A broad deregulatory agenda is expected to continue at the Federal Communications Commission ("FCC" or "Commission") and in Congress as Republicans retain control of the White House and increase their representation in Congress. Republican control is expected to translate into support for further easing the media ownership rules, federal preemption of state and local telecommunications regulations, reform of the intercarrier compensation regime and elimination of unbundling obligations on incumbent local exchange carriers ("ILECs"). The chief exceptions to the deregulatory agenda likely will be in the areas of content regulation and indecency in the media.
At the FCC, Republicans will retain their 3-2 majority. Most believe that Chairman Michael Powell will resign his post as Chairman sometime in early 2005, after the Commission votes on key items including the digital television transition, the triennial review of the unbundling regime and the Nextel spectrum swap. Powell, however, has not yet announced his departure. Possible replacements for Powell include Commissioner Martin (term expires June 2006), Commissioner Abernathy (term expired June 2004), former Texas Public Utilities Commission Chair Rebecca Klein, former head of the National Telecommunications and Information Administration ("NTIA") Janice Obuchowski, and current NTIA chief Michael Gallagher. If either Martin or Abernathy becomes the Chairman, leading candidates to fill a Commission vacancy include Ms. Klein, Earl Comstock, a former aide to Senator Ted Stevens (R-AL), and William Bailey, current Commerce Committee Majority Counsel and aide to Sen. John McCain (R-AZ).
President Bush nominated Commissioner Jonathan Adelstein, one of two Democratic commissioners, to remain for another five-year term, and the Senate approved the nomination on November 21. The term for Commissioner Copps, the other Democratic commissioner, expires in June of 2005. Commissioner Adelstein’s nomination was seen as positive for rural interests and support for universal service subsidies for rural telecommunications services. Adelstein and Copps also have strongly opposed relaxation of the media consolidation rules.
In the Senate, the powerful chairmanship of the Commerce Committee, with oversight over telecommunications policy, is expected to go to either Senator Stevens of Alaska or Senator Daniel Inouye of Hawaii. Potential reform of the universal service fund support mechanism is expected to be a priority. If the Commerce Committee is chaired by a senator from either Alaska or Hawaii, two states with high telecommunications costs and heavy reliance on the universal service subsidy program, an interesting counterbalance to the general deregulatory movement could develop on this issue. The success of Voice over Internet Protocol ("VOIP") services, which do not contribute to the universal service fund, and the FCC’s recent decision to preempt regulation of VOIP services, have raised concerns over the long-term financial viability of the fund and the potential for increased telecommunications costs for consumers.
Expected Items for December Open Meeting Agenda and Early in 2005
The FCC Wireline Competition Bureau ("WCB") is expected to send draft rules for Unbundled Network Elements ("UNEs") to Chairman Powell’s office in late November in advance of the Commission’s December 15, 2004 Open Meeting. If adopted, these rules would replace those in the FCC’s Triennial Review Order ("TRO") adopted in February, 2003. Following various lawsuits, the U.S. Court of Appeals for the District of Columbia vacated the Commission’s TRO earlier this year. While the Commissioners may vote on permanent UNE rules in December, the full text of the order outlining the decision is not expected for another few months.
Also expected at the December 15 Open Meeting (if not voted on prior to the meeting) is the Commission rule for air-to-ground ("ATG") communications made on commercial airlines, including broadband. An ATG order is currently circulating among the Commissioners and it could be finalized before the December meeting.
Other matters slated for progress before year’s end include intercarrier compensation, VOIP and universal service. After the November open meeting, Jeff Carlisle, Chief of the WCB, discussed some of these pending proceedings and presented a possible timeline for the resolution of each. The Commission plans to issue a Notice of Proposed Rulemaking in its intercarrier compensation docket by the end of November, for which it will accept comments throughout the winter, possibly taking significant action next summer.
Regarding pending VOIP issues, Level 3 Communication submitted a petition requesting that the FCC forbear from enforcing its rules to the extent that they permit local exchange carriers to impose access charges on VOIP calls connected to the public switched telephone network ("PSTN"). The statutory deadline for the forbearance petition is in December, but the Commission may extend it for three months until March, 2005. SBC has also filed a forbearance petition, requesting that the FCC refrain from applying Title II common carrier regulations to IP platform services. The statutory deadline for this petition is in February, 2005, but the Commission may extend its deadline to May, 2005.
The timetable for action on two other VOIP items remains unknown. One is a response to the Inflexion petition requesting an exemption from access charges for VOIP services provided to underserved markets. The other is a rulemaking that will decide whether Communications Assistance for Law Enforcement Act ("CALEA") requirements apply to VOIP services.
Finally, the WCB expects to take some steps forward regarding universal service over the next several months. The WCB will likely send a draft order suggesting a revision of the methodology by which universal service contributions are collected to the Commissioners in the spring of 2005. Within the next month, the WCB also expects to send out a draft of a further notice of proposed rulemaking, proposing revisions to the current methodology by which carriers compensate each other for carrying and terminating traffic. The WCB Chief expects the Commission to conclude this proceeding sometime next year.
International Bureau Releases Foreign Ownership Guidelines
On November 17, 2004, the International Bureau released a document entitled "Foreign Ownership Guidelines for FCC Common Carrier and Aeronautical Radio Licenses" ("Guidelines"). Although the Guidelines do not break any new ground, they do set forth a clear and concise summary of the precedent and a detailed explanation of how the FCC makes its foreign ownership calculations.
California Consumer Group Accuses AT&T and SBC of Unfair Business Practices
UCAN, a consumer protection group based in San Diego, California, has filed two separate lawsuits in San Diego County Superior Court alleging that AT&T and SBC each violated California Business and Professions Code Section 17200 et seq. Section 17200 allows plaintiffs to act as "private attorneys general" and bring unfair business practice claims in civil court. In both cases UCAN seeks equitable and injunctive relief and monetary damages.
UCAN’s claim against AT&T alleges that the "Regulatory Fees" section of AT&T’s single-line business customer bills included a "Long Distance Federal Carrier Line Charge" of $3.35 and that this charge is identified elsewhere on the invoice as a "fee that recovers additional access costs that long distance carriers are required to pay to local exchange carriers for maintenance of its Primary Interexchange Carrier (PIC) data." UCAN claims that when it inquired about this charge, AT&T informed it that the charge was mislabeled and was not a PIC charge (which under FCC regulations may only be imposed on multi-line business customers) but rather a charge to recover AT&T’s internal expenses associated with regulatory compliance. This charge, UCAN claims, is in addition to a separate line item on AT&T’s bills identified as "Long Distance Administrative Expense Fee" that may recover the same expenses. AT&T’s "misrepresentation" of these charges to its customers violates Section 17203, according to the UCAN complaint.
In its separate complaint against various SBC companies, UCAN alleges that SBC violated Section 17204 by including inaccurate and misleading information about its international call prices on its consumer website. According to UCAN, the international rates most easily found on the sbc.com website are the rates available only to those customers who purchase an international calling plan and pay an additional fee, upwards of $2.95 per month. Any customer not purchasing an international calling plan defaults to the "Basic IDDD" rates that are materially higher, in some cases more than 30 times higher, than the rates available to calling plan subscribers. Furthermore, UCAN claims that SBC "actively conceals" the default rates in violation of FTC guidelines for advertising on the Internet. According to UCAN, the customers most likely to be harmed by SBC’s practices are those most vulnerable, such as non-native English speakers, minorities, or others without the knowledge or ability to challenge the charges.
To date neither AT&T nor SBC has responded to UCAN’s claims.
FCC Revises Local Competition and Broadband Reporting Form
In November, the FCC made significant revisions to its Local Competition and Broadband Reporting Form (Form 477). First, the Commission extended the reporting program for five years beyond its current expiration in March 2005. Second, the Commission eliminated existing reporting thresholds in order to obtain information on rural, underserved areas and from all local exchange carriers, all mobile telephone carriers, and all facilities-based broadband providers. As a result, many rural ILECs, wireless Internet service providers, and municipalities will now be required to file Form 477. Third, the Commission will now require more detailed reporting by speed tiers and by zip code, identification of situations in which broadband is bundled with other services, and separate reporting of different technologies (broadband over power line, DSL, cable modem, etc.).
These changes will be effective with the September 2005 Form 477 filings, and the Commission stated its intent to engage in outreach to smaller companies that will be required to report as a result of these changes. Although the Commission noted the importance of obtaining information from small companies in rural or underserved areas, it also recognized the burden imposed on these companies and noted that there is a waiver process for the smallest providers. The Commission declined to add specific questions regarding local telephone service provided exclusively by VOIP. Finally, the Commission confirmed the confidential treatment of information submitted on Form 477 and eliminated the requirement that parties seeking confidential treatment provide a separate, redacted version of the form.
FCC Continues to Lift ISP on Additional Routes
As reported in previous issues of this Bulletin, the Commission earlier this year reformed its rules to remove its international settlements policy ("ISP") from routes that comply with Commission-mandated settlement rates. In early November, the Commission announced that 40 additional routes are now exempt from the ISP, including the U.S.-India and the U.S.-Mexico routes. There are now 162 U.S.-international routes exempt from the ISP. The Commission has not yet ruled on the U.S.-Philippines route, for which many issues and concerns were raised. As additional filings demonstrating benchmark compliance are made, additional routes will be exempted.
BROADCAST DEVELOPMENTS
Media Bureau Finds Pappas Violated Political Programming Rules
The FCC’s Media Bureau ruled on November 1 that Pappas Telecasting violated the equal opportunities provision of the Commission’s political broadcasting rules. A complaint filed by Nicole Parra, a Democratic candidate for the California Assembly, alleged that Pappas gave her opponent free airtime on TV stations in Fresno, Sanger, and Hanford, CA, while rejecting her requests for free equal opportunities. FCC rules provide that when a candidate is furnished time at no cost, competing candidates are entitled to receive the same amount of free time in comparable time periods. Pappas had claimed that the airtime was a political contribution to several Republican County Central Committees.
CBS Stations Challenge Janet Jackson Indecency Fine
On November 8, CBS filed notice of its opposition to the FCC’s proposed fine for the broadcast of Janet Jackson’s breast exposure during the Super Bowl Halftime Show. The Commission proposed imposing the maximum $550,000 fine against 20 CBS-owned stations for violating the FCC’s indecency rules. CBS argued in its challenge that the fine violates the First Amendment by punishing stations for a fleeting incident during a live broadcast, asserting that they could not have foreseen the incident and should not be held responsible. The network also argued that the FCC’s test for indecency was not met and that the Commission should not have cited indecent broadcasts by Viacom-owned radio stations in deciding to impose the maximum fine. The FCC is reviewing the challenge.
ABC Stations Preempt "Saving Private Ryan" and Complaints Roll In
Fearing fines for violating indecency rules, ABC-affiliated stations in Boston, Orlando, Atlanta, Des Moines, and Kearney, Nebraska preempted an uncut version of the award-winning film "Saving Private Ryan," which was slated to air on November 11. The film contains violence and profanity, but "was praised almost universally" for its treatment of combat in the Second World War, according to Dan Glickman, President of the MPAA. Ray Cole, President of the Des Moines station, which had broadcast the movie uncut in 2001 and 2002, said: "The inconsistent manner in which the FCC is choosing to apply these rules puts TV stations like ours in a most difficult position." The National Association of Broadcasters and Media Access Project agreed that the stations’ actions reflect the dilemma stations face with respect to the indecency rules. ABC offered to indemnify any affiliate for any FCC fines issued for broadcasting the film. The FCC has received complaints against ABC affiliates that aired the movie. FCC Chairman Powell commented that the stations’ actions to preempt programming such as "Saving Private Ryan" may be a subtle attempt to portray FCC indecency rules negatively.
Carriers File Competing Studies as FCC Staff Prepares Draft Unbundling Order
Following the filing of initial comments in October, the FCC staff continued to work on permanent network unbundling rules that will replace those struck down by the D.C. Circuit decision overturning much of the TRO. Industry lobbying efforts intensified as carriers filed dueling studies to support their positions. In an ex parte filing on November 5, SBC replied to competitive local exchange carrier ("CLEC") arguments that unbundled access to high-capacity "loops" (local subscriber lines) and transport is essential for CLECs to compete effectively because the ILECs’ special access rates are too high for special access service to provide an effective substitute for local loop and transport UNEs. SBC argued that CLECs are already making heavy use of special access services; in fact, the vast majority of high-capacity loops used by CLECs are special access lines, rather than UNEs, and CLECs use those lines to serve nearly three-quarters of large corporate accounts — many more enterprise customers (i.e., business customers with more than four lines) than SBC has.
In a study filed on November 10, however, CompTel/Ascent asserted that denying CLECs access to high-capacity DS-1 and DS-3 loops and transport serving business customers would cost U.S. businesses about $130 billion over the next 10 years and deprive the economy of more than 426,000 new jobs. The $130 billion figure is derived from $105 billion in higher rates that would have to be paid for special access services, which typically cost twice as much as UNEs for the same facilities, and $25 billion for additional services because of the increased costs. As a result, "t is likely that much of the local telephone competition presently serving business customers would evaporate," according to the study. The Bell companies strongly disputed the study, citing SBC’s study of the previous week and a study sponsored by the U.S. Chamber of Commerce estimating that reforming unbundling rules would generate more than 200,000 jobs over five years, while boosting capital investment by nearly $60 billion.
Meanwhile, BellSouth submitted a report developed by NERA Economic Consulting stating that ILEC special access services are subject to both intermodal and intramodal competition and that CLEC claims of excessive ILEC earnings on those services are incorrect. BellSouth submitted another filing stating that intermodal competition also creates alternatives for CLECs aside from UNEs and special access services. Competitor interests appearing on a special access panel at a National Association of Regulatory Utility Commissioners ("NARUC") meeting on November 14 stated that special access may not be as competitive as commonly believed because of long-term contractual lock-ins and lack of access to commercial buildings. According to Brian Moir, alternative fiber is available in only about ten percent of commercial buildings, irrespective of the number of transport networks that could service the buildings. Steve Morris, Deputy Chief of the Pricing Policy Division of the WCB, told the attendees that the staff is considering the factors that may affect the availability of special access in crafting proposed unbundling rules.
In a November 17 ex parte filing, BellSouth, saying that it wanted to "set the record straight" on competitive deployment of DS-1 and DS-3 loops, submitted examples of CLEC self-provisioning of these facilities. BellSouth stated that "facilities-based CLECs have a sizeable share of the DS-1 market in BellSouth’s region … particularly … in … metropolitan areas …" Finally, a group of private equity firms stated in a November 19 letter to the FCC that they are concerned about reports that the FCC might be considering expanding the partial exemption for broadband facilities from the unbundling requirements to cover DS-1 loops to customers using fewer than a certain number of telephone numbers (as few as 10) at a particular location. The letter states that limiting the availability of unbundled DS-1 loops to customers with more than 10 lines "would eliminate access to 88% of business locations."
Chairman Michael Powell and WCB Chief Jeffrey Carlisle have asserted, and most observers agree, that the FCC will meet its December 15 deadline in adopting permanent unbundling rules, but some analysts have speculated that the final text might not be released for some time after that. Consultant Joe Gillan suggested at a CompTel/Ascent show in early November that the re-election of President Bush means that any likely FCC majority will reach an "ideologically consistent" decision that will not result in the six-month "post-order rambling" that followed adoption of the TRO, but some delay should be expected. The WCB was expected to send draft rules to Chairman Powell’s office the week of November 15. Chairman Powell would need to begin circulating the proposal among the other commissioners by November 24 in order for the FCC to be in a position to adopt rules at the December 15 agenda meeting.
On November 16, it was reported that unnamed sources have indicated that the proposed draft rules are expected to eliminate switching as a UNE, thereby eliminating UNE-P (i.e., a combination of the local loop, local switching and shared transport UNEs), although the WCB is considering a phase-out of six months to two years. The WCB will also likely recommend retaining high-capacity loops and transport as UNEs, notwithstanding ILEC arguments as to the availability of special access and other alternatives. The WCB is also designing a test, however, to determine when CLECs would be impaired without access to these UNEs, perhaps using the number of end-user business lines per wire center or the presence of fiber-based CLEC colocators as criteria. The crucial high-capacity loop issue for CLECs is the DS-1 loop because that is typically used in situations where there may not be enough traffic to justify self-provisioning. The staff is also trying to come up with a useful definition of the enterprise market and is looking more at the "potential" for impairment than it did before.
The state commissions continue to adjust their unbundling requirements in response to developments at the FCC and the courts. SBC, BellSouth and Verizon have requested various state commissions, including the Nevada PUC, the Kansas Corporation Commission ("Kansas CC"), the Michigan PSC, the Tennessee Regulatory Authority and the North Carolina Utilities Commission, to arbitrate changes to their interconnection agreements with CLECs in order to conform them to current federal unbundling requirements, as established in the D.C. Circuit’s decision and the FCC’s interim unbundling rules. The Bells claim that although their interconnection agreements include UNEs that are no longer required to be offered, the CLECs refuse to amend the agreements. It was reported on October 29 that the Kansas CC had called for comments by November 19 on SBC’s arbitration petition.
The state commissions are also continuing to enforce the FCC unbundling requirements that have not been overturned as well as state unbundling requirements. On October 29, it was reported that the New York PSC ("NYPSC") has required Verizon either to file tariffs for wholesale services offered in place of the enterprise UNEs that it is no longer required to provide or to explain why such services are not subject to state tariffing and federal resale obligations. The NYPSC noted that when Verizon discontinued its UNE-P services to enterprise customers, it promised that it would offer similar replacement services, but has not done so. The NYPSC also stated that Verizon remains under a state obligation to price any replacement service at "just and reasonable" rates. Similarly, it was reported on November 3 that a Virginia Corporation Commission hearing examiner held that Verizon should remain obligated to provide AT&T with enterprise UNE-P services until Verizon can provide AT&T with new enhanced extended links (i.e., combinations of enterprise loops and dedicated transport facilities).
The NYPSC separately called for comments on what amendments might be needed to Verizon’s performance standards to ensure timely and accurate completion of "hot cuts" (i.e., migrating a customer from one carrier’s local switch to another carrier’s switch without an interruption of service). Meanwhile, the California PUC decided to hold off on adopting batch hot cut rules for SBC and Verizon until it can decide whether to incorporate into proposed state rules the rates, standards, processes and principles adopted in August by the NYPSC for Verizon hot cuts. The PUC called for comments on whether the NYPSC hot cut regulations are appropriate for Verizon and SBC in California. On November 22, it was reported that the Delaware PSC approved Verizon interim hot cut rates and adopted the NYPSC hot cut rules for Verizon.
On October 29, it was reported that the Florida PSC held that, under Section 271, BellSouth must honor the existing "line-sharing" provisions of its interconnection agreement with Covad (permitting CLECs to use the high-capacity portion of ordinary voice loops to provide broadband service to BellSouth’s local service customers) and allow Covad to purchase new line-sharing arrangements until the agreement expires on December 19. Under Section 271 of the Communications Act, a Bell company may seek FCC authorization to enter the interstate long distance service market in its own local service territory (which BellSouth has done in Florida) on certain conditions, including compliance with a checklist that includes unbundling obligations. As reported in the October Communications Law Bulletin, the FCC has "forborne" from imposing, under the Section 271 checklist, unbundling requirements that it has removed under Section 251 for broadband facilities, but it is not clear whether the forbearance order covers line-sharing obligations. The Florida PSC stated that it would revisit this issue if the FCC ever clearly removed line-sharing from the Section 271 obligations.
On November 2, it was reported that the Texas PUC approved the interconnection agreement between SBC and Sage Telecom, completing a long-running controversy over the documents that carriers must file in connection with local service interconnection agreements. SBC and Sage had argued that those portions of their agreement that provided facilities and services no longer required under the FCC’s unbundling requirements need not be filed with the PUC. The PUC disagreed and ordered the agreement to be filed in May to permit full review. It was reported on November 8, however, that the Florida PSC decided to postpone final action on a CLEC petition to require ILECs to publicly file all interconnection agreements until the FCC adopts permanent unbundling rules. The FCC is expected to address state commission authority to review interconnection agreements in its order. On November 15, it was reported that Qwest had reached a proposed settlement with the Washington Utilities & Transportation Commission ("WUTC") staff of the WUTC’s charges that Qwest had made secret preferential deals with selected CLECs in return for their dropping their opposition to Qwest regulatory initiatives. Under the settlement, Qwest would pay a fine of $7.8 million and be required to file all interconnection agreements.
Congress Passes Satellite Retransmission Legislation
Congress passed legislation that would permit satellite providers to retransmit broadcast television signals for another five years, but requires satellite companies to offer those signals on one dish. Congress passed the legislation to address concerns of broadcasters, who had complained that satellite providers made certain channels available only on a second dish, which some consumers elected not to install. Satellite providers claimed that the two-dish system was necessitated by capacity constraints and EchoStar asserted that the required one-dish channel consolidation would cost the company $100 million. The legislation allows satellite providers 18 months to phase out the two-dish system.
General Accounting Office Concludes that Nextel Swap Complies with Federal Law
The General Accounting Office ("GAO") determined that the Commission’s decision in its "800 MHz Rebanding Order" to grant Nextel 1.9 GHz spectrum does not violate federal law. GAO launched its investigation in response to a request from Senator Frank Lautenberg. The senator asked GAO to determine whether the spectrum swap provisions of the Commission’s order violated the Anti-deficiency Act, which prohibits federal agencies from authorizing expenditures in excess of what Congress appropriates, and the Miscellaneous Receipts Act, which requires the federal government to deposit received funds into the U.S. Treasury.
Although it did not find that the spectrum deal violated either act, GAO cautioned that the Commission’s order "reflects an expanded use of the Commission’s authority for which there is no exact precedent." Senator Lautenberg accepted GAO’s conclusion, but noted that a broader issue is emerging out of this controversy. He suggested that when Congress re-evaluates the Communications Act next session, it "should review the appropriate division in spectrum management between Congress and the FCC."
A Nextel spokesperson indicated that the company was pleased with the GAO’s findings and added that the "GAO’s opinion is good news for public safety."
Congressman to Propose FCC Reorganization
A spokesperson for Representative Wynn, a House Telecom Subcommittee member, indicated that Wynn plans to introduce the "FCC Reorganization Act" next session. Representative Wynn claims that convergence has rendered the Commission’s current organization obsolete and that a new structure should be based on "the purpose of the regulation as opposed to type of technology." The proposed legislation would include the following bureaus: (1) Spectrum Management Bureau; (2) Government Affairs and Consumer Education Bureau; (3) Economic Regulations Bureau; (4) Social Interest Bureau; and (5) Program Content Bureau. The proposed legislation would not change the structure of the Enforcement and International bureaus and it would allow the Commission to evaluate its structure every five years and institute any necessary changes.
FCC Releases Broadband-over-Powerline Order
Bruce Romano, Associate Chief of the Office of Engineering and Technology, commented that the Broadband-over-Powerline Order, which was released October 28, contained "no surprises." As we reported in our October issue, the Commission adopted rules that: (1) establish new technical requirements for Broadband-over-Powerline ("BPL") devices; (2) prohibit BPL devices from operating in certain bands; (3) require consultation with public safety agencies, federal government sensitive stations, and aeronautical stations; (4) launch a new Access BPL notification database that will assist BPL providers and other service providers in identifying and resolving harmful interference; (5) require Access BPL systems to obtain certification; and (6) create improved measurement procedures for all devices that use RF energy to communicate over powerlines.
At a Power Line Communications Association ("PLCA") conference, Romano indicated that BPL would operate as an unlicensed service under Part 15 of the Commission’s rules. He added that despite concerns voiced by the American Radio Relay League and other groups, the Commission would not reduce the emissions limits for BPL devices. Romano explained that the Commission must certify all equipment before it is distributed for mass use. The new BPL rules will become effective 30 days after publication in the Federal Register.
With the rules in place, industry officials continue to tout the nascent technology’s potential. Tom Sullivan, chief of the NTIA’s Spectrum Engineering Branch, predicted that BPL could increase broadband deployment in the U.S. PLCA president Alan Shark said that he expects 2005 to be a "pivotal" year for BPL and that many providers will change from small trials of the technology to commercial rollouts.
FCC Holds Symposium Regarding the Effect of New Technologies on Numbering Resources
The WCB recently held a symposium on "The Future of Numbering" to explore how numbering resources may be impacted by new technologies and services, such as VOIP. Although it is doubtful that the way telephone companies obtain telephone numbers will change in the short term, this developing issue may indicate that a change in allocating numbering resources is coming in the future.
No shortage of telephone numbers currently exists, and numbers are not expected to be exhausted until 2035 or later. However, FCC staff at the symposium expressed the need to start looking at this issue now, given that new technologies may put more pressure on numbering resources. Panelists at the symposium included representatives from the FCC, state regulators, the North American Numbering Plan Administrator ("NANPA"), academia, wireless and wireline companies, VOIP providers, and equipment manufacturers.
Representatives from the wireless and VOIP industries framed the issue as whether numbering policies accommodate new technologies, rather than the reverse. Currently, numbers are generally assigned on a geographic basis, and are associated with a particular calling area. New technologies, however, are not geographically based. For example, both wireless and VOIP services are portable and are used irrespective of jurisdictional boundaries. Industry representatives generally agreed that numbers will have to identify the customer, not the customer’s location. Thus, an area code will simply be a prefix that is not associated with a particular city or state. State regulators, however, cautioned that the assignment and use of numbering resources should be a joint effort by the FCC and states.
Despite the concern that new technologies may deplete numbering resources, one panelist noted that such technologies may, in fact, conserve numbers. Voicing concern about recent debates over the ability of VOIP providers to obtain telephone numbers, numerous panelists urged the FCC to ensure that access to numbering resources is technology-neutral and nondiscriminatory.
Media Bureau Issues Report on a la Carte Pay-Television Programming
In response to requests by several Congressional leaders for an investigation into the matter, the FCC Media Bureau on November 19 issued a report concluding that allowing consumers the option of receiving a la carte programming on multichannel video programming distribution ("MVPD") systems such as cable television systems would not result in lower rates for most pay-television households. The Bureau found that the average cable household watches approximately 17 channels, but that only those who would purchase fewer than 9 programming networks under the a la carte regime may enjoy a reduction in their cable bill. Given its current viewing habits, the average cable household, under the a la carte regime, likely would face an increase in its monthly bill of between 14 and 30 percent. The Bureau also discussed new a la carte models, such as "mixed bundling" and "voluntary a la carte," that could help mitigate some, but not all, of the harms associated with a pure a la carte regime.
Additionally, the Bureau offered several policy recommendations to enhance consumer choice, promote competition, and equip consumers with the tools to avoid receiving objectionable programming. The Bureau encouraged policymakers to offer incentives for more MVPD competition, as well as incentives to allow consumers more control over programming choices through such means as video-on-demand and digital video recorders. The Bureau also recommended pursuing aggressive policies to promote broadband deployment and technologies that allow consumers to block any unwanted programming.
Congress Tries to Fix Some Universal Service Problems During Lame-Duck Session; FCC Enforces Contribution Requirements
Industry members are seeking a legislative fix to recent troubles that could undermine the stability of the Universal Service Fund ("USF"). Specifically, many are urging Congress to include language in legislation during its lame-duck session that exempts the Universal Service Administrative Company ("USAC"), which administers the USF, from the Anti-Deficiency Act ("ADA"). Under the ADA, USAC must keep cash on hand to cover all of its funding obligations, instead of its past accounting practices which allowed it to make commitments based upon monies it will collect in the future. Without the legislation, USAC may have to raise the USF contribution factor to 12.5 percent or more, which would eventually be reflected in consumers’ bills.
In early August, as a result of an FCC decision, USAC froze all funding requests through the E-rate Program and the universal service health care support mechanism. Although USAC recently began granting funding commitments, such grants were, and will continue to be, limited and prioritized. Rural telephone companies are now worried that USAC will withhold funding under the universal service high-cost funding mechanism, a substantial source of income for the companies. The National Telecommunications Cooperative Association, a trade organization representing rural companies, warned that the accounting change ordered by the FCC could bankrupt rural carriers.
Congress failed to include USF-related information when it passed an omnibus appropriations bill shortly before the Thanksgiving holiday. The USF and other telecommunications legislation appear to have failed because Senator McCain (R. Ariz.) attached unrelated boxing reform measures that stalled the bill, and sources indicate that Senator DeLay (R. Texas) said he would block any legislation sponsored by a senator who opposed certain energy legislation. Congress will return on December 7 to negotiate intelligence legislation, and the outstanding telecommunications bills may be addressed then.
Despite the delay in passing an ADA exemption for the USF, appropriators passed an omnibus bill that included language prohibiting the FCC from limiting universal service funds allocated to telecommunications carriers to the primary line that delivers service to customers. Although the Federal-State Joint Board on Universal Service recommended such a restriction earlier this year over strong objections by rural groups, it appears those groups were more successful on the Hill.
In addition, a conference report for the omnibus bill directed the FCC to not take any action that would result in an increase in rates for prepaid calling cards that are used by military personnel. The legislation directly relates to a petition pending before the FCC regarding whether AT&T’s prepaid calling card service is an "information service" and thus not required to pay access charges or contribute to USF. The military is one of AT&T’s calling card customers, but AT&T has disclosed that it has withheld $500 million in access and universal service payments. It is not clear whether this language will have any impact on the FCC, however, given that it was only included in a report.
In related matters, the FCC entered into a consent decree with TON Services, Inc. ("TON"), a payphone and prepaid calling services provider, in which TON will make a voluntary contribution of $400,000 to the U.S. Treasury for its alleged failure to contribute to the USF and other FCC-mandated funds. Although the consent decree does not specifically constitute a finding of liability, TON acknowledged that it had failed to contribute to the funds when it had been under a different management team. Even prior to the FCC’s investigation of TON, the service provider had already voluntarily begun the process of correcting its non-compliance and had fully cured any non-payment by the time it entered into the consent decree. Thus, the $400,000 penalty is in addition to TON’s required USF contributions. Chairman Powell, praising the enforcement action, warned that the FCC "cannot and will not tolerate refusals to comply with our contribution rules."
FCC Preempts State Regulation of VOIP Services
The FCC took another step forward in the ongoing debate over regulation of VOIP services by preempting state regulation of certain aspects of VOIP provider operations. Specifically, the Commission ruled that Vonage Holdings Corporation’s ("Vonage") DigitalVoice service is not subject to certification, tariffing and E911 requirements that the Minnesota Public Utilities Commission ("MPUC") otherwise imposes on intrastate telecommunications carriers. The Commission limited its decision to Vonage’s DigitalVoice service and services similar to DigitalVoice and certain state regulatory obligations. The FCC stated, however, that its decision made it clear that the FCC, not states, has the responsibility and obligation to determine what regulatory requirements apply to IP-based technologies and services.
The FCC adopted the Vonage decision over objections from Commissioners Copps and Adelstein regarding the piecemeal fashion in which the FCC is addressing VOIP issues. The Vonage decision, however, was prompted in large part by the pending court case before the U.S. Court of Appeals for the Eighth Circuit, which is deciding whether the MPUC has authority to regulate Vonage’s DigitalVoice service. The text of the Vonage decision was released five days prior to oral arguments. The MPUC filed an emergency motion asking the court to postpone oral arguments until after it and the other parties had an opportunity to review and file supplemental briefs on the FCC’s decision. The court, however, denied the motion and oral arguments took place as scheduled.
Counsel for the MPUC, Vonage, and the FCC were present at the oral arguments. The court questioned the parties about whether it had authority to act in this case absent a direct challenge to the FCC’s order, and whether the court’s decision would have any practical effect if the FCC has exercised its preemption authority. The parties appeared willing to accept the court upholding the lower court’s injunction against the MPUC from enforcing its regulations on Vonage, but the MPUC urged the court to limit its decision only to the scope of the FCC’s decision (i.e., the preemption of "certification, tariffing, or other related requirements as a condition of service in Minnesota"). One member of the court expressed concern that "the FCC order appears to leave some room for the states to regulate VOIP services" and asked how the court could ensure that its decision did not foreclose future action by the state that was not addressed by the FCC. In light of the recent FCC decision, the court gave parties 15 days to submit post-argument briefs.
Outstanding questions regarding the regulatory classification of VOIP and other IP-enabled services and whether these services are subject to universal service obligations, intercarrier compensation, public safety requirements, access to services by disabled persons, and the Communications Assistance for Law Enforcement Act ("CALEA") will be addressed in other pending FCC proceedings. |
