Ill. Commerce Commission (ICC) was scheduled to hold special meeting today (July 9) to discuss testing program for SBC/Ameritech’s operation support systems (OSS). Meeting comes on heels of last week’s advisory to ICC by OSS tester KPMG Consulting that date for final report on Ill. OSS testing had slipped again, to Oct. 22 from Sept. 18. Testing originally was to have concluded by May. ICC at today’s meeting expects to hear presentations from Ameritech, CLECs AT&T, WorldCom, McLeod USA and TDS Telecom, and possibly other CLECs and KPMG.
Country of origin cases
Consultant on AT&T-Comcast merger for more than 50 local franchising authorities (LFAs) in Minn., Tenn. and Wis. stuck to recommendation to deny request for approval of franchise transfer (CD June 18 p6) despite additional material provided companies. Creighton, Bradley & Guzzetta (CBG) said companies had sought opportunity to respond in detail to its recommendation and had extended deadline for LFA consideration of franchise transfer application to July 31. CBG had based its original conclusion on ground that merged entity wouldn’t be qualified financially and that deal would affect services and rates adversely. Additional information provided by companies didn’t alter that recommendation, it said. CBG said companies explained that they might be able to pay down $32 billion debt of merged entity by selling AT&T’s interest in Time Warner Entertainment (TWE). Estimates of income from such sale were $6-$6.5 billion, CBG said: “It is now speculated on Wall Street that the TWE investment may not be monetized as originally set forth.” Instead, it said, it’s believed TWE investment will be traded for subscribers/cable franchises: “This impact would be that AT&T Comcast’s amount of long-term debt would not be reduced by the after-tax proceeds of the sale of TWE, and AT&T Comcast would have additional systems to include under its umbrella.” Since it was only speculation, CBG said, it couldn’t estimate impact of asset transfer on AT&T Comcast. It also said it didn’t know how exchanging TWE investment for subscribers/franchises would affect original agreement with AT&T Corp. on disposition of TWE. As for system operations that directly affect local subscribers, CBG said companies and Wall St. would ask LFAs to rely on “simple fact” that merged company would be led by Comcast Pres. Brian Roberts, “who is a very talented man.” Conceding Roberts had “excellent reputation” as head of telecom empire, CBG said although he was qualified, “we cannot assume that he may also be a magician.” Without data provided by companies on projected revenue and expenses of merged entity “it is not possible to assume success by his [Robert’s] fortitude and personality alone,” it said. Saying telecom industry faced difficult financial times, it said that not mere “business greatness” but “going forward business plan” for merged company based on reasonable and verifiable assumptions would be needed for local approval. CBG termed “reckless” and “dangerous” assumptions by companies and Wall St. that “people will buy the stuff they sell and probably buy more of it at higher prices.” As for companies’ belief that they could combine some existing duplicative operations and save money, it said they merely provided Wall St. analysis of how merged company could cut corners when asked for explanation of economies of scale that were factored into business plan of merged company. Referring to companies’ statement there would be enough revenue counterbalancing expenses to make merger work, CPB said they hadn’t presented even single line- of-business plan that included projected expenses and revenue at system level and assumptions supporting those projections. When asked “how they will pull this off,” CBG said, companies “made clear that any such questions are either none of our business, beyond our legal scope to even ask such things or beyond their legal obligation to answer the questions.” Comcast spokeswoman said CBG was doing communities “unfortunate disservice” by relying on “faulty, inaccurate and misleading” financial analysis to support its recommendations. “The consultant relies on a ’trust me I am right and everybody else is wrong’ approach,” she said. CBG’s analysis differed “dramatically” from reports of other municipal consultants and 4 leading cable industry investment analysts, spokeswoman said.
Observers of FCC and cable industry didn’t mince words Fri. when asked about Commission’s admission that there were “computational errors” in its experimental study on cable ownership, one saying research now should be deemed “irrelevant” and another referring to it as “a stupid little study.” They noted FCC released revised study and press release enumerating at least 4 errors at 5 p.m. on July 3, just before long holiday weekend. “They clearly wanted to bury the bad news,” one observer said. FCC official with firsthand knowledge of study and methods used acknowledged errors but said study wasn’t fundamentally flawed and, in fact, was quite relevant. Major change, official said, was that area of concern has shifted from market with 2 major cable operators to market with one dominant player holding at least 51% of market.
Spectrum Holdings, one of largest bidders for upcoming lower 700 MHz band auction, petitioned FCC for reconsideration of decision to let bidders select licenses to pursue other than those identified in their original short- form applications. FCC Wireless Bureau plans to hold auction for C- and D-blocks of lower 700 MHz spectrum next month. Date was rescheduled after Congress delayed planned Jan. 14 start for upper 700 MHz auction and June 19 for all of lower band, including larger A, B and E-block licenses. Legislation instead postponed all of 700 MHz auctions except for smaller C- and D-block licenses on Aug. 27.
FCC said “several computational errors” were found in 117-page experimental study on cable ownership limits. FCC study, released last month (CD June 4 p3), said horizontal concentration in cable industry could lead to problems for some programming networks seeking carriage. Study’s errors were found in experiments dealing with “most-favored-nation (MFN)” provisions, sources said, leading Commission to issue “slightly revised” working paper. Under MFN pacts, programming networks negotiating with cable operators guarantee that large cable MSOs won’t have to pay affiliate fee any higher than that paid by smaller companies. Study had said MFN provision “substantially increases” MSOs’ bargaining power because they were able to negotiate lower affiliate fees than small buyers.
Kan. no-call telemarketing list law took effect July 1 without a list for residents to sign on to, while Mo. no-call list signed up its one millionth household on its first anniversary. Kan. has no list because state hasn’t been able to complete contract with vendor selected as administrator. Kan. Attorney Gen. Office has been negotiating with Direct Marketing Assn., a telemarketing trade group, on list maintenance agreement but hasn’t been able to break impasse on certain terms. No-call law designated DMA to maintain list, but gave AG discretion to select another vendor if agreement with DMA couldn’t be reached. AG spokesman said if matters with DMA weren’t resolved within week, state could seek another vendor. Law originally envisioned first list July 1 and first update Oct. 1. If state can sign with vendor by Sept. 1, then enforcement could begin with list issued Oct. 1. In Mo., meanwhile, state’s no-call list marked its first anniversary by registering its one millionth household. Attorney Gen. Jay Nixon, whose office administers list, called no-call law most successful govt. program since rural electrification. In keeping with law’s intent to preserve residential privacy, Nixon said he didn’t make congratulatory call to millionth household nor reveal its identity. To date, AG’s office has received over 22,000 complaints. Violators face fine up to $5,000 per offending call.
U.S. Trade Representative (USTR) Robert Zoellick released American proposals this week for World Trade Organization (WTO) services negotiations, including recommendations for WTO members to remove “discriminatory trade restrictions” in telecom and IT sectors. Proposals for liberalizing trade in services lacked details such as specific requests that USTR is making of other WTO members. USTR spokesman said deadline for hard bargaining in WTO services negotiations wasn’t until next March and USTR would outline more details as that date drew nearer. “We are still very early in the process,” he said, with U.S. still receiving requests from other WTO members. In part, U.S. is seeking: (1) In telecom services, full privatization of incumbent telcos in WTO member countries that haven’t yet taken that step and commitments on cable network services. (2) In area of IT, increased access for data processing services, as well as software and hardware-related services.
Following civil fraud charges filed by SEC last week, Bush Administration said Mon. that General Services Administration (GSA) now was assessing ability of WorldCom to sign contracts with federal govt. in future. Federal acquisition regulations, which govern contracting with govt. agencies, stipulate general standards of conduct for contractors, including “satisfactory record of integrity and business ethics,” said spokeswoman for Office of Management & Budget. Due to SEC civil complaint and allegations involving WorldCom’s financial practices, GSA will examine company’s qualifications to sign future contracts with U.S., she said. One of largest contracts for which WorldCom is in running is $2 billion FAA Telecommunications Infrastructure contract. One potential outcome of govt. inquiry could be company’s suspension from conducting new business with federal agencies. GSA took that step in March when it suspended Enron from doing new business with govt. for at least 12 months based on finding that energy giant had engaged in misconduct and internal control irregularities.
Cal. PUC ruled telemarketers must have live representative available to speak on 97% of completed calls. PUC said only 3 calls in 100 can end with call being terminated because no live representative comes on line. PUC issued rule (Case R-02-02-020) as required by 2001 Cal. law that prohibits use by telemarketers of predictive or other automated dialers that connect calls when there was no live representative available to handle calls. Law directed PUC to set acceptable error rate for such “hang-up calls,” which PUC set at 3%. PUC also directed its Telecom Div. to hold workshop on feasibility of reducing hang-up call rate to 1% next year, and to develop rules for recordkeeping and consumer education. Separately, Cal. PUC modified some operation support system (OSS) performance measures for unbundled network elements (UNEs) in Pacific Bell’s wholesale performance assurance plan. PUC changed certain measures for UNE platforms and line-sharing products, eliminated UNE port product and added 3 days to UNE loop provisioning intervals for loops with local number portability to allow time for implementing number porting. Pac Bell and CLECs had asked for changes. Cal. PUC also agreed to extend until next spring deadline for resolving DSL provisioning discrimination complaint by Cal. ISP Assn. against Pac Bell and SBC Advanced Solutions. PUC rules require complaints to be resolved within 12 months, but agency said matter (Case C01-07-027 required full hearings and it would miss original July deadline. Order now is due by April 30 and hearing will begin Sept. 18, 2003.
BET announced that effective July 1, it would drop infomercials in favor of broader combination of religious and original network shows. BET Pres. Debra Lee said change was based on feedback from viewers. Placement of additional gospel and inspirational programming coincides with BET’s scheduled launch of 2 new digital networks also today -- BET Gospel and BET Hip Hop, joining BET Jazz.