June 2006

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CONGRESSIONAL AGENDA
Net Neutrality Puts Time Crunch On Telecom Agenda
House Schedules COPE Vote
Whitacre Sees No Video Price War
High-tech Firms want to Maintain Network Neutrality
Broadband Regulation: Will Congress Neuter the Net?
House To Vote on Brownback Bill

FCC NEWS
Internet on U.S. Planes moves Closer to Takeoff
FCC Clarifies Spectrum Auction Rules
AT&T/BellSouth Opponents Weigh In

TELEVISION
Cable Operators find it Tough to Swallow HDTV

QUICKLY -- Internet Surveillance Providers; Wave=20
of Media Consolidation in Response to Internet;=20
Judge Sacks Adelphia Complaint; FCC Indecency=20
Undercount; Mike McCurry & 'Net Neutrality'; Radio Farda

CONGRESSIONAL AGENDA

NET NEUTRALITY PUTS TIME CRUNCH ON TELECOM AGENDA
[SOURCE: InformationWeek, AUTHOR: KC JonesTechWeb.com]
Time is running out for Congress to pass several=20
telecommunications rule changes this year because=20
the changes are tied to another contentious=20
issue: network neutrality. Since net neutrality=20
is holding the telecommunications agenda hostage,=20
the idea of compromise legislation is catching=20
on. "As sand runs out of the hour glass,=20
compromises are reached," said Thaddeus Strom,=20
vice president of congressional relations for=20
Parry, Romani, DeConcini & Symms. "It's a=20
question of finding floor time," said Strom,=20
whose powerful lobbying firm represents Verizon.=20
And, there are several obstacles to overcome.=20
Committee chairs are vying for jurisdictional=20
control over net neutrality also called Internet=20
neutrality. Members are drafting and revising=20
several bills to guarantee equal access to=20
networks or to protect providers' ability to=20
charge more for better access and improved=20
networks. As a challenging election season=20
approaches, lobbyists are applying pressure from=20
both sides. If Congress cannot get one version to=20
the floor, and soon, members are likely to turn=20
their attention away from telecommunications=20
issues during recesses, budgeting and campaigns.=20
Then there is the threat of returning to a more=20
net neutrality-friendly congress =AD one controlled=20
by Democrats in one house or both. Political=20
strategists believe, and telecommunications=20
lobbyists acknowledge, that voters could sweep=20
out Republican incumbents over national issues.=20
"There's certainly speculation about a sea-change=20
in the control," Strom said. While several=20
Republicans favor legislation aimed at preserving=20
neutrality, Democrats are not jumping to the aid=20
of telecommunications companies. That means it=20
could be a better strategy for telecommunications=20
providers to make some concessions on net=20
neutrality now, in a more certain=20
environment. "It will probably be more than they=20
want because it's the only way to get legislation=20
passed this year," said Chris McKee, vice=20
president and assistant general counsel of Covad=20
Communications Group, a broadband voice and data=20
communications provider. Strom said compromise=20
legislation, which could be introduced next week,=20
would likely include promises not to block,=20
degrade or modify network access. The House Rules=20
Committee is likely to decide next week whether=20
to send an existing net neutrality bill to the floor.
http://www.informationweek.com/internet/showArticle.jhtml;jsessionid=3DU...
DBSZ4GWRMQSNDBCCKH0CJUMEKJVN?articleID=3D188701295&subSection=3D

HOUSE SCHEDULES COPE VOTE
[SOURCE: Benton Foundation]
House Majority Whip Roy Blunt (R-MO) has released=20
the agenda for this week and it includes time for=20
consideration of HR 5252, the Communications=20
Opportunity, Promotion, and Enhancement Act of=20
2006, sponsored by House Commerce Committee=20
Chairman Joe Barton (T-TX). The bill's main aim=20
is to pave the way for the creation of national=20
video franchises. In April the Commerce Committee=20
approved the bill 42 to 12. Learn more about the bill at the URL below.
http://www.benton.org/index.php?q=3Dnode/1882

WHITACRE SEES NO VIDEO PRICE WAR
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
AT&T Chairman Edward Whitacre tried to assure=20
Wall Street types at a Sanford C. Bernstein & Co.=20
media conference in New York this week that the=20
entry of telcos into the video space would not=20
lead to price cuts in video service. "He pointed=20
to AT&T's plan to bundle broadband, voice, long=20
distance, wireless, and video (a quintuple play)=20
and said that would give the company flexibility=20
in pricing. I don't think there=92s going to be a=20
price war. I think it=92s going to be a war of=20
value and of services," he said. "I think we will=20
be very well positioned." Most legislators have=20
pointed to price and service competition as=20
driving forces behind revamping telecom=20
legislation to make it easier to launch video=20
service in competition to cable. Wall Street is=20
concerned that a price war would affect the=20
long-term health of Lightspeed. On the issue of=20
'net neutrality, Whitacre said that he would=20
continue to try to educate Congress that company=20
is "not going to do anything to affect the Internet. Zero."
http://www.broadcastingcable.com/article/CA6340661?display=3DBreaking+News
* Made for TV: A Tale of Two Telcos
Over the next two years, two phone giants --=20
Verizon and AT&T -- will spend more than $10=20
billion to present TV packages that rival all the=20
latest digital services offered by cable operators today.
http://www.broadcastingcable.com/article/CA6340687?display=3DSpecial+Report

HIGH-TECH FIRMS WANT TO MAINTAIN NETWORK NEUTRALITY
[SOURCE: San Francisco Chronicle 6/2, AUTHOR: Tom Abate]
The nation's largest high-tech trade association=20
jumped into the network neutrality debate=20
Thursday, siding with content providers like=20
Google that want to stop telephone and cable=20
companies from charging them higher fees for=20
preferred Internet delivery. The 2,500-member=20
American Electronics Association, which=20
represents the biggest companies in Silicon=20
Valley, urged Congress to give the Federal=20
Communications Commission rule-making and=20
enforcement authority to preserve the way=20
Internet traffic is delivered on a first-come,=20
first-served basis. Association President William=20
Archey echoed the arguments of net neutrality=20
proponents who say startups will be hurt if they=20
have to pay for preferred delivery. "The low=20
barriers to entry for such innovators must be=20
preserved," Archey said. This unusual call for=20
regulation by a trade group that generally=20
opposes it is a blow to phone and cable companies=20
that say they face big expenses to expand=20
broadband access to homes and hope to recoup some=20
of those costs by charging content providers.=20
Otherwise, they say, consumers will have to pay the whole bill.
http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2006...
/02/BUG76J61121.DTL&type=3Dpolitics

BROADBAND REGULATION: WILL CONGRESS NEUTER THE NET?
[SOURCE: Heritage Foundation, AUTHOR: James L. Gattuso]
[Commentary] Gattuso states that =93net neutrality=94=20
regulation would be both unnecessary and harmful:=20
1) By actively managing traffic flow, network=20
owners could use scarce Internet capacity more=20
effi=ADciently. At the same time, traffic fees=20
could spur some much-needed investment in=20
broadband networks. 2) Fears that network owners=20
would abuse their discretion by impeding or even=20
blocking services and Web sites that they=20
disfavor are unfounded. In today=92s competitive=20
broadband market, network abuse would quickly=20
send consumers to another provider. Moreover, if=20
a network owner somehow does abuse its power,=20
existing competition law -- with its decades of=20
precedent -- is more than sufficient to address=20
the problem. 3) Neutrality regulation would hurt=20
competition. If all providers were forced to act=20
alike, network owners=92 ability to distinguish=20
their services from one another -- and smaller=20
networks=92 abil=ADity to challenge established=20
rivals -- would be reduced. 4) Imposing a new,=20
separate set of rules on the Internet would=20
invite endless uncertainty and litigation.=20
Inevitably, regulators would be drawn into=20
years-long, lobbyist-driven policy quag=ADmires as=20
to whether this or that action is allowed or=20
banned and what prices can be charged. This would=20
be a bonanza for lobbyists and lawyers but would=20
hurt innovation, investment, and Internet users.=20
Gattuso concludes, "Advocates of neutrality=20
regulation argue that the future of the Internet=20
is at issue in this debate. They are correct.=20
This is why such regulation of the Inter=ADnet should be rejected."
http://www.heritage.org/Research/Regulation/bg1941.cfm

HOUSE TO VOTE ON BROWNBACK BILL
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The House will vote on the Broadcast Decency=20
Enforcement Act of 2005 (S. 193), sponsored by=20
Sen Sam Brownback (R-KS), on Tuesday June 6. It=20
will almost certainly pass given that it has=20
already passed the Senate unanimously and an even=20
tougher House bill passed overwhelmingly last=20
year. The bill lacks virtually all the poison=20
pill provisions that have kept any indecency bill=20
from passing in the past two years. Those have=20
included bringing a station's license into play=20
and upping the fines on performers, both=20
provisions were in the House bill that passed,=20
but got no traction in the Senate. =93Next week,=20
the House will vote on the broadcast decency=20
enforcement act, and I hope we can send a bill to=20
the president=92s desk for him to sign and enact=20
into law," said Sen Brownback. "This is a victory for children and families=
.=94
http://www.broadcastingcable.com/article/CA6340701?display=3DBreaking+News
* Lawmakers Poised to OK Indecency Bill
http://www.latimes.com/business/la-fi-decency3jun03,1,447267.story

FCC NEWS

INTERNET ON US PLANES MOVES CLOSER TO TAKEOFF
[SOURCE: Reuters, AUTHOR: Jeremy Pelofsky]
The prospect of fast Internet connections aboard=20
U.S. commercial airline flights moved ahead on=20
Friday when JetBlue Airways Corp. and another=20
company won licenses for airborne communications=20
services. LiveTV LLC, a subsidiary of the=20
low-cost airline JetBlue which tries to lure=20
customers with on board satellite television=20
service, won a 1 megahertz wireless license with=20
a bid of $7 million. The larger 3 megahertz=20
license was won by AC BidCo with its bid of $31.3=20
million. That company has ties to AirCell Inc.,=20
which designs and sells airborne communications=20
systems, and to private equity firm Ripplewood=20
Holdings LLC. The companies are expected to offer=20
travelers any kind of communications service,=20
like voice communications, Internet access or=20
e-mail while in flight. The licenses granted by=20
the Federal Communications Commission require=20
that the companies provide "substantial service"=20
to aircraft within five years. The Federal=20
Communications Commission raised a total of $38.3=20
million after 144 rounds and there were no more=20
bids. Proceeds will go into the U.S. Treasury.
http://today.reuters.com/news/newsArticle.aspx?type=3DtechnologyNews&sto...
D=3D2006-06-02T194206Z_01_N02222830_RTRUKOC_0_US-TELECOMS-WIRELESS-AUCTION.=
xml&archived=3DFalse
* FCC'S Auction of Air-Ground Spectrum Licenses Concludes
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-265757A1.doc

FCC CLARIFIES "DESIGNATED ENTITY" ELIGIBILITY RULES
[SOURCE: Federal Communications Commission]
On Friday, the Federal Communications Commission=20
(FCC) adopted an Order on Reconsideration of the=20
Second Report and Order (Recon Order) that=20
provides guidance on certain aspects of the FCC's=20
April 2006 Second Report and Order (April 2006=20
Order) which modified certain rules governing the=20
benefits reserved for applicants or licensees=20
that qualify as "designated entities." Several=20
parties have recently submitted filings seeking=20
reconsideration and clarification of various=20
aspects of the April 2006 Order and Friday's=20
Recon Order addresses issues raised in those=20
filings. The Order: 1) dismissed arguments=20
claiming that the adoption of rules in the April=20
2006 Order was without sufficient notice, 2)=20
clarified how the FCC will evaluate impermissible=20
and attributable material relationships,=20
including those that are grandfathered, for the=20
purpose of determining eligibility for designated=20
entity benefits and the imposition of unjust=20
enrichment, 3) responded to arguments that rule=20
changes related to unjust enrichment payments=20
were arbitrary and capricious, and made clear=20
that the ten-year schedule applies only to=20
licenses granted after release of the April 2006=20
Order, and 4) clarified that the new rule=20
relating to reportable eligibility events=20
includes events that might affect a designated=20
entity's eligibility under either the new=20
material relationship or existing controlling=20
interest standards. Chairman Kevin Martin said,=20
"These changes to our designated entity rules=20
arose out of a last-minute proposal in the=20
proceeding to adopt rules for the Advanced=20
Wireless Services spectrum. While I supported=20
examining potential changes to our designated=20
entity rules for future auctions, I did not=20
believe the rules needed to be changed,=20
especially in advance of the auction this=20
summer. Nevertheless, I agreed to the changes in=20
order to obtain the support needed to establish=20
the rules for wireless services that were=20
essential to making the spectrum available for=20
wireless broadband services this summer." In a=20
separate statement, Commissioner Adelstein said,=20
"I support the specific clarifications in this=20
Order on Reconsideration because they in part=20
respond to legitimate concerns from designated=20
entities regarding the possibly retroactive=20
application of new rules. I have this lingering=20
concern, though, that the Commission's course of=20
action in this troubled proceeding,=20
notwithstanding the legal maneuvering in this=20
decision, may still leave other issues=20
unresolved. As I have noted before, much of this=20
uncertainty could have been avoided had we=20
started this proceeding earlier and kept it more=20
narrowly focused. I hope that the Commission's=20
decisions over the past several months do not=20
prove to be the undoing of our most significant auction in 10 years."
http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-265754A1.doc
See the Order:=20
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-78A1.doc
* Chairman Martin's statement:=20
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-78A2.doc
* Commissioner Adelstein's statement:=20
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-78A4.doc
* Commissioner Copps:=20
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-78A3.doc
* Commissioner Tate:=20
http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-78A5.doc

AT&T/BELLSOUTH OPPONENTS WEIGH IN
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
Public comment is due today at the Federal=20
Communications Commission on the proposed merger=20
of AT&T and BellSouth. Opponents include American=20
Antitrust Institute, COMPTEL, Consumer Federation=20
of America; Free Press, Media Access Project,=20
National Association of State Utility Consumer=20
Advocates. The groups also promise on June 6 to=20
announce "new activities and strategies" to block the deal.
http://www.broadcastingcable.com/article/CA6340751?display=3DBreaking+News

TELEVISION

CABLE OPERATORS FIND IT TOUGH TO SWALLOW HDTV
[SOURCE: USAToday, AUTHOR: David Lieberman]
This year, for the first time, consumers will buy=20
more high-definition, digital television (HDTV)=20
sets than traditional ones. Morgan Stanley=20
estimates that nearly 26% of households will=20
enjoy HD's gee-whiz video and theater sound by=20
year's end and that 67.6% will in 2010, thanks to=20
prices falling from today's $1,000 and up. That's=20
good news for the TV industry, right? Maybe not=20
for cable operators. Their wires are so packed=20
with TV channels and new services -- including=20
video on demand (VOD), broadband Internet and=20
phone -- that many are scrambling to find=20
bandwidth for the coming wave of HD channels.=20
=93Cable operators need massive capacity for HDTV,=20
and have to move quickly,=94 says Sanford C.=20
Bernstein's Craig Moffett. =93HDTV is=20
hot.=94 Executives say they're on the case. But=20
their favorite plans to fix their bandwidth=20
problem will, at least in the short-term, create=20
hassles for millions of subscribers -- especially=20
those who hate the idea of hooking their TVs to a=20
set-top box. For example, one solution could=20
strip dozens of channels from customers with=20
cable-ready TVs -- forcing them to pay an extra=20
$10 or more a month for a digital box and service=20
just to keep the channels they get now without=20
them. The other leading remedy would hobble new=20
HDTV sets designed with a slot to work with a=20
slick, credit card-size CableCard instead of a=20
box. In addition to being an inconvenience and=20
expense, either change would represent yet=20
another setback for the decade-old federal effort=20
to force the industry to free consumers from=20
cable boxes. But operators seem willing to take=20
the heat. They fear that if they fail to heed=20
warnings such as Moffett's, they'll lose many of=20
their 65 million subscribers who are hot for HD=20
to satellite and phone company rivals that=20
already are able to offer lots of HDTV channels and plan many more.
http://www.usatoday.com/printedition/money/20060605/hdcable.art.htm

QUICKLY

INTERNET SURVEILLANCE PROVIDERS
[SOURCE: Los Angeles Times, AUTHOR: Editorial Staff]
[Commentary] The Bush Administration has opened=20
talks with leading Internet providers and search=20
engines about preserving their records. The=20
Justice Department apparently wants Internet=20
companies to keep two years' worth of data on=20
where users go, what they search for and to whom=20
they send e-mail. The ostensible purpose is to=20
combat child pornography and terrorism. That's a=20
laudable goal. It's not at all clear, however,=20
that this plan would put more bad guys behind=20
bars. It's more likely that the new troves of=20
data would attract hackers or trial lawyers. But=20
before Internet companies or lawmakers agree to=20
this plan, the Justice Department should have to=20
show that the change is needed to put more child=20
pornographers and terrorists behind bars. How=20
many cases, if any, have foundered because=20
investigators had access to only a few months'=20
worth of data rather than two years' worth? The=20
benefits of the new approach may be questionable, but the risks are not.
http://www.latimes.com/news/printedition/opinion/la-ed-isp05jun05,1,4797...
story?coll=3Dla-news-comment
(requires registration)

WAVE OF MEDIA CONSOLIDATION IN RESPONSE TO INTERNET
[SOURCE: Associated Press]
The wave of consolidation sweeping over the=20
newspaper business is an unprecedented response=20
to the Internet and other changes in media, a top=20
newspaper industry analyst said Thursday. Lauren=20
Rich Fine, an analyst with Merrill Lynch who has=20
been studying the industry for 18 years, said=20
newspapers are looking to find ways to remain=20
relevant and still earn healthy profits as=20
advertisers follow readers online and to cable=20
television. "I've never seen these kinds of=20
changes before," she said. Fine said that before=20
the Web and cable television, most media=20
coexisted without eating into each other's ad=20
dollars. But now advertisers are drawn to the=20
Internet's ability to reach both wide audiences=20
and also target specific groups of people. What's=20
more, the Web is also threatening newspapers'=20
bread and butter, classified ads. Newspapers on=20
average have a profit margin of about 21.5=20
percent. That is expected to drop to about 16.5=20
percent by 2011, she said. "Newspapers won't be=20
as profitable, but they can still be profitable.=20
They will no longer be a growth market," Fine=20
said. In order for the papers to cut costs, she=20
said analysts expect more of the consolidation=20
like the recent sale of Knight Ridder's 32=20
newspapers to McClatchy Co., which in turn put 12 papers up for sale.
http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_con...
t_id=3D1002612380
See also --
* Online Ads Drive Gains at Newspapers
Overall newspaper advertising revenues rose 1.8%=20
in the first quarter of the year, an industry=20
group reported Friday, with most of the growth coming from online ads.
http://online.wsj.com/article/SB114927103917369985.html?mod=3Dtodays_us_...
e_one

JUDGE SACKS ADELPHIA COMPLAINT
[SOURCE: Multichannel News, AUTHOR: Mike Farrell & Ted Hearn]
A bankruptcy court judge Friday shot down The=20
America Channel=92s attempt to block Time Warner=92s=20
and Comcast=92s joint purchase of Adelphia=20
Communications Corp., granting Adelphia a=20
temporary restraining order and injunction=20
against the fledgling digital channel=92s antitrust=20
suit. In a brief order issued June 2, U.S.=20
Bankruptcy Court Judge Robert Gerber upheld=20
Adelphia=92s motion and enjoined The America=20
Channel from further pursuing its case against=20
Adelphia, from taking any further action to=20
interfere with the court=92s jurisdiction over the=20
bankruptcy case and from taking any further=20
action to interfere with the sale of Adelphia=20
assets to Time Warner and Comcast. An attorney=20
for The America Channel said the network would=20
try to reverse the judge=92s decision. =93We don't=20
think there is a valid legal basis for his order,=20
so we are going to challenge it,=94 said Daniel=20
Shulman, of Minneapolis-based Gray, Plant, Mooty, Mooty & Bennett.
http://www.multichannel.com/article/CA6340663.html?display=3DBreaking+News

FCC FINDS, CORRECTS INDECENCY UNDERCOUNT
[SOURCE: Broadcasting&Cable, AUTHOR: John Eggerton]
The Federal Communications Commission initially=20
missed some 133,000 of the 275,131 indecency=20
complaints received through March 31.
http://www.broadcastingcable.com/article/CA6340706?display=3DBreaking+News

TAKING SIDES ON 'NET NEUTRALITY'
[SOURCE: Los Angeles Times, AUTHOR: Jim Puzzanghera]
Ex-Clinton spokesman Mike McCurry draws fire from=20
the left for his work for telecom giants.
http://www.latimes.com/business/printedition/la-fi-mccurry5jun05,1,24160...
story?coll=3Dla-headlines-pe-business
(requires registration)

US STATION SEEKS EAR OF IRAN'S YOUTH
[SOURCE: Washington Post, AUTHOR: David Finkel]
The U.S.-funded Radio Farda knows only two things=20
for sure: that the audience is surreptitiously=20
listening somewhere inside Iran, and that the=20
Iranian government doesn't want anyone to hear=20
what a U.S.-funded radio service has to say. How,=20
then, does Radio Farda -- which receives about $7=20
million in federal funding and is hoping for=20
substantially more as the United States expands=20
its push for democracy in Iran -- decide on what=20
to broadcast to such an audience?
http://www.washingtonpost.com/wp-dyn/content/article/2006/06/04/AR200606...
0890.html
(requires registration)
--------------------------------------------------------------
Communications-related Headlines is a free online=20
news summary service provided by the Benton=20
Foundation (www.benton.org). Posted Monday=20
through Friday, this service provides updates on=20
important industry developments, policy issues,=20
and other related news events. While the=20
summaries are factually accurate, their often=20
informal tone does not always represent the tone=20
of the original articles. Headlines are compiled=20
by Kevin Taglang headlines( at )benton.org -- we welcome your comments.
--------------------------------------------------------------