House Commerce Oversight Subcommittee members at hearing Tues. asked how current and former top Global Crossing and Qwest executives could lack knowledge of questionable transactions and other details within companies. In 2nd hearing on questionable “capacity swaps” between Global Crossing and Qwest, companies’ leaders defended transactions as legitimate, despite several rounds of detailed questioning by members.
Notable CROSS rulings
FCC’s Media Bureau released 12 studies Tues. examining media marketplace that generally showed increasingly competitive landscape, with consumers often substituting one form of media for another for consumption of news and other information. Commission sought comments on studies as part of its 3rd biennial regulatory review of broadcast ownership rules begun Sept. 12. Omnibus proceeding seeks to revise and update virtually every broadcast ownership rule on books (CD Sept 13 p1) after courts struck down most rules, questioning their efficacy because FCC didn’t present empirical evidence about why it chose to limit ownership in manner it did.
Qwest and Global Crossing were portrayed by House members Tues. as companies making secret deals in effort to boost revenue. Views were expressed in Commerce Oversight Subcommittee hearing on “capacity swaps” that companies used. Panel members said deals to acquire more capacity while telecom marketplace was shrinking were highly questionable and Commerce Committee Chmn. Tauzin (R-La.) suggested such deals were crafted to keep stock prices high for benefit of high-level executives. Hearing followed nearly 7 months of investigation by subcommittee, which produced binder full of memos, e-mails and other documents that members used as basis for their questions.
Ninth U.S. Appeals Court, San Francisco, reversed lower court Mon. and ruled that FCC regulations that took effect after Ariz. Corporation Commission (ACC) arbitrated interconnection agreements must be applied to those agreements. Court then applied those new regulations to numerous provisions of the ACC interconnection agreements, addressing disputes over such things as cable sheath mileage, 4-wire loop price, conditions for access to subloops. Appeals court affirmed District Court on most of those issues but remanded or reversed a few. U S West began negotiating agreements with CLECs in Ariz. in spring of 1996, shortly after Telecom Act was passed. Agreement wasn’t reached with any CLECs so ACC began arbitration in late 1996, with last decisions coming in early 1998. Changes in FCC regulations occurred after 8th U.S. Appeals Court, St. Louis, in 2000 vacated several FCC regulations, including some pricing rules, some of which were reversed by U.S. Supreme Court in 2001. Ninth Circuit had delayed action on U S West v. Jennings (99-16247) until high court ruled. Originally, both U S West and CLECs appealed to 9th Circuit. U S West dropped its appeal, so Mon. ruling was on remaining CLEC cross- appeals. Court concluded: “Because the role of the federal courts is to determine whether the agreements comply with the Act, and because the FCC properly has exercised its authority to implement the Act by means of promulgating regulations, we conclude that we must ensure that the interconnection agreements comply with current FCC regulations, regardless of whether those regulations were in effect when the ACC approved the agreements.”
FCC began most comprehensive look at media ownership regulation it ever has undertaken, Chmn. Powell proclaimed, by examining virtually all rules limiting broadcast ownership. At Thurs. meeting, item passed 3-0, with Comr. Martin concurring in part and Comr. Copps concurring but not voting in favor of item. Copps said he believed “tone” of Notice of Proposed Rulemaking (NPRM) indicated Commission had prejudged situation in favor of deregulation. Powell denied that, telling reporters after meeting that he was keeping “an open mind.”
International Trade Commission (ITC) upheld ruling by administrative law judge that EchoStar didn’t infringe on patents of Gemstar, EchoStar announced. ITC also said Gemstar’s patent was unenforceable. EchoStar still has patent infringement case pending against Gemstar in U.S. Dist. Court. Gemstar also lost patent infringement case against Scientific-Atlantic in U.S. Dist. Court, Atlanta, S-A said. Court granted motion Fri. after Scientific-Atlantic won ruling at ITC Thurs. Court also rejected Gemstar’s cross-motion for summary judgment.
Cal. PUC ruled on phone directory, building access and right-of-way (ROW) issues. Agency ordered SBC/Pacific Bell to resume including in its White Pages phone directories lists of exchanges within customer’s free local calling area, starting with next editions. Pac Bell had stopped providing that information in 2000 on ground that local competition made it too difficult to ensure accuracy. Instead, Pac Bell directed customers to call operators for local number information. PUC (Case 01-03-028) said Pac Bell’s decision was unreasonable given an error rate of less than 1% for entire state. PUC said inclusion of local calling scope in Pac Bell directories would assist customers in making choices among local providers. Agency also told Pac Bell to make calling-scope information available on its Web site within 12 months. In building access matter (Case R95-04-043), it ordered that landlords or householders bear cost of relocating telecom entrance facilities or network interfaces if they requested move. If relocation resulted in utility property’s being transferred to premises owner, transfer would be at net book value of property, not market value, agency said. Rules also require that entrance facilities and network interfaces be relocated to same spot on customer premises if both are being moved. Rules declare that service providing cross-connects belong to telecom providers, not landlords. Where landlords own cross-connects, property transfers will take place at time when there is an installation or other alteration of service at premises. In right-of-way matter (Case R95-04-044), PUC declined to extend its binding arbitration process for handling local right-of- way disputes to include interexchange carriers. Its process was created as alternative to state court litigation to deal with ROW disputes between municipalities and local exchange providers, but City of Riverside asked that arbitration process be extended to also cover ROW disputes between cities and IXCs. Riverside has filed ROW lawsuit against IXC Williams Communications in Riverside County Superior Court, but PUC said city hadn’t provided justification for expanding binding arbitration to cover IXC-city ROW disputes. In another matter, PUC postponed until Sept. 19 its vote on whether to endorse Pac Bell’s Sec. 271 interLATA long distance application.
Coalition including Canadian Internet Providers Assn. (CAIP), Canadian Cable TV Assn. (CCTA), and Bell Canada filed with Canadian Supreme Court bid to appeal recent Tariff 22 ruling by country’s federal court of appeal involving online music royalties. Federal court had supported Society of Composers, Authors & Music Publishers of Canada (SOCAN) application to Copyright Board for new Internet royalty. Court also had ruled that ISPs could be required to pay royalty based on their caching activities and might be liable for copyright infringement. CAIP Pres. Jay Thomson said ruling placed Canadian ISPs “in the impossible position” of having to choose between operating economically by caching or running risk of copyright liability. He said court’s “real and substantial connection” test exposed Canadian ISPs to “liability for content sent from around the globe” and discouraged foreign content providers from allowing Canadians to access their Web sites. He noted that since decision wasn’t explicitly limited to music, it could apply to all Internet content. SOCAN and Canadian Recording Industry Assn. (CRIA) have until end of Aug. to cross-appeal but have applied to court to have CAIP’s supporting affidavits struck on ground that they include legal arguments and, at same time, asked for extension of their cross-appeal filing date. CRIA Pres. Brian Robertson argued that its mandate was to ensure content providers were paid for their work: “Do your business plan, but do not expect the copyright owners to subsidize you. Webcasters want to expropriate tens of thousands of copyrighted works and take them out there to create a business model, then say, ‘Sorry, the business model doesn’t allow for paying you.’ In any other business, you'd look at these people as though they're total lunatics,” Robertson said. CAIP has until Aug. 26 to respond to music industry’s motion on affidavits, Thomson said: “We'll obviously oppose their motion -- on the grounds that what we have filed is permissible under the Supreme Court rules. This particular dust-up is procedural rather than substantive… The next big event will be when SOCAN files its counter-appeal, which now probably won’t be until the end of September.”
Cal. PUC proposed rule that would require landlords to bear costs of relocating telecom or energy utility entrance facilities and network demarcation points on their property if move was being done at landlord’s request. In addition, if relocation resulted in some utility property’s being transferred to landlord, utility would be compensated at net book value. Draft order rejected pleas from telephone and energy companies that such property transfers should be at fair market value, saying disputes over market value could become tool to be used against competitors. Rules also would place ownership of service-provisioning cross-connects with facilities-based carrier using them because carriers had more expertise than landlords to properly operate and maintain them, PUC said. Actual ownership transfers from landlords to carriers would take place when customer transferred service to new carrier or ordered service changes that require rearrangement of cross-connects, agency said. Proposal is on PUC’s Aug. 22 agenda.
Continuity of service and future of telecom industry will be examined in Senate Commerce Committee hearing today on financial turmoil in telecom market. Committee Chmn. Hollings (D-S.C.) will preside over hearing featuring testimony from FCC Chmn. Powell, who will address continuity of service before discussing future of telecom industry in general, FCC spokesman told us. WorldCom CEO John Sidgmore, Global Crossing CEO John Legre and Qwest Pres. Afshin Mohebbi also will testify.