December 2009

FCC Sets Its Sights On Fiber Exemption

Apparently, the Federal Communications Commission's Media Bureau has circulated an order that would narrow the so-called terrestrial loophole by applying the 1992 Cable Act's prohibition on unfair or deceptive practices. The Cable Act requires pay TV distributors to make "satellite cable programming," such as networks, in which they hold a financial interest available to their competitors on a nondiscriminatory basis (section 628c for those keeping track). But current FCC rules allow providers to withhold such programming from competitors in instances where it isn't distributed via satellite. According to the sources, the order does not add "and terrestrial" to the exclusivity prohibition. Instead, it says the ban in that section can be extended to terrestrially delivered programming if a case can be made that an exclusive contract violates the rule against "unfair methods of competition or unfair or deceptive acts or practices." (Section 628b, for those still keeping score.)

Verizon Wireless responds to FCC query, says termination fees tied to administration costs

Verizon Wireless defended its recent decision to double penalties for smart-phone customers who leave their contracts early (known as early termination fee or ETF), telling the Federal Communications Commission that it needed to do so to keep up with the rising costs of mobile devices that it is subsidizes for its users -- and the "costs and risks of providing service, which include advertising, commission, store costs, and network costs." Verizon said consumers are protected from the fees being too onerous: They are given 30 days to leave a contract without penalty; a user can buy a phone at full price without signing a long-term contract; and termination fees are prorated throughout the length of the contract. The Verizon letter reveals nothing but tries to pass itself off as a manifesto that anything it does is good for consumers.

Verizon writes: "The new ETF structure for Advanced Devices begins at $350 and declines by $10 per month for a two-year contract. Thus, a customer terminating in the last month of a two- year contract term could be assessed an ETF of $120. This ETF structure is fair and reasonable for several reasons. First, taking customers who terminate their contracts before the end of the contract term as a whole, Verizon Wireless still incurs a financial loss from early terminations, even with the $350 ETF. Second, prorating the ETF to zero in the last month would mean that, to recoup the same amount of the losses caused by early terminations as a whole, Verizon Wireless would have to set the starting amount for the ETF higher than $350."

The letter drew immediate criticism from consumer groups that said Verizon is unfairly charging consumers for costs unassociated with the phones. Such policies, they say, deter users from switching carriers even when they move to areas without service and can add up to hundreds of dollars of penalties for households that want to terminate service even close to the end of their contracts.

The Challenges to Broadband Deployment Financing

One identified obstacle to broadband access in rural communities is the lack of available private financing for network deployment, whether through capital investment, debt financing, or other financial support. While several federal programs support broadband deployment in unserved and underserved areas, challenges in obtaining private debt or equity support that prevent effective deployment remain. Even with government support, many enterprises may be unable to achieve a profitable operating model, and the business case for potential deployment projects in many rural areas may be inadequate to merit sufficient private sector support. In an effort to address these challenges, the Federal Communications Commission seeks comment on the potential private sector and government funding vehicles for effective financing of broadband deployment projects in rural and high cost areas. While many of these vehicles may be outside the FCC's scope and jurisdiction, the Commission is considering a range of potential vehicles in order to address the Congressional call for "an analysis of the most effective and efficient mechanism for ensuring broadband access" to all Americans.

The FCC asks:

1) What existing federal government institutions, program mechanisms, and sources of funding could be employed to create greater incentives for privately financed rural broadband deployment?

2) What new financing methods should be employed to increase effectiveness and encourage entrepreneurship in the private sector for supporting rural broadband deployment?

Comments are due January 8, 2010.

What the first broadband stimulus awards tell us about how to win

It is too soon to say how well the first broadband stimulus fund awards will represent the awards that follow (they represent less than 10% of the first-round funds, and the rules may change for the second round), but given how publicly the White House touted these first picks, it would seem they're intended to be exemplary, to some degree, of what the administration wants in an applicant. Assuming that's true, what do these early winners tell us about how to win broadband stimulus funds?

1) Middle-mile projects took two thirds of the nearly $183 million in awards announced on Thursday and 70% of the funds devoted to broadband infrastructure.

2) The vast majority of broadband infrastructure funds went to private telecom service providers.

3) Public/private partnerships.

4) The vast majority of projects that won funding were contained (or mostly contained) within a single state.

5) Don't panic over protests. Program administrators had promised that it wouldn't be easy for challengers to disqualify stimulus applications, and they may be making good on that promise. More than one of the projects that won funding was opposed by companies claiming to already serve the area in question.

Unleashing the Digital Television Band: A Proposal for an Overlay Auction

Americans could be accessing more advanced wireless networks, developing more useful technologies, and enjoying decidedly more productive opportunities in the economy were the TV Band - the Mother Lode of underutilized radio spectrum - allocated to its highest valued use. This paper puts forward a simple proposal to accomplish that. It does not impose any given business model on the market, or dictate how airwaves should be utilized. Rather, it uses modern tools of spectrum management to create incentives for key players to cooperate, remedying conflicts and ending hold-outs. It is a specific plan in terms of its basic components, but it is sufficiently generic as to accommodate policy choices reflecting differing goals. It is a platform whose specifications can be customized. The plan would:
divide the 294 MHz DTV Band into seven national overlay licenses;
allocate each overlay seven contiguous TV channels (42 MHz), reducing borders (as opposed to non-contiguous channel allotments);
allot overlays exclusive, flexible-use rights as defined in the 700 MHz licenses previously sold at auction,18 subject to incumbents' encumbrances;
grandfather DTV broadcast incumbents indefinitely;
DTV stations are required to distribute video content free-to-viewer, but the mandate is platform-neutral;
overlay licenses are sold at auction;
limit two per customer.

Court Asks FCC to Defend Media Ownership Rule Stay

The Third Circuit Court of Appeals has given the Federal Communications Commission and backers of its position three weeks to explain why the court should not lift the years-long stay on the FCC's media ownership rule rewrite and start hearing the legal challenges. The judges want more input on why the court should not lift the stay on the revised newspaper-broadcast cross-ownership rule and set a schedule for briefs on court challenges to that rule -- both those currently before the court and those held in abeyance. In particular, they said, "the parties are directed to address the Media Parties' argument in their status report that, despite proceedings over the last several years repealing the 1975 Ban [on newspaper-broadcast cross-ownership] that ban remains in effect. The parties shall file responses to this order to show cause within twenty-one days of the date of this order."

AT&T survives Operation Chokehold

The appointed hour — Friday, from 12 noon to 1 p.m. PST — came and went and AT&T's wireless had not been brought to its knees. "As far as I can tell, there's been no impact at all," wrote Dan Lyons in The Secret Diary of Steve Jobs at 12:19 p.m. "My iPhone is working just the same as ever. "It was Lyons, writing as Fake Steve Jobs, who on Monday had encouraged iPhone owners to overwhelm AT&T's network by turning on a data-intensive app and running it for an hour. Operation Chokehold, as he dubbed it, was intended as a protest against AT&T's threatened imposition of data usage fees. By Wednesday, after the Federal Communications Commission's chief of homeland security issued a stern warning, Lyons began to have second thoughts. But by then the protest had taken on a life of its own. Although there were scattered reports of slowdowns Friday on the Operation Chokehold Facebook page, AT&T's 3G network seemed to be holding up just fine.

Second Circuit Schedules Oral Arguments In Fox Vs. FCC for Jan 13

Apparently, the Second Circuit Court of Appeals in New York has scheduled oral arguments in Fox vs. the Federal Communications Commission for January 13. The court will give 22 minutes a side for argument. The court is hearing the case on instructions from the Supreme Court, which overturned the Second Circuit's decision that the FCC's crackdown on fleeting profanity was arbitrary and capricious and remanded the decision back to the court. The FCC concluded that the "vulgar expletives" uttered by Cher and Nicole Richie during a Fox 2002 broadcast of the Billboard Music Awards were a violation of community standards for broadcasting. The Second Circuit can now get into the First Amendment issues raised by that indecency decision, but which it did not reach in the first go-around.

French court rules against Google over book copying

A Paris court on Friday found Google guilty of violating copyright by digitizing books and putting extracts online, following a legal challenge by major French publishers. The court found against Google after the La Martiniere group, which controls the highbrow Editions du Seuil publishing house, argued that publishers and authors were losing out in the latest stage of the digital revolution.

Genachowski should balance his spectrum policy team with a broadcaster

[Commentary] As long as Duke Law Professor Stuart Benjamin remains an adviser to Federal Communications Commission Chairman Julius Genachowski, everything that comes out of the commission relating to broadcasting will be suspect. How much of this or that policy is intended to achieve the stated goal (more diversity, localism, better kids' programming) and how much meant simply to weaken broadcasting so that the FCC can recover the spectrum for other purposes? So far, Chairman Genachowski has shown little interest in broadcasting. It's come up primarily in the context of a proposal to shift some of the broadcast spectrum to wireless broadband operators. That has put broadcasters on the defensive, afraid to even talk to the FCC about spectrum. The presence of Benjamin is now pushing broadcasters from defensiveness to hostility. It wasn't just what Benjamin said, it was how he said it. To him, over-the-air broadcasting is something to scrape off your shoe before stepping into the future. For the record, Benjamin isn't advocating driving broadcasters out of business. He just wants to drive them off the airwaves. He believes that they can continue as cable channels and that idea has some merit. He also opposes indecency regulation. But Chairman Genachowski should at least add some balance to his spectrum policy team. He should hire an adviser or two who has actually worked in broadcasting and believes in its future as an over-the-air medium. And if the broadcasters' mobile DTV effort fizzles and their over-the-air audience continues to dwindle and it comes time to talk about a spectrum deal, the broadcasters will have someone at the FCC they can talk to, someone they can trust.

Benton

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