George Vradenburg, exec. vp-global & strategic policy, AOL Time Warner, is stepping down from his high-profile post to become full-time adviser to company. Vradenburg, who in more than 4 years at AOL bolstered company’s Washington lobbying efforts, spearheaded company’s original drive for open access mandates on cable operators and shepherded its takeover of Time Warner through FTC and FCC, said he would shift his focus to “Internet building activities beyond policy organization,” including elimination of digital divide and other technology and education issues. In particular, he said, he will concentrate on “the intersection of the Internet and health care” and extension of Internet benefits to developing nations. “We're seeing the existing inequalities being exacerbated,” he said. “That’s not productive.” Vradenburg, 2nd senior AOL Time Warner executive to take new post since companies completed merger in Jan., said switch occurred after several months of conversations with company Chmn. Steve Case. “It’s been a product of discussion,” he said. “It was something that Steve felt was good for the company and I felt was good for me.” AOL Time Warner announced late Thurs. that Vradenburg would be replaced by Robert Kimmitt, now pres.-vice chmn. of Commerce One and former U.S. ambassador to Germany, effective July 1. Company said Kimmitt, like Vradenburg, will oversee its worldwide public policy initiatives. Kimmitt, also former law partner in Wilmer, Cutler & Pickering and ex-managing dir. of Lehman Bros., will report to Case and be member of company’s Exec. Committee. Vradenburg is former executive of both CBS and Fox.
Country of origin cases
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.
Members of House Telecom Subcommittee voiced concern Thurs. that wireless carriers and 911 call centers wouldn’t meet Oct. 1 deadline for deploying Phase 2 of Enhanced 911 location capabilities. Ranking Democrat Markey (Mass.) warned “industry should not seek -- nor should the Commission grant -- waivers to rules merely for business convenience.” He cited what he called “manana” syndrome among carriers on implementing E911. “But when it comes to 3G, they want spectrum today. They stipulate that it’s a national priority.” Markey said he backed industry’s quest for more 3G spectrum, but said he would “like to see the same alacrity and aggressiveness” on public safety offerings linked to E911. Hearing focused on thorny implementation issues that face wireless industry less than 4 months before Phase 2 deadline, including equipment availability and readiness of public safety answering points.
General Services Administration (GSA), under scrutiny on Capitol Hill for delays in Metropolitan Area Acquisition (MAA) contracts and high overhead rates, repeatedly pointed Wed. to lagging competition in local telecom market as one factor. House Govt. Affairs Subcommittee questioned why GSA was charging management fees of up to 85% in some cases. Technology & Procurement Policy Subcommittee quizzed GSA, General Accounting Office (GAO) and telecom carriers on why implementation in $4 billion MAA program still was only 11% complete in N.Y.C., with other cities also not yet shifted to local services contract for federal agencies. Building access barriers were cited as slowing progress of MAA contractors. “It is taking longer than expected to achieve the benefits of local competition,” said Sandra Bates, GSA comr., Federal Technology Service. Panel members and GAO, which is still working on MAA program report, didn’t lay blame for problems squarely on shoulders of GSA, but some fingerpointing did surface as AT&T and Bell companies criticized high level of overhead rates, with some saying GSA needlessly was inserting itself between govt. agency contractors and customers.
Fla. PSC moved up by 3 months, to Aug. 1, implementation date for overlay atop Ft. Lauderdale 954 area code because new number usage projections showed current code would have run out of numbers before original Oct. 1 implementation date. With new date for start of 754 overlay code, end of permissive dialing period also moved up 3 months, to April 1, 2002. In other matters, PSC proposed fining First American Telecom $25,000 for offering prepaid phone cards for local calls without PSC certificate, plus additional $10,000 fine for ignoring agency staff inquiries. Company has until July 3 to respond. PSC also accepted $9,000 offer from CLEC Supra Telecom to settle charges of failing to respond to customer complaints and $3,500 offer from Priority Link to settle charges of failing to provide PSC staff with access to company records.
Slowing customer demand and soft economy caused Hughes Electronics to issue revised guidance for 2nd quarter and 2001, Pres. Jack Shaw said. He said management focus on sales also contributed to downturn, calling “uncertainty” and time-consuming negotiations “major distraction” that “negatively impacted our financial performance.” Hughes management “hadn’t devoted enough time to running the company,” Shaw said. Hughes said results were particularly weak in rural markets served by National Rural Telecom Co-op. Rural markets also are served by independent reseller Pegasus, which has begun aggressive marketing campaign in rural areas. Shaw said he expected DirecTV to add fewer subscribers in U.S. “than we originally anticipated.” Company will take aggressive steps to “strengthen the performance” of distribution partners. Subscriber acquisitions in 2nd quarter were reduced 50% to 175,000 from as many as 350,000 net additions in U.S. Shaw said DirecTV planned to target cable customers who had been hit with large rate increases and poor service. Marketing focus also will be shifted to 60 million TV households where DirecTV offers local channels in addition to adding lease program to reduce churn. Shaw called results “unacceptable” and promised company would do better.
Fla. Office of Public Counsel (OPC) urged Fla. PSC to fine BellSouth (BS) $100 million for 7,000 service quality violations in years 1996 through 1999. Consumer watchdog agency urged stiff fine in brief filed in preparation for July 2 hearing on OPC’s petition (Doc. 99-1378) for reconsideration of PSC’s decision last year to fine carrier only $125,000 for service violations that OPC had complained of in its original 1999 petition. OPC said fine of $25 million per year was justified because violations of repair, installation and responsiveness standards were repeated over entire 4-year period and continued to this day, “reflecting [BellSouth’s] decisions to place profit before service and deliberately ignore Commission service requirements.” BS acknowledged past problems in meeting PSC’s service standards but said fine sought by OPC was inappropriate because violations weren’t willful or part of any deliberate BellSouth policy. Carrier said it suffered weather-related problems from flooding and hurricanes, coupled with periodic problems with maintaining sufficient technician work force. It also said PSC’s service standards didn’t allow for company’s problems keeping pace with state’s fast growth. In last 2 decades, it grew from 1.2 million to 6.6 million access lines, BS said, while simultaneously upgrading its network to handle market shift from primarily voice to primarily data. BellSouth said much of that activity occurred during the years at issue in this case.
CHICAGO -- Whether News Corp. or EchoStar buys DirecTV, deal probably will face heavy scrutiny by lawmakers and regulators, key Hill staffers said. Speaking at NCTA convention here late Mon., congressional aides said either scenario would raise competitive concerns in Washington, potentially complicating efforts by new DBS company to compete against cable operators and other video rivals. But they said concerns would differ greatly, depending upon which buyer succeeded. “It’s 2 completely different set of competitive issues,” said Victoria Bassetti, chief counsel for Senate Antitrust Subcommittee.
“On the basis of their digital efforts to date, broadcasters have no legitimate claim to preferential digital carriage,” AT&T said in comments on FCC must-carry rules (CS 98-120). Company said broadcast DTV efforts had “lagged significantly,” while cable launched more than 60 new digital channels: “Even in upgraded systems, dual must-carry would deprive consumers of innovative and diverse video and nonvideo services.” HBO agreed that even though cable channel capacity was increasing “there is increasing demand for that capacity from new and enhanced cable networks,” many of which are owned by broadcasters. It also said broadcasters increasingly were using retransmission consent as leverage for carriage of their owned cable channels. C-SPAN said its experience launching C-SPAN 3 and other channels showed must-carry was limiting cable channel capacity. Paxson said its proposal to allow multicast channels to be downconverted and carried on digital cable channels would ease burden on cable, potentially allowing 20 TV stations to be carried on significantly less than 1/3 of upgraded cable system’s capacity. Requiring cable carriage of only one of station’s DTV channels “forces broadcasters to make a choice that is ultimately detrimental to consumers,” CEA said: “Without assurance that digital broadcast signals will be carried during the DTV transition, broadcasters and programmers will have little incentive to produce original digital programming [and] consumers will have less incentive to purchase digital receivers.” CEA said must-carry could be based on system channel capacity, and “fears are grossly exaggerated” about impact of must-carry on cable network carriage because channel capacity is increasing “dramatically” and not all broadcasters will seek carriage at once. Satellite Bcstg. & Communications Assn. (SBCA) is “vitally concerned” over dual carriage and legal grounding of satellite must-carry regime, it said in comments to FCC on must-carry. “Considering DTV-related issues in the context of satellite carriage at this point is premature,” SBCA said. Mandating dual carriage would be setback to development of competitive environment that already was providing more video choices to consumers, SBCA said. Meanwhile, SBCA member EchoStar said it strongly supported Commission decision not to impose dual carriage requirements. “There is no basis for the Commission to reconsider the decision legally or factually. Dual carriage would be unconstitutional.”
U.S. Court of Appeals, D.C., turned down petitions for review of FCC’s order on competitive bidding and other rules for 800 MHz special mobile radio (SMR) service filed by Small Business in Telecommunications (SBT). At issue were FCC rules on planned auction of licenses for 175 economic areas (EA) for upper 200 channels of SMR band. Commission had determined that any EA licensee could require any incumbent SMR operator to relocate to lower 230 channels of SMR spectrum as long as new licensee provided displaced incumbent with comparable facilities and spectrum. FCC also had crafted auction rules to allow bidding credits for small businesses. Much of decision involved procedural machinations between FCC and SBT, which had filed 2 petitions for reconsideration in 1997 asking agency to review parts of orders dealing with both lower and upper channels of 800 MHz. SBT argued to D.C. Circuit that FCC: (1) Failed to obtain prior approval from Small Business Administration (SBA) of its small business definition. (2) Didn’t give parties enough time to participate in 800 MHz SMR auction. (3) Failed to address economic impact of relocation on small business incumbent licensees. In opinion written by Circuit Judge Karen Henderson, court ruled SBT’s contentions on SBA approval of small business definitions were “without merit.” (Between 2 petitions for review filed by SBT, SBA had approved definitions.) SBT contention that FCC had failed to follow Final Regulatory Flexibility Act (FRFA) analysis in its lower channel report and order also was rejected by 3-judge court. Judges Judith Rogers and David Tatel also heard case. “From our review of the record, it appears that SBT failed to raise the FRFA analysis issue during the rulemaking,” decision said. It also noted that, subsequent to original lower channel report and order, FCC had revisited issue of when incumbents should be repaid for involuntary relocation costs.