commission must be aware of the severe capital restrictions that currently face the wireless industry, many of whose members are Auction 35 winners,” Dobson wrote. Now most wireless carriers face capital market pressure to reduce leverage, he said. “Uncertain future” of NextWave spectrum means Wall St. is viewing this negatively by attributing little or no value to spectrum even though deposits are treated as expended funds, he said. “Indeed, in Wall Street’s view, the Auction 35 winners are, at this time, actually worse off for having won licenses in that auction.” Since carriers submitted joint request for return of down payments in Jan., they have collectively lost $29 million of additional interest and “unknown number of lost opportunities to expand existing services.”
Wash. legislature passed bill (HB-2031) that cuts taxes city govts. can levy on payphone providers. Bill sent to Gov. Gary Locke (D) limits local gross receipts taxes to 0.2%, same as for nonutility businesses such as retailers. Previously, cities could assess at utility business rate of up to 6%. Lower tax cap applies only to payphone operators that aren’t affiliated with incumbent telco providing payphone access lines. Legislature passed another telecom bill that would raise cap on local E-911 taxes to 50 cents monthly per line from 25 cents and adds new 20-cent state E- 911 tax. Bill would extend E-911 tax collection liability to include wireless carriers. Measure sent to Locke (HB-2592) also would allow E-911 account to be used for funding and operating wireless E-911 statewide. Companion bill that also passed (HB-2595) would give wireless carriers representation on state E-911 Advisory Council and prohibit state from imposing E-911 wireless location requirements beyond those set by FCC.
FCC granted request by AT&T Wireless and CTIA to extend Commission’s deadline for filing comments in response to Technical Public Notice in matter of “Flexibility for Delivery of Communications by Mobile Satellite Service (MSS) Providers in 2 GHz band, L-band and 1.6/2.4 GHz band.” Commission extended deadline to March 22 from March 15. AT&T said Commission asked variety of specific technical question regarding feasibility of provision of MSS and terrestrial wireless service by separate providers over same spectrum band. It said its engineers would need more time to review and analyze Commission’s questions.
Verizon plans to file Sec. 271 application with FCC for Me. next week and N.H. application later in March, Senior Vp Tom Tauke said Wed. in news briefing. In answer to question, he said filing with state commission in Va. was planned for Fri. and by end of March all state filings should be made. Assuming quick state action, Del. is expected to go to FCC in June-July, Va. and W.Va. in summer, Md. and D.C. in Aug.- Sept., he said. “I think we've gotten the systems thing down,” he said, noting that there hasn’t been as much discussion about operations support systems in recent Sec. 271 filings with FCC. Instead, TELRIC (Total Element Long- Run Incremental Cost) pricing has been focus of debate, he said. Asked which venue Verizon was targeting -- Hill or FCC -- in battle to win regulatory relief for broadband, he responded: “I don’t care if the decision is made in the courts, the FCC or the Hill, whatever forum is available. We're in all forums.” Because of opposition by Senate Commerce Committee Chmn. Hollings (D-S.C.) to broadband bill passed in House, Tauke acknowledged that “we have tough sledding” there. Asked whether Verizon would settle for weaker form of broadband relief if Senate were willing to do that, Tauke said “anything is an improvement over the status quo.” He said Hill action was preferable because Congress had more power to preempt states: “Congress can do it more cleanly and completely.” Tauke said he was uncomfortable talking about state preemption, being from company that was heavily regulated at state level, “but this is a national policy.” Crux of briefing was on state of competition in communications. Tauke and Asst. Vp Link Hoewing said there was growing trend toward substitution of traditional landline services through wireless, broadband, Internet services. Popularity of instant messaging by teens, as well as availability of easier-to-use IP telephony, is indication of even more substitution down road, they said. Verizon executives said company’s 2% drop in access lines last year was indication of that trend. Some of substitution is result of drop in 2nd lines as Verizon sells customers DSL service, Tauke acknowledged. But he said DSL sales didn’t fully offset access line loss because company still lost money on DSL, which was common with new technologies.
Rep. Terry (R-Neb.) urged FCC to add “Rural Issues Div.” to each bureau to improve communications between rural telecom providers and FCC. “I have spent many hours listening to and discussing the frustrations many rural telecommunications providers have with the FCC,” Terry said in letter to FCC Chmn. Powell Tues.: “The most frustrating issue… is the apparent inability to talk to and deal with someone at the FCC who understands the needs and issues of rural companies.” He said one or 2 people could be assigned to such division in each bureau “to coordinate and speak out on the issues currently facing rural telecommunications providers, especially when new rules and regulations are addressed that would affect rural… providers.” He said div. also could be contact point for small companies to “get answers and updates” about rural issues. OPASTCO praised Terry for trying “to make the Commission more responsive to the needs of rural telecommunications providers.” On same day, Terry wrote to House Telecom Subcommittee Chmn. Upton (R-Mich.) requesting hearing on HR-1171, which would lift caps on high-cost universal service support system. Bill was introduced by Rep. Deal (R-Ga.) and co-sponsored by Terry and others. “The current universal service caps imposed by the FCC are a cap on investment,” Terry wrote: “These caps hinder the ability of small rural telecommunications providers to invest in new infrastructure that is considered a key to their rural economic development.”
Following FCC approval last month of ultra-wideband (UWB) order, some industry attention is turning to question of how govt. agencies that use technology will be covered under what Commission and NTIA officials call “conservative” limits. One school of thought, industry source said, is that FCC could set similar limits for govt. operators in commercial bands as commercial users of UWB devices face in commercial and govt. bands. However, source said there also was provision in Communications Act that stated that FCC approval of radio frequency devices didn’t apply to those used by govt. Until commercial deployments of UWB enabled by order ramp up later this year, govt. agencies now constitute largest group of UWB users. Some of most serious concerns expressed to NTIA and FCC over potential for UWB to interfere with GPS and other safety-of-life systems came from agencies such as Pentagon and Transportation Dept. Following FCC release of order, which is now undergoing final editing and is expected out soon, NTIA still could update part of its manual addressing unlicensed devices. Process wouldn’t necessarily have to reflect same level of restrictions imposed by FCC’s Part 15 rules for UWB. How FCC addresses govt. users of UWB devices in final order is being watched closely by both industry and Capitol Hill.
FCC will be acting in arbitrary and capricious manner if it regulates “functionally equivalent services” such as DSL and cable modems in “disparate ways,” USTA Pres. Walter McCormick said in responding to our interview with Cable Bureau Chief Kenneth Ferree (CD March 12 p1). In interview, Ferree said it wasn’t job of bureau to make sure regulation of 2 services matched. Cable modem regulation is by Cable Bureau, DSL by Common Carrier Bureau. Ferree said in interview that bureaus did some coordination, but their job wasn’t necessarily to create same rules for each. McCormick issued statement saying FCC decision expected Thurs. on classifying cable modem service would give Commission “an opportunity to show that it understands the real world, where there is intermodal competition between cable, satellite and wireline service providers… These high-speed Internet services are offered as functionally equivalent.” He said FCC should ask itself why cable modems and DSLs were regulated by separate bureaus. Ferree said Tues. it was “unfortunate that there was a misunderstanding. As I said in the interview, the Bureau, in preparing the cable modem access item, was not trying to craft rules for both wireline and cable providers. That said, the Commissioners have a broader perspective that encompasses concerns about regulatory consistency, and the Bureau will continue to coordinate as necessary to address those issues.”
Mont. PSC said Qwest appeared to have complied with all 14 points of Sec. 271 interLATA long distance entry checklist. But agency said findings on items relating to Qwest operation support systems (OSS) were contingent on carrier’s passing regionwide OSS test. Checklist finding doesn’t settle issue entirely, PSC said, because it still has to determine whether Qwest’s interLATA entry is in public interest and give final approval to its postentry performance assurance plan. Also, PSC said Qwest must initiate proceeding for wholesale cost review before FCC made final decision on its application.
FCC’s likely classification of cable modem as information service not only “misconstrues” Congress’s intent in Telecom Act but also threatens to create “regulatory black hole” for high-speed services, public interest groups said. Such classification would encumber both local and federal govts. from protecting public interest concerns in increasingly centralized industry, said Consumer Federation of America (CFA) and Center for Digital Democracy (CDD). Designation as information service would absolve broadband cable from obligations typically applied to telecom services, they said. “The [projected] FCC decision is fatally flawed and will not provide a workable framework for promoting the deployment of advanced telecommunications capabilities,” CFA Research Dir. Mark Cooper said. Agency’s policy would “undermine” open communications environment that applications developers and content suppliers needed to drive innovation, he said. FCC’s proposed decision betrays “dangerous imbalance” in agency approach to broadband policymaking, said Mark Wahl, CDD broadband project dir. “By pandering to the interests of network owners alone, the Commission is abandoning the public interest safeguards that make the Internet a valuable communications medium,” he said.