The Month In Brief
As we discuss further below, on March 16, President Bush announced his selection of Republican Commissioner Kevin Martin as Chairman of the Federal Communications Commission ("FCC" or "Commission"). As a sitting Commissioner since 2001, Martin will not be required to undergo confirmation hearings before the Senate.
The FCC faces a number of contentious issues as the Martin era begins. Developments in several of these areas are reviewed in this issue of our Bulletin, which also includes our usual list of deadlines for your calendar.
MCI Board Accepts Verizon Bid as Qwest Prepares a New Offer
As we reported in last month’s Bulletin, the telecommunications industry continues to consolidate as AT&T and MCI, the longtime giants of the intercity telephone services market, prepare to be absorbed by former Bell operating companies. In AT&T’s case, the buyer is SBC; in MCI’s case, Qwest continues to battle the MCI board’s preferred suitor, Verizon.
As this issue of the Bulletin goes to press, Qwest apparently is prepared to make yet another offer in its effort to beat Verizon’s $7.6 billion bid. Reportedly, Qwest’s next proposal might raise the deal’s value to nearly $9 billion.
Triennial Review Developments
Shortly after publication of the FCC’s Triennial Review ("TRO") Remand Order in the Federal Register, the Bell Operating Companies ("BOCs"), the U.S. Telecom Association ("USTA"), and competitive local exchange carriers ("CLECs") have appealed the order in various federal appellate courts. The BOCs and USTA filed a petition for review in the D.C. Circuit Court, while the CLECs filed petitions for review in a number of other federal appellate courts in an effort to ensure that a lottery among the circuits will result in a consolidation of the appeals in a court other than the D.C. Circuit Court, which has favored the BOCs on unbundling issues. As a result of the lottery, the case was assigned to the Third Circuit Court, but that court subsequently granted the motion of the BOCs and USTA to transfer the appeal to the D.C. Circuit Court.
The BOCs and USTA also filed in the D.C. Circuit Court a petition for writ of mandamus to direct the FCC to implement fully the court’s prior decision regarding the unbundling rules. Additionally, the BOCs and USTA filed in the D.C. Circuit Court a motion for expedited action and limited stay of the portion of the TRO Remand Order allowing CLECs to convert special access circuits to UNEs. The BOCs and USTA maintained that the mandamus petition is the appropriate route for judicial review, but that, if the court declines that route, it should act expeditiously on the petition for review and grant a partial stay of the special access conversion rules.
On March 16, the D.C. Circuit Court dismissed the BOC/USTA mandamus petition. The court concluded that the issue was moot, but noted that the dismissal did not foreclose the filing of a new petition for review or writ of mandamus. The court further directed the clerk to assign petitions for review and mandamus to a new, randomly selected panel of the court.
On March 14, the FCC denied Verizon’s petition seeking partial stay, pending judicial review, of the special access conversion rules. The FCC found that the challenged rules merely maintain the Commission’s preexisting policy allowing conversions and that denial of a stay would not change the status quo. Accordingly, the FCC concluded that Verizon failed to demonstrate that it will suffer substantial harm in the absence of a stay. The FCC also found that the petition was procedurally defective because it did not seek to maintain the status quo pending judicial review, but rather to impose a new prohibition on competitive LECs’ access to UNEs.
In a separate, but related matter, the Association for Local Telecommunications Services ("ALTS") raised objections against the BOCs’ lists of central offices where high-capacity unbundled network elements ("UNEs") no longer will be available after March 11 because they purportedly satisfy the FCC’s standards for unbundling relief set forth in the TRO Remand Order. ALTS complained that the BOCs were attempting to circumvent the TRO Remand Order’s requirement that unbundling relief must be implemented through interconnection agreements, rather than unilaterally by the BOCs. ALTS also challenged the BOCs’ methodology for counting business lines and fiber collocators, which are the FCC’s criteria for CLEC impairment. Consequently, ALTS asked the FCC to instruct the BOCs to provide UNEs after March 11 to any CLEC certifying that it is entitled to purchase them and to comply with the requirement that all changes to the UNE regime must be implemented through interconnection agreements.
In another UNE-related matter, the FCC on March 17 granted BellSouth’s request to preempt state regulations requiring incumbent local exchange carriers ("LECs") to provide digital subscriber line service over the same UNE loops that a competitive LEC uses to provide voice service. The FCC concluded that these state regulations are inconsistent with the unbundling rules and policies set forth in the FCC’s 2003 Triennial Review Order.
Broadcast Developments
FCC Proposes First-Ever Fines for Closed Caption Rule Violations.
For the first time in its history, the FCC proposed fines for violations of its emergency closed captioning rules. The Commission issued notices of apparent liability to three San Diego TV stations for failing to provide in a timely manner, to persons with hearing disabilities, critical information about the 2003 wildfires emergency. The information was provided aurally during the stations’ programming, but was not provided through closed captioning or other visual presentation method until after delays of at least 30 minutes. The wildfires, which spread quickly and required evacuation of residents in some areas, caused loss of life, injuries and extensive property damage. The proposed fines were $20,000 for 12 separate violations for KGTV, the ABC affiliate; $20,000 for 11 violations for KFMB-TV, the CBS affiliate; and $25,000 for 22 violations for KUSI-TV, the UPN affiliate.Sinclair and U.S. File Cross-Petitions on Media Rules.
Sinclair Broadcast Group, which owns over 62 stations in the U.S., and the acting Solicitor General each filed a conditional cross-petition for writ of certiorari to review the media ownership decision by the U.S. Court of Appeals for the Third Circuit. In prior litigation brought by Sinclair, the D.C. Circuit Court of Appeals ordered the FCC to either justify or eliminate the 8-voices test of the local television ownership rule. The Third Circuit Court of Appeals required the FCC to continue to apply the 8-voices test until the agency acts on a remand order from the court. The Sinclair petition asks the Supreme Court to determine whether the Third Circuit erred by not setting aside the local television ownership rule. The petition filed by the U.S. argued that the petitions filed by various broadcast companies do not warrant review of the Third Circuit’s decision. If, however, the Supreme Court grants review of the media ownership case, the U.S. requests that the Court consider the issue of whether the Third Circuit erred in holding that the media rules were not supported by reasoned analysis.Tribune Ordered to Divest Connecticut Station.
The U.S. District Court for the District of Connecticut ordered Tribune Co. to divest WTXX, the WB affiliate in Waterbury, Connecticut, to comply with FCC cross-ownership rules. Tribune also owns The Hartford Courant, the daily newspaper in the market, and WTIC-TV in Hartford. The FCC had ordered Tribune to sell WTXX in 2001, but Tribune had requested and received several FCC waivers to retain ownership of WTXX, arguing that it was a failing station. Tribune’s request for a permanent waiver of the rule remains pending at the FCC.Commission Denies Several Broadcast Indecency Complaints
. The FCC issued orders denying indecency complaints against several TV broadcast licensees for the Terrell Owens/Nicolette Sheridan "towel-dropping" introduction to "Monday Night Football," ABC’s uncut presentation of "Saving Private Ryan," and episodes of "Angel," "Will and Grace" and "Arrested Development." In each case, the Commission concluded that the material aired did not constitute an obscene or indecent broadcast.Stevens Seeks to Apply Indecency Rules to Cable.
During a speech to the National Association of Broadcasters, Senate Commerce Committee Chairman Ted Stevens (R-AK) called for an expansion of indecency regulations to pay TV. Stevens said that viewers do not differentiate between over-the-air broadcasters and cable and that the government should have the same power to deal with cable as it does with broadcast television. Later in that week, the FCC denied indecency complaints against CNN’s broadcast of the Democratic National Convention and an episode of FX’s program "Nip/Tuck," both of which were aired on cable and satellite services. The CNN program was alleged indecent because a microphone captured a staff member uttering the "F-word" after Senator Kerry’s acceptance speech. In both cases, the Commission ruled that as an initial matter, it does not regulate indecency and profanity on cable and satellite subscription services, and furthermore, the material at issue does not meet the legal test for obscenity.FCC Issues Report on Over-the-Air Broadcast Viewers to Congress
. As Congress considers applying a date certain to the end of the digital transition, the FCC issued a report on the status of over-the-air television, including potential options for assisting viewers when analog service ends. The report analyzes the timing and nature of a switchover from analog to digital service (comparing a simultaneous end of analog and beginning of digital service against a "fade-to-black" phase out of analog service), the cost of digital-to-analog converter boxes and reasons why over-the-air viewers do not subscribe to pay services such as cable and satellite TV. The report describes the consequences of various approaches to completing the transition, but does not recommendation any particular course of action.FCC Releases Further Notice of Proposed Rulemaking Seeking Comment On Intercarrier Compensation Reform Proposals
On March 3, the FCC released a Further Notice of Proposed Rulemaking ("FNPRM") reviewing the record in its four-year old Intercarrier Compensation proceeding and requesting comment on the intercarrier compensation ("IC") reform proposals submitted by several industry groups. Unlike the typical rulemaking notice, the FNPRM makes no tentative findings of its own. In that respect, the FNPRM resembles a further notice of inquiry as much as a rulemaking notice and reflects a lack of progress by the FCC staff in developing a preferred approach to IC reform.
The FNPRM states that the current IC regime is outmoded and inefficient. The existing rules are based upon distinctions between carrier type, traffic type, service classifications and the end points of communications, all of which are no longer appropriate distinctions given current market developments. Federal and state access charge rules govern interexchange carrier and wireless carrier payments to local exchange carriers ("LECs") that originate and terminate long distance and wireless calls, while reciprocal compensation rules established under Section 251(b)(5) of the Communications Act govern compensation between carriers for the transport and termination of local calls and other calls not subject to access charges. Although terminating access charges and reciprocal compensation rates differ widely, the LEC call termination functions being compensated under those rates are virtually identical.
The FNPRM states that any new IC approach should promote economic efficiency, preserve universal service, be competitively and technologically neutral and administratively simple, address the impact on network interconnection rules, and provide detailed information and/or a transition plan regarding implementation issues. The FNPRM summarizes several industry IC reform proposals and seeks comment on whether it should adopt a single proposal in its entirety, a modified version of any of the proposals, or a combination of components from different plans. Reform proposals or principles for reform were filed by various ad hoc carrier coalitions, trade associations and two state regulatory agency associations. The FNPRM requests comment on various legal issues raised by the proposals, such as the FCC’s jurisdiction to impose an IC system covering intrastate as well as interstate intercarrier charges. Another set of legal issues is raised by the suggestion in some of the proposals to replace all reciprocal compensation and access charges with a "bill-and-keep" system, under which carriers could not charge each other for originating or terminating a call but instead would have to recover all of their costs from end-user customers. The FNPRM also requests comment on the rules that should be imposed regarding carrier interconnection responsibilities and costs and how detailed those rules should be. One significant aspect of any IC system is universal service reform. The FNPRM seeks comment on whether any reduction in intercarrier charges that it requires must be made up by other charges or increased universal service support in order to ensure revenue neutrality for incumbent LECs. The FNPRM also requests comment as to what type of transition to a new IC system would be appropriate and how long the transition should be. Finally, the FNPRM seeks comment on various wireless carrier-related issues, such as whether wireless carriers should continue to be allowed to have numbers with different routing and rating points.
Comments are due on May 23 and reply comments on June 22.
FCC Extends Truth-In-Billing Rules To Wireless Providers And Seeks Comment On Additional Measures
At its March 10, 2005 open meeting, the FCC expanded certain federal consumer protection rules to wireless services by extending its truth-in-billing rules to wireless carriers and it announced that it seeks comments on additional measures that will aid consumers in making informed choices among competitive telecommunications services. The Commission’s actions came in response to increased consumer complaints about billing practices of wireless and other interstate providers and a petition filed by the National Association of State Utility Consumer Advocates ("NASUCA").
Specifically, the FCC removed the existing exemption for Commercial Mobile Radio Service ("CMRS") carriers from the rules requiring that billing descriptions be brief, clear, non-misleading and in plain language. It also held that it is misleading to represent discretionary line item charges in any manner that suggests such line items are taxes or government mandated charges; and clarified that the burden rests upon the carrier to demonstrate that any line item that purports to recover a specific governmental or regulatory program fee conforms to the amount authorized by the government to be collected. Finally, it concluded that its regulations should preempt state regulation requiring or prohibiting the use of line items on wireless carriers’ bills because this activity constitutes rate regulation. The Commission emphasized, however, that this in no way limits states’ ability to enforce their own generally applicable consumer protection laws.
The FCC also released a Second Further Notice of Proposed Rulemaking at this meeting, seeking comments on the distinction between government "mandated" and other charges and whether it is "unreasonable" to combine federal regulatory charges into single line items. It tentatively concluded that providers should place government mandated charges in a separate section of the bill, and that carriers must disclose to customers at the point of sale the full rate, including any non-mandated line items and a reasonable estimate of government mandated surcharges.
This Truth-in-Billing item was the most controversial of the meeting, and provoked mixed reactions from Commissioners and consumer groups. Commissioners Copps and Adelstein dissented from the decision to preempt state efforts to curb line item abuses or require that these charges be explained. The Consumers Federation of America, the Consumers Union, the National Consumer Law Center and State PIRGs strongly criticized the Commission action. NASUCA opposed the Commission’s decision, arguing that it blocks the states from taking action against billing abuses while refusing to solve a nationwide problem. On the other side, the CTIA applauded the Commission for rejecting NASUCA’s petition, stating that this was a major victory for wireless consumers. Finally, NASUCA has decided to take its objections to court, and filed a petition for judicial review with the Eleventh Circuit Court of Appeals.
Oregon Settlement Permits Consumers To File Complaints Against Wireless Carriers
Verizon Wireless, Sprint, and Cingular agreed to give Oregon regulators authority to investigate customer complaints. They agreed to provide accurate coverage maps, disclose all costs and conditions associated with service contracts, and allow customers to cancel new contracts within two weeks for any reason.
This decision, announced on February 18, resulted from a settlement agreement reached last July following allegations that the nations’ three largest wireless phone providers engaged in deceptive sales practices. While most American cell phone customers must take up complaints with the FCC, Oregon residents will now be able to file their complaints with the Oregon Public Utility Commission. This agency will team up with the Oregon Attorney General’s Office for Consumer Protection to handle complaints and monitor compliance.
California Consumer Bill Of Rights
Introduced In California, the battle over a wireless consumer’s bill of rights continues. The rules enacted last May by the California Public Utilities Commission ("CPUC") put heavy restrictions on wireless carriers’ billing and customer contracts, forcing companies to disclose more information and give customers 30 days to cancel a contract without penalty. They also required carriers to post rates on the Internet and get written permission from customers to change services.
In late January, the CPUC suspended these rules after a three to one vote by the commissioners. Telecommunications carriers must continue to comply with all rules currently in place, including rules on slamming (the unauthorized switching of service) and cramming (placing unauthorized charges on a bill). The suspension will be in place until a new decision is issued sometime this year. In the meantime, state legislators proposed a telecom reform proposal at the CPUC Open Meeting on February 24, 2005. The utility commission, for its part, is also looking beyond the bill of rights. It has drafted a proposal to launch a rulemaking to assess and revise the regulation of all telecommunications in California except for small incumbent local exchange carriers.
While this battle is far from over, lawmakers and the CPUC hope to have a resolution by the end of 2005.
Commission Releases Dual Carriage Order
As we reported in the February CLB, the Commission decided on February 10th that cable systems are not required to carry all digital signals generated by broadcast stations. In the Second Report and Order, released on February 23rd, the Commission resolved: (1) not to impose a dual carriage requirement on cable operators during the broadcast transition from analog to digital, on the grounds that the must-carry statute "neither mandates nor precludes the mandatory simultaneous carriage" of both analog and digital signals, and that a dual carriage requirement would likely violate a cable operator’s First Amendment rights; and (2) not to impose a multicast must-carry obligation on cable operators. Under the Commission’s decision, if a digital broadcaster elects to divide its spectrum into several unrelated programming streams, cable operators are required to carry only one of the programming streams – the one designated as "primary" by the broadcasters.
FCC Adopts Rules for Smart Radios
On March 10th, the Commission adopted modified rules for cognitive, or "smart," radios to encourage continued development and deployment of the technology. Smart radios make possible the improved use of vacant spectrum by tuning or adapting to vacant spectrum according to certain external information identified by the smart radio. Some smart radios use geographic positioning system (GPS) data to determine location and permissible transmissions. Others sense the radiofrequency (RF) environment and use this information to decide on an optimal frequency range and transmit power in order to avoid harmful interference. Smart radios are viewed as potentially useful for facilitating secondary markets use of spectrum, by allowing leased use of the spectrum when a licensee is not actively using the spectrum, and rapid reversion to the licensee when needed. Industry forums and standards bodies are working on internationally accepted standards for smart radios.
In the Report and Order, the Commission modified and clarified the requirements for software and cognitive radios. Radios that incorporate software must be designed to provide reasonable security measures to prevent unauthorized modifications that could affect the RF operating parameters or affect the circumstances under which the transmitter operates. The Commission also eliminated the requirement that manufacturers of software-defined radios supply software "source code" at the time of certification. Instead, such manufacturers must supply high level operational descriptions of the software that controls the radio’s radiofrequency characteristics, and a description of the software security measures employed to prevent unauthorized modifications. The Order also describes technical measures cognitive radios can employ to allow secondary use of spectrum by lessees while maintaining the availability of the spectrum for a higher priority use by the licensee.
FCC Issues First Notice of Apparent Liability Under Do-Not-Call Rules
On March 1, the FCC proposed a forfeiture of $770,000 against Dynasty Mortgage, L.L.C. ("Dynasty") for calling residential consumers who had registered their phone numbers on the National Do-Not-Call Registry (the "Registry"). The FCC proposed the maximum forfeiture of $11,000 for each of Dynasty’s seventy violations because it continued to call numbers on the Registry even after the FCC warned it about potential penalties. Dynasty also allegedly told consumers that it was exempt from the Do-Not-Call rules. The FCC’s proposed maximum forfeiture in this case, which follows sixteen citations against non-common carriers and two consent decrees with common carriers, indicates that the FCC will vigorously enforce the Do‑Not‑Call rules.
In other recent enforcement developments, the FCC entered into a consent decree with Sprint for slamming violations and a consent decree with Publix Companies ("Publix") for violations related to the Telecommunications Relay Service ("TRS"). The FCC entered into the consent decree with Sprint on March 10. The consent decree ended an FCC investigation that was based on consumer complaints that their service was changed to Sprint without authorization. Under the consent decree, Sprint agreed to make a voluntary contribution to the United States Treasury in the amount of $4,000,000. The consent decree also requires Sprint to implement a compliance plan in which it will implement a process to confirm authorized consumer changes, train employees and non-employee sales representatives regarding this process, and compile monthly reports with respect to complaints that Sprint receives alleging unauthorized preferred carrier changes and deceptive marketing complaints.
In its consent decree with the FCC, Publix agreed to cease operations as a common carrier and pay $7.9 million to reimburse the TRS Fund. The consent decree ends an FCC investigation into whether Publix received TRS funds "under false pretenses." Publix and its owner, Raanan Liebermann, entered a guilty plea with the U.S. Attorney’s Office for making a false statement to the FCC via the TRS fund administrator and conducting an unlawful monetary transaction.
Months of Speculation End as Commissioner Martin Named FCC Chairman
On March 21, FCC Commissioner Kevin Martin took over as FCC chairman. As one of his first actions, Martin requested that bureau chiefs temporarily refrain from releasing public notices, acting on personnel matters, or authorizing travel. The request allows Chairman Martin and his staff the opportunity to review the status of important matters currently before the bureaus. Sources at the FCC indicated that Chairman Martin’s request is fairly common from a newly appointed chairman.
In the meantime, the White House has completed the paperwork for President Bush to officially designate Martin as "chairman." Although the Senate must confirm all commissioners, the President may appoint one of the five commissioners as chairman without subjecting the appointee to confirmation hearings. Martin issued a statement that the FCC has several challenging issues before it, such as advancing homeland security and promoting broadband deployment.
On a related note, Commissioner Abernathy announced that she will leave the FCC. However, in a news conference on March 17, she indicated that she will not leave the Commission until the Bush administration appoints her successor. Abernathy added that although she will not seek reappointment, her departure is not necessarily "imminent."
FCC Issues Expected Order on "Naked DSL," But Criticizes ILEC Number Porting
In an expected ruling on a BellSouth preemption petition, the FCC preempted state rules that required BellSouth to provide digital subscriber line ("DSL") service to customers obtaining voice service from competitive local exchange carriers ("CLECs") using an unbundled network element ("UNE") loop. The FCC held that such state rules conflicted with the FCC’s Triennial Review Order ("TRO") by effectively requiring unbundling of the low frequency portion of the loop ("LFPL"). The FCC based its decision in part on the availability of line splitting arrangements under which two CLECs team up to provide voice and data service over the UNE loop.
The FCC did not rule upon BellSouth’s arguments that the state decisions constituted unlawful regulation of interstate service and/or unlawful regulation of an information service.
In a warning to the incumbent local exchange carriers ("ILECs"), however, the FCC warned that ILECs cannot delay the porting of telephone numbers until a customer cancels the associated DSL service. The FCC stated that it intended to enforce its non-discriminatory porting requirements and would not permit non-porting-related restrictions or delays.
Finally, the FCC issued a related Notice of Inquiry ("NOI") on the broader question of the tying or bundling of services. Specifically, the FCC has asked how such tying affects intramodal and intermodal competition, and whether such bundling harms new providers such as voice over Internet protocol ("VOIP") providers.
Commissioners Copps and Adelstein supported the number porting portion of the order, but dissented from the core ruling, raising concerns that wireless-only consumers or VOIP consumers might be denied broadband service.
To read Part 2 of this article please click on the Next Page link below
