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.
Country of origin cases
The future of the broadcast ownership cap still is in doubt, after the Senate failed to invoke cloture for the Omnibus Appropriations bill Tues. The Senate rejected the call to end debate on the bill by a vote of 48-45, with 60 votes needed to invoke cloture. The bill includes a provision that would establish a 39% broadcast ownership cap. The provision is authorizing, not appropriations, language, which means it would effectively be a permanent ownership cap. The ownership cap language is part of the Commerce Justice State (CJS) appropriations bill, which also includes funding for the Commerce Dept., FCC and FTC. It was unclear whether Senate Majority Leader Frist (R-Tenn.) would give up efforts to pass the omnibus or would call for another cloture vote in the coming days. However, Gerry Waldron, of the Network Affiliated Stations Alliance (NASA), said he expected the omnibus to be ratified in the near future. “We understand there are larger politics at play,” he said: “We expect it ultimately to pass.” Although a compromise on the 35% cap that NASA sought, Waldron said the compromise was significant because the cap would be permanent. (Technically, the FCC could raise the ownership cap at any time through a rulemaking.) Waldron said NASA was encouraged because Senate Appropriations Chmn. Stevens (R-Alaska) had urged the FCC to treat this as a permanent cap. Media ownership was mentioned during the debate on the bill Tues., but most objections from Democrats were focused on overtime rules and country-of-origin labeling for food products. House leaders have said they wouldn’t reopen debate on the omnibus. The alternative probably would be a continuing resolution (CR) until Sept. 30 -- the end of the fiscal year -- which would freeze funding for those agencies at 2003 levels. Frist warned senators that a CR until Sept. 30 would sap funding for several important programs and Stevens also warned that rejection of the omnibus would eliminate appropriations earmarked for their states.
The year 2007 will be pivotal for digital radio, said a report by InStat/MDR, projecting unit sales of more than 19 million for satellite and terrestrial. The report also said a transition to digital tuners from analog probably will begin with the more expensive analog radios. In-Stat/MDR Senior Analyst Michelle Abraham said the transition to digital in Europe originally was slow because receivers were too expensive, but countries that continued to conduct trials for the services were “waiting for the regulatory framework to be in place and digital coverage to expand.” The report said S. Korea and Japan were looking at deploying video streams in addition to audio streams with their planned satellite radio services. Sirius announced its plans to introduce video streams at this month’s CES in Las Vegas.
The Dept. of Justice, FBI and Drug Enforcement Administration urged the FCC to deny a BellSouth petition seeking a ruling that state commissions couldn’t regulate broadband Internet access by requiring BellSouth to provide such service to CLEC voice customers, sometimes referred to as line splitting. In comments filed Jan. 15, DoJ and the others expressed concern that such action would lessen state commission authority and jeopardize CALEA requirements. The filing said the role of state PUCs in regulating broadband Internet access was pending in the wireline broadband rulemaking. DoJ said the BellSouth petition was premature because the issue was pending in several U.S. dist. courts. Although comments on the petition (WC Doc. 03-251) originally were due Jan. 15, the deadline was delayed until Jan. 30, when more are expected to be filed.
Congress isn’t expected to pass comprehensive legislation on communications issues this session, many sources said, but that doesn’t mean lawmakers won’t be busy in the communications realm. Most sources provided a laundry list of issues that would get at least some attention from lawmakers who return today (Tues.) for the 2nd session of the 108th Congress. While no large-scale bills are expected, Congress could pass legislation this year to restrict broadcast ownership, fund enhanced 911 (E911) and spectrum relocation, and renew the Satellite Home Viewer Improvement Act (SHVIA). But there’s likely to be a lot of talk on the Hill about communications issues, as VoIP, universal service fund (USF), broadcast decency and cable rates.
The U.S. Appeals Court, D.C., said Fri. it was “befuddled” by an FCC order allowing Qwest to charge toll fees to a paging company, so it remanded the case. At issue was an FCC decision dismissing Mountain Communications’ complaint against Qwest for charging toll fees for the paging company’s calls that originated and terminated in the same calling area but were routed through a point of interconnection (POI) in another local area. The court, in an opinion written by Judge Laurence Silberman, said the FCC had taken what appeared to be the opposite position in a similar case, TRS Wireless v. U S West. Silberman wrote that, in the TRS case, the FCC “rejected a similar effort on the part of [an] LEC to charge a paging carrier for transmitting calls to the paging carrier’s POI, where the POI and the caller are in the same LATA but different local calling areas.” Although the FCC had made a distinction between the 2 cases, the court said “we are befuddled at the Commission’s efforts to explain away its TRS decision; the facts seem -- and are conceded to be -- identical, but the results are opposite.” Judges David Sentelle and Merrick Garland also were on the panel.
Attention turned in recent months in the 800 MHz proceeding to the question of how to value spectrum at 1.9 GHz under a rebanding proposal by Nextel and others, FCC Wireless Bureau Chief John Muleta said after the Commission’s Thurs. agenda meeting. But he said that didn’t mean the agency had zeroed in on the “consensus plan” to mitigate interference to public safety at 800 MHz. Other FCC officials acknowledged they faced budgetary belt-tightening in 2004 and said a must-carry decision might be a way off.
USTA urged the FCC to act quickly on the AT&T’s petition seeking exemption of its phone-to-phone IP telephony services from access charges. In an ex parte meeting with FCC Comr. Copps’ Senior Legal Adviser Jessica Rosenworcel last Fri., USTA argued that the voice service described in AT&T’s petition was a telecom service and subject to such charges under FCC rules. “Access charges must be paid when a call both originates and terminates on a local exchange carrier’s circuit switched network,” it said in a Jan. 12 ex parte filing with the FCC. It urged the Commission to “act quickly to remove the uncertainty within the industry and affirmatively state that the services that AT&T provides in its petition are telecommunications services and access charges apply.” In a separate ex parte letter, BellSouth urged the FCC to deny AT&T’s petition, because it did “not present any novel question of law or fact and, accordingly, should be dealt with independently and outside of the discussion on voice over IP.” It contended that the petition described nothing more than a conversion to a different protocol -- and then back again -- that was completely internal to the IXC’s network: “Phone-to-phone telephony using Internet protocol for some portion of the transmission does not fall within the definition of an enhanced or information service, and, consequently, is not subject to the enhanced service access exemption.” However, AT&T rushed to reassure Copps and Rosenworcel that the FCC shouldn’t impose the existing PSTN access charge scheme on VoIP, saying “those regulations would disincent investment in this important new technology.” In a separate ex parte meeting with them Mon., the company said issues related to universal service and access charge contributions to ILEC profits would be better addressed holistically in the intercarrier compensation reform proceeding “rather than import the competition distorting access charge regime into this new technology.” AT&T said the Commission’s failure to act fast in that proceeding, pending about 3 years, was “placing undue pressure on the Commission to act in a very regulatory manner towards VoIP traffic.” AT&T also said providers of IP-based services were in fact compensating all LECs for terminating that traffic pursuant to the Act’s interconnection provisions. “Consequently, all LECs were recovering their respective costs plus a reasonable profit for terminating that traffic and that any claim that a carrier was not recovering its costs was an outright fabrication,” it said in its Jan. 13 ex parte filing.
With thousands of parents and some members of Congress bearing down on him, FCC Chmn. Powell sent a draft proposal to his fellow commissioners that would reverse an earlier ruling on the use of the F-word on TV. The initial ruling by the FCC Enforcement Bureau last year came under withering criticism from a variety of quarters, most vocally from the Parents TV Council (PTC), because the decision essentially allowed the F-word’s use as long as it was as an adjective. Agency sources said Powell in all likelihood would receive unanimous support for the part of the draft that would deem it unacceptable for the F-word to be broadcast from 6 a.m. to 10 p.m., when children might be watching, and when the courts have said the agency’s indecency rules apply.
The Mich. Dept. of State Police (MSP) and the state’s Dept. of Information Technology opposed a request by the National Wildlife Federation (NWF) and other groups asking the FCC to conduct certain environmental analyses before approving tower projects. The groups asked the FCC to require an environmental assessment for a public safety wireless facility in Copper Harbor, Mich., which is one of 180 stations in the Mich. Public Safety Communications System. The Mich. agencies took exception to a broader application by the environmental groups last month seeking review of their earlier challenge of the approval of the single public safety site. The Mich. agencies said the issues raised in the latest challenge were too broad. The application “improperly seeks review of numerous issues that are outside the scope of the original NWF petition,” they said. They said the “out-of-scope” issues included questions on: (1) Alleged failures by the FCC and MSP to consult with the U.S. Fish & Wildlife Service (FWS). (2) Alleged failures to carry out conservation plans under the Endangered Species Act (ESA). (3) Alleged “generic deficiencies” in the Commission’s environmental rules. In its original filing last year, NWF told the FCC Wireless Bureau that insufficient environmental analyses were made before tower construction, meaning the agency was violating the ESA and the National Environmental Policy Act. The groups asked the agency immediately to conduct environmental assessments on 3 towers and evaluate the cumulative impact of the tower permitting system on migratory birds and endangered species. The Bureau rejected the request, saying the MSP and FWS were conducting a study on avian collision and towers. NWF contended the Bureau had erred in concluding that it would be premature to perform environmental assessments before the avian study was complete. The Mich. agencies said the broader issues weren’t before the FCC in the original petition, so they couldn’t be the basis for an application for review (AFR) under FCC rules. “Moreover, with regard to all of these issues, petitioners have failed to establish interested-party status in connection with this petition, or aggrieved party status in connection with the AFR, and therefore petitioners lack standing to raise these issues,” the Mich. agencies said.