In ruling that overturns $17 billion PCS auction results, U.S. Appeals Court, D.C., handed resounding victory Fri. to NextWave in its nearly 3-year battle to retain licenses for which it had bid $4.7 billion. Unanimous ruling by 3-judge panel reversed 1998 FCC decision that cancelled NextWave licenses for missed payment, meaning C-block licenses on which largest U.S. carrier Verizon Wireless bid nearly $9 billion would revert to NextWave. Several industry observers pointed out shortfall that decision, if not challenged by FCC or sustained on appeal, would mean to govt. coffers. NextWave bid $4.7 billion for 90 PCS licenses in 1996, but bidders such as AT&T Wireless, Cingular and Verizon in reauction agreed to pay nearly $15.4 billion. Unclear as of Fri. was what action FCC would take next, with request for en banc hearing before D.C. Circuit or for airing before U.S. Supreme Court among potential options. Verizon Wireless CEO Denny Strigl urged FCC and NextWave to “settle this dispute in a way that permits the FCC’s auction results to stand.” While NextWave immediately outlined plans to begin buildout of licenses, speculation turned Fri. to settlement possibilities, with ex-FCC Chmn. William Kennard seeing potential “tragedy” if carrier received “billions” to walk away from licenses.
Country of origin cases
U.S. Trade Representative Robert Zoellick said Thurs. that U.S. won’t renew 1999 procurement agreement with Japan that covers procurement practices of Nippon Telegraph & Telephone (NTT). Instead of renewing pact, which expires July 1, Zoellick said U.S. would “actively monitor NTT’s procurement practices and purchases from U.S. suppliers” through information supplied by U.S. industry. He said U.S. sales to NTT under past agreements had had competitive effects on both Japan’s telecom market and U.S. telecom equipment suppliers. But he stopped short of declaring victory. “More remains to be done to achieve a fully open NTT market,” Zoellick said. “We believe the best way to pursue this goal is to continue to closely monitor NTT purchases and purchasing practices in coordination with U.S. industry.” As result, American Electronics Assn. (AeA) and Telecommunications Industry Assn. (TIA) said Thurs. they planned to “vigorously” monitor NTT procurement practices. AeA and TIA said they were undertaking quarterly tracking of NTT’s total equipment purchases. “This recognition of the agreement’s expiration date does not signify overall industry satisfaction with NTT’s procurement practices or with the share of non-Japanese origin procurement in NTT’s total equipment purchases,” groups said. Since 1999 agreement was signed, groups said U.S. suppliers had seen sales increase in certain product areas, but “the overall results do not equal the level of increased sales U.S. companies have seen for their equipment in the Japanese private market or other regions of the world.” NTT, which in 1999 was restructured into 2 local companies and one long distance provider, still is 46% owned by Japanese govt., its largest shareowner. U.S. and Japan had reached 2-year equipment supply agreement that year, which was one in series of renewals of previous agreements, after U.S. negotiators had persuaded Japan to allow continued govt. monitoring of streamlined NTT procurement practices. Pact covered NTT purchases from foreign telecom equipment manufacturers.
Liberty Media Group will buy 6 German cable companies owned by Deutsche Telekom for estimated $4.7 billion, providing Liberty with entry into world’s 2nd largest TV market. Deutsche Telekom said Thurs. it would sell its entire interest in 6 of its 9 regional cable firms, with total of more than 10 million subscribers, to Liberty Media and expected to sign definitive agreements next month. Deal represents expansion of international efforts by Liberty Media, which originally intended to lead consortium buying controlling 55% stake in cable systems for $2.5 billion under letter of intent signed in Feb. Separately, Liberty Media said it reached agreement in principle to grant Klesch & Co. option to buy up to 24.9% stake in regional cable firms. In original deal, Klesch would have been part of Liberty-led consortium from start.
House Judiciary Committee’s Crime Subcommittee approved bill Thurs. that would give law enforcement officers right to use wiretaps when investigating child sex crimes. Bill, approved on voice vote after short hearing, is same as one approved by full House last year. Bill, which goes now to full committee, died last year because there was no action on it in Senate. Its sponsor Rep. Johnson (R-Conn.) said at hearing that bill was necessary because sex crimes against children weren’t among those crimes for which wiretaps are allowed. She said bill was particularly aimed at sex predators who met children on Internet and then used telephone to establish more contact. However, Rep. Scott (D-Va.) expressed concern that bill represented “unnecessary expansion of federal wiretap authority.” He said wiretap law originally viewed taps as “last resort” and now there are more than 50 “predicate crimes,” meaning those for which wiretaps are permitted. Legislation would add 3 new wiretap “predicates": (1) Child pornography. (2) Coercion and enticement to engage in prostitution or other illegal sexual activity. (3) Transportation of minors to engage in prostitution or other illegal sexual activity. Rep. Barr (R-Ga.) also expressed misgivings about bill, saying he was “not absolutely certain the tools aren’t there under current law.” However, FBI Deputy Asst. Dir. Francis Gallagher said problem was expanding with Internet, giving sex criminals more access to possible targets who they then contacted by phone or in person. Bill, he said, “is not only warranted but necessary.”
General Accounting Office (GAO) dismissed protest filed by AT&T charging that General Services Administration (GSA) had waived or relaxed certain FTS 2001 requirements when awarding $1.5 billion contract to Sprint and WorldCom. AT&T had filed contract challenge at GSA, following GAO report released in April that outlined reasons behind transition delays to FTS 2001 from FTS 2000. In protest filed at GAO, AT&T said GSA had waived FTS 2001 specifications in way that fundamentally altered purpose of contracts. AT&T had lost FTS 2001 to Sprint and WorldCom, but didn’t choose at time to challenge awards, waiting nearly 2 years when GAO report was released. Latest GAO decision sided with GSA request that AT&T protest be dismissed. GSA had argued that issues central to protest had to do with contract administration and weren’t under jurisdiction of GAO and that protest wasn’t timely. GAO decision said office’s purview over such contract awards didn’t extend to contract modifications once bid was awarded. Exception to rule exists when contract requirements are waived beyond scope of original agreement “since the work covered by the modification would otherwise be subject to the statutory requirements for competition,” decision said. AT&T had argued that GSA relaxed contract requirements on length of frequently delayed transition to new contract and had ignored some transition requirements. GSA originally expected transition to take 12 months and subsequently put in place series of interim contracts to extend transition. “Our reading of the solicitation as a whole shows that offerors were on notice that the transition might be delayed for any reason, and for a period of time limited only by the length of FTS 2000 contract extensions,” GAO decision said. “As a result, even if GSA has relaxed or waived requirements associated with the transition, such a development was of a nature that potential offerors, such as AT&T, should have anticipated at the time of the original award.” On allegations of relaxed requirements, GAO said shortcomings and problems with performance aren’t evidence “that contract requirements have been waived and AT&T has provided no evidence that GSA has ‘refused to enforce’ billing or other requirements.”
Qwest says it expects to file Sec. 271 interLATA long distance application with FCC for at least one state by Oct., despite slower-than-expected pace of regionwide operation support system (OSS) testing by KPMG Consulting (CD June 18 p6). Qwest spokesman didn’t say which state would be first, but said company this summer and fall would be working with all its states on non- OSS items on Telecom Act’s 14-point open market checklist so those issues can be cleared before final OSS test results were in. Qwest said it expected to have long distance approvals for all 14 in-region states within 12 months. It originally had hoped to see OSS testing completed in July, but found process was taking longer than expected. Qwest said it expected OSS testing to be completed before Oct., and was doing whatever it could to speed process along.
Cross-border telemarketing scams, mostly originating in Canada, are expected to result in losses of $36.5 million for U.S. consumers in 2001, FTC official told Senate Committee on Governmental Affairs’ Permanent Subcommittee on Investigations. Consumers reported $19.5 million in losses last year due to fraudulent cross-border telemarketing. FTC’s Consumer Sentinel database shows that 71% of all cross-border complaints last year were made by U.S. consumers against Canadian companies. Cross- border fraud often is frustrating to combat, said Hugh Stevenson of the FTC Bureau of Consumer Protection, due to “difficulties of obtaining information about foreign targets and enforcing domestic remedies in foreign jurisdictions.” He said best methods to fight cross-border scams would include enhanced cooperative efforts with Canadian law enforcement and increased information sharing between nations.
Thirteen-state test of Qwest’s operation support systems (OSS), originally scheduled for July completion, won’t be finished until Oct. at earliest, it said Thurs. KPMG Consulting simultaneously is testing adequacy of Qwest’s OSS in every in- region state except Ariz., which is running separate test program. Test results will determine whether states proceed with Qwest’s petitions for endorsement of Sec. 271 interLATA long distance applications to FCC. Officials didn’t cite any single factor for longer-than-expected test program, but said this was first time anyone had tried OSS testing on such large scale and problems were to be expected. To try to speed process, Qwest made controversial offer to fly KPMG test evaluators between test sites in smaller markets in carrier’s corporate jets. KPMG rejected offer, citing appearance of potential conflict. Qwest said KPMG would have been billed for direct costs of flights, which would have saved Qwest money compared with cost of commercial airline flights. Qwest is footing entire bill for OSS testing. Qwest had hoped to start filing for some states at FCC in fall, but now isn’t venturing guess as to when it might do so.
U.S. Appeals Court, D.C., sided with FCC twice Fri. in 2 separate rulings, backing regulations on pricing for traffic that travels between ILECs and paging companies and upholding unrelated order on formula for Universal Service Fund (USF). In first case, D.C. Circuit unanimously rejected petitions by LECs, including Qwest,, that sought to overturn agency’s interpretation of regulations that bar LEC from assessing charges on another carrier for local traffic that originates on LEC’s network. That case turned on Qwest challenge involving one-way paging company TSR Wireless, which Qwest had charged for dedicated transmission facilities needed to pass paging calls on to its customers. Court also struck down challenge by National Exchange Carrier Assn. (NECA) to FCC order on USF formula. It said NECA had failed to demonstrate Common Carrier Bureau decision to retain 1998 formula for calculating those payments was arbitrary and capricious.
AT&T Wireless, Cingular Wireless, Sprint PCS and Verizon Wireless urged FCC last week to defer grant of 2 GHz mobile satellite service (MSS) applications until after it seeks comments on March 8 New ICO filing. New ICO CEO Craig McCaw had sought FCC approval of plan that would allow him to develop terrestrial spectrum using radio spectrum allocated to MSS operators such as New ICO (CD April 4 p1). New ICO’s March filing raised concerns that “the MSS services as applied for may not be viable,” carriers told FCC Chmn. Powell in June 13 letter, citing commercial wireless industry’s keen interest in such spectrum for 3G. Wireless carriers want FCC to defer acting not just on New ICO’s request, but on all pending 2 GHz MSS applications. Carriers said New ICO had reached collaboration agreements with 2 other MSS applicants and that there was “uncertainty” in business plans of other applicants. If Commission decided MSS spectrum was suitable for terrestrial services, it must be auctioned, carriers said. “Action on these applications should be -- and must be -- deferred until the broad spectrum policy and license processing issues raised by New ICO’s fillings are addressed,” they said. Arguments raised in letter expand on those made by CTIA last month in petition for rulemaking that asked Commission to reallocate “underutilized” MSS spectrum for other uses, including 3G. Four wireless carriers disagreed with New ICO contentions that latter was asking for modification of its original license applications. FCC should respond to CTIA petition before it grants any 2 GHz MSS authorizations, they said. They argued that because New ICO’s request would be “fundamental” change in original application, FCC must seek comment on modifications. “By submitting proposed modifications to its system architecture as an ex parte filing in a rulemaking proceeding, New ICO has essentially disregarded the Commission’s application processing requirements,” wireless carriers wrote. Carriers also contended New ICO’s request would: (1) Undermine FCC’s policies on satellite construction and build- out. “In essence, New ICO now has told the Commission that it will not meet the milestones for construction of the MSS system for which it applied.” (2) Contravene existing allocation for MSS, which doesn’t allow domestic terrestrial use. (3) Go against “long-held practices and policies for satellite services.”