Country of origin cases

The 2004 state legislative sessions have seen introduction of bills in Hawaii, Wash., Colo. and Ida. to change the makeup of state commissions or the scope of their duties. Meanwhile, carphone safety bills are moving in Colo., Md. and Utah.

The Assn. for Local Telecom Services (ALTS) and 14 carriers asked the FCC not to single out facilities-based CLECs as “the only carriers to take an additional immediate financial injury” before it adopted a unified intercarrier compensation regime. They expressed concerns about possible revisions in the rules issued in 2001 in the CLEC Access Charge order the FCC was considering that would reduce compensation CLECs could collect from IXCs for originating and terminating long distance traffic. “The FCC intends to come up with a unified regime… and it shouldn’t single out one of the most vulnerable sectors -- CLECs -- that already had dramatic rate reductions,” ALTS Gen. Counsel Jonathan Askin said in an interview. In its filing, ALTS said CLEC interstate access revenue dropped 87% in 3 years -- equal to 13.7% of total CLEC telecom revenue. “Given that the current CLEC access charge rules were intended to function as ‘bright line’ tests in order to escape the ‘legal and practical difficulties’ involved in analyzing specific CLEC access rates, we fail to understand why the Commission would now entertain challenges to CLEC access charges that are ultimately grounded on the same ‘objective reasonableness’ test it expressly declined to apply 3 years ago,” ALTS said. It said the Commission “cannot rationally reverse field now” by adopting cost-oriented arguments, such as Qwest’s attempt to allocate the CLEC access charge benchmark rate among various access cost components to reduce that rate by the amount allocated to particular access functions not performed by a CLEC: “Such an approach is entirely inconsistent with the CLEC Access Charge order, which acknowledged that interstate CLEC access rates need not be separated into discrete rate elements because the conclusive access rates were not founded on economic cost modeling.” ALTS also said CLECs, which had been performing aggregator services for CMRS companies and other large customers “for years… reasonably relied on the CLEC Access Charge order… in believing they would be entitled to continue to be compensated at the CLEC benchmark rate for routing CMRS 8YY traffic.” It urged the FCC not to single out CLEC Access Charge issues from broader intercarrier compensation reform process: “If the FCC felt compelled to single out CLECs for further reduction, any reductions must be prospective only, and must be clearly articulated to avoid intercarrier confusion and litigation.”

FCC Comr. Abernathy called on the Commission to act on AT&T’s petition for exemption from paying access charges for calls that are routed primarily on Internet backbone “sooner rather than later.” In an interview with reporters after her speech at a conference on digital issues sponsored by the FCC and the Catholic U. Law School Thurs. in Washington, she said: “I have thought that maybe we can deal with that in a bigger proceeding, but the problem is… the present uncertainty may be distorting competition and the flow of capital… So, we should try to resolve that tension and provide at least some immediate clarity.”

With suitors lining up for AT&T Wireless, industry attention has turned to how the FCC is likely to review the first major wireless merger since it lifted the spectrum cap a year ago. As a legal matter, the Commission is expected to view transactions in the context of a national wireless market, sources said. How the FCC handles the first proposed combination among the 6 national providers is being watched closely for signs of how the agency will examine what could be a flurry of consolidation in the sector, industry observers said.

President Bush is expected to sign a 39% broadcast ownership cap and the $820 billion spending package that it accompanies, which was approved by the Senate Thurs., 65-28. The Senate adopted the omnibus appropriations package after Democrats dropped their objections. Industry sources said since the White House helped broker several of the compromises to which the Democrats objected, Bush’s signature was expected. The broadcast ownership cap is one area where the White House helped negotiate a compromise, they said. Industry sources said House leadership increased the 35% ownership cap originally agreed to by House and Senate appropriators to 39% after the White House insisted on the change. The increase would keep News Corp. (Fox) and Viacom (CBS) under the ownership cap and keep them from having to divest stations. The passage of the bill came 2 days after Democrats voted to keep debate open. Democrats, along with a few Republicans, had expressed concern about a number of provisions in the bill, with most floor discussion focusing on overtime rules and country-of-origin labeling for food. However, the ownership provisions were on the Democrats’ list of objections, and Senate Minority Leader Daschle (D-S.D.) hinted that the Democrats would try to revisit the issue of media consolidation: “We will say more about that in the future.” Sen. Dorgan (D-N.D.), who has helped lead the Senate fight against consolidation, was a vocal critic of the broadcast ownership compromise. His objections were based partly on what he charged was the back-room nature of the White House compromise -- since he declined to push other media ownership restrictions after he believed Congress would enact a 35% cap -- and partly on his concerns about media ownership, a spokesman has said. Senate Commerce Committee Chmn. McCain (R-Ariz.) also has raised concerns about the FCC’s looser cross-ownership rules, which he has said were just as “onerous” as the broadcast ownership cap. Several Democrats quietly said they were happy with the compromise, calling it close enough to 35% to please them, plus, unlike the original 35% language, the 39% clause was in authorization language, meaning legislators wouldn’t have to revisit the issue again next year, as they would have had the cap been in appropriations language. Democrats also said they were pleased that the language essentially would be permanent. Officially, the FCC could open a rulemaking on the ownership cap at any time and change the cap. However, several sources said it was unlikely that would occur soon, or at least not during the Powell administration, because of the firestorm the issue created. Senate Appropriations Chmn. Stevens (R-Alaska) has urged that the FCC treat the cap as permanent.

Showing a series of charts to describe different service models, Verizon Senior Vp Thomas Tauke told reporters Wed. that whether to levy access charges on VoIP calls could be determined easily based on whether new or old technology was used to start or end a call. Tauke’s proposed system, which generally was based on how much of transmission path was circuit- or IP-based, had 4 models, one of which obviously applied to AT&T’s petition for access charge. The models ranged from a traditional circuit-switched network with access charge payment to a full IP-based network and no access charges.

The U.S. Supreme Court refused to hear an appeal by Skywalker Communications of Ind., originally Apollo Satellite Systems, in its lawsuit against Skywalker Communications Inc. The denial of certiorari, handed down this week, let stand a June decision from the 7th U.S. Court of Appeals, Chicago. Apollo sued Skywalker alleging constructive fraud, criminal mischief, breach of contract and tortious interference based on an oral deal. Apollo and Skywalker had signed a 1992 contract that Apollo would sell satellite equipment under the Skywalker name until one of them terminated the agreement. According to Apollo, the companies then agreed orally in 1996 both would approach EchoStar for rights to sell EchoStar’s equipment in a 7-state territory they would split. The appeals court said EchoStar granted Skywalker -- not Apollo -- distribution rights, and then Skywalker notified Apollo in 1999 it wouldn’t renew the 1992 contract and Apollo had to stop using the Skywalker name. Although there was no writing signed by Skywalker evidencing a 1996 contract, Apollo said a number of documents corroborated an oral agreement. Apollo said: “[G]iven that the 1992 Agreement existed between the 2 corporations, only a short leap is required to reach the conclusion that [the 1996 agreement] did as well.” But the court disagreed, saying none of the documents had mentioned an agreement in 1996 or specified details such as what percentage of sales would go to Apollo.

A 2nd and even larger wave of copyright infringement lawsuits was announced Wed. by the RIAA, all based on the more difficult “John Doe” process of using court subpoenas to identify alleged illegal peer-to-peer file sharers. The latest suits were forced to use the subpoena process as a result of a court decision won by Verizon (CD Dec 22 p1).

Bell companies, taking a view different from wireless carriers, urged the FCC to not impose costly technical solutions to ease wireless-to-wireline number porting in cases in which there was a mismatch between the rate center associated with a wireless number and the one in which a wireline operator would serve the customer. Companies filed FCC comments this week on a further notice on wireless local number portability (LNP) issues. As for whether wireline companies should complete intermodal ports in time periods closer to those of wireless carriers, several companies urged the FCC to keep the existing interval required for wireline companies.

Amid increased speculation that a merger deal with Cingular Wireless may be near, UBS downgraded AT&T Wireless to “neutral” from “buy.” News reports indicated several suitors, including Cingular and NTT DoCoMo, had expressed interest in buying AT&T Wireless. The reports said Cingular made a formal bid for AT&T Wireless over the weekend, a move that would create a new No. 1 wireless carrier in the U.S. and drop Verizon Wireless to 2nd largest. AT&T Wireless’s stock was trading at $10.39 on the N.Y. Stock Exchange mid- day Tues., up from a 52-week low of $5.17 and up 4% in daily trading. UBS said in a research note to investors that fundamentals didn’t appear to be fueling AT&T’s share rise as much as did merger speculation. It said it believed wireless industry consolidation made sense and AT&T Wireless was a “prime acquisition candidate.” However, it said it preferred Sprint PCS in a consolidation scenario at its current price. UBS also said the effect of wireless local number portability (LNP), which took effect Nov. 24 for the top 100 markets, was expected to be in line for the 4th quarter with original consensus expectations. But it said AT&T Wireless still “fared the worst among the national operators (in terms of ports out versus ports in).” It said AT&T Wireless had been among the most aggressive carriers on holiday service offerings and equipment discounts, promotions that could affect the carrier’s average revenue per user in the first quarter. Legg Mason said in a research note Fri. that it put the odds of an AT&T Wireless’s sale to another carrier at greater than 50%, noting that aside from Cingular, interest in a deal had expanded to Nextel, NTT DoCoMo, Vodafone and possibly T-Mobile. A Cingular-AT&T Wireless combination probably would receive govt. approval, although it could come with several divestiture requirements, Legg Mason said. “The bigger problem would be if there were a quick follow-up merger, forcing the DoJ to review the 2 deals together,” it said. “In that case, the approval prospects would depend on the partners, with greater concentration causing greater antitrust concern, e.g., if Verizon Wireless combines with Sprint PCS.” Legg Mason said a Cingular-AT&T Wireless deal could have an impact on the pending 800 MHz proceeding at the FCC in which Nextel and others are backing a rebanding plan to mitigate public safety interference. The research note said both AT&T Wireless and Cingular had spent resources opposing the plan and under a merger would have to redirect that energy to win regulatory approval of the deal. “Such a deal would increase the sympathy at the FCC for strengthening Nextel, which would remain as the only large pure wireless player without a parent wireline company, and therefore its continued strength would be considered important for innovation in the sector,” Legg Mason said.