As expected, state regulators offered support while most competitors opposed Verizon’s request to offer long distance service to its small customer base in Conn. Only surprise in comments filed with FCC Mon. came from AT&T, which told agency it wouldn’t object to application as long as Verizon was held to its promise to maintain same rates, terms and conditions in Conn. as it offered in N.Y. state. Verizon serves only 2 communities in Conn., both using equipment located in N.Y. state, where carrier already has received Sec. 271 long distance approval from FCC.
AOL Time Warner asked FCC for “expedited treatment” of company’s claim that cable operators have right to block electronic program guides (EPGs) from other service providers. In new campaign against Gemstar-TV Guide International, which has complained about MSO’s stripping Gemstar’s EPG from its cable systems in favor its own EPG, AOL Time Warner quietly filed petition for declaratory ruling with Commission May 9. Even though program-related material has right to cable carriage on vertical blanking interval of broadcast signal, MSO said, EPGs with broad programming, advertising and promotional information don’t qualify as program related. AOL Time Warner also argued that mandatory carriage of EPGs would violate First Amendment rights of cable operators. Gemstar-TV Guide, which had filed complaint against MSO’s stripping practices last year, abruptly dropped that complaint last month when it seemed clear that agency would rule against it. But AOL Time Warner, which restored Gemstar’s EPG to its systems at least temporarily, wants Commission to rule on issue anyway to stave off future objections. Separately, Gemstar-TV Guide said it lost $123.2 million in first quarter ended March 31, reversing profit of $27.3 million year ago. Company attributed large loss to write-offs for its $14.9 billion purchase of TV Guide. Loss came despite surge in revenue to $352.5 million from $84 million.
FCC isn’t ready to consider streaming media as full competitor to broadcast and cable TV, it said in its decision allowing major broadcast networks to own smaller networks. CBS owner Viacom, which wanted permission to continue owning UPN, had argued that Internet was viable competitor to TV, but FCC, in footnote, said: “Given the nascent stage of the Internet video industry, we believe it is premature to give decisional significance to Internet video at this juncture.” In order released May 15, Commission also said it still was too early to determine competitive impact of DTV. In other portions of final text, FCC said: (1) Growth in number of commercial TV stations to 1,663 in Sept. from 1,550 in Aug. 1996, and declining network viewership share had reduced competitive impact of allowing dual network ownership. (2) Rapid growth in number of cable channels, as well as in DBS, also mitigated impact. (3) Merger of large and small broadcast networks “may produce significant efficiencies by internalizing the contentious issue of program production risk- sharing.” (4) Commenters divided on issue of whether merger of 2 major networks would enhance market power, so FCC decided it didn’t have to address that issue. (5) Retainion of old dual network rule would have “adverse consequences on diversity at the local level” since affiliates of failed network might not be able to afford quality programming. (6) Dual networks would have “strong economic incentive” to diversify programming and serve minority or niche audiences. Commission also stayed requirement that Viacom divest itself of UPN by May 3.
Cable operators, manufacturers and their allies took off their gloves in battle over federal govt.’s interactive TV (ITV) policy, pounding away at Disney, Viacom, Gemstar-TV Guide and consumer electronics manufacturers for pursuing ITV regulation of cable industry. In reply comments on FCC’s ITV inquiry, AT&T, Comcast, Motorola, NCTA and Scientific-Atlanta accused regulatory proponents of hypocrisy and said they sought to replace fair marketplace competition with unfair govt. rules. In particular, they attacked Disney and Viacom, major independent programmers whose many cable networks are members of NCTA. Cable interests accused programmers and broadcasters of trying to use Commission’s proceeding to gain leverage in private, commercial negotiations.
Following approval by FCC last week, Texas Instruments (TI) said it planned to submit wireless local area network (WLAN) reference design for Commission certification under new blanket interim waiver. Waiver was part of further notice of proposed rulemaking designed to update Part 15 rules for spread spectrum systems to usher in new technologies that haven’t met past spread spectrum definitions (CD May 11 p3). Notice proposes to relax frequency-hopping spread spectrum rules as requested in joint petition filed by 3Com and other companies. Further notice also included blanket interim waiver that would allow certain new digital technologies that met peak power requirements to receive equipment certification before final rule was adopted. Under waiver, TI said it was submitting WLAN design based on its 22 Mbps IEEE 802.11b technology. “The impact of the FCC’s decision is great news for the entire wireless LAN industry since it should speed deployment of new products to market and accelerate the overall adoption of wireless networking by consumers,” said TI Gen. Mgr.-Wireless Networking Business Unit Mike Hogan.
Assn. of Communications Enterprises (ASCENT) asked U.S. Appeals Court, D.C., to review FCC’s order granting Verizon long distance entry in Mass. In May 11 notice of appeal, ASCENT said Commission granted Verizon’s application before carrier had satisfied competitive checklist in Telecom Act’s Sec. 271. ASCENT also filed comments with court in support of WorldCom’s request that court stay FCC order pending judicial review. ASCENT told court that, along with supporting WorldCom’s arguments, it had another ground for appealing FCC’s Verizon order: FCC overlooked Verizon’s refusal to offer DSL-based services for resale because company provided such services through affiliate. ASCENT said FCC’s decision violated recent ruling by D.C. Circuit that Telecom Act’s Sec. 251 requirements extended to affiliates of ILECs.
Incumbents and CLECs are drawing battle lines over bill in Mich. legislature (HB-4764) that would require full structural separation of Ameritech and Verizon by Jan. 2003. Bill is before House Commerce Committee. Ameritech disparaged bill as mere “temper tantrum” by certain segments of CLEC industry that it said were afraid to compete. Carrier said competition statistics publicized by CLEC backers of bill were obsolete data from 1999. Verizon called structural separation “a solution waiting for a problem,” especially since it said there was “no evidence” that it would promote competition or resolve any other telecom issues while plenty of evidence existed that it would produce market confusion, threaten jobs, increase costs. Verizon called structural separation “a discredited idea” rejected by economists, FCC, other states. Telcos said they doubted bill would get serious consideration in year-round Mich. legislature. Meanwhile, Mich. CLECs began new ad campaign to drum up support for HB-4764, proclaiming Mich. “needs local competition now” and structural separation is only way to get competition. CLECs said bill would give them “fighting chance” to compete against Ameritech by eliminating inherent conflict of interest when company served both its own retail customers and those of CLECs. CLECs said it would take structural separation to bring about Telecom Act’s promise of open, fully competitive local markets. Issue also has emerged via proposed legislation or CLEC petitions in Fla., Ill., Md., N.J., Pa. and Va., but to date no state has adopted it. Pa. came closest, but PUC stopped short of requiring Verizon to create independent wholesale and retail business units, instead ordering functional separation via separate wholesale and retail divisions within current Pa. operating company.
Rep. Davis (R-Va.) is pushing Julie Rones for Democratic seat on FCC, he said in letter to White House. Rones, Va. resident, is ex-NAB legal fellow and Fletcher, Heald & Hildreth, was delegate to Space WARC conference in 1980s.
More than 24% of E-rate funds that were committed to applicants in first 2 program years remained unused as of Jan. 2001, GAO reported to Appropriations Subcommittee on Commerce, Justice, State. In May 11 report, GAO said $880 million of $3.7 billion was unused, although efforts by E-rate administrators reduced total from 35% -- $1.3 billion -- unused at end of Aug. 2000. FCC and Universal Service Administrative Co. (USAC) have taken steps to reduce level of unused money, including canceling funding commitments if applicants don’t meet deadlines for receiving services associated with E-rate funds. Cancellations make more money available to other applicants, GAO said. FCC told GAO that as of April, figure had been reduced to $774 million. Unused E-rate funds are kept in interest-bearing account. E-rate funds, which are used to reduce cost of Internet projects, don’t go directly to schools and libraries. Instead they are sent to contractors as reimbursement for providing discounted services. GAO report also found that requests for services greatly exceeded $2.25 billion yearly cap in 3rd and 4th years. For 3rd year, more than $4.2 billion in requests were received. USAC estimated that 4th year requests would be nearly $5.2 billion, GAO said. USAC generally has had enough money each year to fund requests for telecom services and Internet access, which are considered first priority. However, E-rate program could support only small part of requests for internal connection, which are lower priority, GAO said. Nearly $2 billion of $3.2 billion worth of requests for internal connections in 3rd year have gone unfunded, agency said. GAO also questioned procedure USAC used to keep track of funding requests. For example, data don’t reflect original amount of funding requested by applicants, only amount approved after application review, GAO said. It prepared similar report for Sen. Rockefeller (D-W.Va.) that offered more detailed state-by-state breakdown of funding by category of service.
Eight Mich. CLECs plus CLEC trade groups CompTel and ASCENT urged Mich. PSC to “carefully consider” last week’s Ameritech notice of its intent to file with FCC for Sec. 271 interLATA long distance authority by Oct. CLEC interests said Ameritech’s filing (Case U-12320) “unilaterally announces a new plan of action” for PSC’s review of 271 application that disregards process and timetable that PSC and all other parties agreed to in Feb. 2000 for 271 review. CLECs said new procedure Ameritech was attempting to establish didn’t include list of mandatory conditions PSC said last year that Ameritech must meet before it sought agency’s endorsement. CLECs criticized Ameritech for deciding to file its entire body of checklist compliance evidence at once instead of taking items one at time, as PSC originally intended. Ameritech indicated compliance filing would be made this week. CLECs asked PSC to: (1) Change company’s new proposal, defer compliance filing until 3rd-party operation support system (OSS) test neared completion. (2) Allow CLECs at least 6 weeks for comments at each comment-reply cycle in schedule instead of Ameritech’s proposed 4 weeks. (3) Reject carrier’s proposed changes in KPMG Consulting’s OSS test evaluation process. (4) Set date certain for company to file 3 months’ actual performance data.