FCC Law Blog

FCC Initiates Net Neutrality Rulemaking

updates@antitrustlawblog.com (Sheppard Mullin) — Mon, 02 Nov 2009 13:12:05 -0500

In its latest move in the "net neutrality" debate, the Federal Communications Commission (FCC) issued a Notice of Proposed Rulemaking (NPRM) in late October 2009 that breaks from the FCC's historically restrained approach to Internet regulation and proposes a host of new prohibitions and requirements on broadband providers. While some have praised the move as a necessary means to ensure continuing investment in innovative content and competition in the Internet access market, others have argued that formal regulation will discourage broadband providers from investing in infrastructure, stifle broadband-related job creation, and lead to congested, slow-moving networks. In addition, some opponents of the move have questioned whether the FCC even possesses the legal authority to regulate Internet network management.

As expected, the proposed rules would codify four existing Internet principles established by the FCC in 2005 as mere "guidelines." These four principles are the following:

1.Subject to reasonable network management, a provider of broadband Internet access service may not prevent any of its users from sending or receiving the lawful content of the user's choice over the Internet.

2.Subject to reasonable network management, a provider of broadband Internet access service may not prevent any of its users from running the lawful applications or using the lawful services of the user's choice.

3.Subject to reasonable network management, a provider of broadband Internet access service may not prevent any of its users from connecting to and using on its network the user's choice of lawful devices that do not harm the network.

4.Subject to reasonable network management, a provider of broadband Internet access service may not deprive any of its users of the user's entitlement to competition among network providers, application providers, service providers, and content providers.

The proposed rules would also establish two new "nondiscrimination" and "transparency" rules:

5.Subject to reasonable network management, a provider of broadband Internet access service must treat lawful content, applications, and services in a nondiscriminatory manner.

6.Subject to reasonable network management, a provider of broadband Internet access service must disclose such information concerning network management and other practices as is reasonably required for users and content, application, and service providers to enjoy the protections specified in [the FCC's net neutrality principles].

Under the proposed definition of "reasonable network management," broadband providers would still be able to manage their networks to reduce congestion and address quality-of-service concerns, address harmful traffic or traffic that is unwanted by users, and prevent the unlawful transfer of content. Thus, while it may be reasonable for a broadband provider to temporarily limit usage during periods of congestion or to charge subscribers based on usage rather than a flat monthly fee, it would not be reasonable to block or degrade VoIP traffic but not other services that similarly affect bandwidth usage, or to block or deprioritize particular content on the basis of viewpoint alone. Similarly, it would be reasonable under the proposed rules for a broadband provider to prevent the unlawful distribution of copyrighted works or to block spam, child pornography, or content that a particular individual has requested be blocked.

Despite the vast expenditure of energy that has gone into debating whether the FCC should promulgate net neutrality rules and what form those rules should take, many commentators have questioned whether the FCC possesses the legal authority to regulate Internet network management. The FCC has argued in the Comcast/BitTorrent proceeding that it has ancillary jurisdiction over broadband Internet access service because the subject matter falls within the FCC's general statutory grant of jurisdiction and the regulation is "reasonably ancillary to the effective performance of the Commission's various responsibilities." While this position was echoed by Chairman Genachowski and Democratic Commissioners Copps and Clyburn in the FCC's NPRM, the merit of the argument is far from clear. Republican Commissioners McDowell and Baker have both expressed doubts, and the Comcast/BitTorrent proceeding is currently on appeal before the U.S. Court of Appeals for the D.C. Circuit. Oral arguments in the case are currently scheduled for January 8, 2010, which presents interesting timing for the case given the FCC's desire to complete its rulemaking next year. In addition, Senator John McCain (R – AZ) has introduced a bill (S. 1836) that would prohibit the FCC from regulating Internet services altogether.

The FCC is currently seeking comments from the public as to what form the final rules should take and whether the FCC possesses legal authority to regulate Internet network management in general. Comments are due on January 14, 2010 and reply comments are due on March 5, 2010.

Authored By:

Christopher S. Huther
(202) 772-5374
chuther@shepparmdullin.com

and

Megan H. Troy
(202) 772-5373
mtroy@shepparmdullin.com

and

Brian D. Weimer
(202) 469-4904
bweimer@shepparmdullin.com

and

Daniel Brooks
(202) 469-4916
dbrooks@sheppardmullin.com

D.C. Circuit Strikes Down Cable Ownership Cap

updates@antitrustlawblog.com (Sheppard Mullin) — Thu, 10 Sep 2009 09:42:24 -0500

On August 28, 2009, the Court of Appeals for the District of Columbia Circuit issued an opinion in Comcast Corporation v. FCC, which vacated the FCC's 30% limit on the number of subscribers to which a cable operator could offer service.

The 30% cap, created in 1993, was initially intended to promote competition in the cable television market and increase consumer access to diverse network programming. In 1993, however, the cable television market was dominated by large companies that had exclusive monopoly franchises in particular geographic areas. Since that time, the cable television landscape has changed dramatically. Now, direct broadcast satellite companies provide programming to approximately one-third of subscribers, consumers have access to significantly more channels of programming than ever before, competitive wireline providers are expanding rapidly, and alternate transmission methods of video media are playing ever-increasing roles in the lives of consumers.

Despite these fundamental changes, however, the FCC refused to alter or eliminate the 30% subscriber limit to better reflect market realities. Moreover, the FCC applied the cap not only to incumbent cable providers, but to competitive wireline providers – telephone companies providing fiber optic video services – which, ironically, decreased competition by limiting the total number of subscribers to which these new providers could offer service.

Citing to the “substantial competition” in the cable television marketplace today, the D.C. Circuit struck down the FCC’s 30% limit as arbitrary and capricious. The Court found the record “replete with evidence of ever increasing competition among video providers,” and properly observed that “the broadcast industry is dynamic in terms of technological change; solutions adequate a decade ago are not necessarily so now, and those acceptable today may well be outmoded 10 years hence.” Refusing to ignore this “crucial fact about the nature of the video industry,” the Court vacated the FCC's 30% subscriber limit.

Though the D.C Circuit did not “think that prospect looms large,” the FCC will have another opportunity to justify the 30% limit. In weighing this decision, the FCC would be wise to remember that competitive markets consistently prove themselves superior to regulatory fiat in fostering investment and innovation and in protecting consumers' interests and serving their needs. The FCC thus should promote robust competition and avoid placing unnecessary restrictions on cable operators – particularly competitive wireline providers, who, by definition, have never possessed bottleneck monopoly power over access to video programming. In light of the Court's ruling and the realities of the cable market, it appears unlikely that the FCC will be able to justify any future cap-based regulation.

Authored by:

Christopher S. Huther
(202) 772-5374
chuther@sheppardmullin.com

and

Megan H. Troy
(202) 772-5373
mtroy@sheppardmullin.com

and

Jeremy Keim
(202) 741-8429
jkeim@sheppardmullin.com

Increased Prospects for Broadband Deployment under Obama

updates@antitrustlawblog.com (Sheppard Mullin) — Thu, 18 Dec 2008 13:31:02 -0500

A broad coalition of telecommunications companies and organizations has called upon President-elect Barack Obama to prioritize broadband deployment and stimulate investment in broadband services. This large coalition – which includes AT&T, Verizon, Google, Alcatel-Lucent, organizations representing the cable and wireless industries, organizations representing state and local governments, as well as consumer groups – emphasizes both infrastructure deployment and demand stimulation to foster broadband investment, adoption and utilization. Specifically, the coalition advocates, among other things, expanding the coverage of broadband networks to areas where there are currently none, obtaining higher speed connections in areas where networks already exist, and providing subsidies to low-income individuals to purchase a computer or pay for a broadband connection. To achieve these objectives, the group favors tax incentives, grants, low-cost loans and loan guarantees, and universal service subsidies.

President-elect Obama has already made clear that he intends to make broadband deployment a priority. In his December 6^th radio address, the President-elect announced plans to make substantial new investments in national infrastructure to stimulate the economy, including funds to increase broadband availability. The Obama Transition also has indicated that it will look at reforming the Universal Service Fund, making better use of the nation’s wireless spectrum, promoting next-generation facilities, technologies and applications, and providing new tax and loan incentives as means by which to encourage the deployment of next generation broadband. While specific details of the proposed stimulus package have not yet been made public, it is likely to include some, if not all, of these initiatives. Recent meetings with a wide range of telecommunications companies also suggest that President-elect Obama’s Transition Team will consider input from the telecom industry in determining which measures will be included in the stimulus package.

With Congress expected to pass a large economic stimulus package in early 2009, broadband deployment appears likely to get a boost from any legislation ultimately adopted. House Speaker Nancy Pelosi, who is taking the lead on the stimulus package in Congress, has signaled her support for action on broadband deployment. This support in Congress, coupled with the support of the incoming administration and the telecommunications industry in general, means that investment in broadband is likely to be part of any stimulus funding approved in the coming year.

Authored by:

Christopher S. Huther

(202) 772-5374

chuther@sheppardmullin.com

and

Megan H. Troy

(202) 772-5373

mtroy@sheppardmullin.com

and

Karin Hunter Johnson

(202) 218-0008

kjohnson@sheppardmullin.com

Senate Passes FISA Bill With Telecom Immunity

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 16 Jul 2008 15:55:33 -0500

The Senate recently voted 69-28 in favor of a bill (H.R. 6304) that will provide retroactive legal immunity to telephone companies that participated in the Bush administration's warrantless surveillance program. The bill’s passage ended more than a year of legislative debate over whether to immunize phone companies from lawsuits filed by subscribers alleging that the companies violated their civil rights by participating in the program.

The warrantless surveillance program began shortly after the terrorist attacks of September 11, 2001, when the White House issued an executive order authorizing the National Security Agency ("NSA") to eavesdrop on international phone calls and email messages of Americans and others inside the U.S. without obtaining the court-approved warrants that are normally required under the Foreign Intelligence Surveillance Act of 1978 ("FISA") for domestic spying. Prominent telephone companies such as AT&T, Verizon, and others participated in the program by granting the NSA access to private communications data. After the program was disclosed in late 2005, telephone subscribers filed over forty class action lawsuits against the companies, arguing that their civil rights had been violated by the disclosure of their personal information. The lawsuits threatened the telephone companies with billions of dollars in potential liability.

The recently passed bill, which President Bush has promised to sign into law quickly, will grant retroactive legal immunity to phone companies that participated in the program. Under the legislation, district courts will "promptly dismiss" the lawsuits upon determining that the defendant companies received directives from the administration to participate in the program. Because the Senate Intelligence Committee has made clear that the firms did, in fact, receive such directives, dismissal of the suits is now a virtual inevitability.

In addition to providing retroactive legal immunity to telephone companies, the legislation will allow the government to monitor foreign communications more easily. The government will not have to obtain warrants to monitor foreigners whose communications pass through or are stored by U.S. communications hubs, or to monitor U.S. residents communicating with suspected foreign terrorists (provided that the U.S. resident being monitored is not the target of the surveillance and that efforts are made to minimize the surveillance of his or her communications). Warrants will still be necessary to monitor U.S. residents who are themselves the targets of surveillance, and for Americans traveling abroad as well. In certain "exigent" circumstances—e.g., attorney general certification that there is probable cause to believe that a target is linked to terrorism—the government will be able to conduct emergency wiretaps on Americans for up to seven days without obtaining a warrant. In a concession to Democrats, the bill also reaffirms that FISA is the "exclusive" means of conducting surveillance wiretaps, a provision designed to prevent comparable programs from evading court scrutiny in the future. All provisions of the bill will sunset at the end of 2012.

As expected, the Senate rejected proposed amendments that would have weakened the bill's immunity provisions. Proponents of the legislation praise the bill as vital for national security and important for ensuring that phone companies acting in good faith are not punished for their assistance with the program. Critics, on the other hand, argue that the legislation will prevent the administration from being held accountable for its actions and that, because most members of Congress have not been briefed on the warrantless surveillance program, granting retroactive immunity at this point is ill advised. Senate majority leader Harry Reid (D-NV), a critic of the bill, has promised to review the law next year, and lawyers representing plaintiffs in the lawsuits have vowed to challenge the immunity provision in federal court.

Authored by:

Christopher S. Huther

(202) 772-5374

chuther@sheppardmullin.com

and

Megan H. Troy

(202) 772-5373

mtroy@sheppardmullin.com

FCC Steps Up DTV Enforcement

updates@antitrustlawblog.com (Sheppard Mullin) — Thu, 17 Apr 2008 18:28:18 -0500

The FCC’s recent DTV enforcement actions made one thing clear – the Commission is being vigilant in the enforcement of its digital television (or “DTV”) regulations. On April 9, 2008, the FCC adopted notices of apparent liability (“NALs”) against eleven companies for mislabeling analog-only television sets with no digital tuners, leaving full V-chip functionality out of DTV sets, and shipping analog-only sets with no digital tuners. The proposed fines total $6.6 million. The FCC also issued consent decrees against seven companies that collectively agreed to pay $3,445,000 for V-chip violations.

Of the eleven NALs, seven were issued against large retail chains for allegedly failing to warn customers that analog-only television sets will not work after the switch to digital broadcasting in 2009. They include Sears and Kmart ($1.1 million in proposed fines); Wal-Mart and Sam’s Club ($992,000); Circuit City ($712,000); Fry's Electronics ($384,000); Target ($296,000); Best Buy ($280,000); and CompUSA ($168,000). In total, the seven retailers were assessed a total of $3,928,000 in NALs, with Sears and Kmart being the hardest hit (a total of 137 alleged violations). According to FCC Chairman Kevin Martin, in testimony before the Senate Commerce Committee on April 8, the FCC inspected 2,716 stores as well as 36 web sites searching for violations.

The FCC also adopted two NALs – proposing a total of $1.6 million in fines – against companies alleged to have violated the DTV tuner mandate. One NAL proposed fines of $357,900 against Precor Inc. for allegedly shipping workout equipment containing TVs without digital tuners, while the other proposed fines of $1,266,100 against Syntax Brillian for shipping televisions in interstate commerce that also lacked digital tuners tuners.

Finally, Polaroid and Proview Technology face fines of $775,000 and $300,000, respectively, for violations of the FCC’s requirement that digital televisions recognize digital V-chip technology. The FCC signed consent decrees with seven other manufacturers accused of V-chip violations. The largest settlement was with LG Electronics, which agreed to pay $1,700,000. Settlements were also reached with Philips ($450,000), Sanyo ($375,000), Vizio ($370,000), Panasonic ($320,000), Westinghouse ($210,000), and Audiovox ($20,000).

Authored by:

Megan H. Troy

(202) 772-5373

mtroy@sheppardmullin.com

and

Christopher Huther

(202) 772-5374

chuther@sheppardmullin.com

and

Richard Siegel

(202) 772-5392

rsiegel@sheppardmullin.com

Incumbents Big Winners in 700 MHz Auction

updates@antitrustlawblog.com (Sheppard Mullin) — Tue, 01 Apr 2008 14:39:29 -0500

The FCC recently announced the results of auctions for newly available 700 MHz radio spectrum. Altogether, 1090 licenses were sold to 101 different bidders. Over $19 billion was raised by the auction – an amount that far exceeds the sum raised in any single spectrum previously conducted and went beyond Congressional estimates by about $9 billion.

The biggest winners of the auction were the incumbent providers, with Verizon Wireless purchasing licenses covering 475 million POPS (population) for $9.63 billion, and AT&T Mobility purchasing licenses covering 175.8 million POPS for $6.64 billion. Combined, the two companies were responsible for over $16.25 billion of the approximately $19.6 billion spent by winning bidders. As expected, Google did not win any of the C block licenses. It had bid $4.7 billion on the 8-region package covering all 50 states, but lost to Verizon for 7 of those regions and to Triad-700 for Alaska.

The spectrum, which is presently used for UHF television broadcasts, will be returned to the FCC next year as a result of the conversion to digital television. The FCC intends to use the money raised in the auction to aid in that conversion. Among the benefits of this spectrum, it is believed that the 700 MHz frequencies will penetrate buildings better than current cellular service, which operates between 850 and 1900 MHz, thereby allowing greater reception and service within buildings than is currently available. In addition to increased quality, it is expected that the new spectrum will lead to greater choices for consumers in both devices and services.

One block of spectrum, the "D-block," was not purchased as no bidder reached the FCC's reserve price for the auction. The FCC is currently considering how to go about re-auctioning that block.

Authored by:

Megan H. Troy

(202) 772-5373

mtroy@sheppardmullin.com

and

Christopher S. Huther

(202) 772-5374

chuther@sheppardmullin.com

and

Richard Siegel

(202) 772-5392

rsiegel@sheppardmullin.com

Washington Update - July/August 2007

updates@antitrustlawblog.com (Sheppard Mullin) — Thu, 13 Sep 2007 14:29:42 -0500

I. Legislative Branch Activity

A. Senate Committee Passes Three Telecom Bills.

On July 19, the Senate Commerce Committee approved three telecommunications bills: a broadband data bill (S-1492), a number porting measure (S-1769), and an indecency bill (S-1780). The broadband data bill, as passed by the Committee, directs the Commission to use Form 477 data to determine broadband service tiers, creating a separate tier for advanced services. The requirements for Form 477 would be altered to identify actual numbers of broadband connections associated with subscribers. In addition, the FCC would be allowed to choose whether to utilize 5-digit or 9-digit zip codes, or census tract information.

The controversial indecency bill would punish broadcasters for "fleeting expletives" and single words or images that air. Some groups warn that passage of such a bill reverses the recent U.S. Court of Appeals case that threw out a FCC policy of fining stations for such expletives, and will only invite further litigation.

B. Senate Bill to Increase Funding for Interoperability.

On July 27, the House passed HR-1, a bill based on the recommendations of the 9/11 Commission. Included in the massive bill was $400 million to upgrade the nation's 911 service and promote increased interoperability of emergency services. The funds will arrive in FY 2009 and will be allocated through grant programs, which will be administered by the Department of Homeland Security. President Bush signed the bill into law on August 3.

C. New Parental Control Bill Clears Senate Committee.

The Child Safe Viewing Act of 2007 (S-602), introduced by Sen. Mark Pryor (D-AR), was approved in a Senate Commerce Committee markup. The bill asks the FCC to examine newer blocking technologies than the current V-chip. These new devices could be used on TVs, DVD players, cable set top boxes, and satellite receivers. The filter itself would be independent of the preexisting TV rating system and would filter language based on closed captioning.

D. Legislative Calendar.

The House and Senate reconvened September 4 and are in session until October 8.

II. Federal Communications Commission (FCC) Activity

A. July FCC Meeting.

Commission Adopts Rules for the 700 MHz Band.

The Commission passed a single order at the July 31 FCC Open Meeting -- rules for the 700 MHz band that is being vacated by television stations as a result of the DTV transition. The new rules are intended to promote the creation of a nationwide interoperable broadband network for public safety, as well as to promote new wireless services for consumers. Per the rules adopted, 22 MHz of the spectrum is allocated for open access, 10 MHz for a public-private partnership, and another 10 MHz for the nationwide wireless broadband network.

The Order also set reserve prices for the auction. The C-block of spectrum, allocated for open access, has a minimum bid of $4.6 billion, while the nationwide public-private partnership band is set at $1.3 billion. If the reserve is not met for the C-block, the space will be reauctioned without any open access provisions.

The band space is to be auctioned off by the Congressionally mandated deadline of January 28, 2009.

B. Other July FCC Activity.

1. DTV Transition NPRM Approved (Docket 07-148).

On July 30, the Commission released a Notice of Proposed Rulemaking that seeks comment on possible DTV consumer education initiatives that broadcasters, MVPDs, retailers, and manufacturers would have to undertake. Comments are due on September 17 and reply comments on October 1.

2. Studies on Media Ownership Released (Docket 06-121).

The FCC published on July 31 ten studies concerning media ownership. The studies are intended to inform the Commission during its review of broadcast ownership policies. Comments are due 60 days after release of the public notice, on October 1, with reply comments due October 16. The following are the topics and authors:

Study 1: How People Get News and Information

Author: Nielsen Media Research, Inc.

Study 2: Ownership Structure and Robustness of Media

Authors: Kiran Duwadi, Scott Roberts, and Andrew Wise, FCC

Technical Appendix: C. Anthony Bush, FCC

Study 3: Television Station Ownership Structure and the Quantity and Quality of TV Programming

Author: Gregory S. Crawford, Department of Economics, University of Arizona

Study 4: News Operations

Section I: The Impact of Ownership Structure on Television Stations’ News and Public Affairs Programming, Author: Daniel Shiman, FCC

Section II: Ownership Structure, Market Characteristics and the Quantity of News and Public Affairs Programming: An Empirical Analysis of Radio Airplay, Author: Kenneth Lynch, FCC

Section III: Factors that Affect a Radio Station’s Propensity to Adopt a News Format, Author: Craig Stroup, FCC

Section IV: The Effect of Ownership and Market Structure on News Operations, Author: Pedro Almoguera, FCC

Study 5: Station Ownership and Programming in Radio

Author: Tasneem Chipty, CRA International, Inc.

Study 6: The Effects of Cross-Ownership on the Local Content and Political Slant of Local Television News

Author: Jeffrey Milyo, Center for Applied Economics, University of Kansas, School of Business; Department of Economics and Truman School of Public Affairs, University of Missouri

Study 7: Minority and Female Ownership in Media Enterprises

Authors: Arie Beresteanu and Paul B. Ellickson, Duke University

Study 8: The Impact of the FCC’s TV Duopoly Rule Relaxation on Minority and Women Owned Broadcast Stations 1999-2006

Author: Allen S. Hammond, IV, Santa Clara University

Study 9: Vertical Integration and the Market for Broadcast and Cable Television Programming

Author: Austan Goolsbee, University of Chicago, Graduate School of Business; American Bar Foundation; and National Bureau of Economic Research

Study 10: Review of the Radio Industry, 2007

Author: George Williams, FCC

C. August FCC Meeting.

The August Open Meeting also had only one item on its agenda: automatic roaming rules. The approved Report and Order and Further Notice of Proposed Rulemaking requires carriers to offer automatic roaming to customers of other carriers. Some data, such as text messaging, was included in the Order. Wireless broadband was not, however, and the FCC agreed to open a rulemaking on the subject. Of some controversy, though, was the stipulation that to qualify for roaming protection, carriers must not only have bought licenses in the area, but have built out their networks. Companies who bought licenses in last year's Advanced Wireless Auction may be affected, as many have not built out yet.

D. Other August FCC Activity.

1. USF Protections Strengthened.

On August 29, the FCC released an order that expands the scope of punishment for defrauding the Universal Service Fund ("USF"). Previously, participants could only be debarred if they defrauded schools and libraries, known as the E-Rate Program. Now the possibility of sanctions has been expanded to encompass all aspects of the USF, including high-cost, rural health care and low-income programs.

2. Long Distance and Local Rules for Bells Lessened.

Late on August 31, the FCC gave Bell Operating Companies ("BOCs") more opportunity to integrate their long distance and local service. BOCs like AT&T and Verizon will not face tariffs and other penalties for not separating the services. The Commission is believed to have acted because of an AT&T Forbearance Petition on the same matter that would have taken effect Friday.

E. Next Commission Meeting.

The September open meeting is scheduled for Tuesday the 11^th at 9:30 AM.

III. National Telecommunications and Information Administration (NTIA)

IBM Team to Lead DTV Coupon Program.

In August, the NTIA awarded an IBM-led team a $120 million contract to organize and implement the DTV coupon program. On February 17, 2009, televisions will not longer receive analog signals and by then consumers must have converter boxes for digital signals. The move won high praise from consumer groups such as CEA and NAB.

IV. Antitrust Agency Activity/Deal Announcements

Parties File Comments on XM-Sirius Merger.

In July, parties filed comments on the proposed merger between satellite radio providers XM and Sirius. NAB contended that, when the FCC set up satellite digital audio radio service (DARS) in 1997, it intended the service to contain two distinct competitors. Any merger between those two, NAB argued, would constitute a monopoly and thereby raise prices and reduce programming for consumers. Other opponents, such as Media Access Project (MAP), claimed that the satellite radio providers use a overly broad definition of their service when they posited inclusion with a market including broadcast radio, iPods, and CDs. MAP maintained that XM and Sirius represent a distinct market and should be treated as such.

Supporting comments were filed by former Attorney General Edwin Meese, a few consumer groups, and supply companies. Most argued that satellite radio providers should be considered within the larger audio market; they also touted the benefits the merger would provide consumers in terms of programming choice and availability.

Washington Update - June 2007

updates@antitrustlawblog.com (Sheppard Mullin) — Tue, 03 Jul 2007 09:18:58 -0500

I. Legislative Branch Activity

A. Senate Committee Passes Caller ID Spoofing Bill.

On June 28, the Senate Commerce Committee, by a voice vote, passed an anti-spoofing bill (S-704). This bill orders the FCC to write rules within 6 months of enactment and would impose civil and criminal penalties up to $10,000 per violation, capped at $1 million. The House passed a similar bill on June 12 (HR-251), which was referred to the Senate Commerce Committee. Little debate occurred and the effort maintains strong bipartisan support.

B. Legislative Calendar.

The House and Senate are not in session from July 2 until July 6.

II. Federal Communications Commission (FCC) Activity

A. June FCC Meeting.

On June 28, the Commission met in Portland, Maine putatively to discuss localism, though attending Commissioners (Chairman Martin remained in Washington, DC) used the forum to discuss topics ranging from ownership diversity to broadcast license renewals to childhood obesity. The one item on the agenda, a NPRM concerning plug-and-play devices, was pulled just 24 hours before the meeting.

B. Other May FCC Activity.

1. Pleading Cycle Established for XM-Sirius Merger (MB Docket 07-57).

The FCC, on June 8, approved the pleading cycle for the merger of XM Satellite Radio Holdings and Sirius Satellite Radio Inc. Comments or Petitions to Deny are due July 9, and the Reply Comments or Oppositions follow on July 24.

Back on February 19, XM and Sirius signed a merger agreement, which calls for the two companies to combine their programming. The merger will have to be approved by both the Department of Justice and the FCC. The sticking point will be what constitutes the market for satellite radio, whether it is narrowly defined or should be expanded to allow competition with FM and AM stations, people with access to the Internet, or owners of other digital music media such as iPods.

2. Comment Period Extended in Multiple Dwelling Unit NPRM (Docket 07-51).

The Commission granted a Motion for Extension of Time submitted by Real Access Alliance and pushed the comment deadline back to July 2. Reply Comments are now due August 1. The Motion argued that commenters needed more time to analyze the Inside Wiring Order (FCC 07-111), which the FCC released on June 8. In March, the FCC adopted a Notice of Proposed Rulemaking that sought comment on exclusive contracts for video services in multiple dwelling units (MDUs), such as apartment buildings.

3. Commissioner Tate to Be Re-Nominated.

The White House announced its intention to re-nominate Commissioner Tate to serve a 5 year term, which will end in 2012. Commissioner Tate has been filling the unexpired term of Chairman Powell. Her term was to have ended June 30, 2007.

4. FCC Acts Upon Set-Top Box Waiver Requests.

On Friday June 29, the Commission released six separate orders concerning set-top box rules and waiver requests. As of July 1, 2007, set-top boxes with integrated security may no longer be deployed by cable systems. In the Commission's latest order, those cable systems which have converted to all-digital carriage and those that will become all-digital by February 17, 2009, were granted an omnibus waiver. The FCC denied a waiver filed by NCTA, which filed on behalf of all cable operators.

On the same day, the FCC released a Third Further Notice of Proposed Rulemaking concerning the bi-directional capability of CableCARDs and whether these rules should apply to all MVPDs.

C. Next Commission Meeting.

The July open meeting date and agenda are not yet available.

III. Litigation

A. Judge Hears Oral Arguments in Vonage-Verizon Case.

On June 25, oral arguments were held in the Vonage-Verizon patent dispute case before the U.S. Court of Appeals for the Federal Circuit. Lawyers for Vonage argued that U.S. District Court Judge Claude Hilton did not give sufficient instructions to the jury. Specifically, Vonage accused Judge Hilton of misinterpreting conditional access and failing to define two other terms – translation and destination access. Verizon countered that such arguments have their place and time in the lower court, but were too late now.

One of the three judges on the panel, Judge Timothy Dyk, offered some hope to Vonage when he stated that there could be some "middle ground" for those patent infringers that might be put out of business due to a ruling. He asked whether Vonage should be allowed time to develop a workaround as a part of the injunction.

B. FCC Indecency Policy Found Unlawful.

On June 5, the U.S. Court of Appeals for the Second Circuit sided with the broadcast networks by striking down FCC policy concerning "fleeting expletives." The divided panel of judges sent the case back to the Commission to be rewritten, finding that such fleeting expletives may be used out of frustration or excitement, and do not always have obscene connotations. They cited uses of such language by President Bush and Vice-President Cheney, examples also given by the network lawyers. Chairman Martin expressed disappointment with the ruling and stated that the FCC is considering whether to appeal the case before all the judges of the appeals court, or to take the case directly to the Supreme Court.

Washington Update - May 2007

updates@antitrustlawblog.com (Sheppard Mullin) — Tue, 05 Jun 2007 16:44:20 -0500

I. Legislative Branch Activity

A. Inouye Introduces Broadband Deployment Bills.

On May 24, Sen. Inouye (D-HI) presented a bill (S.1492), which seeks to improve upon the quality of data collection used for FCC broadband status reports. Instead of the current standard use of 5 digit zip codes, the bill calls for expansion to 9 digit codes, thus highlighting underserved areas more precisely. Sen. Inouye's bill demands that the FCC reevaluate its 200 kbps definition of high-speed service, and it would create a "2^nd generation" level that has enough bandwidth for uses like streaming video.

B. Legislative Calendar.

The House and Senate will reconvene from Memorial Day break on June 4.

II. Federal Communications Commission (FCC) Activity

A. May FCC Meeting.

1. FCC Implements Katrina Panel Recommendations.

The Commission adopted an Order (FCC 07-107) that implements several recommendations of the FCC’s Independent Panel Reviewing the Impact of Hurricane Katrina on Communications Networks. This panel was intended to improve emergency response capabilities of first responders and ensure all levels of government can communicate effectively during a crisis. The Order extends Special Temporary Authorizations that exempt Bells from enforcement of section 272 by one year. This would allow them to share non-public network information with their section 272 and other affiliates when planning for a disaster.

The Order also states that LECs and CMRS providers must have emergency back-up sources for infrastructure powered by local commercial power (including cell sites, central offices, remote switches, and digital loop carrier system remote terminals). These LECs and CMRS providers, as well as some VoIP providers, will have to submit reports to verify the strength and resiliency of their 911 systems.

2. FCC Seeks to Enhance 911 Accuracy and Reliability.

The Commission approved a Notice of Proposed Rulemaking (FCC 07-108) on possible alterations to 911 accuracy and reliability requirements for wireless carriers and for VoIP providers. Among other matters, the NPRM tentatively concludes that wireless carriers should be required to meet Phase II location accuracy standards under Section 20.18(h). The Commission also asks whether wireless carriers should be afforded a delay to implement any such rule change.

3. Commission Attempts to Strengthen EAS.

The FCC adopted a Second Report and Order and Further Notice of Proposed Rulemaking (FCC 07-109) that hopes to strengthen the nation's emergency alert system ("EAS"). The Order promotes the development of fully digital technologies and delivery systems. Specifically, it requires that EAS participants accept text, audio, and video messages on a common platform, to ensure more efficient transmission.

The FNPRM seeks comment on methods to deliver better warnings to persons with disabilities and non-English speakers.

4. Disability Access Requirements Extended to VoIP Services.

Also at the May open meeting, the Commission sought to extend the disability access requirements of Sections 225 and 255 of the Communications Act, which currently apply to traditional phone services, to providers of VoIP services and to manufacturers of specially designed equipment used to provide those services. The full text of the Report and Order (07-110) has not yet been released.

5. Changes to Multi-Unit Building Service Rules.

The Commission amended its inside wiring rules with the intent of increasing competition for telephone and video services in multi-unit dwellings. Specifically, the FCC clarified that video service competitors need not cut through sheet rock to connect cable wiring and that competing telephone companies must be allowed access to incumbent's inside wire subloops at the terminal block in order to install service. Multi-unit buildings may still, however, sign contracts with one carrier to provide sole access, excluding competitors. The full text of the Report and Order and Declaratory Ruling (FCC 07-111) has not yet been released.

B. Other May FCC Activity.

Joint Board Recommends Universal Service Changes.

On May 1, the Federal-State Joint Board on Universal Service advocated that the Commission take action to inhibit the growth of high-cost universal service support payments. Specifically, the Board recommended an immediate cap be imposed to limit what eligible telecommunications carriers may receive. On May 14, the Commission issued a Notice of Proposed Rulemaking (FCC 07-88) seeking comment on this topic.

C. Next Commission Meeting.

The next open Commission meeting is scheduled for June 28, 2007. The agenda is not yet available.

III. Litigation

A. Vonage, Verizon Battle in Courts over Patent Dispute.

On May 3, the U.S. Court of Appeals, Federal Circuit, refused to remand Vonage's patent infringement case against Verizon back to U.S. District Court Judge Claude Hilton. Vonage had asked for the remand after the Supreme Court decision in KSR v. Teleflex, which modified the standard used by judges in reviewing patent claims. Meanwhile, the appeals court is considering a broader appeal by Vonage challenging Judge Hilton's initial ruling. Vonage's brief on that appeal was filed May 9 and the oral arguments are scheduled for June 25.

B. FCC Indecency Policy Takes Hit.

On June 5, the U.S. Court of Appeals for the Second Circuit sided with the broadcast networks by striking down FCC policy concerning "fleeting expletives." The divided panel of judges sent the case back to the Commission to be rewritten, arguing that such fleeting expletives may be used out of frustration or excitement, and do not always have obscene connotations. They cited uses of such language by President Bush and Vice-President Cheney, examples also given by the network lawyers. Chairman Martin expressed disappointment with the ruling and stated that the FCC is considering whether to appeal the case before all the judges of the appeals court, or to take the case directly to the Supreme Court.

IV. Antitrust Agency Activity/Deal Announcements

Private Equity Firms to Acquire Alltel for $27.5 Billion.

On May 21, the private equity firms TPG Capital and GS Capital Partners made a $27.5 billion bid to purchase telecom company Alltel. Conditioned on the approval of the Justice Department and FCC, the buyout will be one of the largest in telecom history, behind only the Cingular/AT&T and Sprint/Nextel mergers. Merger approval is seen as likely.

Washington Update - March/April 2007

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 04 May 2007 13:58:23 -0500

I. Legislative Branch Activity

A. Senate Commerce Committee Meets to Discuss Universal Service.

On March 1, the Senate Commerce Committee invited Commissioners Tate and Copps, as well as other regulatory officials, to discuss the Universal Service Fund (USF). Senators from rural areas demanded that broadband needs to play a part in the USF program. Commissioner Copps endorsed adding broadband, but added that he could probably not gather the two additional votes necessary. Commissioner Tate said, while she believes the FCC has the authority to make the change, that adding broadband to the USF requires further study. Other panelists insisted that Congressional action would be necessary to ensure that USF issues are addressed quickly, as changes by the FCC could take several years.

B. House Increases Oversight Over Telecom.

Rep. Markey (D-MA), Chairman of the House Subcommittee on Telecommunications and the Internet, has increased oversight over the FCC and National Telecommunications and Information Administration (NTIA) with numerous hearings. Throughout March and April, the Committee held a total of seven hearings concerning media, broadband, spectrum management and wireless issues, and general oversight over the FCC and NTIA.

C. Universal Service Fund Bills Introduced to House.

On April 26, Reps. Rick Boucher (D-VA) and Lee Terry (R-NE) introduced the Universal Service Fund Act of 2007. Their bill, using language from a bill Sen. Stevens' (R-AK) submitted earlier in the 110^th Congress, aims to use USF monies for broadband while curbing the overall growth of the Fund. The bill would expand the base of contributors to include VoIP, Cable Internet, DSL, WiMAX, and broadband over power lines. The FCC would still have to decide the correct contribution formula.

D. Senate Judiciary Passes Data Mining Bill.

On April 12, the Senate Judiciary Committee passed the Federal Agency Data-Mining Reporting Act of 2007. The bill, which passed on a voice vote, requires the head of each federal department or agency to report to Congress any use of data mining. It also requires annual updates on any new uses. Except when dealing with classified programs, these reports must be released to the public.

E. Legislative Calendar.

The House and Senate will not be in session from May 28 through June 1.

II. Federal Communications Commission (FCC) Activity

A. April FCC Meeting.

1. FCC Requires Retailers to Fully Inform Consumers About Analog TV Equipment Limitations as Transition to Digital Approaches.

The FCC adopted an Order that requires retailers to inform consumers when equipment is being sold as analog only. The FCC reasoned that because many consumers are not aware of the February 17, 2009 cut-off date, retailers must be explicit when selling analog televisions.

2. FCC Initiates Third Review of DTV Transition. (Docket 07-91)

The Commission initiated its third review of the transition from analog to digital television through a Notice of Proposed Rulemaking, which proposes deadlines to facilitate the digital transition of full-power stations. According to the FCC, the NPRM takes the following actions to assist in that transition:

Restricts the grant of future extensions of time to construct digital facilities;
Offers expedited processing to stations applying for a construction permit for their post-transition channel based on the new DTV Table of Allotments;
Examines the circumstances in which stations may reduce or terminate analog service to facilitate construction of post-transition facilities;
Permits stations that have different pre-transition and post-transition channels to devote their resources to building their post-transition channel;
Requires stations by December 1, 2007 to file a form with the Commission detailing the current status of the station’s digital transition, the additional steps the station must take before the transition deadline, and a plan for how the station intends to meet the deadline; and
Establishes February 17, 2009 as the construction deadline for stations with new channel allotments in the upcoming new DTV Table of Allotments.

3. FCC Seeks Comment on Dual Analog/Digital Broadcast Signal Delivery After the Digital Television Transition. (Docket 98-120)

Also at the April meeting, the FCC issued a Second Further Notice of Proposed Rulemaking seeking comment on proposals designed to ensure that cable subscribers with analog televisions will receive must-carry local channels after the February 17, 2009 transition. Noting that many cable subscribers still have analog cable, the FNPRM seeks comment on whether rules should be adopted to require cable operators to: "(1) carry the signals of all must-carry stations in an analog format to all analog cable subscribers, or (2) for all-digital systems, carry those signals only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content."

4. FCC Addresses Rules Governing Commercial Wireless and Public Safety Licenses in the 700 MHz Spectrum Band.

A closely watched item on the agenda was the adoption of rules for the 700 MHz auction. Disagreements within the Commissioners delayed the meeting for over 8 hours, and even with this added time they were not able to agree upon a specific band plan. Instead, the FCC adopted a FNPRM that seeks comment on several different ideas. Chairman Martin had pressed to divide the upper 700 MHz band into large blocks, which would enable a bidder to win a nationwide license. It would also contain no cellular market areas (CMAs) in the upper band and only one CMA block in the lower 700 MHz band. Democratic Commissioners, joined by Commissioner McDowell, strongly opposed the plan. Text of the rulemaking has not been released yet. The Commission has limited time to act, as Congress has set January 28, 2008 as the final day the auction can begin.

B. Other April FCC Activity.

1. FCC Attempts to Prevent Pretexting.

In an effort to protect personal phone records, the FCC adopted additional safeguards to prevent unauthorized access to customer proprietary network information (CPNI). Some of those safeguards include: carrier authentication requirements, notice to customers of account changes, notice of unauthorized disclosure of CPNI, joint venture and independent contractor use of CPNI, and annual CPNI certification.

2. FCC Terminates Proceeding on the Use of Cellular Phones Onboard Aircraft. (Docket 04-435)

The FCC released a Memorandum Opinion and Order that ends its proceeding on cell phone use aboard airplanes. They cited insufficient technical information concerning possible interference, as well as incomplete research from the airlines, manufacturers, and wireless carriers.

3. Broadcasters Pay $12.5 Million to Resolve Possible "Payola" Violations.

On April 13, the FCC agreed to consent decrees with CBS Radio, Citadel Broadcasting, Clear Channel, and Entercom Communications worth $12.5 million. The payments closed investigations into allegations that each violated the FCC's sponsorship identification rules, which is commonly called payola. In other words, each entity accepted payments from record labels in exchange for airplay, and did not disclose those transactions.

4. FCC Begins Inquiries on Broadband Data and Broadband Deployment. (Docket 07-45 for NOI and Docket 07-38 for NPRM)

On April 16, the FCC released two documents concerning broadband deployment. First, a Notice of Inquiry (NOI) attempts to determine whether broadband services are getting to all Americans in a reasonable and timely manner. Among other questions, the NOI asks: whether the definition of broadband should change based on technological advances; whether consumers are adopting new services; and whether rural and hard-to-serve areas are on a level playing field.

At the same time, the Commission issued a Notice of Proposed Rulemaking to improve upon the data collection which would set broadband policy in the future. Topics include: possibly modifying speed tier information, improving collection of data concerning wireless broadband service, the best way to measure subscribers of VoIP, and gathering more accurate data on current broadband deployment in general.

C. March FCC Meeting.

The Commission held an open meeting on March 22, 2007 to discuss numerous topics.

1. FCC Initiates Rulemaking to Evaluate Access to Multiple Dwelling Units for Video Providers. (Docket 07-51)

The FCC adopted a Notice of Proposed Rulemaking that seeks comment on exclusive contracts for video services in multiple dwelling units (MDUs), such as apartment buildings. The NPRM will determine the current environment for service providers attempting to gain access to MDUs and the impact of exclusive contracts on consumer choice and video competition. The Commission tentatively concluded in the NPRM that it has the authority to regulate exclusive contracts in MDUs when it deems that competition and deployment are being impeded.

2. FCC Adopts Rules for Digital Audio Broadcasting. (Docket 99-325)

The Commission adopted a Second Report and Order, First Order on Reconsideration, and Second Further Notice of Proposed Rulemaking, which includes several rules to allow terrestrial radio broadcasters to increase local service in their communities.

The Order:

Refrains from imposing a mandatory conversion schedule for radio stations to commence digital broadcast operations;
Allows FM radio stations to operate in the extended hybrid digital mode, which allows for a higher bit-rate;
Requires that each local radio station broadcasting in digital mode to simulcast a digital signal of at least comparable audio quality to its analog signal;
Permits a radio station to transmit high quality audio, multiple program streams, and data casting services at its discretion;
Allows radio stations to time broker unused digital bandwidth to third parties, subject to certain regulatory requirements;
Applies existing programming and operational statutory and regulatory requirements to all free DAB programming streams;
Authorizes AM nighttime operations;
Dismisses several pending Petitions for Reconsideration and Petitions for Rulemaking that asked, inter alia, the Commission to reconsider the adoption of iBiquity’s in-band, on-channel (IBOC) system as the technology chosen for DAB transmission
Seeks further comment on appropriate limits to the amount of subscription services that may be offered by radio stations; and
Seeks comment on whether the Commission should adopt any new public interest requirements for digital audio broadcasters.

3. FCC Evaluates 76 Noncommercial Educational FM Application Groups.

The Commission resolved several long pending mutually exclusive applications for new or modified noncommercial educational (NCE) FM broadcast service to 76 different communities. The Commission plans to open a filing window for new NCE FM stations in the fall of 2007. This Order provides a chart summarizing the outcome of these potential new applicants.

4. FCC Approves Citadel/Disney Radio Transaction.

The FCC approved a transaction in which Citadel Broadcasting Corporation will acquire 24 radio stations from subsidiaries of The Walt Disney Company.

5. FCC Grants 182 E-Rate Appeals. (Docket 02-06)

The FCC granted 182 separate appeals from schools or libraries which had either been denied or received reduced funding under the E-rate program. In every case, the FCC held that the entity had been denied funding due to a technicality or minor error. Under the E-rate program, eligible schools and libraries may apply for discounts for telecommunications services, Internet access and internal connections. The FCC remanded the applications back to the Universal Service Administrative Company and directed them to complete review in 90 to 120 days.

6. FCC Launches Inquiry into Broadband Market Practices. (Docket 07-52)

The Commission issued a Notice of Inquiry that seeks information on the behavior of broadband market participants, including: how providers are managing increased traffic, price differences for different Internet speeds, possible policy differences for those providers that charge end users for access versus those that do not, and how consumers are affected by these policies. Comments are due on June 15 and replies a month later on July 16.

7. FCC Grants Application for Transfer of Control of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) from Verizon Communications, Inc. to America Movil, S.A. de C.V.

The FCC adopted a Memorandum Opinion and Order and Declaratory Ruling that grants the application for transfer of control of Telecomunicaciones de Puerto Rico, Inc. (TELPRI) and petition for declaratory ruling filed by Verizon Communications, Inc. and América Móvil, S.A. de C.V. (América Móvil).

8. FCC Adopts Annual Report on State of Competition in Satellite Industry. (Docket 06-67)

As directed by Congress, the FCC issued its first annual report describing the state of competition in the communications satellite service industry. The report covers data from 2000 to 2006 in both the wholesale and retail markets. The Commission finds sufficient competition at present, and reports that the satellite industry provides many benefits to consumers, the government, and American industry.

9. FCC Classifies Wireless Broadband Internet Access Service as an Information Service.

As expected, the FCC declared that wireless broadband Internet service should be classified as an information service under the Communications Act. This places wireless access under the same regulatory rules that other broadband providers face. By definition, the Commission understood wireless service to be that which uses spectrum, wireless facilities, and technologies to provide high-speed access. Specifically, the Commission found that the “transmission component” behind wireless access is "telecommunications" and that the “provision of this telecommunications transmission” as a part of a wireless network is an information service.

10. FCC Seeks Comment on Permitting the Use of Smaller Antennas by Fixed Service Operators in the 11 GHz Band.

The FCC adopted a Notice of Proposed Rulemaking that seeks comment on the installation of smaller antennas by Fixed Service operators in the 10.7-11.7 GHz band, and whether this service would be in the public interest or would cause too much interference.

11. FCC Addresses Rules for Private Land Mobile Radio Systems to Transition to 6.25 kHz Narrowband Technology. (Docket 99-87)

Finally, the Commission issued a Third Report and Order that declined to establish a fixed date for private land mobile radio systems to transfer from the 150-174 MHz and 421-512 MHz to 6.25 kHz narrowband technology. It does strongly urge licensees to make that transition directly, however, rather than first adopting the 12.5 kHz technology as a stopgap. The Order also moves the implementation date of the 6.25 kHz technology to January 1, 2011.

D. Other March FCC Activity.

1. FCC Releases Text of AT&T Inc.-BellSouth Corp. Merger Order.

On March 26, the Commission released a Memorandum Opinion and Order approving the merger of AT&T and BellSouth. The FCC concludes that five benefits to consumers will result from the merger: deployment of broadband through more areas, increased competition for advanced pay television, improved wireless products, enhanced national security, and better disaster response and preparation. In its analysis of competitive effects of the merger, the Commission focused on six key groups of services: special access competition, retail enterprise competition, mass market voice competition, mass market Internet competition, Internet backbone competition, and international competition. The Order also details the conditions of merger approval.

2. FCC Approves Transfer of Univision Communications Inc., and Enters Into $24 Million Consent Decree With Univision Concerning Children's Programming Requirements.

On March 27, the FCC approved transfer of control of Univision Communications, from current shareholders to Broadcasting Media Partners. In a related action, the FCC and Univision agreed upon a $24 million consent decree to resolve disputes concerning violations of the FCC's children’s programming rules.

E. Next Commission Meeting.

The next open Commission meeting is scheduled for May 31, 2007. The agenda is not yet available.

III. NTIA

NTIA Issues Final Rule on Converter Box Coupon Program.

On March 12, the NTIA released its final order concerning digital-to-analog converter boxes. In the order, the NTIA states that each household will be eligible to apply for up to two $40 coupons in order to purchase such converter boxes. An initial allotment of $990 million is available, and the coupons may begin to be acquired on January 1, 2008. If initial funds are used up, another $510 million is available, but this time coupons will only be available to those households without pay-TV subscriptions.

IV. Litigation

A. Vonage, Verizon Battle in Courts over Patent Dispute.

Throughout March and April, Vonage and Verizon waged legal battles over certain patents, which Verizon claims Vonage infringed upon. Back on March 8, a federal jury decided that Vonage must pay $58 million in damages to Verizon for infringing upon three of the five patents under review. It did, however, decide that Vonage's actions were not willful, which kept the damages lower. Matters became worse for Vonage when, on March 26, U.S. District Court Judge Claude Hilton issued, but did not sign, a permanent injunction barring use of Verizon patents. Since it is speculated that Vonage does not have a technological work-around, an injunction could cripple Vonage service.

On April 4, Judge Hilton issued a stay on the injunction, which would allow existing Vonage customers to continue using the Verizon patents. Some legal confusion then arose as Vonage filed an appeal the same day with the U.S. Appeals Court, Federal Circuit. An emergency full stay was granted. This stay would override Judge Hilton's partial stay, and would allow Vonage to apply these patents to new and existing customers while legal battles continue. Verizon is appealing the emergency full stay on the ground that Judge Hilton's partial stay was never formally issued, and therefore, it cannot be appealed. Both Verizon and Vonage filed comments on the emergency stay late in April and a decision is still pending.

B. Powers Under Tunney Act More Limited.

On March 30, U.S. District Judge Emmet Sullivan gave approval to the SBC-AT&T and Verizon-MCI mergers, saying portions under his jurisdiction to review were deemed in the public interest. Judge Sullivan added that his role, under the Tunney Act, is limited to determining if consent decrees are in the public interest. He is not to examine whether mergers violate antitrust laws or whether they, in their entirety, meet the public interest. Judge Sullivan wrote that arguments against the consent decrees went beyond the narrow scope of the Tunney Act and DOJ responses were reasonable.

Washington Update - February 2007

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 28 Feb 2007 10:02:08 -0500

I. Legislative Branch Activity

A. FCC Commissioners Go Before Senate Commerce Committee.

On February 1, all five FCC Commissioners met with the newly Democratically controlled Senate Commerce Committee. Committee Chairman Senator Inouye (D-HI) expressed concern over a special access provision in the AT&T/BellSouth merger and questioned Chairman Martin about his stated qualms over its legality. Many lawmakers were eager to discuss the country's low standing worldwide in broadband deployment. Martin responded that making wireless broadband an information service might be possible and would ease regulations that inhibit expedited growth. Other matters brought up by Senators included the privacy of phone records, E-911, the Universal Service Fund, and public input on any new broadcast ownership rules.

B. Future Committee Hearings.

On March 1, the Senate Commerce Committee will meet at 10:00 am to discuss Universal Service. Commissioners Copps and Tate will be present, along with industry leaders and regional public service commissioners.

Also on March 1, at 10:30 am, the House Energy and Commerce Subcommittee on Telecommunications and the Internet will meet. Their topic will be the "Digital Future of the United States: Part I -- The Future of the World Wide Web." The House Judiciary Committee is holding a meeting on February 28 concerning the proposed XM-Sirius merger.

C. Legislative Calendar.

The House and Senate are in session for all of March.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting in Harrisburg, PA on February 23, 2007 to discuss the 2006 broadcast ownership proceeding. This was the third in a series of six meetings concerning broadcast ownership.

B. Other FCC Activity.

1. FCC Budget for 2008 Announced.

In February, President Bush released his budget for the fiscal year 2008. The proposed budget includes $313 million allocated for the FCC. Currently, the FCC receives $289.8 million annually. The amount covers all operations as well as $1.5 million for education on the DTV transition.

2. Staff Changes at the FCC.

· Derek Poarch was named Public Safety and Homeland Security Bureau Chief.

C. Next Commission Meeting.

The date and agenda for the March public meeting is not yet available.

III. Antitrust Agency Activity/Deal Announcements

XM-Sirius Announce Proposed Merger.

On February 19, XM Satellite Radio Holdings and Sirius Satellite Radio Inc. signed a merger agreement, which calls for the two companies to combine their programming. The merger will have to be approved by both the Department of Justice and the FCC. The sticking point will be what constitutes the market for satellite radio, whether it is narrowly defined or should be expanded to allow competition with FM and AM stations, people with access to the Internet, or owners of other digital music media such as iPods.

IV. NTIA

NTIA Cedes Control of Public Safety Program to DHS.

The NTIA, in a Memorandum of Understanding, agreed to pay the Department of Homeland Security (DHS) to run the Public Safety Interoperable Communications (PSIC) Grant Program, which is supposed to enable first responders to communicate better. These responders are more familiar with the DHS system, a central reason behind the switch according the DHS. House Telecom Subcommittee Oversight Chairman Stupak (D-MI) was angered with the announcement. He said that the NTIA was the intended administrator under the DTV law and that both parties are clearly ignoring Congressional intent.

Washington Update - January 2007

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 31 Jan 2007 15:42:20 -0500

I. Legislative Branch Activity

A. Optimism for Major Telecom Legislation Waning.

As Congressmen settled into the new Congress in January, staffers for Senate Commerce Committee Chairman Daniel Inouye confirmed that he will seek to pass smaller, more targeted communications bills in this session. The key telecom companies such as Verizon, BellSouth, and AT&T, who supported GOP-led legislation, are expected to withdraw support for any major Democratic measures. Inouye has called for a hearing on the state of the telecom marketplace for February 1. All five FCC commissioners will be there to present their testimonies and answer what are expected to be tough questions from Democrats.

In the House, House Energy and Commerce Telecommunications and the Internet Subcommittee Chairman Rep. Edward Markey is planning a series of hearings on net neutrality. In January, Rep. Markey introduced stand-alone legislation on the topic.

B. Legislative Calendar.

The House and Senate will adjourn on February 19 and resume on February 26 due to President's Day.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on January 17, 2007 to hear presentations regarding implementations of the agency’s strategic plan and a comprehensive review of FCC policies and procedures. Panelists included Chiefs of the Consumer & Governmental Affairs Bureau, the Enforcement Bureau, the Public Safety and Homeland Security Bureau, the Wireless Telecommunications Bureau, the Office of Engineering and Technology, the International Bureau, the Media Bureau, and the Wireline Competition Bureau.

B. Other FCC Activity.

1. FCC Releases Declaratory Ruling Concerning Interstate TRS Fund.

On January 11, the FCC released the Declaratory Ruling concerning IP captioned telephone service (IP CTS). In December, the FCC had stated that it is a form of telecommunications relay service (TRS) and is therefore eligible for the Interstate TRS Fund. The ruling was in response to a petition filed by Ultratec, Inc., and received widespread support from the disability community.

IP CTS should give consumers the choice of using a computer, PDA, or wireless device to make a call, without having to purchase special telephone equipment.

2. FCC Addresses E-911 Compliance.

The FCC released orders addressing nine Petitions for Waiver from wireless companies concerning the E-911 location-capable handset penetration deadline. The Commission referred four companies, Sprint, Alltel, U.S. Cingular, and Nextel to the Enforcement Bureau. Others, Verizon, Leap, QWest Wireless, and Centennial were warned to come into compliance, but were not referred. Wireless carriers had been ordered to have 95% of customer's phones contain location-capable handsets by December 31, 2005. Forfeitures from these proceedings, especially for Sprint, are expected to reach millions of dollars.

3. Staff Changes at the FCC.

Fred Campbell was named Chief of the Wireless Telecommunications Bureau;
Monica Desai was named Chief of the Media Bureau;
Catherine Seidel was named Chief of the Consumer and Governmental Affairs Bureau;
Deputy General Counsel Eric D. Miller is leaving and will be replaced by Joseph R. Palmore.

C. Next Commission Meeting.

The next Commission meeting is currently scheduled for 9:30 AM on Friday, February 23, 2007. The agenda is not yet available.

III. Antitrust Agency Activity/Deal Announcements

News Corp. Files for Transfer of DIRECTV.

On January 29, News Corp. filed an application with the FCC to ask permission for the transfer of its interest in DIRECTV to Liberty Media. Liberty will also receive three regional sports networks (RSNs) and $550 million in cash. In return, Liberty has agreed to give up its stake in News Corp. and will abide by the program access and RSN conditions that were established when News Corp. acquired is interest in DIRECTV. The petition argues that the agreement would reduce the vertical integration of DIRECTV by placing them in a company with less ownership in broadcast stations and RSNs.

IV. Litigation

Supreme Court Refuses to Hear Distant Networks Case.

The U.S. Supreme Court refused to hear EchoStar's appeal over Judge William Dimitrouleas' decision to block distant network service for over 900,000 customers. EchoStar had argued that the injunction unfairly shuts off service to 850,000 of its customers. The decision does not impact the customer's ability to receive signals from an outside company, National Programming Service (NPS). The National Association of Broadcasters has challenged the third-party involvement, stating that EchoStar is attempting to evade the injunction.

Washington Update - December 2006

updates@antitrustlawblog.com (Sheppard Mullin) — Mon, 08 Jan 2007 10:01:49 -0500

I. Legislative Branch Activity

A. Congress Passes Pretexting, Two Other Bills in Lame Duck Session.

As the 109^th Congress drew to a close in December, three telecom bills managed their way through the halls of Congress. First and foremost, the Senate finally approved a ban on pretexting (HR-4709), which the House had passed in April. In addition to banning the acquisition of phone records through fraudulent means, the bill would prohibit the unauthorized sale or transfer of confidential phone records, or the receipt of such information with the knowledge that it was fraudulently obtained.

Congress also approved a bill increasing FTC enforcement of spam and spyware (S-1068), and a bill that offers discounts on long distance phone charges for soldiers stationed abroad (originally an amendment in the defunct telecom bill HR-5252).

B. Net Neutrality Expected to be Decisive in 110th Congress.

One of the priorities of the new Congress in January will undoubtedly be net neutrality. In the Senate, Senators Snowe (R-ME), Dorgan (D-ND), and Wyden (D-OR) are all expected to reintroduce bills from last session. Sen. Wyden has been working with Rep. Markey (D-MA) to create more inclusive language. Wyden's revised bill is thought to allow bits to be prioritized if there is no discrimination at the source.

C. Legislative Calendar.

The House and Senate adjourned on December 20 and began the 110^th Congress on January 4.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on December 20, 2006 and adopted four items: rules to ensure reasonable franchising process for new video market entrants; a report on 2005 cable industry prices; a NPRM seeking comment on implementing a nationwide, broadband, interoperable public safety network in the 700 MHz band; and a Declaratory Ruling regarding whether Internet Protocol captioned telephone service is a form of telecommunications relay service (TRS) compensable from the Interstate TRS Fund.

1. FCC Adopts Rules to Ensure Reasonable Franchising Process for New Video Market Entrants.

At the December public meeting, the FCC adopted a Report and Order and Further Notice of Proposed Rulemaking concerning new video entrants into the MVPD market. Referring to Section 621 (a)(1) of the Communication Act of 1934, the Order and FNPRM attempt to ensure that franchising authorities are acting in a competitive manner to new entrants. In the Order, the Commission concluded that the current state of the franchising process seems to constitute an unreasonable barrier to entry that impedes the goal of increased cable competition and accelerated broadband deployment. Action expected 1Q 2007.

Specifically in the Order, the Commission states it found that:

Franchising negotiations that extend beyond certain time frames amount to an unreasonable refusal to award a competitive franchise within the meaning of Section 621(a)(1);
requiring an applicant to agree to unreasonable build-out requirements constitutes an unreasonable refusal to award a competitive franchise;
Unless certain specified costs, fees, and other compensation required by local franchising authorities are counted toward the statutory five percent cap on franchise fees, demanding them could result in an unreasonable refusal to award a competitive franchise;
It would be an unreasonable refusal to award a competitive franchise if the local franchising authority denied an application based on a new entrant’s refusal to undertake certain unreasonable obligations relating to public, educational, and governmental and institutional networks;
Preempting local laws, regulations, and requirements, including local level-playing-field provisions, to the extent they impose greater restrictions on market entry than the rules adopted herein;
It does not have sufficient information to make such determinations with respect to franchising decisions made at the state level or in compliance with state statutory directives, such as statewide franchising decisions. As a result, the Order addresses only decisions made by county- or municipal-level franchising authorities.

In the Further Notice of Proposed Rulemaking, the Commission seeks to determine how the Order will affect existing video franchises. It posits that the Order should only apply to current franchises when their license expires and comes up for renewal, not sooner. The Commission should conclude this rulemaking and release an order no later than six months after the release of the Order.

2. FCC Releases Report on 2005 Cable Industry Prices.

Also at the December public meeting, the FCC released its annual report on cable industry prices. The report covers the twelve month period ending January 1, 2005 and is based on a survey of prices from cable companies in a random selection of communities. The report shows an increase of 5.2% in the monthly rate for all cable services ($40.91 to $43.04). Since the first report of this kind was commissioned by Congress in Telecommunications Act of 1996, prices have risen 93%.

Prices charged by cable operators in communities with adequate competition were 17% lower than in communities without effective competition. DBS competition, however, does not appear to constrain cable prices – average prices were the same as or slightly higher in communities where DBS was the basis for relieving a cable operator from rate regulation than in noncompetitive communities.

The report states that 96% of all cable subscribers were served by systems that offered Internet access. In addition, 42% of subscribers were offered telephone service by their cable operator. There was very little variation between the groups (those with and without a finding of effective competition) in terms of system capacity or the percentage of subscribers offered advanced services.

3. FCC Seeks Comment on Implementation of a Nationwide, Broadband, Interoperable Public Safety.

The Commission adopted a Ninth Notice of Proposed Rulemaking that proposes to create a national, centralized approach to public safety access in the 700 MHz band. The initiative seeks to promote the deployment of advanced broadband applications, related radio technologies, and modern, IP-based system architecture.

The proposed rules attempt to meet the following public safety objectives: (1) opportunities for broadband, national, interoperable use of 700 MHz spectrum; (2) new sources of funding for the build-out and operation of the national public safety network; (3) economies of scale and scope in production and competition in supply to maximize cost effectiveness; (4) efficient spectrum use; (5) network robustness and survivability; and (6) flexible, modern IP-based wireless system architecture.

4. Internet Protocol Captioned Telephone Service Eligible for Compensation from Interstate TRS Fund.

Finally at the December meeting, the Commission adopted a Declaratory Ruling stating that IP captioned telephone service (IP CTS) is a form of telecommunications relay service (TRS) and is therefore eligible for the Interstate TRS Fund. This ruling was in response to a petition filed by Ultratec, Inc., and received widespread support from the disability community.

IP CTS should give consumers the choice of using a computer, PDA, or wireless device to make a call, without having to purchase special telephone equipment.

B. Other FCC Activity.

1. FCC Approves Merger of AT&T Inc. and BellSouth Corp.

On December 29, the FCC finally approved the merger of AT&T and BellSouth by a 4-0 vote. In order to secure approving votes of Democratic Commissioners Copps and Adelstein, AT&T was forced to propose major concessions. Examples of these concessions include the divestiture of some wireless licenses in the 2.5 gigahertz band, and a $19.95 per month price tag for stand-alone basic high-speed Internet service. But perhaps the most important concession concerned net neutrality. AT&T agreed, in essence, to a basic set of net neutrality principles. Specifically, AT&T promised "not to provide or to sell to Internet content, application, or service providers, including those affiliated with AT&T/BellSouth, any service that privileges, degrades or prioritizes any packet transmitted over AT&T/BellSouth's wireline broadband Internet access service based on its source, ownership or destination." AT&T has agreed to abide by these net neutrality rules for two years. The real world implications of the net neutrality rules is yet unclear, but both Chairman Martin and Commissioner Tate argue that the principle only applies to this merger, and will not influence or apply to other FCC actions.

2. FCC Grants ACS of Anchorage, Inc. Forbearance Relief in the Anchorage, Alaska Study Area.

The FCC granted, in part, a petition for forbearance filed by ACS of Anchorage, Inc. that sought relief from unbundling obligations and pricing obligations that applied to it as the incumbent telephone company in Anchorage, Alaska. Because of the particular market characteristics of the Anchorage area, the Commission has determined to relieve ACS of certain legacy monopoly regulations.

C. Next Commission Meeting.

The next Commission meeting is currently scheduled for 9:30 AM on Wednesday, January 17, 2007. The agenda is not yet available.

D. Pending Proceedings. There are several pending proceedings that may be acted upon in the near term, including the following:

Broadcast Ownership FNPRM: The Further Notice opens the broadcast quadrennial review of all of the media ownership rules, as required by statute. Comment Date: Oct. 23, 2006. Reply Date: Jan 17, 2006.
DTV Second Periodic Review: Outstanding issue concerning upgrades to open v-chip.
Plug & Play: One-Way: FCC action on reconsideration pending; Court of Appeals held in abeyance; Two-Way: Ongoing negotiations and reporting to FCC throughout 2006; potential NPRM.
Cable Horizontal and Vertical Ownership Limits: May 2005 further notice seeks to update stale record. An earlier notice sought comment on how to address D.C. Circuit remand of cable ownership regulations.
IP-Enabled Services: Will address the regulatory treatment of IP-enabled services, including video services.
Program Access Rules: Rules governing MVPD access to certain programming owned by cable operators will sunset in October 2007. FCC to evaluate whether sunset date should be extended.
Set-Top Box Waiver Proceeding: Action expected 1Q 2007.
Digital Must-Carry: Outstanding issues include: material degradation, program-related material, DBS carriage of DTV signals. Action expected 2007 or 2008.

III. Litigation

Justice Department Defends Actions

The Justice Department in December defended its approval of the Verizon/MCI and SBC/AT&T mergers as being in the public's interest. In a filing, redacted for public viewing, the Justice Department concluded that it need only place restrictions on outside fiber-optic access to commercial buildings where Verizon and MCI or AT&T and SBC are the only two providers. This filing represented a response to arguments from opponents in November and the latest in a series of attempts to get U.S. District Judge Emmet Sullivan to approve the mergers. Judge Sullivan stated on November 30 that he had not completed his review of the Verizon/MCI and SBC/AT&T mergers under the Tunney Act. He implied that a decision was not likely anytime soon and mentioned the possibility of holding evidentiary hearings into the way the Department of Justice handled the two mergers.

EchoStar Wins Appeal in NPS Deal

U.S. District Court Judge William Dimitrouleas ruled on December 22 that NPS could sell distant networks from Atlanta and San Francisco to EchoStar subscribers. He argued that EchoStar should not be held in contempt, as broadcasters claimed, for the sale. Broadcasters argued that EchoStar and NPS are in concert to work around the injunction. Earlier in the month, on December 15, U.S. Magistrate Judge Barry Seltzer concurred when he ruled in favor of EchoStar and NPS. Broadcasters vowed to take the decision to the U.S. Appeals Court, but a decision there could take weeks or months.

Should You Be Neutral on "Net Neutrality"?

updates@antitrustlawblog.com (Sheppard Mullin) — Mon, 01 Jan 2007 08:55:07 -0500

There is a policy debate going on in Washington that will determine how the Internet is used and regulated in the future. If your business depends upon the Internet, this is one debate that you should not sit out.

To view the article please click here.

Sheppard Mullin Announces New FCC Law Blog

updates@antitrustlawblog.com (Sheppard Mullin) — Fri, 08 Dec 2006 15:58:56 -0500

We are pleased to announce that the Communications Group at Sheppard Mullin has launched a new Communications Law Blog. You can access it at http://www.fcclawblog.com. A blog is an online web journal. You will now be able to access up-to-date information on Communications Law.

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Washington Update - November 2006

updates@antitrustlawblog.com (Sheppard Mullin) — Mon, 04 Dec 2006 10:11:29 -0500

I. Legislative Branch Activity

A. EchoStar Pleas for Congressional Help.

Earlier this year, the U.S. Court of Appeals for the 11th Circuit found EchoStar in violation of the Satellite Home Viewer Act by regularly and unlawfully delivering out-of-market stations in competition to local stations that carry the same network programming. The Court set a deadline of December 1 for EchoStar to shutdown all distant networks, those deemed illegal and legal. An effort to reach a settlement with broadcasters failed when Fox and its affiliates refused to sign on. In late November, the Court of Appeals rejected EchoStar's final plea to delay the December 1 cutoff.

Facing the prospect of having to turn off distant broadcast networks for approximately 850,000 subscribers, EchoStar turned to Congress. A bill was introduced on November 16 by Senators Leahy and Allard, which would allow Dish subscribers who are legally entitled to the signals to continue to receive them. It also requires EchoStar to deposit $20 million to cover any future violations. Specifically, the bill would permit access to distant channels in only areas in which there existed no local-into-local service, and to show those distant networks, EchoStar would be required to pay two royalty fees instead of one. The Senate recessed, however, without taking any action on the bill. The House may take up the matter when it returns in early December.

B. New House and Senate Commerce Committee Leaders.

With the Democratic takeover of the Senate in January, Senator Inouye (D-HI) has been appointed as Commerce Committee Chairman. Democrats will now be represented by 12 members, including 3 new faces: Senators Tom Carper (D-DE), Amy Klobuchar (D-MN), and Claire McCaskill (D-MO). Senator George Allen and Senator Conrad Burns lost their re-election campaigns.

After 12 years in the minority, Rep. John Dingell will resume his position as Chairman of the House Committee on Energy and Commerce in January. Rep. Edward Markey (D-MA) will head the House Commerce Telecom Subcommittee in the 110^th Congress.

C. Legislative Calendar.

The House and Senate adjourned on November 16 and will resume the lame duck session on December 5.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on November 3, 2006 and adopted three items: a Report and Order regarding changes to the process for community of license changes and the process for amendments to the FM Table of Allotments; a Notice of Proposed Rulemaking on whether it should adopt certain measures to mitigate migratory bird collisions with communications towers; and a Memorandum Opinion and Order concerning the classification of broadband over power line Internet access service.

1. FCC Adopts Order to Streamline FM Table of Allotments and AM Community of License Procedures.

The Report and Order adopts the following rule changes:

Permits Community of License Minor Change Applications – Allows AM and FM licensees and permittees to change their community of license by first-come/first-served minor modification applications, streamlining the current two-step procedures.
Requires Simultaneous Filing of Form 301 with Petitions to Add New FM Allotments – Requires filing Form 301, and paying the required filing fee, with all petitions to add new FM allotments to the Table. This will help ensure that parties who value new allotments most – those who participate in broadcast auctions – will be the ones seeking to add new FM allotments.
Eliminates the Prohibition on Electronic Filing of Rulemaking Petitions to Amend FM Table of Allotments – Eliminates the current prohibition on electronic filing of petitions and other documents in proceedings to amend the FM Table of Allotments.

2. FCC Seeks Comment on Possible Measures to Reduce Migratory Bird Collisions with Communications Towers.

The FCC adopted a Notice of Proposed Rule Making that seeks comment on whether it should take measures to reduce the number of migratory bird collisions with communications towers.

3. FCC Classifies Broadband Over Power Line-Enabled Internet Access as "Information Service."

Specifically, the Order finds that the transmission component underlying BPL-enabled Internet access service is “telecommunications,” and that the provision of this telecommunications transmission component as part of a functionally integrated, finished BPL-enabled Internet access service offering is an information service. The order places BPL-enabled Internet access service on an equal regulatory footing with other broadband services, such as cable modem service and DSL Internet access service.

B. Other FCC Activity.

1. FCC Issues Order on Remand Addressing Earlier Broadcast Television Indecency Decisions.

The FCC released an Order addressing several television indecency decisions that were remanded to the Commission by the United States Court of Appeals for the Second Circuit. As part of its March 15, 2006 Omnibus Indecency Order, the FCC originally found that the broadcasts of “The 2003 Billboard Music Awards,” “The Early Show,” “The 2002 Billboard Music Awards,” and several episodes of “NYPD Blue” were apparently indecent and profane. Penalties were not proposed, however, because of specific circumstances associated with the broadcasts.

In this Order, the Commission replaced its prior decisions about the above programs with new findings based on its review of affected licensee responses and public comments, and a fresh look at the issues raised by the broadcasts. Nonetheless, the FCC continues to believe that the use of the words "shit" and "fuck" by participants in “The 2003 Billboard Music Awards” and “The 2002 Billboard Music Awards” was indecent and profane. The FCC also found that the broadcast of "shit" during “The Early Show” was neither indecent nor profane in this instance due to the fact that it occurred during news programming. Finally, the Commission dismissed the indecency complaint regarding the “NYPD Blue” episodes as inadequate to trigger enforcement action.

2. FCC Seeks Comment Regarding Possible Revision or Elimination of Rules Under the Regulatory Flexibility Act, 5 U.S.C. 610 (CB Docket No. 06-208).

On November 22, the FCC released a Public Notice in order to review rules adopted by the agency in calendar year 1996 which have, or might have, a significant economic impact on a substantial number of small entities. The purpose of the review is to determine whether such rules should be continued without change, or should be amended or rescinded, consistent with the stated objectives of section 610 of the RFA, to minimize any significant economic impact of such rules upon a substantial number of small entities. Comments are due within 60 days of being published in the Federal Register (November 29).

3. FCC Names Economic Studies to be Conducted as Part of Media Ownership Rules Review.

On November 22, the FCC announced it would commission 10 new studies on media ownership in television, radio, newspaper, and the Internet. The studies are as follows:

Study 1: How People Get News and Information

Description: This study will survey consumers about their use of media. It will identify consumers’ primary, secondary, and tertiary sources of news and information; whether these sources change depending upon the time of day or day of the week; and the frequency with which consumers access these sources.

Author: Nielsen

Study 2: Ownership Structure and Robustness of Media

Description: This study will describe the ownership structure and robustness of current media, including broadcast television, cable television, satellite television, broadcast radio, satellite radio, newspapers, and the Internet. The information gathered concerning the current media marketplace will be compared to the state of the media marketplace when the Commission last reviewed its ownership rules in the years 2002-2003.

Authors: C. Anthony Bush, Kiran Duwadi, Scott Roberts, and Andrew Wise, FCC

Study 3: Effect of Ownership Structure and Robustness on the Quantity and Quality of TV Programming

Description: This study will analyze the effect of ownership structure and robustness (as described in Study 2) on various measures of the quantity and quality of different types of TV programming, including local news and public affairs, minority programming, children’s programming, family programming, religious programming, and violent and indecent content.

Author: Gregory Crawford, University of Arizona

Study 4: News Operations

Description: This study will collect data on the size and scope of the news operations of radio and television stations and newspapers. It will also analyze the relationship between the nature of the news operations and market characteristics, including ownership structure and robustness.

Authors: Kenneth Lynch, Daniel Shiman, and Craig Stroup, FCC

Study 5: Station Ownership and Programming in Radio

Description: This study will use station-level data to examine how ownership structure affects the programming and audience of radio stations.

Author: Tasneem Chipty, CRAI

Study 6: News Coverage of Cross-Owned Newspapers and Television Stations

Description: This study will examine the effect of newspaper cross-ownership on television news coverage using matched pairs of cross-owned and non-cross-owned television stations.

Author: Jeffrey Milyo, University of Missouri

Studies 7 & 8: Minority Ownership

Description: These two studies will examine levels of minority ownership of media companies and barriers to entry.

Study 7 Authors: Arie Bersteanu and Paul Ellickson, Duke University

Study 8 Authors: Allen Hammond, Santa Clara University and Barbara O’Connor, California State University, Sacramento

Study 9: Vertical Integration

Description: This study will examine levels of vertical integration in the media industry.

Author: Austan Goolsbee, University of Chicago

Study 10: Radio Industry Review: Trends in Ownership, Format, and Finance

Description: This study will update a study done during our last review of the media ownership rules. That study was titled “Radio Industry Review 2002: Trends in Ownership, Format, and Finance.

Each study will undergo peer review before being submitted. Democratic Commissioners Adelstein and Copps immediately criticized the studies.

C. Chairman Martin Confirmed for Second Term as Commissioner.

On November 16, the Senate voted unanimously to reconfirm Kevin Martin as Chairman of the FCC for a second five-year term.

D. Next Commission Meeting.

The next Commission meeting is currently scheduled for 9:30 AM on Wednesday, December 20, 2006. The agenda is not yet available.

E. Pending Proceedings. There are several pending proceedings that may be acted upon in the near term, including the following:

Broadcast Ownership FNPRM: The Further Notice opens the broadcast quadrennial review of all of the media ownership rules, as required by statute. Comment Date: Oct. 23, 2006. Reply Date: Dec. 21, 2006.
Local Franchising NPRM: Rules would facilitate the franchise approval process for telcos seeking to enter the video market. Action expected 4Q 2006
Digital Television Distributed Transmission System (DTS) Technologies: Rules allow broadcasters to use transmitters to fill in service gaps caused by geographic barriers. FCC is considering rules for permanent DTS operation. Action expected 4Q 2006.
DTV Second Periodic Review: Outstanding issue concerning upgrades to open v-chip. Action expected 4Q 2006.
Plug & Play: One-Way: FCC action on reconsideration pending; Court of Appeals held in abeyance; Two-Way: Ongoing negotiations and reporting to FCC throughout 2006; potential NPRM. Action expected 4Q 2006.
Cable Horizontal and Vertical Ownership Limits: May 2005 further notice seeks to update stale record. An earlier notice sought comment on how to address D.C. Circuit remand of cable ownership regulations. Action expected 4Q 2006.
IP-Enabled Services: Will address the regulatory treatment of IP-enabled services, including video services. Action expected 4Q 2006.
Program Access Rules: Rules governing MVPD access to certain programming owned by cable operators will sunset in October 2007. FCC to evaluate whether sunset date should be extended. Action expected 4Q 2006.
White Spaces" Proceeding: FCC proposes to allow unlicensed radio transmitters to operate in the broadcast television spectrum at locations where that spectrum is not being used; seeks comment. Action expected 4Q 2006.
Set-Top Box Waiver Proceeding: Action expected in 4Q 2006 or 1Q 2007.
AT&T-Bellsouth Merger: Comments were due June 5; replies were due June 20. Action expected in 4Q 2006 or 1Q 2007
Digital Must-Carry: Outstanding issues include: material degradation, program-related material, DBS carriage of DTV signals. Action expected 2007 or 2008.

III. Antitrust Agency Activity/Deal Announcements

No Date Yet for FCC Vote on AT&T/BellSouth Merger.

A date for a vote on the merger between AT&T and BellSouth has not been set. Parties involved hope for a resolution on the matter before the Democratically controlled Congress takes office in January. There is speculation that Chairman Martin may try to convince recused Commissioner McDowell to become active in the proceeding.

IV. Litigation

Judge Not Ready to Act on Mergers.

U.S. District Judge Emmet Sullivan stated on November 30 that he has not completed his review of the Verizon/MCI and SBC/AT&T mergers under the Tunney Act. Judge Sullivan implied a decision was not likely anytime soon and mentioned the possibility of holding evidentiary hearings into the way the Department of Justice handled the two mergers.

Washington Update - October 2006

updates@antitrustlawblog.com (Sheppard Mullin) — Mon, 30 Oct 2006 18:14:43 -0500

I. Legislative Branch Activity

A. Surveillance Bill Stalls in Senate.

There was little activity in Congress this month as most members were out on the campaign trail. The Senate did not address the surveillance bill (HR-5825) passed by the House in September, 232-191. The bill, in effect, would authorize an existing National Security Agency surveillance program by setting rules for warrantless surveillance in certain circumstances.

B. Legislative Calendar.

The Senate and the House adjourned for the elections on October 6. Legislators in both chambers will return to the Hill for a "lame duck" session after the election.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on October 12, 2006. Although the Commission did not address the AT&T/BellSouth merger, it did adopt three items: a Notice of Inquiry that seeks comments and information for the Thirteenth Annual Report on the status of competition in the market for the delivery of video programming; an Order concerning a request for declaratory ruling regarding the interference protection requirements applicable to the 700 MHz Band; and a First Report and Order and Further Notice of Proposed Rule Making concerning new wireless operations in the TV broadcast bands.

1. FCC Issues Inquiry for Annual Report to Congress on Video Competition.

The Notice of Inquiry, which seeks comment and information on competition in the video programming market, is designed to assist the FCC with its annual Video Competition Report. In this report, the FCC expects to recount changes in the competitive environment over the last year. The Notice seeks information that will allow the FCC to evaluate the status of competition in the video marketplace, changes in the market since the 2005 Video Competition Report, prospects for new entrants, factors that have facilitated or impeded competition, and the effect these factors are having on consumers’ access to video programming.

The Notice also requests:

Data that will allow the FCC to evaluate horizontal concentration in the video marketplace, vertical integration between programming distributors and programming services, and other issues relating to the programming available to consumers.
Information on technical issues, including equipment and emerging services.
Comments regarding developments in foreign markets, which may contribute to the FCC’s understanding of domestic markets and provide insight into factors affecting video competition.
Comments on digital content protection measures currently in use and how the Commission can encourage the development of digital rights management technology that will promote access to high value digital content.
Comments on whether MVPDs that offer Internet access service are giving subscribers a choice of Internet service providers and whether any MVPD offering high-speed Internet service has blocked access to certain kinds of Internet content or applications.

2. FCC Acts on Qualcomm Petition Regarding Interference Protection Requirements in the 700 MHz Band.

The FCC granted in part and denied in part a Petition for Declaratory Ruling filed by Qualcomm Incorporated regarding the requirements for interference protection in the 700 MHz band. Qualcomm is a Lower 700 MHz Band licensee and is seeking to deploy a mobile multimedia service called MediaFLO using this spectrum. Because Qualcomm’s licenses cover TV/DTV Channel 55 of the 700 MHz Band, the company must protect broadcasters on Channels 54, 55 and 56 from interference using the criteria set forth in the FCC’s rules.

The FCC acted on Qualcomm’s petition seeking relief from certain provisions of these interference protection rules. First, the FCC declared that Office of Engineering and Technology Bulletin No. 69, with certain modifications, is an appropriate methodology for demonstrating whether the MediaFLO system complies with the FCC’s rules on interference protection in the 700 MHz Band. Additionally, the FCC and its licensees have substantial experience with its implementation, particularly as it relates to predicting interference to television service from transmitters located both outside and inside another station’s service contour.

Second, the FCC declined Qualcomm’s request to declare that predicted interference to not more than two percent of the population served by a TV/DTV station is de minimis and therefore acceptable. However, the FCC granted Qualcomm a limited waiver using a measured approach where the allowable predicted interference to a TV/DTV station’s service caused by the MediaFLO system will increase incrementally each year from the release of today’s Order until the end of the DTV transition in February 2009.

Finally, Qualcomm had requested that the FCC establish streamlined processing procedures for any OET-69 showings, including a rebuttable presumption that such showings are sufficient when no objections are filed with the FCC. Because Qualcomm’s request for a de minimis interference exception was granted solely to Qualcomm through a waiver, rather than declaratory ruling, the FCC declined to establish streamlined processing of applications.

3. FCC Takes Steps to Allow New Low Power Devices on Vacant TV Channels.

The Commission adopted a First Report and Order and Further Notice of Proposed Rulemaking taking the first steps toward allowing new low power devices to operate in the broadcast television spectrum at locations where channels in that spectrum are not in use by television stations or other authorized services.

In the First Report and Order, the Commission concluded that fixed low power devices can be allowed to operate on TV channels in areas where those frequencies are not being used for TV or other incumbent licensed services. The Commission declined to permit operation on TV channel 37, which is used by radio astronomy and wireless medical telemetry services; and on TV channels 52-69, which have been reallocated for public safety and other mobile services. It also declined to permit the operation of personal/portable devices on TV channels 14-20, which are used by public safety service in 13 cities, leaving for further consideration the issue of whether fixed devices might be used in that band. Marketing of such devices may commence on February 18, 2009, after the digital television (DTV) transition is complete and all TV stations are in operation on their permanent DTV channels.

In the Further Notice, the Commission invited further comment on a number of issues that were raised in response to the Notice of Proposed Rule Making. It solicited additional information that is needed to determine whether personal/portable devices can operate in any of the TV channels without causing harmful interference. It also invited comment to explore whether low power devices should be permitted on TV channels 2-4, which are used by TV interface devices such as VCRs, and whether fixed low power devices can be permitted on TV channels 14-20.

B. Other FCC Activity.

1. FCC Consents with Conditions to ALLTEL Acquisition of Midwest Wireless Licenses and Authorizations.

The FCC consented to the applications filed in connection with the proposed acquisition of Midwest Wireless by ALLTEL, subject to certain conditions. In analyzing ALLTEL’s proposed acquisition of Midwest Wireless, the FCC examined the market for mobile telephony services and concluded that the companies had demonstrated that the merger, with the conditions described below, will serve the public interest, convenience, and necessity. Further, the FCC concluded that the likely public interest benefits of the merger outweigh any potential public interest harms and that competitive harm is unlikely in most mobile telephony markets involved in the proposed transaction. In four Cellular Market Areas, however, the FCC determined that likely competitive harms exceed the likely benefits of the transaction and, in these areas, imposed conditions that will effectively remedy the potential for these particular harms. The conditions imposed with respect to the cellular systems in the markets listed below mirror, in large part, the terms of a settlement agreement between the applicants and the Department of Justice.

C. Next Commission Meeting.

The next Commission meeting is currently scheduled for 9:30 AM on Thursday, November 3, 2006. The agenda includes: a Report and Order regarding changes to the process for community of license changes and the process for amendments to the FM Table of Allotments; a Notice of Proposed Rulemaking on whether it should adopt certain measures to mitigate migratory bird collisions with communications towers; a Memorandum Opinion and Order concerning the classification of broadband over power line Internet access service; and a Memorandum Opinion and Order regarding the transfer of control application of AT&T and BellSouth.

D. Pending Proceedings. There are several pending proceedings that may be acted upon in the near term, including the following:

Broadcast Ownership FNPRM. The Further Notice opens the broadcast quadrennial review of all of the media ownership rules, as required by statute. Comment Date: Oct. 23, 2006. Reply Date: Dec. 21, 2006.
Local Franchising NPRM: Rules would facilitate the franchise approval process for telcos seeking to enter the video market. Action expected 4Q 2006
Digital Television Distributed Transmission System (DTS) Technologies: Rules allow broadcasters to use transmitters to fill-in service gaps caused by geographic barriers. FCC is considering rules for permanent DTS operation. Action expected 3Q or 4Q 2006.
DTV Second Periodic Review: Outstanding issue concerning upgrades to open v-chip. Action expected 3Q or 4Q 2006.
Plug & Play: One-Way: FCC action on reconsideration pending; Court of Appeals held in abeyance; Two-Way: Ongoing negotiations and reporting to FCC throughout 2006; potential NPRM. Action expected 3Q or 4Q 2006.
Cable Horizontal and Vertical Ownership Limits: May 2005 further notice seeks to update stale record. An earlier notice sought comment on how to address D.C. Circuit remand of cable ownership regulations. Action expected 4Q 2006.
IP-Enabled Services: Will address the regulatory treatment of IP-enabled services, including video services. Action expected 4Q 2006.
Program Access Rules: Rules governing MVPD access to certain programming owned by cable operators will sunset in October 2007. FCC to evaluate whether sunset date should be extended. Action expected 4Q 2006.
"White Spaces" Proceeding: FCC proposes to allow unlicensed radio transmitters to operate in the broadcast television spectrum at locations where that spectrum is not being used; seeks comment. Action expected 4Q 2006.
AT&T-Bellsouth Merger: Comments due June 5; replies due June 20. Action in 4Q 2006 or 1Q 2007
Digital Must-Carry: Outstanding issues include: material degradation, program-related material, DBS carriage of DTV signals. Action expected 2007 or 2008.

III. Antitrust Agency Activity/Deal Announcements

New Date Set for FCC Vote on AT&T/BellSouth Merger.

The Federal Communications Commission delayed a vote on the proposed buyout of BellSouth by AT&T until November 3 after the two Democratic Commissioners asked for time to study last-minute proposals.

In comments filed after the delayed vote, critics of the merger called for stronger net neutrality requirements and performance metrics and pricing guidelines for special access.

IV. Litigation

Permanent Injunction Sets December 1 Deadline for EchoStar.

On October 20, US District Judge William P. Dimitrouleas in Florida issued a permanent injunction against EchoStar to stop delivering distant signals to out-of-market subscribers by December 1. The Court refused to honor the previous settlement agreement reached between EchoStar and the networks, excluding News Corp. EchoStar likely will ask the 11th U.S. Appeals Court, Miami, to stay and overturn the order. The likelihood of success of such an appeal is, however, extremely low. EchoStar also is seeking legislation to reverse the Court's order. Action in Congress on this issue is also thought to be unlikely.

Washington Update - September 2006

updates@antitrustlawblog.com (Sheppard Mullin) — Sat, 30 Sep 2006 16:11:44 -0500

I. Legislative Branch Activity

A. Port Security Bill Clears Conference.

In probably its last major action before the mid-term election recess, Congress approved the Security and Accountability for Every (SAFE) Port Act of 2006 by a vote of 409-2. The relevant FCC provisions are in Title VI. Section 602 directs the FCC to adopt a protocol to enable Commercial Mobile Radio Services (CMRS) providers to provide emergency alerts to subscribers. CMRS licensees may voluntarily elect to transmit emergency alerts to subscribers. If CMRS licensees elect not to transmit emergency alerts, they must provide clear and conspicuous notice at the point of sale of any devices with which its service is included that it does not do so. In addition, CMRS licensees that elect not to transmit emergency alerts also must notify existing subscribers of such election. Section 603 directs the FCC to establish a Commercial Mobile Service Alert Advisory Committee to make recommendations on CMRS emergency alert protocols.

B. House Passes Surveillance Bill.

The House passed the embattled electronic surveillance bill (HR-5825) 232-191 late on September 28. Thirteen Republicans voted against the bill, with 18 Democrats joining the Republican majority in approving it. The bill is a compromise worked out by the House Judiciary and Intelligence Committees, and sets rules for letting the President conduct warrantless electronic surveillance. The bill in effect would authorize an existing National Security Agency surveillance program, by setting rules for warrantless surveillance after an attack. The bill lets the government pursue targeted individuals up to 60 days.

C. Legislative Calendar.

The Senate and the House are targeting to adjourn before the elections on October 6.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on September 26, 2006. At the meeting, the Commission adopted four items: the 11th Report concerning the annual report on the competitive market conditions with respect to Commercial Mobile Radio Services (CMRS), a Second Order on Reconsideration and Second Report and Order concerning children’s television obligations, an Order concerning how the rural health care funding mechanism can be used to enhance public and non-public health care providers’ access to advanced telecommunications and information services, and a Public Safety and Homeland Security Bureau report regarding the launch of the new Bureau.

1. FCC Adopts 11^th Annual Report on State of Competition in the Wireless Industry.

The report examined the conditions prevailing in the CMRS marketplace in 2005. The FCC concluded that there is effective competition in the CMRS marketplace based on its analysis of various measures of competition, including: the number of competing carriers providing service in an area, market shares, pricing behavior and trends, technological upgrades and product innovations, subscriber growth, usage patterns, churn, and service quality.

The report shows that competition among wireless carriers continues to afford many significant benefits to consumers. During 2005, the number of mobile telephone subscribers in the United States rose from 184.7 million to 213 million, increasing the nationwide penetration rate to approximately 71 percent. The amount of time mobile subscribers spend talking and texting on their mobile phones has also increased and the volume of text message traffic grew to 48.7 billion messages in the second half of 2005, nearly double the 24.7 billion messages in the same period of 2004.

2. FCC Revises Children’s Television Obligations for Broadcasters.

The FCC approved a Second Order on Reconsideration and Second Report and Order resolving issues regarding the obligations of television broadcasters to protect and serve children in their audiences.

The Order approves the following modifications or clarifications of the children’s television rules:

The website rule – The Order adopts two clarifications to the rule: 1) the rule applies only when Internet addresses are displayed during program material or during promotional material not counted as commercial time; and 2) if an Internet address for a website that does not meet the four-prong test is displayed during a promotion, in addition to counting against the commercial time limits, the promotion will be clearly separated from programming material.
The host-selling rule – The Order permits the sale of merchandise featuring a program-related character in parts of the website that are sufficiently separated from the program itself to mitigate the impact of host selling.
The promotions rule – The Orderrevises the definition of “commercial matter” adopted in 2004 to provide additional flexibility for broadcasters and cable operators.
The preemption rule – The Order eliminates the cap on the number of preemptions and returns to a case-by-case approach.
The multicasting rule – The Order clarifies the limit on the repeat of core programs under the digital processing guideline adopted in 2004.
The Order clarifies that certain public service announcements, which are not commercial matter, are not subject to the restriction regarding the display of website addresses. It also clarifies that station identifications and emergency announcements are not subject to the website rules.
3. FCC Adopts Pilot Program Under Rural Health Care Mechanism.

The FCC adopted an Order that establishes a pilot program to help public and non-profit health care providers build state and region-wide broadband networks dedicated to the provision of health care services, and connect those networks to Internet2, a dedicated nationwide backbone. The construction of such networks will bring the benefits of innovative telehealth, and particularly, telemedicine services to those areas of the country where the need for those benefits is most acute.

4. FCC Announces Launch of the Public Safety and Homeland Security Bureau.

The Commission announced the launch of the Public Safety and Homeland Security Bureau. The new bureau will build on the Commission’s desire to meet the needs of public safety by promoting robust, reliable and resilient communications services in times of emergency. The bureau is responsible for the combined public safety-related functions that were previously dispersed among the other bureaus and offices. It is organized into three divisions: Policy, Public Communications Outreach & Operations, and Communications Systems Analysis.

B. Other FCC Activity.

1. FCC’s Advanced Wireless Services Spectrum Auction Concludes.

The FCC's first auction of Advanced Wireless Service (AWS) spectrum licenses ended on September 18. A total of 1,122 licenses were offered in the auction, and 104 bidders won 1,087 licenses. The AWS licenses can be used to provide any of a wide array of innovative wireless services and technologies including voice, data, video, and other wireless broadband services offered over Third Generation (“3G”) mobile networks. Auction No. 66 began on August 9, 2006, and closed after 161 rounds of bidding, raising total gross bids of nearly $13.9 billion. The top five winning bidders based on the net amount of their winning bids include: T-Mobile License LLC; Cellco Partnership d/b/a Verizon Wireless; SpectrumCo LLC; MetroPCS AWS, LLC; and Cingular AWS, LLC.

2. FCC Denies Fones4All Petition to Expand Network Unbundling Obligation Through Forbearance.

The FCC denied a petition filed by Fones4All Corporation requesting that the Commission expand incumbent local exchange carriers’ unbundling obligations by forbearing from specific aspects of the FCC’s unbundling rules under section 251(d)(2) of the Communications Act of 1934. The FCC concluded that forbearance from rule 51.319(d) would not give Fones4All the relief it seeks, and therefore denied the Petition as procedurally defective. The FCC also concluded that the Petition did not meet the three prongs of the section 10 forbearance test.

C. Next Commission Meeting.

The next Commission meeting is currently scheduled for 9:30 AM on Thursday, October 12, 2006. The agenda for that meeting is not yet available, although FCC action on the AT&T/BellSouth merger is possible.

D. Pending Proceedings.There are several pending proceedings that may be acted upon in the near term, including the following:
- Broadcast Ownership FNPRM. The Further Notice opens the broadcast quadrennial review of all of the media ownership rules, as required by statute. Comment Date: Oct. 23, 2006. Reply Date: Dec. 21, 2006.
- Local Franchising NPRM: Rules would facilitate the franchise approval process for telcos seeking to enter the video market. Action expected 4Q 2006
- Digital Television Distributed Transmission System (DTS) Technologies: Rules allow broadcasters to use transmitters to fill-in service gaps caused by geographic barriers. FCC is considering rules for permanent DTS operation. Action expected 3Q or 4Q 2006.
- DTV Second Periodic Review: Outstanding issue concerning upgrades to open v-chip. Action expected 3Q or 4Q 2006.
- Plug & Play: One-Way: FCC action on reconsideration pending; Court of Appeals held in abeyance; Two-Way: Ongoing negotiations and reporting to FCC throughout 2006; potential NPRM. Action expected 3Q or 4Q 2006.
- Cable Horizontal and Vertical Ownership Limits: May 2005 further notice seeks to update stale record. An earlier notice sought comment on how to address D.C. Circuit remand of cable ownership regulations. Action expected 4Q 2006.
- IP-Enabled Services: Will address the regulatory treatment of IP-enabled services, including video services. Action expected 4Q 2006.
- Program Access Rules: Rules governing MVPD access to certain programming owned by cable operators will sunset in October 2007. FCC to evaluate whether sunset date should be extended. Action expected 4Q 2006.
- "White Spaces" Proceeding: FCC proposes to allow unlicensed radio transmitters to operate in the broadcast television spectrum at locations where that spectrum is not being used; seeks comment. Action expected 4Q 2006.
- AT&T-Bellsouth Merger: Comments due June 5; replies due June 20. Action in 4Q 2006 or 1Q 2007
- Digital Must-Carry: Outstanding issues include: material degradation, program-related material, DBS carriage of DTV signals. Action expected 2007 or 2008.
III. Executive Branch Activity

NTIA: Comments received on Digital Television Converter Box Program.

The federal government must allow every U.S. household to seek financial aid to pay for digital-to-analog converter boxes after analog TV transmissions are halted in early 2009, top broadcasting and electronics trade groups said last week. The industry groups — led by the National Association of Broadcasters and the Consumer Electronics Association — said that in designing the converter program, Congress included every household and did not give the executive branch authority to add to, or subtract from, the eligibility pool.

NTIA has more than a year to put the final touches on the converter-box program. The agency is planning to issue coupons on a first-come, first-served basis from January 1, 2008 to March 31, 2009.

IV. Antitrust Agency Activity/Deal Announcements

Date Set for FCC Vote on AT&T/BellSouth Merger.

Chairman Martin has set the stage for a vote on the AT&T/BellSouth merger at the October 12 FCC public meeting. The FCC's action was unusual in that it came before the Justice Department had reached a decision on whether or not the deal would adversely affect competition and possibly harm consumers. Chairman Martin stated he recommends the merger be approved without any conditions.

Both the scope and timing of the merger has stirred controversy in Congress. Two influential senators urged the FCC and Justice Department to consider imposing conditions on the proposed merger. In a letter to both agencies, Sens. Mike DeWine, R-Ohio, and Herb Kohl, D-Wis., said divestitures of company assets may be needed, along with curbs on the ability of the merged parties to "warehouse" spectrum, thus restricting it from competitors.

Meanwhile, two House members, Judiciary Committee Chairman James Sensenbrenner, R-Wis., and John Conyers of Michigan, the panel's top Democrat, urged the Justice Department to refrain from ruling on the merger until a court review of two previous telecom deals is complete.

U.S. District Judge Emmet Sullivan is currently reviewing the mergers of Verizon Communications with MCI as well as the former SBC Communications takeover of AT&T, under expanded power Congress gave the courts in the Tunney Act of 2004 to more closely scrutinize Justice Department antitrust pacts with companies.

V. Litigation

A. 2^nd Circuit Remands Indecency Case Back to FCC, Commenters Weigh In.

On September 7, a three-judge panel for the 2nd Circuit Court of Appeals agreed to remand the cases to the FCC for 60 days. The decision, which also put on hold rulings that four television programs from 2002 to 2004 contained foul language, was seen as temporarily stopping the FCC's "fleeting expletive" policy, under which broadcast stations could be fined for airing profanities, even if used only once.

The FCC had asked the court to allow it to reopen the decision so that it could respond to complaints by the major broadcast television networks. Comments were due on September 21st. In a combined filing at the FCC, CBS, Fox, and NBC took aim at the entirety of the FCC's indecency enforcement regime, saying they wanted the Commission to "rescind its radical new interpretation of indecency rules." In their filing, the networks asked the FCC to "reverse its radically expanded efforts to regulate through punitive forfeitures what it considers to be "indecent speech." They argue that the FCC's previous "cautious and limited" enforcement is the "centerpiece" of its defense of having the power to regulate broadcast speech. It is this regime that the Supreme Court narrowly upheld, expressly excluding "isolated" uses of "potentially offensive" language, which the FCC is now punishing.

Petitions for review and reply briefs must be filed in the 2nd Circuit by December 11.

B. EchoStar, Fox Square Off on Distant Networks.

The U.S. Court of Appeals for the 11th Circuit previously found EchoStar in violation of the Satellite Home Viewer Act by regularly and unlawfully delivering out-of-market stations ("distant signals") in competition to local stations that carry the same network programming. In an effort to head-off the pending injunction, EchoStar came to terms with ABC, NBC, CBS, and the Fox affiliates. The Fox Network and about 25 Fox stations, however, have objected to the proposed settlement. The U.S. District Court gave EchoStar until September 12 to explain why the court should not issue the injunction.

In its court filing, EchoStar told a Florida district court that it should not have to pull the distant network signals of 800,000 subscribers because circumstance have changed dramatically since a court ordered it to, and consumers would be unduly and unfairly hurt by the move. Also, they say, competitor DIRECTV would directly benefit from the move. EchoStar says that the August 25, $100 million settlement—with all but the Fox affiliates—is a "substantial" change in circumstance since the injunction was ordered. It also says that in light of the settlement, a permanent injunction would be "unjust, particularly to consumers."

EchoStar also asked for at least 120 business days to comply if ordered by a federal judge to terminate Big Four network programming largely located in rural areas. EchoStar told the court it would need at least four months to help consumers find alternatives for receiving network programming, including purchase of a local TV-signal package in the 165 markets where EchoStar makes that option available.

Washington Update - August 2006

updates@antitrustlawblog.com (Sheppard Mullin) — Wed, 30 Aug 2006 12:05:35 -0500

I. Legislative Branch Activity

A. Senate Fails to Pass Telecom Bill Before August Recess.

The Senate shut down for August recess without passing the telecom bill (HR-5252), despite Commerce Committee Chairman Stevens’ (R-AK) week-long drive to round up the 60 votes needed to avoid a filibuster. Sen. Sununu (R-NH) was helping Stevens to round up votes. According to Sen. Sununu, technology is moving so quickly that the bill will be obsolete by next Congress.

The next step for Sen. Stevens is a move to a slimmed-down bill that deals only with video franchise relief and Universal Service Fund reform -- a formula that Hill sources say has a more reasonable chance of passage. House Commerce Committee Chairman Barton (R-TX) is expected to be amenable to some type of compromise on USF in the interest of striking a deal on a telecom bill.

B. Democrats Block Vote on Specter Surveillance Bill.

On August 3, Senate Judiciary Committee Chairman Specter (R-PA) failed to bring his electronic surveillance bill (S-2453) to a vote after Democrats voiced strong objections in a markup session. No further action can occur until after the August recess. Sen. Specter’s bill, endorsed by the White House, is opposed by several powerful committee Democrats. The bill's future is uncertain.

C. Legislative Calendar.

On July 31, the House entered its summer recess and will resume business on September 5.The Senate remained active for an extra week, before recessing on August 7. It too will reconvene on September 5.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on August 3, 2006. At the meeting, the Commission adopted two items: A Notice of Proposed Rulemaking regarding the rules governing wireless licenses in the 698-746, 747-762, and 777-792 MHz Bands, and an Order in response to petitions for reconsideration of the rules applicable to Broadband over Power Line systems.

1. FCC Seeks Comment on Possible Modifications to Rules Governing Wireless Licenses in Portions of the 700 MHz Spectrum Band. The Commission adopted a Notice of Proposed Rule Making (released on August 10) that seeks comment on possible changes to the rules governing wireless licenses in the 698-746, 747-762, and 777-792 MHz spectrum bands. These portions of the 698-806 MHz band, which is commonly referred to as the “700 MHz Band,” have been allocated for commercial wireless services and do not include the 700 MHz Guard Bands nor the portions of the 700 MHz Band that have been allocated for public safety services. Under the Digital Television and Public Safety Act of 2005, which was signed into law earlier this year, the FCC is required to commence an auction of previously unauctioned spectrum in this Band no later than January 28, 2008.

2. FCC Adopts Memorandum Opinion and Order on Broadband Over Power Lines to Promote Broadband Service to All Americans. As part of its ongoing efforts to promote access to broadband services for all Americans and to encourage new facilities-based broadband platforms, the FCC generally affirmed its rules for Access Broadband over Power Line (Access BPL) systems while maintaining safeguards against harmful interference to existing radio services.

B. Other FCC Activity.

1. Commission Seeks Comment on Proposal to Revise Rules for Direct Broadcast Satellite Service. (Docket 06-160) The FCC released a NPRM on August 18 seeking comment on licensing procedures and service rules for satellites providing Direct Broadcast Satellite (DBS) service. The Notice seeks comment on proposals that will apply to any application for authority to provide DBS service in the United States using the 12.2-12.7 GHz band and associated feeder links in the 17.3-17.8 GHz band. This includes both unassigned channels at orbit locations assigned to the United States under the ITU Region 2 BSS and feeder-link Plans, and applications for DBS service from space stations located at orbital locations not assigned to the United States in the ITU Region 2 BSS and feeder-link Plans. The Notice also seeks comment on new licensing procedures, including the use of the first-come, first-served process for all DBS applications, regardless of the proposed orbit location.

2. Bidding Begins in AWS-1 Auction (#66). On August 9, bidding on Advanced Wireless Spectrum (auction #66) began. Applicants are hoping to acquire some of the 1,122 licenses in the 1710-1755 MHz and 2110-2155 MHz band. The auction has garnered nearly $13.6 billion in bids through round 63, though the number of bids per round has fallen by half to around 150. The three previous rounds had averaged 170 new bids per round, and the three rounds before those garnered 240 bids on average. Eighty-six licenses are still without a bid. Of licenses that have not received bids, about 100 are geographically small, A-block cellular market areas in Pennsylvania, Tennessee, Ohio, Kentucky and Florida. The other dozen or so licenses cover areas such as Guam, American Samoa, Puerto Rico and the Gulf of Mexico.

3. Verizon and BellSouth Remove Increased DSL Fees. Responding to FCC letters of inquiry received on August 25, Verizon and BellSouth both agreed to drop newly added "cost recovery" fees from their DSL service. The surcharge began appearing in customer bills in mid-August, right after DSL providers were allowed to stop collecting a federal fee for the Universal Service Fund. The new fees were almost identical to the old USF fees, so customers saw little or no change in their bills.

C. Next Commission Meeting. The next Commission meeting is currently scheduled for 9:30 AM on Thursday, September 26, 2006. The agenda for that meeting is not yet available.

D. Pending Proceedings. There are several pending proceedings that may be acted upon in the near term, including the following:

Ø Local Franchising NPRM: Rules would facilitate the franchise approval process for telcos seeking to enter the video market. Action expected 4Q 2006.

Ø Digital Television Distributed Transmission System (DTS) Technologies: Rules allow broadcasters to use transmitters to fill-in service gaps caused by geographic barriers. FCC is considering rules for permanent DTS operation. Action expected 3Q or 4Q 2006.

Ø DTV Second Periodic Review: Outstanding issue concerning upgrades to open v-chip. Action expected 3Q or 4Q 2006.

Ø Plug & Play: One-Way: FCC action on reconsideration pending; Court of Appeals held in abeyance; Two-Way: Ongoing negotiations and reporting to FCC throughout 2006; potential NPRM. Action expected 3Q or 4Q 2006.

Ø Cable Horizontal and Vertical Ownership Limits: May 2005 further notice seeks to update stale record. An earlier notice sought comment on how to address D.C. Circuit remand of cable ownership regulations. Action expected 4Q 2006.

Ø IP-Enabled Services: Will address the regulatory treatment of IP-enabled services, including video services. Action expected 4Q 2006.

Ø Program Access Rules: Rules governing MVPD access to certain programming owned by cable operators will sunset in October 2007. FCC to evaluate whether sunset date should be extended. Action expected 4Q 2006.

Ø "White Spaces" Proceeding: FCC proposes to allow unlicensed radio transmitters to operate in the broadcast television spectrum at locations where that spectrum is not being used; seeks comment. Action expected 4Q 2006.

Ø AT&T-Bellsouth Merger: Comments due June 5; replies due June 20. Action in 4Q 2006 or 1Q 2007

Ø Digital Must-Carry: Outstanding issues include: material degradation, program-related material, DBS carriage of DTV signals. Action expected 2007 or 2008.

III. Executive Branch Activity

A. NTIA: Market Research for Implementation of Digital to Analog Converter Box Coupon Program.

On July 31, 2006, NTIA published a Request for Information (RFI) to conduct market research for implementation of the Congressionally mandated Digital to Analog Converter Box Coupon Program. NTIA is seeking capability information from organizations with the experience, qualifications, solution approaches, and best practices necessary to implement and administer the Coupon Program. This RFI is for information and planning purposes only and does not constitute a Request for Proposal. Responses to the RFI are due September 15, 2006.

IV. Antitrust Agency Activity/Deal Announcements

A. Commissioner McDowell May Be Recused from AT&T-BellSouth Merger Vote. FCC Commissioner McDowell may be excluded from voting on the AT&T-BellSouth merger because his former employer, CLEC association COMPTEL, has participated substantially in the proceeding. If Commissioner McDowell is disqualified, only four commissioners would vote on the item, which could give Democratic Commissioners Adelstein and Copps more bargaining power to add conditions to any approval.

B. DOJ Turns Over Documents to Court on Telecom Mergers. U.S. antitrust authorities on August 9 turned over additional documents to U.S. District Court Judge Emmet Sullivan in support of government settlements permitting two major telecommunications mergers. Judge Sullivan is overseeing a Tunney Act review of the DOJ’s approval of the Verizon-MCI and SBC-AT&T mergers. The Tunney Act provides the judiciary with the authority to evaluate the effectiveness of consent decrees and whether those decrees will protect the public interest. The Act also directs judges to consider the impact of a transaction on "competition in the relevant market or markets."Judge Sullivan's review also could affect the manner in which the DOJ approaches its examination of AT&T's proposed purchase of BellSouth.

V. Litigation

A. Appeals Court Upholds FCC Interconnection Decision.

A 2-year-old FCC decision to limit CLECs’ ability to opt into interconnection agreements negotiated by other carriers was upheld on August 29 by the 9th Circuit Court of Appeals. Finding Sec. 252(i) of the Telecom Act “ambiguous,” the court held the FCC's interpretation to be reasonable.

Sec. 252(i) provides that carriers must make interconnection agreements available to other carriers, the statute does not define the specific parameters of such availability. The FCC in 1996 adopted a 'pick & choose' interpretation that let carriers opt into parts of interconnection agreements negotiated by other carriers. It replaced that approach in 2004 with an "all or nothing" approach under which a carrier must adopt another carrier’s agreement completely or not at all.

B. FCC Wants to Reconsider Indecency Ruling.

FCC lawyers announced on August 29 the Commission had rushed to judgment in concluding that "NYPD Blue" and three other television programs violated rules governing the broadcast of indecent and profane material. FCC lawyers therefore asked an appeals court to delay hearing a challenge to the FCC's findings for two months so that it may reconsider its rulings. The court has not yet issued an order on the motion.

C. EchoStar, Fox Square Off on Distant Networks.

The U.S. Court of Appeals for the 11th Circuit has previously found EchoStar in violation of the Satellite Home Viewer Act by regularly and unlawfully delivering out-of-market stations ("distant signals") in competition to local stations that carry the same network programming. The court has ordered the U.S. District Court with jurisdiction over the matter to issue an injunction that would prohibit EchoStar from retransmitting distant television broadcast signals. In an effort to head-off the pending injunction, EchoStar came to terms on August 25^th with ABC, NBC, CBS and the Fox affiliates. The Fox Network and about 25 Fox stations, however, have objected to the proposed settlement. The U.S. District Court has given EchoStar until Sept. 12th to explain why the court should not issue the injunction.

D. Appeals Court Upholds FCC on CableCARD, Lets Integration Ban Stand.

On August 18, the D.C. Circuit upheld the FCC's "integration ban," which requires cable operators to separate encryption functions from basic decoding capabilities in their set-top boxes. Separating these functions allows cable customers to plug their cable line directly into a TV set without the need for a set-top box.

E. Judge Rules Warrantless Wiretapping Unconstitutional.

The National Security Agency is violating the U.S. Constitution by monitoring phone calls and e-mails without warrants, and must stop, a federal judge in Detroit ruled on August 17. U.S. District Judge Anna Taylor said NSA’s program “violates the APA [Administrative Procedures Act], the Separation of Powers doctrine, the First and Fourth Amendments of the United States Constitution and the statutory law,” including the Foreign Intelligence Surveillance Act. The DOJ immediately appealed the decision to the 6th Circuit Court of Appeals.

Washington Update - July 2006

updates@antitrustlawblog.com (Sheppard Mullin) — Sun, 30 Jul 2006 11:42:41 -0500

I. Legislative Branch Activity

A. House Passes Interoperability Bill.

On July 25, the House passed 414-2 a bill (HR-5852) that would coordinate national, state, and local emergency communications efforts through a new Department of Homeland Security. The head of the new DHS emergency communications office would oversee all such communications nationwide. States would have to write plans and coordinate regionally among federal, state, and local officials. The bill would tie award of DHS grants to development of “effective statement interoperable communications plans.”

B. Legislative Calendar.

On July 31, the House enters its summer recess. The Senate will remain active for another week, before stopping work on August 7. Both Houses of Congress will reconvene post Labor Day on September 5.

II. Federal Communications Commission (FCC) Activity

A. FCC Meeting.

The Commission held an open meeting on July 13, 2006. At the meeting, the Commission adopted four items: the Adelphia/Time Warner/Comcast license transfer, a proposed forfeiture involving its CPNI investigation against LocateCell, a rulemaking to establish a new "MedRadio" service for medical radio communication devices, and a rulemaking on TRS compensation. Just prior to the meeting, an item concerning digital audio broadcasting systems was removed from the agenda.

1. FCC Approves Adelphia/Time Warner/Comcast License Transfer. The FCC approved the sale of substantially all of the cable systems and assets of Adelphia Communications Corporation to Time Warner and Comcast Corporation, the exchange of certain cable systems and assets between affiliates or subsidiaries of Time Warner and Comcast, and the redemption of Comcast’s interests in Time Warner Cable and Time Warner Entertainment Company.

The Commission determined that subscribers would benefit from the resolution of the Adelphia bankruptcy proceeding in the form of new investment and upgrades to the network. Additionally, the transactions would accelerate deployment of VoIP and other advanced video services, such as local VOD programming, to subscribers.

Conversely, the Commission found that the proposed transactions may increase the likelihood of harm in markets in which Time Warner or Comcast has, or may in the future have, an ownership interest in Regional Sports Networks. The Commission imposed remedial conditions similar to those imposed in the News Corp.-Hughes order to address its concerns.

2. FCC Proposes Forfeiture in Context of Its CPNI Investigation - Commission Proposes Maximum Forfeiture Of $97,500 Against LocateCell. The FCC found that LocateCell apparently “willfully or repeatedly” violated a Commission order by failing to provide information and documents required by a subpoena. For this failure, the Commission issued a $97,500 Notice of Apparent Liability for Forfeiture against LocateCell.

LocateCell received the subpoena as part of the Commission’s investigation into the apparent offering and sale of customer proprietary network information (CPNI) by data brokers. The subpoena sought to determine how LocateCell was able to access sensitive personal subscriber information that telecommunications carriers are obligated to protect under section 222 of the Telecommunications Act and the Commission’s rules.

3. FCC Begins Rulemaking to Establish A New "MedRadio" Service for Medical Radio Communication Devices. (Docket: 06-135) The FCC initiated a proceeding to establish a new service for advanced medical radio communication devices in the 401-406 MHz band. In the NPRM, the FCC proposed designating an additional two-megahertz of spectrum for these devices, at 401-402 MHz and 405-406 MHz, adjacent to the existing Medical Implant Communications Service (MICS) band at 402-405 MHz, for a total of 5 megahertz specifically designated for medical device radio communications.

4. FCC Seeks Comment on Broad Range of Issues Concerning TRS Compensation. (Docket: 03-123) The Commission is seeking comment on a broad range of issues concerning the compensation of providers of telecommunications relay services (TRS) from the Interstate TRS Fund for their costs of providing TRS. Title IV of the Americans with Disabilities Act of 1990 (ADA) requires common carriers offering “telephone voice transmission services” to alsoprovide TRS so that persons with hearing and speech disabilities will have access to the telephone system. The ADA also mandates that eligible TRS providers will be compensated for certain costs associated with providing TRS.

B. Other FCC Activity.

1. FCC Releases FNPRM for Media Ownership Proceeding. (Docket: 02-277). The FCC released a Further Notice of Proposed Rulemaking on July 24 that seeks comment on issues raised by the U.S. Court of Appeals for the Third Circuit in Prometheus v. FCC, which two years ago stayed and remanded several media ownership rules that the Commission had adopted in its 2002 Biennial Review Order. The FNPRM seeks comment on the following ownership rules:

Local Television Ownership Limit
Local Radio Ownership Limit
Newspaper Broadcast Cross-Ownership Ban
Radio Television Cross-Ownership Limit
Dual Network Ban
UHF discount on the National Television Ownership Limit

C. Next Commission Meeting. The next Commission meeting is currently scheduled for 9:30 AM on Thursday, August 3, 2006. The agenda for that meeting will include three items: 1) An Order concerning the classification of Broadband over Power Line Internet access service; 2) An Order in response to petitions for reconsideration of the rules applicable to Broadband over Power Line systems; 3) A Notice of Proposed Rulemaking regarding the rules governing wireless licenses in the 698-746, 747-762, and 777-792 MHz Bands.

D. Pending Proceedings. There are several pending proceedings that may be acted upon in the near term, including the following.

Ø Spectrum Auctions

· 1710-1755 and 2110-2155 MHz Advanced Wireless Services Auction # 66. Short-form applications were filed June 19. Upfront payments due July 17. A mock auction will be held on August 7, actual auction begins August 9.

· Digital LPTV Auction # 85 – LPTV stations can convert to digital operations on their analog channels or by obtaining a companion digital channel. Applications were due June 30. An auction seminar was held on June 12 and can be viewed via streaming video on the FCC's website. Not yet scheduled; expected 3Q 2006.

Ø Local Franchising NPRM: Rules would facilitate the franchise approval process for telcos seeking to enter the video market. Action expected 4Q 2006

Ø DTV Second Periodic Review: Outstanding issue concerning upgrades to open v-chip. Action expected 3Q or 4Q 2006.

Ø IP-Enabled Services: Will address the regulatory treatment of IP-enabled services, including video services. Action expected 4Q 2006.

Ø AT&T-Bellsouth Merger: Comments due June 5; replies due June 20. Action in 4Q 2006 or 1Q 2007

Ø Digital Must-Carry: Outstanding issues include: material degradation, program-related material, DBS carriage of DTV signals. Action expected 2007 or 2008.

III. Executive Branch Activity

A. NTIA Seeks Public Comment on Digital Television Converter Box Program.

The Deficit Reduction Act of 2005 imposes a deadline of February 18, 2009 for completion of the transition to digital television. The Act also requires the National Telecommunications and Information Administration (NTIA) to implement and administer a program to provide coupons to consumers for use towards the purchase of digital-to-analog converter boxes. The converter boxes are necessary for consumers who wish to continue receiving broadcast programming over the air using analog-only televisions after the February 2009 transition deadline. Without converter boxes, consumers with analog-only television sets will be unable to view full-power television broadcasts unless they purchase digital television sets or subscribe to cable or satellite service The NTIA’s Notice of Proposed Rulemaking seeks public comment on such issues as which U.S. households should receive the coupons to help purchase a digital converter box, restrictions for the coupons, the application process, coupon expiration manufacturing standard for the converter box, and the coupon distribution system. The deadline for filing comments is September 25, 2006.

IV. Antitrust Agency Activity/Deal Announcements

A. Court Reviews DOJ Action on Verizon-MCI and SBC-AT&T Mergers.

U.S. District Court Judge Emmet Sullivan is overseeing a Tunney Act review of the Department of Justice’s (“DOJ’s”) approval of the Verizon-MCI and SBC-AT&T mergers. The Tunney Act provides the judiciary with the authority to evaluate the effectiveness of consent decrees and whether those decrees will protect the public interest. The Act also directs judges to consider the impact of a transaction on "competition in the relevant market or markets."

Earlier this month, Judge Sullivan requested unredacted versions of the consent agreements entered into by the telecommunications companies and the DOJ in connection with the two mergers. Judge Sullivan later requested additional supporting information and gave the government until Aug. 7 to file the necessary documents with the court. It is not anticipated that Tunney Act review will ultimately unravel either merger, although some observers note that the review may result in additional merger conditions, such as further asset divestitures.

V. Litigation

A. Consumer Protection Groups take CALEA case to Court of Appeals En Banc. The U.S. Court of Appeals in June upheld a newer and broader definition of the Communications Assistance for Law Enforcement Act (CALEA). The original CALEA bill, passed in 1994, required telephone companies to set up their infrastructure to more easily allow for law enforcement wiretaps. The law's revision would expand the requirement to broadband providers and voice over Internet protocol.

A coalition of groups, including the Electronic Frontier Foundation, the Electronic Privacy Information Centre, Pulver.com, Sun Microsystems, and the National Association of College and University Business Officials, intend to seek en banc review of the legislation. Those organizations argue the Internet is technologically different from phone companies and that expanding the 1994 law would create security loopholes. They also maintain that the FCC went too far when it framed the requirements for ISPs and argue that the FCC is demanding changes that are outside of its legal scope.

B. FCC Seeks an Additional Review of Indecency. The FCC on July 5 asked an appeals court to return a case to the agency so it could reconsider for another 60 days whether some episodes of "The Early Show," "NYPD Blue" and Billboard music award shows violated decency standards. Taking the case back "would allow the Commission to hear all of the licensees' arguments, which is necessary for the broadcasters to make these same arguments before the court," the Commission said. The court will hear oral arguments from "any party desiring" to weigh in on the FCC remand request and oppositions to that request on August 8 at 2 p.m.

C. Settlement Approved in Gabelli Fraud Case. Mario Gabelli, and related companies, will pay $130 million to resolve civil fraud allegations that Gabelli created fake companies to gain an unfair advantage in the auctions of cell phone spectrum. According to the terms of the settlement, neither Gabelli nor any of the affiliated entities or individuals admitted any wrongdoing or liability. The lawsuit had accused Gabelli of rigging the system by creating sham companies that bid for wireless phone licenses at a discount under rules favoring minority and small businesses. He then resold the licenses at a profit, according to the government.

D. CBS to appeal FCC ruling on Jackson fine. On July 28, CBS paid a $550,000 indecency fine for the Janet Jackson Super Bowl incident, but it intends to take the decision to court. The television network said the fine was "unconstitutional, contrary to the Communications Act and FCC rules and generally arbitrary, capricious and contrary to law.”