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from: Mondaq News

United States: Communications Law Bulletin -- March, 2007

04 April 2007
Article by Charles H. Kennedy

The Month in Brief

Among other developments in the month of March, members of the House Energy and Commerce Committee held rescheduled oversight hearings of the Federal Communications Commission (the "FCC" or the "Commission"). This was the first time in four years that the full panel of FCC commissioners had appeared before Committee members, and Democratic members had harsh words for the Commission generally and Chairman Martin in particular.

Committee Chairman Dingell (D-MI) set the tone when he criticized the FCC for usurping Congress’s legislative authority. Dingell was especially unhappy with last December’s FCC action on streamlining of the video franchising rules, and suggested more generally that the Commission might benefit from "an oversight hearing every month to keep the business of the Commission on track."

Other concerns were expressed by Rep. Edward Markey (D-MA), who noted that broadband deployment in the United States lags well behind other developed nations, and suggested that the Commission improve its collection of deployment information and "explore ways to create incentives for investment in new technologies." Markey also questioned Chairman Martin about the National Security Agency’s collection of individual telephone records and the sale of customer records to pretexters. Another Democrat, Anna Eshoo of California, complained about the lack of oversight hearings in recent years and questioned both Chairman Martin and Commissioner Tate on their handling of the AT&T-BellSouth merger and the possibility that conditions placed on the merger will be selectively enforced. The AT&T-BellSouth merger conditions also drew fire from the Republican side, with Representative Barton (R-TX) suggesting that the imposition of Net neutrality provisions was contrary to the will of Congress, which has so far declined to pass legislation that mandates Net neutrality.

Besides the oversight hearings, March also saw the judicial approval of the SBC-AT&T and Verizon-MCI mergers and major victories for Voice Over Internet Protocol ("VOIP") services. These and other developments are covered in this issue of our Bulletin, along with our usual list of deadlines for your calendar.

Judge Approves SBC-AT&T and Verizon-MCI Mergers

On March 30, 2007, Judge Emmet Sullivan of the United States District Court for the District of Columbia approved the agreement between the parties and the Justice Department in the SBC-AT&T and Verizon-MCI mergers. Although the mergers were approved by the Justice Department and the FCC more than a year ago, Judge Sullivan was tasked under the Tunney Act with determining whether the deals are in the public interest.

At hearings held last year, Judge Sullivan criticized the Justice Department for presenting an inadequate record and suggested that he might hold evidentiary proceedings to assist in his decision. In his decision of March 30, Judge Sullivan pointed out that his public interest finding under the Tunney Act does not establish that "these mergers . . . are altogether in the public interest, nor whether they should be approved by other branches of government."

In another merger-related story, Qwest Communications International ("Qwest") withdrew the writ of mandamus it had filed with the U.S. Court of Appeals for the D.C. Circuit, demanding that the FCC be directed to suspend certain provisions of a special access tariff that AT&T proposed one day before the FCC approved the merger between AT&T and BellSouth. (See related article in February, 2007 issue of this Bulletin.) Late on March 26, the FCC had revised the special access condition based upon a proposal by AT&T.

Video Franchise Developments

In early March, the FCC released the text of its federal video franchise order adopted in December 2006. (See related articles in the December, 2006 and January, 2007 issues of this Bulletin.) The franchise order was criticized by many groups, including municipalities and cable companies, who were concerned that the order usurps local authority and gives an unfair advantage to Bell companies.

On March 22, the FCC adopted a Notice of Proposed Rulemaking ("NPRM") seeking comment on a number of issues relating to the use of exclusive contracts for the provision of video services to multiple dwelling units ("MDUs"). The NPRM seeks comment on the current conditions facing providers attempting to gain access to MDUs or other real estate developments, the impact of exclusive contracts on consumer choice and video competition, and what steps the Commission should take to ensure that exclusive contracts do not unreasonably impede competitive video entry. The NRPM also tentatively concludes that the FCC has authority to regulate in this area to the extent it finds that such contracts may impede competition and impair deployment of video services. In his separate statement, Chairman Martin explained that the NPRM was released in part out of concern about rising cable prices in recent years.

Video franchise reform bills designed to shift franchising authority from municipalities to the state level have made progress in several states:

* A new Ohio Senate bill, SB-117, would shift video franchising from municipalities to the state’s Commerce Department. The department would have 30 days to review franchise filings, with inaction causing automatic approval.

* The Missouri legislature passed a video franchise reform bill, which the governor signed, that will shift franchising from municipalities to the state public service commission. The commission will have 30 days to act on statewide video franchise applications.

* Iowa’s legislature has taken initial steps towards a bill to shift video franchising from municipalities to the Iowa Utilities Board. The bill, revised to include new buildout requirements and public access obligations, could reach the senate floor for debate in late March.

* Florida’s House of Representatives passed a bill shifting video franchising from municipalities to the Secretary of State. The state Senate has a similar bill in committee, but that bill includes more stringent buildout requirements and greater restrictions on the types of technological platforms that new landline video entrants may use.

* Wisconsin’s legislature introduced parallel video franchise reform bills that would require all entrants to obtain a statewide video service franchise. However, the bill would allow municipalities to keep their existing authority over rights-of-way and public, educational, and government channels.

* Tennessee’s legislature introduced a video franchise bill, which was set for House committee hearings on March 27. The bill would shift video franchising authority from municipalities to the Secretary of State. The bill does not impose buildout requirements on new entrants, but it allows incumbents to opt out of existing municipal-level franchises when a state-franchised competitor enters the market.

Meanwhile, statewide franchise measures were dealt setbacks in Utah and Idaho, where bills were defeated or withdrawn.

California Bill to Limit Special Deals Between Video and Broadband Providers and Landlords

AB-1164, currently pending in the California Assembly, would prohibit agreements between video service and broadband service providers and landlords that would interfere with their tenants’ ability to subscribe to the video or broadband provider of their choice. The bill also would prevent landlords from discriminating, in rents or otherwise, between their tenants based on the video or broadband carrier to which the tenant subscribes. The bill was introduced on February 23.

Legislative Developments Senate Commerce Committee Chairman Daniel Inouye (D-HI) is working with members of his committee on a bipartisan measure to reform the federal USF. As part of that effort, he is expected to conduct an in-depth briefing on the potential and limitations of broadband Internet and wireless services. The measure reportedly is not intended to be part of a larger telecommunications reform bill. Obtaining a broad-based consensus on the substance of the measure, however, may prove challenging, given the differing views among lawmakers on how to improve the universal service program. For example, Sen. Ted Stevens (R-AK), the top Republican on the Senate Commerce Committee, opposes reverse auctions, which are intended to limit the number of carriers eligible for USF subsidies and to reduce the size of USF. Some state commission representatives, however, have raised concerns regarding the expanding size of USF and questioned the existing system under which both wireline and wireless carriers providing service to the same areas are eligible to receive subsidies.

On a separate issue, Reps. Inslee (D-WA) and Deal (R-GA) in March introduced a bill requiring the FCC to open broadcast "white space" spectrum for unlicensed use by February 18, 2009. Sens. Kerry (D-MA) and Smith (R-OR) introduced a similar bill in the Senate earlier in January. The measure is supported by the White Spaces Coalition, which includes Microsoft, Google, Intel, Dell, and Hewlett Packard. To demonstrate the feasibility of unlicensed operations in the white spaces, the Coalition has submitted for FCC testing a prototype device that operates in the spectrum without causing harmful interference to existing licensed operations.