Uncertainty over how much revenue taxing the Internet backbone would raise stalled discussions on congressional passage of a moratorium on discriminatory Internet and access taxes. Hill staff involved in the negotiations said backbone taxes were the unresolved issue; supporters of a permanent moratorium want backbone transactions tax-exempt and detractors disagree. Acknowledging the impasse, Senate Commerce Committee Chmn. McCain (R-Ariz.) took to the floor Mon. to say he hoped for a resolution “before we leave for Christmas break.”
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The Senate passed the Agriculture appropriations bill (HR-2673) late Thurs. evening. The bill included billions of dollars in loans and grants for rural telecom and broadband facilities. Most notably, senators restored several million in funding for broadband loans, which can be leveraged to $611 million in loan authorization for 2004. The funding of the loan program was raised to $15.1 million from $9 million (CD Nov 7 p9). The Wireless Communications Assn. (WCA), which lobbied against the funding cuts, said that had the Appropriations Committee funding not been raised, only $335 million in loan authority would have been available. WCA said the Senate also adopted an amendment to liberalize the population criteria for the broadband loan program. Communities of 20,000 or less are eligible for the loans, rather than the original criteria that would have excluded many rural communities that were near small or midsized cities or towns. The Senate Appropriations Committee said the bill included a total $5.6 billion for telecom and electric utility loans, up $43.4 million from 2003. It said the total appropriation for broadband, distance learning and telemedicine was $65.1 million, which supported a $961 million loan level.
Nextel criticized a waiver request by NextWave and Cingular that it said would enable Cingular to abandon obligations to pay nearly $170 million in interest on C- and F-block PCS licenses. The U.S. Bankruptcy Court, White Plains, N.Y., last month approved a $1.4 billion deal in which Cingular is buying 34 PCS licenses from NextWave. The deal leaves NextWave with a national spectrum footprint and the FCC receives $714 million. But Nextel said in a filing Wed. that under the Commission’s unjust enrichment rules, which set requirements for designated entities (DEs) that sell spectrum, Cingular couldn’t be assigned the licenses until the FCC was paid in full, including unpaid principal and all unpaid accrued interest. Nextel said that would raise the total to $884 million, including $687 million in outstanding principal and $197 million in unpaid accrued interest. “The Commission should deny this waiver request,” Nextel said. “The waiver request also flies in the face of statements by Cingular’s owners -- SBC and BellSouth -- that strenuously opposed proposals in a 1997 Commission proceeding that would have reduced the debt owed on C-block licenses.” Last month, Cingular and NextWave filed applications with the FCC to assign licenses as part of the proposed deal. The applications included a request that the agency waive parts of its unjust enrichment rules, which require DEs to pay penalties if they sell a license to a non-DE during a restricted period to compensate for advantages such as bidding credits or installment payment plans (CD Oct 1 p1). “Granting Cingular -- the second largest wireless carrier and clearly not a small business -- a waiver of these rules would do great harm to the integrity of the FCC’s auction process,” Nextel said. It urged the FCC to turn down the waiver request and condition the license transfers on Cingular’s paying the higher amount that Nextel contends is due. Nextel also said the agency should probe whether Cingular had the “requisite character qualifications” to hold the designated licenses. “As the Commission staff has recognized, in 2001 Cingular failed to cooperate in remediating serious interference caused by its operations to a public safety system,” Nextel said: “This egregious failure to address potentially life-threatening interference raises serious issues that warrant further Commission investigation.” It cited Cingular’s “failure to cooperate” in resolving interference to public safety systems in Anne Arundel County, Md., in 2002. As for what Nextel characterized as interest payments that Cingular would owe, it said rates of 6.25% to 6.5% applied to NextWave’s installment payments for the C- and F-block licenses it acquired in 1996 and 1997. Separately, Eldorado Communications and NY Telecom filed a petition asking the FCC to deny the licenses NextWave is selling to Cingular. It urged the agency to “expand the scope of this proceeding” to allow for public comment. Eldorado and NY Telecom have raised similar concerns in the past at the Commission on the transparency of proceedings involving NextWave’s licenses, including a settlement agreement among large wireless carriers, NextWave and the FCC that ultimately died. If the license transfer applications are granted, the filing said, “NextWave will walk away with more than $700 million as a result of assigning licenses originally set aside for small entities like Eldorado to one of the largest wireless carriers in the country.” A Cingular spokesman said the carrier was reviewing Nextel’s filing late Thurs. “On initial review, however, Nextel’s comments are totally without merit and appear to be motivated by Nextel’s unhappiness with Cingular’s objection to Nextel’s attempt to obtain spectrum for free through its spectrum swap scheme,” he said, citing the “consensus plan” backed by Nextel for alleviating public safety interference at 800 MHz.
Opponents of a permanent moratorium on discriminatory Internet taxes and access taxes Thurs. promoted a last-min. compromise that would extend the existing moratorium for 2 years while banning taxes on DSL service, something some states are doing by not breaking it out from other telecom services that are taxed. Supporters of a permanent moratorium amended the House and Senate bills this year to include language to target DSL taxes, but opponents say the language is too broad and could dramatically reduce telecom taxation for states and municipalities.
FCC Comr. Copps said the Commission should seize on allegations of “pay-for-play” involving TV and radio stations and shouldn’t leave it to the Enforcement Bureau alone, but should confront the issue themselves. Although an aide to Chmn. Powell said the issue should be dealt with in the context of the Commission’s current examination of localism, Copps said “pay-for-play” shouldn’t be part of “some never- ending process that’s going to go months and months forward. I think we ought to deal with this now.” His comments came in a media briefing Thurs. one day after Comr. Adelstein called on his colleagues to open a formal inquiry into “pay- for-play.”
The FCC granted a petition for reconsideration filed by the Alliance for Telecom Industry Solutions (ATIS) on callback numbers for new 911-only wireless handsets and donated handsets that weren’t service initialized. The order ATIS challenged had required that those phones use 123-456- 7890 as the phone number transmitted to a public safety answering point (PSAP) receiving a call to address problems created by a lack of a callback capability when 911 calls were dialed from such devices. On reconsideration, the FCC said that in light of information submitted by ATIS’s Emergency Services Interconnection Forum (ESIF), which developed a voluntary technical standard in that area, it removed the requirement to use the number starting with “123.” The ESIF-developed standard “provides a more far- reaching and technically superior solution” to the original April 2002 order, the Commission said. The new requirements to program carrier-donated non-service-initialized phones and new 911-only handsets are for a sequential number beginning with 911 plus 7 digits selected in a manner similar to how certain network software generates a number. The previous order had required 911-only wireless handset manufacturers to program each device with the same code starting Oct. 1 but ESIF had sought a stay based on a technical standard developed by the Telecom Industry Assn. and ATIS. That solution involves use of a wireless handset’s electronic serial number or international mobile station equipment ID to create a “surrogate number” for emergency callback purposes. The point of the system is to prevent misuse of the 911 system as a result of repeat harassment calls made on non- initialized phones and to sort out legitimate callers dialing 911.
House Judiciary Committee Chmn. Sensenbrenner (R-Wis.) said Thurs. that any effort to exempt Bell companies from antitrust laws would result in a “swift and decisive legislative response from the Judiciary Committee and Congress.” Speaking at a Phoenix Center conference in D.C., he said if the U.S. Supreme Court circumvented antitrust oversight with its decision in the Verizon vs. Trinko case, he would respond with legislation.
The FCC’s 5-0 decision late Tues. to enact broadcast flag copyright protection rules wasn’t unexpected, and neither was celebration by the content industry and lamentation by some in high-tech and fair use advocacy groups. Hill reaction was somewhat divided, too, with at least one prominent House member questioning the authority of the FCC to act.
For the first time in Senate history a bill will be challenged today (Thurs.) under a point-of-order as an unfunded mandate. The bill would make permanent the moratorium on discriminatory Internet taxes, including access taxes. Sen. Allen (R-Va.) expressed confidence in a press conference Wed. that S-150 would clear the Senate -- a similar bill, HR-49 by House Select Homeland Security Chmn. Cox (R-Cal.) already cleared the House -- but Sen. Alexander has vowed to challenge the bill under the rarely invoked Unfunded Mandates Reform Act of 1995. The bill, opposed by many state and local groups concerned about loss of telecom tax revenue, is able to come to a floor vote because Alexander agreed to lift his hold on the legislation last week.
Several telecom manufacturing firms wrote to Senate Appropriations Agriculture Subcommittee Chmn. Bennett (R- Utah) and Subcommittee ranking Democrat Kohl (D-Wis.) urging them to support an amendment from Sens. Dorgan (D-N.D.) and Burns (R-Mont.) that would restore rural broadband funding to the Senate Agriculture Appropriations Bill that was debated in the Senate on Wed. The bill includes provisions that would eliminate the Rural Utility Services’ (RUS) ability to process broadband loan applications by zeroing out the administrative funding in the bill. The bill also reduces funding for the RUS broadband program, which was originally enacted under the 2002 Farm Bill. The letter to the senators said the agriculture funding bill would significantly reduce the amount of money available for rural broadband. “In the nine months after the RUS published regulations, proposals representing almost $1 billion in broadband projects have been received by the agency,” the letter said. “However, the appropriations bill’s reduction in the size of the program will result in demand exceeding available monies by a large amount.” The letter said by spending $20 million a year on the program, it will produce at least $700 million annually in RUS loans. “Considering that these monies serve the dual purpose of providing broadband connectivity for rural communities and creating new jobs for the nation, this expenditure would appear to be money well spent,” the letter said. The Dorgan-Burns amendment would restore full funding of the program, the letter said. Signers include: 3M, Alcatel, Alloptic, Catena Networks, Cisco Systems, Corning, Intel, Nortel Networks, Siemens, Vinci Systems, American Public Power Assn., Fiber-to-the-Home Council, Information Technology Industry Council, License Exempt Alliance, Rural Broadband Federation, Telecom Industry Assn., Wireless Communications Assn. The Senate engaged in several hours of debate on the agriculture bill Wed., but the Dorgan-Burns amendment wasn’t considered before our deadline. However, Dorgan said in a floor statement that “if we move down this road, we won’t be able to continue” rural broadband deployments. “Small towns will be told ’tough luck’… The message from Congress will be ‘we support the digital divide.'”